Delhi High Court
M/S Gupta Brothers vs East Delhi Municipal Corporation & Anr on 8 March, 2016
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 8th March, 2016
+ W.P.(C) 2641/2015 & CM No.4733/2015 (for stay).
M/S GUPTA BROTHERS .... Petitioner
Through: Mr. S.N. Pandey, Adv.
Versus
EAST DELHI MUNICIPAL
CORPORATION & ANR ..... Respondents
Through: None.
CORAM:-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. The petition impugns the order dated 30th September, 2014 of the
respondents no.1&2 East Delhi Municipal Corporation (EDMC) de-barring
the petitioner from the panel of respondents EDMC for a period of five years
from the date of issue of the order (less the period of four months and 21
days i.e. from 7th November, 2013 to 28th March, 2014 for which the
petitioner had remained de-barred earlier).
2. The petition challenging the de-barring order was filed and re-filed on
13th February, 2015 and 13th March, 2015 respectively and came up first
before this Court on 18th March, 2015 when none appeared on behalf of the
petitioner and the petition was adjourned to 21st July, 2015. On 21st July,
2015, being prima facie of the view that the matter was purely contractual
W.P.(C) No.2641/2015 Page 1 of 18
and entailed disputed questions of fact and that the remedy by way of a writ
petition under Article 226 of the Constitution of India is not available to the
petitioner, the counsel for the petitioner was heard at length and judgment
reserved. None appeared for the respondents EDMC on advance notice.
Though the judgment went on the back burner for long but it may be
recorded that the petitioner, its counsel at no time in the interregnum
mentioned the matter.
3. The petition is filed pleading (i) that the petitioner was engaged in the
work of civil construction and enlisted with the respondents EDMC/its
predecessor Municipal Corporation of Delhi (MCD) vide Certificate dated
11th December, 2008 has never in the past been de-barred or blacklisted;
rather the work executed by the petitioner was adjudged as very good/good;
(ii) the bid of the petitioner for the work of improvement of six Mother &
Child Healthcare (MCH) Centres was accepted and the Work Order No.195
dated 15th February, 2013 issued by the respondents EDMC in favour of the
petitioner; (iii) that of the six sites, only three sites were handed over to the
petitioner; all the MCH Centres were fully functional between 9.00 a.m. to
3.00 p.m. six days of the week and the work thus could not be carried out in
full swing as the work involved renovation of rooms and halls in which the
W.P.(C) No.2641/2015 Page 2 of 18
MCH Dispensary was operating and the bath rooms attached thereto; the
staff and doctors of the MCH Centres did not allow the work of chiseling
and removal of plaster etc. to be carried out while the Dispensary was
functional; (iv) that the petitioner vide letters dated 13 th March, 2013, 11th
April, 2013, 26th April, 2013, 7th May, 2013 and 27th May, 2013 informed
the respondents EDMC of the hindrance in execution and the slow progress
of the work; (v) after much persuasion, fourth site was handed over but the
progress of the work still remained slow; (vi) the respondents EDMC
however issued a notice dated 11th March, 2013 asking the petitioner to
show cause why action under Clause-2 of the Agreement be not taken
against the petitioner on account of breach of contract on the part of the
petitioner in having not even started the work by then though the time for
completion thereof was of nine months only; (vii) the said show cause notice
was mala fide and a counterblast to the letter dated 13th March, 2013 of the
petitioner complaining of the delays on the part of the respondents EDMC
and as is also evident from the fact that the same was issued much prior to
the stipulated date of 23rd November, 2013 of completion of the work; (viii)
the petitioner vide its letter dated 1st July, 2013 replied to the show cause
notice and also met the Chief Engineer on the same day and was made to
W.P.(C) No.2641/2015 Page 3 of 18
sign on a blank paper on which subsequently false minutes of the meeting
were fabricated; (ix) that out of the total contractual value of Rs.92,88,171/-
towards civil work, work of the value of Rs.65,45,336/- could not be
executed for want of finalization of specifications of tiles and shades by the
respondents EDMC; (x) that the respondents EDMC without paying any
heed to the reply by the petitioner to the show cause notice aforesaid, vide
letter dated 29th July, 2013 directed the petitioner to deposit Rs.10,20,583/-
by way of compensation "as stipulated in Clause-2 of the Agreement"
failing which it was threatened that the amount shall be recovered from any
other contract of the petitioner; (xi) vide subsequent letter dated 6th August,
2013 penalty also was levied on the petitioner; (xii) the petitioner filed
CS(OS) No.1592/2013 impugning the claim of compensation and levy of
penalty on the petitioner and which suit was stated to be pending before this
