Aecom Asia Company Limited vs Airport Authority Of India on 3 November, 2023

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Delhi High Court - Orders

Aecom Asia Company Limited vs Airport Authority Of India on 3 November, 2023

1. The present petition assails order dated 13.07.2023 whereby the petitioner has been "restrained/debarred for a period of one (1) year from participating in future tendering in AAI from the date of issuance of this order".

2. The order has been passed in the backdrop of a show cause notice dated 30.11.2022 wherein it was stated as under:

"No.AAI/CAP/AECOM/22-23/1201/1109-1110 Dated: 30.11.2022 To:

Executive Director (Aviation), M/s. AECOM Asia Company Ltd., 9 /F, Infinity Tower C. DLF Cyber City, Phase II, Gurgaon -122 002 (India) Name of Work: PMC services for Modernization of Chennai Airport, (Phase-

II), Agreement No.: ENGG/ED-SR/AGM (EC)/Chennai Ph-II/PMC/2017/01, dt.06.03.2017 Sub : Show Cause Notice under clause 14.5 of agreement page 260. Ref. : 1) AECOM/PMC/MCAP/PII/2022/3536, Dt: 10.06.2022

2) AECOM/PMC/MCAP/PII/2022/3337, Dt: 16.03.2022 O.M.P.(I) (COMM.) 266/2023 Page 1 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:31

3) AECOM/PMC/MCAPIPII/2022/3336, Dt: 16.03.2022

4) AAI/CAP/CC-II/206/2022/152-154, Dt: 08.02.2022

5) AAI/CAP/CC-II/206/2022/483-491, Dt: 02.06.2022 Dear Sir(s), WHEREAS it appears to the undersigned that by reason of your wrongful delay in delivering drawings, change in level of BHS deck, Non-issuance of drawings in BIM, Incorrect checking of bills, excessive deviation etc. (Refer Annexure-I enclosed), the work entrusted to you under the agreement referred to above, due to which work has not been completed within the stipulated date of completion.

Therefore, I, A.S. Mahesha, GM (Engg.-Project) in exercise of the powers conferred on me by the aforesaid agreement Clause no. 14.5 of SCC (Page 259-260), for and on behalf of the Chairman, AAI, hereby give you notice to show cause, why the letter of restrain / temporarily debar from future participation in AAI tenders shall not be issued to you, within 7 days to my satisfaction on account of the breach of contract on your part. Please note that in case no cause is shown by you within the stipulated period or the cause shown is not to my satisfaction, I shall take such action against you as to restrain I temporarily debar you from future participation in AAI tenders as are contemplated, without further notice.

Yours Faithfully, (A.S. Mahesha) Engineer-in-Charge GM (Engg.-Project), Chennai Airport For and on behalf of The Chairman, AAI"

3. An elaborate reply dated 21.12.2022 to the said show cause notice was sent by the petitioner, inter alia, stating as under :-

                                                "AECOM/PMC/MCAP/PII/2022/3970                                                            21.12.2022
                                                To
                                                General Manager Engg. (Project),
                                                Airports Authority of India,
                                                Chennai Airport Project,
                                                Chennai-600016.

Name of work : PMC Services for Modernization of Chennai Airport, Phase-II. Agreement No.: Agreement No. ENGG/ED-SR/AG(E-C)/Chennai Ph-

II/PMC/2017/01, dated 6th March 2017.

Sub : Show Cause Notice under Clause 14.5 of agreement at Page No.260.

O.M.P.(I) (COMM.) 266/2023 Page 2 of 16

This is a digitally signed order.

Dear Sir, With reference to your above show cause notice issued on various points discussed and AECOM's reply is submitted below.

At the outset AECOM deny all your allegations blaming AECOM for the delay of the project. The following paragraphs brings the allegation made and the reply given are provided.

                                                        a.      Delay in delivery in drawings.
                                                        b.      Change in level of BHS deck.
                                                        c.      Non issuance of Drawings in BIM.
                                                        d.      Excessive deviation beyond estimated value.
                                                        e.      Delay in submission of detailed estimate and draft NIT for 17t
                                                                temporary closure.
                                                        f.      Erroneous/Incorrect evaluation of bill resulting in excessive
                                                                payment to the contractor.

All the above issues are already replied in details through our various letters to AAI and there were few show cause notices issued also properly replied. As AAI satisfied with reply and there was no further action from AAI.

