Indian Kanoon - Search engine for Indian Law

Madhya Pradesh High Court

M/S Shradha Construction vs The State Of Madhya Pradesh on 28 April, 2017

                            WP-15061-2016
          (M/S SHRADHA CONSTRUCTION Vs THE STATE OF MADHYA PRADESH)


28-04-2017

     Shri N. Jauhari, learned counsel for the petitioner.
     Shri Pradeep Singh, learned G. A. for respondent/State.

Heard.

Petitioner has filed this petition against the order dated 5.7.2016 (Ann. P.14).

Petitioner is a partnership firm. It is in the business of construction. It was awarded the work of construction of dam, its appertunent works, excavation of approach and spill channel and canals and its structures of Bagholi Tank Project under agreement No.1/DL/2013-14. Amount of contract was Rs.249.53 lakhs. The work order was issued on 10.04.2013 and work had to be completed within a period of fifteen months. Petitioner could not complete the work within the stipulated period.

Petitioner pleaded that work could not be completed due to following reasons:

A. Respondents' failure to complete land acquisition proceedings and to give entire possession of site.

B. Change of spill Channel from Left Flank of Dam to Right Flank.

           C.      Non shifting of Electric Lines.
           D.     Delay in Canal Works.
           E.      Non Issuance of written Instructions and other
     reasons.

Because the petitioner did not complete the work as per agreement within the stipulated period, Chief Engineer Water Resources Department issued a show cause notice dated 16.2.2015 that why the petitioner firm cannot be black listed for a period of one year and registration of the firm be not suspended. Petitioner submitted reply mentioning the reasons for non-completion of work within the stipulated period. Thereafter final order dated 3.3.2015 was passed and petitioner's firm was black listed for a period of one year i. e. from 1.3.2015 to 29.2.2016. Against the aforesaid order petitioner filed an appeal before the Engineer-in-Chief.

The petitioner filed an application after a period of one year that registration of the firm be restored and its name be removed from black list. Engineer-in-Chief by the impugned order dated 5.7.2016 ordered that an amount of Rs.13.62 lacs is yet to be recovered from the petitioner, hence his application for removal of name of the firm from black list is rejected. It is further observed that if the petitioner would deposit the aforesaid amount then he is at liberty to file another application for restoration of registration of the firm and removal of its name from black list.

Respondents in its reply pleaded that because the petitioner did not complete the work within the stipulated period. Hence, petitioner's firm was black listed for a period of one year and registration of the firm was suspended. Against the aforesaid order an appeal was preferred by the petitioner and that appeal was dismissed. An amount of Rs.13.62 lacs was due against the petitioner, hence Engineer-in- Chief rightly passed the order that unless and until the petitioner deposited the amount due against his firm the name of the firm could not be removed from black list.

It is a fact that petitioner disputed the liability of recovery of amount of Rs.13.62 lacs and he has filed a case before Madhya Pradesh Arbitration Tribunal, Bhopal. The case is pending as Case No.133/2015.

Full Bench of this court in the matter of B. V. Verma and another Vs. State of M. P. and another reported in 2008(1) MPHT 17 (FB) has held that recovery could not be ordered against a contractor if it is disputed by the contractor and proceedings are pending before the Tribunal.

The Apex Court in the matter of Kulja Industries Limited Vs. Western Telecom Project BSNL reported in (2014) 14 SCC 731 has held as under in regard to black listing:

The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975) 1 SCC 70 where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the Authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed:

“20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist.”

18. Subsequent decisions of this Court in M/s Southern Painters v. Fertilizers & Chemicals Travancore Ltd. and Anr. AIR 1994 SC 1277; Patel Engineering Ltd. Union of India (2012) 11 SCC 257; B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd. & Ors. (2006) 11 SCC 548; Joseph Vilangandan v. The Executive Engineer, (PWD) Ernakulam & Ors. (1978) 3 SCC 36 among others have followed the ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor.

Apex Court further in para 22 of the judgment prescribes the guidelines about black listing of a contractor:

22. The guidelines also stipulate the factors that may influence the debarring official’s decision which include the following:

a) The actual or potential harm or impact that results or may result from the wrongdoing.

b) The frequency of incidents and/or duration of the wrongdoing.

c) Whether there is a pattern or prior history of wrongdoing.

d) Whether contractor has been excluded or disqualified by an agency of the Federal Government or have not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct similar to one or more of the causes for debarment specified in this part.

(e) Whether and to what extent did the contractor plan, initiate or carry out the wrongdoing.

(f) Whether the contractor has accepted responsibility for the wrongdoing and recognized the seriousness of the misconduct.

(g) Whether the contractor has paid or agreed to pay all criminal, civil and administrative liabilities for the improper activity, including any investigative or administrative costs incurred by the government, and have made or agreed to make full restitution.

((h) Whether contractor has cooperated fully with the government agencies during the investigation and any court or administrative action.

(i) Whether the wrongdoing was pervasive within the contractor’s organization.

(j) The kind of positions held by the individuals involved in the wrongdoing.

(k) Whether the contractor has taken appropriate corrective action or remedial measures, such as establishing ethics training and implementing programs to prevent recurrence.

(l) Whether the contractor fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation available to the debarring official.” In the present case, Engineer-in-Chief imposed a penalty of black listing for a period of one year and that period has already been over. It is alleged that some amount has to be recovered from the petitioner. But in view of the decision of Full Bench of this court recovery could not be made from the the petitioner because dispute is pending before Arbitration Tribunal, Bhopal.

In this view of the matter, in our opinion order passed by the Engineer-in-Chief dated 5.7.2016 (Ann. P.14) is illegal. It is hereby quashed. Petition is allowed. Respondents are directed to restore the registration of the firm and remove the name of petitioner's firm from black list.

No order as to costs.

  (S.K. GANGELE)                           (ANURAG SHRIVASTAVA)
       JUDGE                                        JUDGE




kkc