Court; (xiii) that in further harassment of the petitioner, the respondents
EDMC issued a notice dated 27th August, 2013 asking the petitioner to show
cause as to why disciplinary action should not be taken against the petitioner
under the Enlistment Rules for not doing work under the Work Order
No.195 dated 15th February, 2013; (xiv) the petitioner submitted a reply
dated 2nd September, 2013 to the said show cause notice but the respondents
W.P.(C) No.2641/2015 Page 4 of 18
EDMC without even considering the same, vide order dated 6th September,
2013 de-barred the petitioner for a period of five years for non-completion
of the work awarded vide work order aforesaid; (xv) the petitioner filed
W.P.(C) No.7277/2013 in this Court impugning the same; though notice
thereof was issued but no interim relief claimed granted; aggrieved from
non-grant of interim relief, the petitioner preferred LPA No.912/2013 and
which LPA as well as the W.P.(C) No.7277/2013 were disposed of vide
order dated 2nd December, 2013 of the Division Bench by setting aside the
order dated 6th September, 2013 of debarment/black listing of the petitioner
by directing the respondents EDMC to pass a fresh order on the show cause
notice dated 27th August, 2013 after considering the reply dated 2nd
September, 2013 of the petitioner; and, (xvi) that a personal hearing was
granted to the petitioner on 16th July, 2014 but it was merely an eyewash and
the respondents EDMC vide impugned order dated 30th September, 2014
have again debarred the petitioner for the same period of five years less the
period of debarment/blacklisting earlier undergone by the petitioner.
4. It is the contention of the petitioner (a) that its debarment is "against
the provisions of Clause-23 of the contract" particularly Clause 23.3 titled
"removal from the approved list"; (b) the order of blacklisting has been
W.P.(C) No.2641/2015 Page 5 of 18
passed mechanically inasmuch as the explanation/response of the petitioner
has not been considered and dealt with; (c) that the empanelment of the
petitioner as a Class-II contractor is a valuable right and cannot be taken
away in the manner done; (d) that none of the Clauses of Class 23.3 of the
contract on which alone blacklisting/debarment can be done are applicable
to the petitioner; (e) that no instructions of the respondents EDMC have
been disobeyed by the petitioner; (f) that the petitioner has never in the past
been proceeded against for the reason of any of its works being
unsatisfactory; (g) that the work order, of renovation of MCH Centres, was
issued notwithstanding the said Centres being functional and during which
time the work was/is not possible; and, (h) that the order of blacklisting for
five years is too harsh and unreasonable.
5. The counsel for the petitioner during the hearing informed that the
civil suit aforesaid filed by the petitioner had been withdrawn upon non-
grant of interim order therein.
6. I had, as aforesaid, prima facie felt the writ remedy to be not available
owing to the recent pronouncement of the Supreme Court in Joshi
Technologies International Inc. Vs. Union of India (2015) 7 SCC 728,
applying the tests laid down wherein it was felt that the lis between the
W.P.(C) No.2641/2015 Page 6 of 18
parties is purely of a personal nature without any public law character. The
counsel for the petitioner during the hearing also argued that the stand of the
respondents EDMC of the default being on the part of the petitioner was
fallacious in view of the letters written by the petitioner from time to time.
The same fortified my view of the dispute entailing factual controversy,
whether the default was on the part of the petitioner or not, being capable of
determination only by examination and cross examination of witness and
which strictly speaking is outside the domain of the writ petition. Else it is
not in dispute, after the direction in the earlier writ petition, that the
petitioner has been given due hearing prior to being blacklisted. The
proportionality of the period of blacklisting is largely in the domain of the
authority having power to blacklist and scope of interference by Court is
limited. (see State of Karnataka Vs. H. Nagaraj (1998) 9 SCC 671, Union
of India Vs. R.K. Sharma (2001) 9 SCC 592 and Om Kumar Vs. Union of
India (2001) 2 SCC 386)). However while dictating the judgment and while
going through the paper book it is felt that one of the legal questions which
can arise is, whether the blacklisting/debarment is contrary to the terms of
blacklisting/debarment laid down by the respondents EDMC itself, as
pleaded by the petitioner with reference to "Clause 23 of the Agreement". It
W.P.(C) No.2641/2015 Page 7 of 18
was felt that if the contract/agreement lists the circumstances or conditions
or events on the happening of which power to blacklist can be exercised,
there can be no blacklisting in contravention thereto. I have thus examined
the matter from the said perspective to see whether a case for calling upon
the respondents EDMC to respond is made out.