Letter to AECOM were issued by the Engineer-in-Charge well in advance to take care of issue of drawings in time, so that the contractor do not take plea of non issuance of drawings and decision. Hence all the drawings and decision were taken in time.

Reply for the above items are given below:

a. Delay in delivery in drawings:

As per Clause 1.2.4 at Page 187 "PMC should ensure that all designs of work are frozen at least three months before actual physical execution of work. Accordingly, all the drawings are issued in time and there was not even a single day the work was stopped for want of drawings whether it is RCC structural works or structural steel works or finishing work.


                                                Sl.         Major Activity        Date of issue of Date of start of actual work at
                                                No.                               Drawing          site
                                                1.          Structural      steel 22-01-2019       Specialized     agency    M/s.
                                                            drawings for roofing                   Eversendai brought on board
                                                                                                   28-05-2019.
                                                2.          Roofing    drawings 01-02-2019         Specialized     agency    M/s.
                                                            issued                                 Lloyds brought on board 15-
                                                                                                   11-2019.
                                                3.          Facade     drawings 09-11-2019         Specialized     agency    M/s.



                                    O.M.P.(I) (COMM.) 266/2023                                                             Page 3 of 16
This is a digitally signed order.

The work was delayed by the contractor for want of resources either it is material or manpower the contractor was always short of resources. Contractor has been alerted through multiple letters in this regard. The following few letters may be referred

i) Shortage of Manpower and shuttering vide AAI Letter No.AAI/CAP/Engg(C)/02/2019/3119-3123, 16-10-2019.

ii) Delay in Progress of work vide AAI Letter No.AAI/CAP/Engg(C)/02/2019/3514-3515, 14-11-2019.

iii) Delay in BHS works vide AAI Letter No.AAI/CAP/Engg(C)/202/2020/7099-7104, 28-10-2020.

iv) Slow progress of structural steel work vide AAI Letter No.AAI/CAP/Engg(C)/202/2020/7065-7068, 21-10-2020.

v) Showcause Notice issued to M/s.L& T vide AAI Letter No.AAI/CAP/Engg(C)/202/2020/7348-7353, 07-12-2020.

b. Change in level of BHS deck:

The BHS deck was changed from(-) 5.600 m (-) 4.700 m. The BHS deck had to be modified after the executing agency came on board in the month of December 2020 to suit with the vendor driven equipment requirement, based on their products, which could not be foreseen in early design stage. You are also aware of the fact that the modification of BHS deck severely impacted the MEPF and IT services and we had to redesign all related systems and facilities, spending several days by many subject experts before delivering the redesign to meet the SHS vendor requirement. The additional efforts by our professionals in re- designing the SHS deck level and subsequent integration of other services like HVAC, IT etc. Comes under the provisions of clause 2.0(c) of F. Conditions of Contract, page 243. We reserve our right to claim for payment of the same at appropriate time.

c. Non issuance of Drawings in BIM:

We wish to invite your attention to our earlier letters bearing references AECOM/PMC-Chennai/153 dated 22nd September 2020 and AECOM/PMC- Chennai/155 dated 5th November 2020 where we have already explained that the GFC drawings for all the disciplines namely architecture, structure, MEP & fire (ASMEPF) have been extracted from the SIM Model only as per the provisions of Clause No.1.2 in page No.185 of the contract agreement.

It has also been brought to your notice vide our above-mentioned letters that we have already explained you that we are using REVIT platform for generating the BIM model and this is being used for extracting and issuing GFC drawings for ASMEPF discipline. We have also shared the SOP for the actions to be taken on SIM platform by other stakeholders vide our letter mentioned above and has also O.M.P.(I) (COMM.) 266/2023 Page 4 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 asked to share the Flow chart with other stakeholders, showing stages of incorporation of details of shop drawings, for their adherence so that the SIM become useful for all the stakeholders.

We understand from your letter that the same has not been implemented from your end. We once again request you to share the Flow chart, provided with the above letters, with other stakeholders for adherence.

