Calcutta High Court
Rabindra Kumar Bhalotia vs Union Of India & Ors on 24 September, 2014
Author: Soumen Sen
Bench: Soumen Sen
TA No. 139 of 2014
CS No. 337 of 2014
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
RABINDRA KUMAR BHALOTIA
Versus
UNION OF INDIA & ORS.
BEFORE:
The Hon'ble Justice Soumen Sen
Date:24.09.2014
Appearance:
Mr. Sudipto Sarkar, Sr. Adv.
Mr. S.N. Mukherjee, Sr. Adv.
Mr. J. Saha. Sr. Adv.
Mr. J. Ganguly, Adv.
Mr. L.K. Chatterjee, Sr. Adv.
Ms. Aparma Banerjee
Soumen Sen, J.:- The petitioner is a manufacturer of pig iron
(medium Phosphoric Iron Break Block). The said break block is an essential
safety item needed by the Indian Railways.
The petitioner claims to have been supplying such material to Indian
Railways for the last 12 years.
Since the said iron medium Phosphoric Iron Break Block are safety
items the petitioner was required to get himself registered as a vendor and
obtain approval from the research designs and standard organization
(hereinafter referred to as RDSO). The petitioner complaints that he has
been unnecessarily victimized by the railways. It is alleged that the Railway
authorities in order to promote the cause of some other manufacturers and
suppliers trying to create all kinds of impediments and the recent act of
delisting the petitioner is the last straw on the camel's back. It is contended
that the petitioner was deregistered resulting in blacklisting on frivolous
grounds and on an earlier occasion such an attempt to blacklist to the
petitioner proved to be futile since by an order dated 26th June, 2014 a single
judge of this Court set aside order of blacklisting.
In this suit the order of the Appellate Authority dated 13th August,
2014 has been challenged. The Appellate Authority passed the order in
terms of the direction passed in the earlier proceeding on 26th June, 2014
directing the appellate authority to decide all issues that were the subject
matter of 1st, 2nd, 3rd and 4th show cause notices by a reasoned order.
Mr. Sudipto Sarkar the Learned Senior Counsel appearing on behalf
of the petitioners submits that the said order was passed in violation of the
principles of natural justice. It is submitted that the petitioner has filed a
detailed representation in answer to all the four show cause notices but
unfortunately, the appellate authority did not give an opportunity of hearing
to the petitioner. It is further contended that the appellate authority has
relied upon documents without giving an opportunity to the petitioner to deal
with such documents
In Para 3.23 of the impugned order, the Appellate Authority has relied
upon the Railway Board Vigilance report with regard to the price rise in pig
iron which reads:
" in support of offered higher rates in the tenders of WR, NER and
SER Riddhi Siddhi had furnished copies of some market analysis
purported to have been done by SAIL to show the prevailing rate of
pig iron... However, when Board Vigilance cross-checked these
documents with CVO/SAIL, he has informed that no such reports were
generated by the branch sales office, central marketing organization
of SAIL. It shows that this firm submitted forged documents to the
aforesaid zonal railways to justify their higher quoted rates. Thus,
firm has resorted to forgery/tampering.. in the documents purported
to ne market analysis of pig iron rates by SAIL"
It is stated that in order to controvert the allegations and give a fair
opportunity to the petitioner to represent its case, the plaintiff would be
entitled to the following documents:-
a) Documents whereby representation allegedly made by him to the
effect that copies of market analysis furnished by him were market
analysis done by SAIL.
b) Letters addressed by Railway Broad Vigilance to SAIL in this
regard along with their enclosures
c) Replies by SAIL to such letters of Railway Board Vigilance
d) Report prepared by railway Board Vigilance against the Plaintiff
with regard to his claim of price rise of pig iron.
In the fourth show cause notice, it had been represented by RDSO that the
plaintiff has tampered with the original electricity bill of August, 2010. The
plaintiff has however, not been supplied with the particulars of either the
original electricity bill that was relied upon by him before the RDSO or the
particulars of the alleged tampering of the same. In the circumstances, it is
not even clear as to what bill or copy thereof has been relied upon by the
RDSO Appellate Authority in this regard. The plaintiff is, thus, entitled to
the following documents:-
a) Details of original electricity bill stated to have been furnished by
the plaintiff to the RDSO.
b) Any note sheet prepared at the time noting the points on which it
was concluded that such original bill had been tampered with
c) Particulars of whether such original bill was retained by the RDSO
or returned to the plaintiff.
d) In the event of it being contended that such original bill was
returned, copies of documents recording such fact.