7. Though the petitioner has referred to a "contract" or to an
"Agreement" but has not filed any Agreement/contract. The only thing
which has been filed is the Work Order dated 15th February, 2013 and which
work order refers to the terms and conditions of tender but which have not
been filed. The said work order further calls upon the petitioner to attend the
office of the respondents EDMC "to complete the formal Agreement" but no
formal Agreement as aforesaid has been filed.
8. A perusal of the show cause notice dated 27th August, 2013 shows that
the petitioner was asked to show cause as to why "disciplinary action should
not be taken against your firm under Enlistment Rule for not doing the
above mentioned work". The work above mentioned was the Work Order
dated 15th February, 2013 supra.
9. The respondents EDMC in the impugned order dated 30 th September,
2014 records (i) that the work under the Work Order dated 15th February,
W.P.(C) No.2641/2015 Page 8 of 18
2013 was to be started latest by 24th February, 2013 and to be completed by
24th November, 2013; (ii) the work was to be taken up at six different sites
of existing MCH Centres for their renovation and improvement; (iii) the
petitioner neither brought any material at site nor started any work at any of
the six sites till 11th March, 2013; (iv) show cause notice dated 11th March,
2013 was issued to the petitioner and the reply of the petitioner thereto was
not found satisfactory; (v) the petitioner also failed to depute a Graduate
Engineer at site to supervise the work; (vi) subsequent letters were written to
the petitioner and the excuses given by the petitioner were not found
acceptable; (vii) the petitioner was well aware about the site conditions and
it was supposed to take up the work in an organized manner so that the same
could be completed in stipulated time period without creating any hindrance
in day-to-day work of health Centres; (viii) the petitioner however took up
the work only at four sites and that too in a haphazard manner by
dismantling of doors, windows and tiles etc. without proper planning and
which created problems in MCH Centres; (ix) the petitioner did not start any
work at the other two sites; (x) that though the petitioner had alleged that
Third Party Quality Assurance Agency had not been engaged but "NCCBM"
was engaged by the department as Third Party Quality Assurance Agency
W.P.(C) No.2641/2015 Page 9 of 18
for this work and which had also inspected the work on 12 th April, 2013; (xi)
since the progress of the work was not proportionate with respect to
stipulated time, a show cause notice "under Clause 3 was also issued" vide
letter dated 1st July, 2014 and personal hearing was also fixed
simultaneously on 1st July, 2014; (xii) during the course of hearing the
petitioner had assured to gear up the progress and to complete the work
within stipulated time; accordingly a joint inspection was fixed up after a
fortnight; (xiii) during the visit on 16th July, 2013 no progress was found and
only two or three workers were found at the two sites; (xiv) the petitioner on
29th July, 2013 completely stopped the work and removed all building
material and T&O from the site; (xv) NCCBM also inspected the site on 29 th
July, 2013 and reported that only 10% of the total work had been
completed; (xvi) another hearing was given to the petitioner on 12 th August,
2013 but the petitioner failed to attend the same; (xvii) since inspite of
giving sufficient opportunity the petitioner had failed to give substantial and
proportionate progress of the work it was felt that the petitioner is willfully
and deliberately not taking up the work with the mala fide intention and
found liable for action under Enlistment Rules; (xviii) since work was of an
urgent nature and was to be completed in a time bound manner, show cause
W.P.(C) No.2641/2015 Page 10 of 18
notice dated 27th August, 2013 for taking disciplinary action under
Enlistment Rule was issued; (xix) the reply of the petitioner was not found
satisfactory; (xx) accordingly the petitioner was debarred for five years vide
order dated 7th November, 2013; (xxi) after the orders in the writ
petition/LPA aforesaid filed by the petitioner personal hearing was granted
to the petitioner and the matter considered afresh; (xxii) it was evident that
the petitioner did not start the work within the stipulated period of ten days
from the work order and even after 50% of the stipulated time had expired
was found to have done only 10% of the work; (xxiii) the petitioner had not
engaged Graduate Engineer at site which was mandatory as per the terms
and conditions of the contract; (xxiv) the petitioner did not even start work
of two sites; (xxv) the demand of the petitioner to hand over the vacant
possession of running health centres was neither feasible nor justified; (xxvi)
the petitioner had failed to improve progress of work inspite of sufficient
opportunity; (xxvii) the petitioner had not abided by the assurances given by
him; and, (xxviii) accordingly the order of debarment from the panel of
EDMC for a period of five years was being issued.