Please be appraised that the designer delivers the SIM in LOO 300/350, and it's the responsibility of the execution agencies to upgrade the LOO and generate the fabrication and subsequently the as built models by incorporating working details so as to augment the model to LOO 400, and thereafter continually updating the field changes and construction details as the work progresses to develop the model further to LOO 500 so that the as-built drawings could be extracted from the same model when the project is completed....... it's noticed that the contractors are subcontractors are not following the same and the GFC model issued by us remained further undeveloped. We have been explaining this industry practice of managing SIM from the beginning of this project, but your office doesn't seem to have taken serious note of the same and preferred defame AECOM that maintains highest standards in BIM in India and across the globe. AECOM being the industry leader for BIM never treat it as a mere 30 construction tool, but take it further to subsequent levels for scheduling, costing, sustainability and finally for asset management (70). But this is possible only when all stakeholders of the project work on the same platform and update the model to LOOS00 by the end of the project so that the operation team can take over the final model for O&M purpose.

d. Excessive deviation beyond estimated value:

As per clause 2.5.1.1 at Page No.200 of the agreement. Methodology:

a. Based on the detailed design I drawings I Technical specifications I Makes finalized as above, the PMC shall prepare the detailed measurement sheets to arrive at quantities of various items of work and formulate the bill of quantities.

b. Based on above, the PMC shall prepare the detailed estimate based on CPWD DSR Enhanced with cost index & market rates duly supported with market rate quotations (Minimum 3 Nos.) (Market rates to be finalized with material, manpower, machinery norms, based on prevailing AAIICPWD norms I Industry norms I sound engineering practices), for call of execution tender and evaluation of financial bids. Detailed Estimated cost shall be prepared ideally for 100% of all the quantifiable items (minimum 95% value, for the remaining 5% cost can be worked out on experience on similar works I industry norms). c. The bill of quantities and the detailed estimate shall be prepared in the format I subheads of work as decided in consultation with AAI.

O.M.P.(I) (COMM.) 266/2023 Page 5 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 As per Clause 14.2 Penalty for excessive deviation beyond estimated value a. It is the responsibility of the PMC to ensure the integrity of the detailed estimate I DPR I Justified cost and that there is minimum variation in the estimated and executed cost which should normally not exceed 5% of the estimated value (based on justified rates). However, in case the variation is observed more than 10% (this shall exclude deviation on account of reasons beyond control of the PMC), over and above the provisions in tender document.

b. An additional recovery limited to the 5% of the consultancy fees shall be made @ 1 % for every 2% additional excess deviation beyond maximum permissible 10% deviation in the justified value (variation between justified cost for the defined scope of work and the completion cost for similar scope of work, making allowance for tender variation as applicable). In case the variation is more than 20%, AA/ reserve the right to initiate other Administrative I penal action including debarment against the PMC.

With reference to the above clauses you have raised your concern regarding the deviations. In this regard, please note that we have reviewed our earlier submissions and the present project status.

We refer to our earlier letter AECOM/PMC/Chennai/DPR/15, 05-07-2017 whereby we have submitted the DPR containing the detailed cost estimate. The snapshot of the relevant paragraph is produced below for your reference.

The detailed Cost Estimate is attached with the chapter, Total cost based on the Preliminary design is estimated to be as follows Civil & Finishing cost = 1207 Crore Electrical works = 949 Crore Airport system = 230 Crore IT systems = 35 Crore Total Project Cost = 2422 Crore The current scenario of the work under various awarded packages as on today, Rs.2129 crores (Excl.GST). Brief details of the same has been produced below for your ready reference.


                                                                            ANTICIPATED COMPLETION COST vs. AA & ES
                                                                                  Modernization of Chennai Airport, Phase-II
                                    S.          Description             Amount (Rs.          Details of Packages        Anticipated      Total       Remarks
                                    No.                                  in crores)                                     Completion     Anticipated
                                                                                                                        Cost (In Cr.   Completion
                                                                                                                        =Rs.)           Cost (In
                                                                                                                                        Cr.=Rs.)
                                    (I)      Terminal
                                             buildings
                                                                                            M/s. L&T                       966.78




                                    O.M.P.(I) (COMM.) 266/2023                                                                              Page 6 of 16
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 M/s Godrej (Interior-Civil) 64.06 STP (Civil) 6.81

a) Civil Works 968.83 Road Works (Boss & 15.35 1089.53 Kavitha) External false ceiling 25.87 Shri Balaji Vestibule Works 6.88 Misc. STP works 1.24 Furniture 2.54 M/s. L&T 256.89 M/s. Pteris Global 366.43

b) Electrical M/s SATIN NEO 4.92 Works M/s. Godrej and Boyce Mfg 21.15 727.92 Co. Ltd.