In the impugned order, it has been recorded that the issue of
tampering of the electricity bill came to the notice of RDSO Vigilance only
during supplementary investigation in March, 2014. It has, however, not
been mentioned as to what is the new document that was chanced upon by
the Railway Vigilance in March, 2014 and no copy thereof has been made
over to the plaintiff. The plaintiff as such is entitled to and seeks a copy of
the same.
In paragraph 3.2.7 of the impugned order, it has been recorded that
material manufactured at the plaintiff's Baltikuri unit was offered for
inspection at the plaintiff's Kumarpara unit for 23 days. No particulars in
this regard, were, however, furnished to the plaintiff. The plaintiff is thus
entitled to and seeks inspection and production of the following documents:
(a) The particulars of the 23 days on which materials manufactured at
the plaintiff's Baltikuri unit was offered inspection at the Kumarpara
unit..
(b) The documents by which such inspection of materials
manufactured at Baltikuri unit were offered at the Kumarpara unit.
c) Particulars of inspection of all materials manufactured by the
plaintiff at its Baltikuri unit between 2005 and 1st April, 2010 and as
to whether such materials (apart form those that were allegedly
inspected at Kumarpara unit during the 23 days referred to in the
impugned order) were inspected at Baltikuri or elsewhere.
The plaintiff is also entitled to and seeks information as to whether the
RDSO or Appellate Authority had relied on the Tender Committee Minutes,
all the inspection reports of all the inspection of materials held at Baltikuri
unit of the plaintiff between 2005 and 2010 while reaching the conclusions
in the impugned order.
Although the whole objective of hearing before the Appellate
Authority was to consider whether the plaintiff should be delisted, the
plaintiff seeks to know why no opportunity was given to the plaintiff to be
beard in connection therewith.
The documents and the information sought herein are of unparalleled
importance and unless the same is provided to the plaintiff, he would suffer
untold and irreparable loss, prejudice and injury.
The plaintiff is also entitled to and seeks an opportunity to examine
the report of RDSO vigilance with respect to investigations referred to in
paragraph 3.1 of the impugned order dated 30 the August, 2014.
In the earlier proceeding while the matter was referred to the appellate
authority for consideration and pass a reasoned order the learned single
judge has made the following observations which I find are relevant even in
this proceeding while considering the prayer for interim relief.
On 12th November, 2013 the plaintiff was temporarily de-listed. He
made representation against this to the higher authorities in the Railways.
On 6th January, 2014 the decision to temporarily delist the plaintiff was
modified by delisting him in the part one list only and placing him in the part
two lists.
It is also noteworthy that whilst all these were taking place the validity
of the plaintiffs registration with the Railways was extended from 15th July,
2013 till 31st July, 2016.
Even after the plaintiff was restored as a part 2 supplier, a fresh show
cause notice was issued on 4th April 2014. The allegation against the
plaintiff was that the same consumer number appeared in the CESC Ltd's
bills for unit nos. 1 and 2. Hence, according to the Railways, the plaintiff
tampered the original electricity bill for the month of August, 2010. Mr.
Chatterjee quoting clause 4.2.7 of the relevant clauses submitted that if there
was misrepresentation a vendor was likely to be delisted. It appears that the
defence of the plaintiff was that he had not submitted any forged electricity
bill.
Then came the delisting order dated 8th May, 2014.
It stated that the plaintiff had been unable to establish that charges
levelled on the firm are actually incorrect. The reply to the show cause
notice was considered 'unsatisfactory'. The firm was delisted with
immediate effect.
There is no dispute that the validity of the plaintiffs registration was
extended from 15th July, 2013 till 31st July, 2016. The facts, which were
investigated in the four show cause notices could, in my opinion, have with
due diligence been investigated by the Railways at the time of renewal of the
plaintiffs registration on 15th July, 2013. In spite of that the registration of
the plaintiff was renewed. Yet proceedings were taken to delist him.