10. The petitioner along with the petition has filed a copy of the
"Instructions for enlistment of contractors in MCD" and which appears to
W.P.(C) No.2641/2015 Page 11 of 18
have been issued in the year 2008. I, at this stage must state that the
petitioner has not placed all the documents before this Court. The conduct
by the petitioner of this petition is found to be as lackadaisical as the conduct
of the petitioner in carrying out the works aforesaid as per the respondent
EDMC. The petitioner, inspite of being barred/blacklisted has not shown
any urgency. As aforesaid the contract has not been placed; the typed copies
only of annexures filed are with a large number of blanks making the same
difficult to comprehend; the orders passed in the suit admittedly filed by the
petitioner have not been filed. Moreover as aforesaid, the counsel for the
petitioner during the hearing did not even refer to the Instructions for
enlistment and only on going through the petition and finding the same to
have been pleaded are the same being considered. On the website of the
Municipal Corporation of Delhi I find a Circular dated 2 nd March, 2012
circulating "Revised instructions for enlistment/revalidation of contractors in
MCD" and "Instructions for enlistment of contractors in MCD, 2012" to be
available and which repeal all the previous instructions. It thus appears that
the instructions as in force are of the year 2012 and not of 2008 as have been
filed by the petitioner. All this shows the lackadaisical attitude of the
petitioner in pursuing this petition. Be that as it may the 2012 instructions
W.P.(C) No.2641/2015 Page 12 of 18
are for enlistment of contractors who intend to work with the MCD and
Clause 23 thereof is titled "Disciplinary Actions". Thereunder Clause 23.1
is titled "Demotion to a lower class", Clause 23.2 is titled "Suspension of
business". Clause 23.3 is titled "Removal from the approved list" and
provides that "the contractor shall have to abide by all the instructions of
enlistment and also by the terms and conditions of the contract and the
notice inviting tenders" and empowers the Enlisting Authority to inter alia
debar the contractor or remove his name from the approved list of
contractors indefinitely or for a period as decided by the Enlisting Authority
after issue of show cause notice and makes the decision of the Enlisting
Authority final and binding on the contractor. Clause 23.3 provides for
removal of the name of the contractor from the approved list of contractors,
if the contractor:-
"A) has , on more than one occasion, failed to execute
contract or has executed it unsatisfactorily; or
B) is proved to be responsible for constructional
defects in two or more works; or
C) persistently violates any important conditions of
the contract; or
D) fails to abide the conditions of enlistment; or
E) is found to have given false particulars at the time
of enlistment; or
F) has indulged in any type of forgery or falsification
of records; or
W.P.(C) No.2641/2015 Page 13 of 18
G) changes constitution of the firm or Individual,
change the name of the firm without prior
approval of the enlistment authority; or
H) changes permanent address/ business address
without intimation to the enlistment authority; or
I) is declared or is in the process of being declared
bankrupt; insolvent, wound up, dissolved on
partitioned; or
J) persistently violates the labour regulations &
rules, or
K) is involved in complaints of serious nature
received from other department which prima facie
appear to be true.
L) Default in settlement of tax dues like income tax,
contract tax, sales tax, octroi, duties etc.
M) has already been demoted for other reason(s),or
N) Ceases to fulfill eligibility criteria based on which
enlistment / revalidation was done, or
O) is considered not required to be in list of MCD for
any other reason considered fit by enlistment
authority.
P) Does not start the work after the same is awarded
to him on three occasions."
11. As I have noticed above, the impugned order of 30 th September, 2014
of blacklisting mentions of the default of the petitioner qua the subject work
order only. The grounds of blacklisting mentioned in Clauses (A) and (B) or
(P) which pertain to defaults in two or more works are therefore not
attracted. Similarly, the grounds mentioned in the impugned order dated
30th September, 2014 do not fall in Causes (D) to (O). That leaves only
Clause (C) i.e. of "persistently violating important conditions of contract".