                                                                                            M/s HYDROTECH                  19.21
                                                                                            Passenger Boarding System      46.61
                                                                                            Deposit to Electrical Board    12.71
                                             c)      Airport               184.75           M/s. L&T                       93.60    119.03
                                             System Works                                   Separate Tender                25.42
                                             d) IT Works                   28.25            M/s. L& T                      30.38     58.63
                                                                                            Separate Tender                28.25
                                                     Total=               1953.92                                                   1995.10
                                             Labour Cess @                 19.54                                                     0.00       Included
                                             1%
                                                     Total=              19.73.46                                                   1995.10
                                             Contingencies                 59.2                                                      35.00
                                             @ 3.0 %
                                                     Total=               2032.66                                                   2030.10

                                             Provision     for
                                             Cost Escalation
                                             @ 6.5 % per                   278.63                                                    40.00
                                             annum after 2
                                             years, for next 2
                                             years
                                                       Total=             2311.29                           -                -      2070.10
                                    (II)      PMC Charges                                            As per Contract       45.81     59.29
                                               (Consultant                   45
                                                 already
                                                appointed)
                                                                                              Additional payment during     7.40
                                                                                                   extended period
                                                                                                 Additional Claims          6.05

                                             Total Cost              2,356.29 Anticipated Completion Cost (In Cr.=Rs.)              2,129.36
                                             Service Tax @
                                             15% of 40% of             110.66 GST Part of the Cost considered                       383.29      -272.63
                                             Total Cost
                                             Total A/A&E/S
                                             Cost incl. Tax          2,467.00 Anticipated Completion Cost Incl GST &                2,512.65
                                             (In Cr.=Rs.)                       CAMC

As per Clause 8.1 of DOP, no revised AA&ES shall be necessary if the variation is on account of statutory increases (18% of GST - Service Tax @ 15% of 40% of Total Cost) [391.17 Cr. - 110.66 Cr.] -272.63 CAMC Cost -102.43 Anticipated Completion Cost (in Cr.)= 2137.59 Net Anticipated Cost saving in Rs.= 375.06 Net Anticipated Cost saving in %= 13.35% O.M.P.(I) (COMM.) 266/2023 Page 7 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 Hence, at this stage we do not foresee variation beyond the stipulated percentage as said in the agreement clause 14.2 of the agreement with respect to estimated value in the DPR.

e. Delay in submission of detailed estimate and draft NIT for 17t temporary closure:

Originally the temporary closure along with Grid line 17t was to be executed by call of separate tender. But later date due to the co-ordination issues it was decided the work will be done by M/s. L&T the main contractor themselves. The detailed estimate and DNIT for 17t closure were submitted earlier was dropped. Hence, there was no delay in submission of detailed estimate the Draft/NIT for 17t temporary closure.

f. Erroneous / Incorrect evaluation of bill resulting in excessive payment to the contractor:

At the outset, please be informed that we have already clarified the fact that there is no malafide intention or collusion in the above error cited by AAI.

As intimated the escalation bill No.01 for the period up to April 2021 was not prepared by M/s. AECOM. It was prepared by the contractor M/s. L& T and submitted to AAI for scrutiny and payment.

When it was scrutinized by AECOM various clause of 10CA and 1 0CC of the GCC were referred and found that the same was also adopted by M/s. L&T. After making the arithmetic corrections it was forwarded to AAI for further necessary action. The documents provided by the Contractor were further verified by all the AAI Officials before forwarded it to Accounts Section for further scrutiny and payment was made.

It was AECOM who found the mistake and informed in the meeting with AAI, that in escalation bill No.1 of M/s. L& T that, All India wholesale price index published by the GOI for all commodities was considered in the calculation of escalation under Clause 10CC as mentioned in GCC. Whereas, as per the Pre Bid Queries & replies of the tender document, the All India Wholesale price index for civil components of construction materials published by CPWD should have been considered which remind unnoticed at the time of processing of escalation Bill No.1 of the contractor. Also, the base price of material without GST as published by concerned Zonal Chief Engineer, CPWD is to be considered for calculation of escalation under Clause 10CA has been advised by the audit team (Ref. your letter AAI/CAP/CC-11/206/2021/1026 dated 17.12.2021). (copy enclosed) Accordingly, the escalation bill was modified and the excess payment was already recovered from the contractor in the very next escalation bill, even before the O.M.P.(I) (COMM.) 266/2023 Page 8 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 receipt of CTE report. In this regard, please refer CPWD works manual 2014.