The Railways themselves created valuable rights in the plaintiff by
withdrawing all the quality complained against him.
The discrepancy in sale price which was raised was of 2008. What
prevented the Railways from investigating this discrepancy on and after
2008 is unknown. It is their case that one unit of the plaintiff was not
functioning from 2005 to 2010. There is no denial of the plaintiff's case that
they have been regular suppliers of break blocks to the Railways, 2005 to
2010 is a very long time. It is extra ordinary how this was not discovered
between 2005 to 2010. After 2010 it is the case of the Railways that both
the units were functional. After 2010 they have accepted supply of the break
blocks from the plaintiff. Therefore, at this point of time I do not attach
much importance to the allegation in the show cause with regard to presence
or absence of unit no.2.
On 12th November, 2013 the plaintiff was temporarily delisted. All
that the Railways ought to have done was to have given the plaintiff an
opportunity of filling their defence, hearing them and pass a reasoned order
on this delisting issue, they tried to get around this by modifying their
decision and placing the plaintiff as a part 2 contractor. By this they have
destroyed their own case, in as much as if a dishonest manufacturer
manufacturing defecting goods can be allowed to be a part 2 manufacturer,
there is no reason why he cannot be a part 1 manufacturer. The difference
in the two parts is with regard to the quantity of supply only when the
dispute is with regard to quality of supply only.
Again while adjudicating the final show cause notice on 8th May, 2014
no reasons have been advanced by the adjudicator at all. It is not for the
accused or the charge-sheeted person to prove his case but it is for the
prosecution to prove its case. The same applies in the case4 of departmental
proceedings also. Very strangely, the adjudicator remarked that the plaintiff
has been unable to disprove the case against him. No reasons and/or no
grounds have been cited."
Delisting is a very serious matter. It deprives a person of his source of
livelihood. It stops the manufacturing process. It closes down a business.
It affects the employees.
It is an admitted position that no opportunity of hearing was given to
the petitioner. The appellate authority passed the order on the basis of
representation made by the petitioner. Having regard to the gravity of the
matter and the consequence that are likely to follow if the charges are proved
in my opinion consideration of a representation without giving an
opportunity of hearing is a violation of a principles of natural justice. The
findings that were arrived at in the earlier proceeding are equally relevant in
the instant case as it could be found from the conclusion of the impugned
order that the quality complaint could not be proved. The conclusion as
recorded in the impugned order is as follows:-
"Considering all the facts and the mate4rial placed on the records, it is
concluded that charges under para 3.2.1 related with the quality of
brake blocks sample could not be proved beyond doubt whereas
charges under para 3.2.2 could be proved partially as only tampering
with the QAP is not proved beyond doubt. Remaining all the charges
as discussed have been proved. Thus, considering all these facts as
mentioned above, M/s. Riddhi Siddhi Udyog, Calcutta adopted
unethical busienss practices to secure undue advantage from the
Government agencies to promote their business. They also
misrepresented facts before Indian Government agencies. Therefore,
I am of the considered opinion that Indian Railways, being a
Government organisation cannot have any business relationship with a
firm who indulges in such unethical business practices and therefore,
delisting of RSU by RDSO from their approved list of vendors vide
their letter no. QAM/Regn/Riddhi Siddhi/K(Pt.III) dated 08.05.2014
is in order .
The appeal of RSU is disposed of without giving any relief to RSU."
Mr. L. K. Chatterjee, learned senior counsel appearing on behalf of
the Union of India, submits that it cannot be ignored that these break blocks
are very vital components of locomotives and that any quality deficiency
would be very prejudicial to the interest of the country. It is submitted that
the finding being recorded by the appellate authority as to the tampering of
the electricity bill and forging of documents regarding price rise this Court
should not interfere at this stage and allow the respondents to file an
affidavit. Mr. Chatterjee has referred to a communication dated January 7, 2014 to show that the petitioner has admitted inspection at Unit II, Kumar Para Road between February 5, 2012 and March 1, 2012 (3 times in 23 days) and on three dates and, accordingly, ignorance of such inspection and consequently demanding production of documents relating to such inspection is a clear afterthought and in suppression of material facts. It is emphasized that the conduct of the petitioner disentitles him from any order. It is submitted that any order staying the order of the appellate authority at this stage would be virtually granting a final relief and nothing would remain to be decided in the application as the suit.