W.P.(C) No.2641/2015 Page 14 of 18
Unlike Clauses (A), (B) and (P), Clause (C) does not use the words "on
more than one occasion" or "two or more works" or "on three occasions". I
have wondered whether to qualify as „persistent‟, the violation of important
conditions of contract within the meaning of Clause (C) has to be qua more
than one work order / contract or can be qua one contract only. From the
use of the words "any important conditions of the contract" instead of
"important conditions of contracts" it appears that the reference is to one
contract only. The word „persistent‟ otherwise means "continuing firmly or
obstinately in an opinion or course of action inspite of difficulty or
opposition". There is nothing in it which requires from use thereof in Clause
(C) that the violation of important conditions of contract to qualify as
„persistent‟ have to be qua more than one contract. I am therefore of the
opinion that persistent violation of important conditions of one contract /
work order can invite debarment / blacklisting under Clause 23.3 of
Instructions for enlistment.
12. The language of the impugned order dated 30 th September, 2014 does
make out a case of „persistent violations of important conditions‟ of subject
work order by the petitioner - in the opinion of the respondents EDMC,
even though exactly these words have not been used. From the material on
W.P.(C) No.2641/2015 Page 15 of 18
record it is evident that the respondents EDMC was giving immense
importance to the work under the subject work order and rightly so, the same
being of renovation of MCH Centers of vital importance to the most
sensitive section of our society.
13. Clause 23.3 supra makes the opinion of the Enlisting Authority final
and binding on the contractor i.e. the petitioner. Of course, it will remain
subject to judicial review but again, a) it is a disputed question of fact
whether the violation was persistent or not, b) the lis is contractual and c)
without any public law character.
14. Not only so, as aforesaid, the Enlistment Instructions/Conditions are
besides the conditions of the notice inviting tender and the contract and
which the petitioner has failed to file. It thus cannot be said whether
thereunder debarment is possible on some other grounds as well. In this
regard I may also notice that the Supreme Court as far back as in Erusian
Equipment & Chemicals Ltd. Vs. State of West Bengal (1975) 1 SCC 70
held that an ordinary individual can choose not to deal with any person but
the Government/Governmental Agencies, as the respondents EDMC are,
cannot choose to exclude persons by discrimination. It was further held that
no person has a fundamental right to insist that the Government must enter
W.P.(C) No.2641/2015 Page 16 of 18
into a contract with him and that in passing an order of blacklisting the
Government must act under a standardised Code. Again in Patel
Engineering Ltd. Vs. Union of India (2012) 11 SCC 257 it was held that
a State can decline to enter into a contractual relationship with a person with
legitimate purpose and that the authority of State to blacklist a person is a
necessary concomitant to the executive power of the State to carry on the
trade or the business and making of contracts for any purpose, etc. and that
there need not be any statutory grant of such power. It was further held that
only legal limitation upon the exercise of such an authority is that State is to
act fairly and rationally without in any way being arbitrary. It was yet further
held that the failure to mention blacklisting to be one of the probable actions
that could be taken against the delinquent bidder does not, by itself, disable
the from blacklisting a delinquent bidder, if it is otherwise justified. The
power to blacklist was held to be inherent in every person legally capable of
entering into contract.
15. I have following the aforesaid and other judgments, in Prabhatam
Advertisement Pvt. Ltd. Vs. Municipal Corporation of Delhi (South Zone)
New Delhi MANU/DE/2674/2015, concluded that the exercise of the power
W.P.(C) No.2641/2015 Page 17 of 18
to blacklist is independent of any provision therefor in any law or in the
contract.
16. Here, not only has the petitioner not placed the contract and the tender
before the Court but even as per the Enlistment Instructions a ground for
blacklisting had accrued. However the petitioner persistently failed and it
thus cannot be said that the blacklisting of the petitioner is contrary to the
Enlistment Instructions also.
17. Else, as I have already observed, the dispute is factual and there is no
grievance of non-compliance of prescribed procedure and principles of
natural justice. This Court has already once in the past directed
reconsideration.
18. Thus no case for entertaining the petition is made out. The petition is
dismissed with liberty to the petitioner to invoke the arbitration clause if any
in the contract or to file a suit on the same cause of action.
No costs.
RAJIV SAHAI ENDLAW, J.
MARCH 08, 2016 „pp‟ ..
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