Section 52.4: Recoveries of over payments pointed out by CTE: "(1) Normally the recoveries of overpayments pointed out by the CTE should be made within a period of 3 months from the date of issue of memorandum by the CTE. The overpayment arising out of the defects pointed out by the CTE should be promptly assessed and accepted by the Divisional Officer whenever agreed to, and the recoveries effected from the money due to the contractor, either from the same work from the immediate running bill, or from any other work or from the security deposit if any, with the Director General (Works)".

As per the above section, the CTE report stating the over payment was received on 02-05-2022 by this office. However, the recovery was already effected from the contractors running bill on 11.02.2022 itself.

It is a well-known fact and standard procedure that once after processing of the contractor's bill by consultant, AAI officials also further conduct scrutiny of the bills and pass it to accounts section before making payment. However, the error remained unnoticed at all levels during the payment of the escalation bill No.1 to the contractor.

Now as per AAI Letter No.AAI/CAP/CCII/206/2022/1080-1082, dt.15-11-2022, ECOM has been penalized for the error and the levy of interest of Rs.34, 11,826/- towards excess payment of escalation Bill No. 1 has been proposed to be recovered from AECOM in the next running bill due for payment, to which we disagree as we are not the beneficiary of the excess payment made by AAI.

In view of the above interest amount which has been kept withheld from the contractor's payment (the beneficiary of the excess payment) is recommended for the deduction / recovery from the running bill of the beneficiary of the excess payment (i.e.) M/s. L& T the contractor.

Your kind attention is also drawn to your letters mentioned under various headline (a) civil, (b) Electrical (c) Planning (d) Airport Systems & (e) Information Technology etc. were promptly replied by AECOM through the following letters.

1. AECOM Letter No.AECOM/PMC/MCAP/PII/2020/1422, 01-04-2020.

2. AECOM Letter No.AECOM/PMC-Chennai/151, 03-09-2020.

3. AECOM Letter No.AECOM/PMC-Chennai/153, 22-09-2020.

4. AECOM Letter No.AECOM/PMC-Chennai/132, 20-10-2020.

5. AECOM Letter No.AECOM/PMC-Chennai/155, 05-11-2020.

6. AECOM Letter No.AECOM/PMC-Chennai/157, 26-11-2020.

7. AECOM Letter No.AECOM/PMC-Chennai/158, 15-12-2020.

8. AECOM Letter No.AECOM/PMC-Chennai/160, 22-12-2020.

O.M.P.(I) (COMM.) 266/2023 Page 9 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32

9. AECOM Letter No.AECOM/PMC-Chennai/163, 01-02-2021.

10. AECOM Letter No.AECOM/PMC-Chennai/165, 10-02-2021.

11. AECOM Letter No.AECOM/PMC/MCAP/PII/2021/2852, 23-09-2021.

12. AECOM Letter No.AECOM/PMC/MCAP/PII/2022/3487, 23-05-2022.

In view of the above, we find it extremely unfortunate that in place of recognizing our goodwill and extra efforts, AAI is issuing such a letter totally thrashing our goodwill and demotivating the team.

Your kind notice is once again invited to the fact that despite our repeated follow up at various levels in AAI our overdue stage payments under various heads and for extra works pertaining to various directives and in principle approval of the authority, amounting to Rs.9.15 crores (2.64 crore-design variation + 6.51 crore- outstanding amount of regular works) have not yet been paid to us. This blockage of huge fund is making it extremely difficult for us to provide uninterrupted and smooth support and PMC services. Please be appraised, the scheduled deliverables are likely to be delayed due to the non-payment of our long overdue outstanding payments. We hope you will understand and appreciate our efforts in providing uninterrupted and continuous inputs in the interest of the project, despite being pushed into this hardship, so that the project progress is not hampered.

In view of the above, you are requested not be restrain/temporarily debar AECOM from future participation in AAI tenders.

Thanking you and assuring you to render the best of our services."

4. As can be seen from the aforesaid, elaborate reasons have been given by the petitioner bringing out as to why the allegations made in the show cause notice were not justified. Further, it was categorically stated that not even for a single day was there any stoppage of work for want of drawings whether in respect of RCC structural work, steel work or finishing work.