It cannot be doubted that the Court should be extremely cautious and circumspect in passing an order at the interim stage which may be final in nature. However, there cannot be a straight-jacket formula that if a finding is arrived at by the Court that the action of the party is perverse on the face of it and violation of principles of natural justice is apparent, the Court would not be precluded from passing any order which may be final in nature. Any order passed in violation of natural justice is non-est. In the instant case, there is no dispute that the petitioner has been supplying safety items since 2002. Initially the petitioner was having its manufacturing unit at Baltikuri. This manufacturing unit was operational from 2002 to 2010. Thereafter the petitioner had started manufacturing from Kumarpara factory. In fact, a certificate of approval has been issued by the Executive Director, Research Designs and Standards Organisation on 2nd April, 2012 in category 1 and the said certificate of approval is extended till 31st July, 2016.
Mr. Chatterjee has referred to the electricity bills and the communications between the Vigilance Department and the Electricity Board and submitted that on the basis of the forged electricity bill, the petitioner has shown as if the petitioner is having its manufacturing unit at Baltikuri. To this, Mr. Saha has referred to the guideline for granting of renewal of registration in Clause (g). Clause (g) refers to electricity connection. The said clause is reproduced below:
(g) Compliance of Electricity Connection-
i. Whether firm is having authorised Yes/No
Electricity connection
ii. Whether firm has submitted latest Yes/No
electricity bill
If yes, date of last electricity bill
Iii Check name of the firm and work
address as per the electricity bill
Mr. Saha submits that no registration in respect of Baltikuri or Kumarpara could have been granted without physical verification and without a full assessment as referred to in the vendor guideline in Clause 4.1.6(A) which is reproduced below:
"On receipt of the case file to the zonal office, the concerned Director shall nominate official for Specification/STR verification in the firm premises and also, verification of original documents like ISO certificate, factory licence/SSI registration, electricity bill etc. Along with STR compliance relevant paras of specification shall be self complied by the vendor and verified by the assessing officer."
There is some substance in the argument of Mr. Saha. It appears that delisting of the petitioner on the ground of forging of electricity bill was without even consulting the guidelines. A manufacturer who has been so successful in supplying the safety items for the last several years would be foolish to submit forged documents for the aforesaid purpose. The conclusion of the appellate authority is also quite tentative and in utter disregard of the said guidelines.
On the aspect of the price rise, Mr. Saha has referred to the detailed representation submitted before the authorities on 8th July, 2014 in which this aspect of the matter was dealt with in paragraph 22(d).
It is stated in the said sub-paragraph that a perusal of the Tender Committee Minutes of the three concerned railways for the captioned tenders would reveal that the documents submitted by the petitioner were not even considered for ascertaining the price and the Technical Committee Convenor himself downloaded reports from website justifying the price of increase. In fact, the Tender Evaluation Committee has referred to the reports to the effect that the steep hike in prices of Pig Iron had been on account of acute shortage of Pig Iron in the market which ultimately resulted in sharp rise in the rates of the Brake Blocks. Mr. Saha had referred to the said minute of the Tender Evaluation Committee dated 10th September, 2008 which supports the stand taken by the petitioner before the appellate authority. The tender committee, in no uncertain term, has agreed that a price rise is inevitable and after a prolonged discussion the petitioner had agreed to reduce its rates. The discussions and recommendations of the tender committee is reproduced below:
"2.0 Discussions & Recommendations
2.1 The firm was advised that they have increased their price by 168.86% compared to their own last order within a span of only about 10 months which appears to be unreasonably high and the firm was asked to reduce their rates to a reasonable level. However, the firm mentioned that there has been unprecedented increase in cost of pig iron, which is 100% raw material used for manufacture of brake shoe. The prices of Pig Iron when the last tender opened (21/08/2007) were @ Rs.13600/- per MT and the same are @ Rs.36900/- per MT when the instant tender opened (27/06/08), which is an increase of 171.32% in cost of pig iron (CP/176-175). They submitted detailed justification for the price rise (kept at CP/178-179), and insisted that their quoted rate is reasonable and they are unable to offer any reduction in their rates. In support of their claim, the firm furnished price data for Pig Iron from SAIL and copies of recent orders of NR, NCR, WR and SAIL (Bhilai Steel Plant) for same/similar items with same raw material specifications. The firm was also asked to accept payment terms of 95% + 5% instead of 98% + 2% quoted by them. However, the firm did not agree for the same and stated that this is their standard payment terms which is being agreed to by other Railways also.