5. In the backdrop of the aforesaid reply filed on behalf of the petitioner, the respondent proceeded to issue the impugned debarring order wherein it was stated as under:

"No.AAI/CAP/AECOM/22-23/1201/1539 Dated: 13.07.2023 To:

Executive Director (Aviation), O.M.P.(I) (COMM.) 266/2023 Page 10 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 M/ s. AECOM Asia Company Ltd., 9 /F, Infinity Tower C. DLF Cyber City, Phase II, Gurgaon -122 002 (India) Sub: Restraining of M/s. AECOM Asia Company Ltd., from Participating in Future tendering in AAI.

Sir(s), Whereas the matter relating to non-performance of Agency and failure in achieving the committed targets in the execution of works was brought to your notice vide Show cause notice.

Whereas reply furnishing clarification in response to the Show cause notice no.AAI/CAP/AECOM/22-23/1201/1109-1110 dt. 30.11.2022 received from your end vide letter no.AECOM/PMC/MCAP/PII/2022/3970 dt.21.12.2022 was not found satisfactory.

Whereas on analysis and review of your reply the Competent Authority has concluded that your performance is unsatisfactory due to various reasons attributable to you.

Therefore, the Competent Authority has decided that firm M/s. AECOM Asia Company Ltd., in any name or style is hereby restraining/debarring for a period of One (1) year from participating in future tendering in AAI from the date of issue of this order.

This is issued without prejudice to the right of AAI as to deemed fit in connection with the aforesaid contract.

This issue with the approval of Competent Authority.

Thanking you, Yours Faithfully, (A.S. Mahesha) General Manager (Engg.)-Project For and on behalf of The Chairman Airports Authority of India."

6. A bare perusal of the impugned order demonstrates that it is cryptic and contains no reasoning whatsoever except an observation that the response of the petitioner was "not found satisfactory". None of the points raised by the petitioner in its show-cause notice have been dealt with. Moreover, it does not disclose any rationale as to the period of debarring.

O.M.P.(I) (COMM.) 266/2023 Page 11 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32

7. Learned counsel for the Respondent has sought to emphasise that the reasons for the debarring can be culled out from the correspondence exchanged between the parties. However, a bare perusal of the debarring order reveals that it does not even refer to any background correspondence. Moreover, it was not even preceded by any opportunity of hearing. A grievance on this count was raised by the Petitioner in its letter dated 21.07.2023, in which it as stated as under :

"Dear Sir, This is in relation to the letter dated 13 July 2023 (referenced at Sri. No. 3 above) ("Debarment Letter") received by AECOM on 13.07.2023. The Debarment Letter seeks to restrain AECOM from participating in future tendering with AAI for a period of one year. A reading of the Debarment Letter reflects no reasoning whatsoever for such an action.

In this regard you may note that on 30 November 2022 (referenced at Sri. No. 1 above) ("SCN"), AAI had shared a show cause notice with AECOM enlisting therein certain concerns basis which a response was sought from AECOM as to why action of debarring AECOM from future tenders of AAI should not be taken. The SCN was duly responded to by AECOM on 21 December 2022 (referenced at Sri. No. 2 above) basis, wherein AECOM had addressed all issues raised by AAI in the SCN, and detailed point-wise response was given to each alleged breach as highlighted under the SCN. The response issued by AECOM to the SCN was duly received by AAI on 21st December 2022. Thereafter, no communication was issued by AAI in response to the said reply and no clarifications were sought by AAI on any points addressed in the said reply and it was abundantly clear that no reasons of delay of the project were attributable to AECOM. It was therefore understood that the response given by AECOM was to the satisfaction of AAI and the matter stood closed.

However, on 13.07.2023 after about seven months, the Debarment Letter was received by AECOM to its utter shock and surprise. The letter does not deal with any of the issues addressed by AECOM, and also does not indicate as to which points could not meet the threshold to satisfy AAI. The Debarment Letter simply makes a blanket statement that AAI is not satisfied with the response of AECOM and thereafter proceeds to take the disproportionate action akin to blacklisting of AECOM from AAI tenders for a period of one year.

It is pertinent to highlight that AECOM was not given any opportunity of being heard before the issuance of the Debarment Letter, which has serious civil consequences for AECOM."