2.2 However, after prolonged discussions the firm finally reduced their rates from basic rate of Rs.1100/- each to Rs.1056/- each and their revised offer is kept at CP/178-179. This amounts to a reduction of 4% in the basic rate. Their revised all inclusive rate works out to Rs.1145.24 each, as against the original all-inclusive rate of Rs.1191/- each. Thus there is a total reduction of Rs.12,16,072/- for reviewed procurable quantity of 26575 nos. (as per para 2.0 of earlier TCM at CP/156).
2.3 TC noted that the revised negotiated rate now quoted is 158.5% higher than the LPR of the same item at an all-inclusive rate of Rs.442.98 each against P.O. No.S/16/07/0002/1/03645 dated 31/10/2007 (TOD 21/08/07, CP/43-44). There is only a single RDSO approved firm on date as per latest RDSO panel at CP/139, and this item is required to be purchased from this firm only. Negotiation has already been held with this firm and they have refused to reduce the rates any further.
TC further noted that recently following orders have been placed by various Railways for same or similar brake blocks:-"
The appellate authority has, however, completely disregarded this aspect of the matter. It is where the appellate authority has gone wrong and acted arbitrarily. Non consideration of the aforesaid minutes make the order vulnerable. Non consideration of a material document or overlooking a material document or fact render a decision perverse. Giving an opportunity of hearing to the petitioner would have helped the appellate authority to appreciate the facts. There has been a complete non-consideration of the recommendation of the tender evaluation committee.
Although an argument was advanced with regard to the standard quality of materials but the same is not borne out of record. The appellate authority also did not arrive at any finding that the petitioner has supplied any sub-standard material. The order of delisting which amounts to blacklisting has a serious civil and evil consequence. It tarnishes the image of a manufacturer and his reputation. In my view the emphasis should be on the quality of the material. The documents have been produced before this Court by Mr. Saha which would show that West Central Railway had written letter to Regional Inspection Office, Eastern Region with regard to the pending contracts. It is stated in the said communication dated 12th September, 2014 that the subject items that are safety items used in break application of electric locomotives are out of stock in West Central Railway and non-availability of material is badly affecting locomotives works and is going to hold up loco out turn of three electric loco sheds of WCR affecting train running. That the petitioners have been participating in different tenders and has been declared a successful vendor in many other tender are not in dispute. Mr. Saha would say that the Railway Authorities are throwing a spanner in the wheel and acted mala fide at the instigation of certain other manufacturers in order to affect the business of the petitioner. If there is any manipulation by the petitioner and the petitioner has violated any guideline just because a competitor in the market has lodged a complaint that by itself cannot be said to be mala fide. However, in the instant case, it appears from the e-mails disclosed at page 181 of the petition that the railway authorities were acting at the instance of one National Store Supply Agency and possibly has proceeded on the basis of such complaints. There is no dispute that the plaintiff manufactured such break blocks exclusively for railways and there is no buyer other than railway. In other words, the railways are the sole purchaser of such products. There is no dispute that the plaintiff has been supplying these break blocks to the railways for a very long time satisfactorily. In the aforesaid facts and circumstances, this Court is of the view that the appellate authority has failed to apply its mind and acted in violation of the principles of natural justice. The impugned order is liable to be set aside and is, accordingly, set aside.
The appellate authority is directed to hear the matter afresh after giving a reasonable opportunity of hearing to the petitioner and in the event the authority wishes to rely upon any document against the petitioner, the same shall be disclosed to the petitioner, at least two weeks before the matter is being heard by the appellate authority. The appellate authority shall also keep in mind that the order of de-registration amounts to stoppage of business and a virtual death of the concern and unless there are grave irregularity, the black-listing or de-registration of the petitioner would not be proper on the principle of doctrine of proportionality. The appellate authority shall decide the appeal afresh within a period of eight weeks from the date of communication of this order.
Urgent xerox certified copy of this order, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J)