O.M.P.(I) (COMM.) 266/2023 Page 12 of 16

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32

8. The touchstone for testing debarment/blacklisting action has been succinctly summarised by the Supreme Court in UMC Technologies (P) Ltd. v. Food Corpn. of India, (2021) 2 SCC 551, in which, it was held as under:

"13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Custodian General, Evacuee Property [Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1] has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.

14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show-cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person

15. In the present case as well, the appellant has submitted that serious prejudice has been caused to it due to the Corporation's order of O.M.P.(I) (COMM.) 266/2023 Page 13 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 blacklisting as several other government corporations have now terminated their contracts with the appellant and/or prevented the appellant from participating in future tenders even though the impugned blacklisting order was, in fact, limited to the Corporation's Madhya Pradesh regional office. This domino effect, which can effectively lead to the civil death of a person, shows that the consequences of blacklisting travel far beyond the dealings of the blacklisted person with one particular government corporation and in view thereof, this Court has consistently prescribed strict adherence to principles of natural justice whenever an entity is sought to be blacklisted.

16. The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. [Erusian Equipment & Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70] in the following terms: (SCC pp. 74-75, paras 12, 15 & 20) "12. ... The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.

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15. ... The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion".

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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."

17. Similarly, this Court in Raghunath Thakur v. State of Bihar [Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229] struck down an order of blacklisting for future contracts on the ground of non- observance of the principles of natural justice. The relevant extract of the judgment in that case is as follows: (SCC p. 230, para 4) "4. ... [I]t is an implied principle of the rule of law that any order O.M.P.(I) (COMM.) 266/2023 Page 14 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32 having civil consequences should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order."

18. This Court in Gorkha Security Services v. State (NCT of Delhi) [Gorkha Security Services v. State (NCT of Delhi), (2014) 9 SCC 105] has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. It has been held thus: (SCC p. 115, para

16) "16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as "civil death" of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts."

19. In light of the above decisions, it is clear that a prior show-cause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision-making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these cases, furnishing of a valid show- cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto."

9. Further, in Isolators & Isolators v. M.P. Madhya Kshetra Vidyut Vitran Co. Ltd., (2023) 8 SCC 607, the Supreme Court has specifically held that it would not be enough to put the concerned party only on notice of debarment, without specifically putting it on notice as to the penalty proposed to be imposed. The relevant extract of the judgment in that case is O.M.P.(I) (COMM.) 266/2023 Page 15 of 16 This is a digitally signed order.

"38. As regards the question of penalty, we find force and substance in the contentions urged on behalf of the appellant that such an imposition cannot be approved for two major factors:

38.1. The first and foremost being that in the show-cause notice dated 26-

11-2019, the appellant was put to notice only as regards the proposition of debarment and in the said notice, nothing was indicated about the proposed imposition of penalty. Though in the cancellation orders dated 19-11-2019 and 21-11-2019, the respondents purportedly reserved their right to take appropriate steps, those orders cannot be read as show-cause notice specifically for the purpose of imposition of penalty. The submissions on behalf of the respondents in this regard that the said orders dated 19-11-2019 and 21-11-2019 have attained finality do not take their case any further. Finality attaching to the action of cancellation cannot be read as a due notice for imposition of penalty even if the respondents chose to employ the expression "cancelled with imposition of penalty" in those orders. Looking to the terms of contract, quantification of the amount of penalty (if at all the penalty is considered leviable) could not have been carried out without affording adequate opportunity of response to the appellant. That being the position, the action of the respondents in imposing the penalty without even putting the appellant to notice as regards this proposed action cannot be approved."

38.2. Secondly, the authority concerned has proceeded to impose the maximum of penalty to the tune of 10% of the deficit supply without specifying as to why the maximum of penalty was sought to be imposed. In this regard, the relevant factors as indicated by the appellant could not have been ignored altogether. Unfortunately, the High Court has totally omitted to consider this aspect of the grievance of the appellant."

10. Considering the aforesaid facts and circumstances, it is directed that the operation of the impugned debarring order shall remain stayed till the next date of hearing.

11. List for disposal on 14.12.2023.

12. In the meantime, parties are directed to file a short synopsis not exceeding three pages, also referring to the judgments sought to be relied upon.

NOVEMBER 3, 2023/cl SACHIN DATTA, J O.M.P.(I) (COMM.) 266/2023 Page 16 of 16 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 07/11/2023 at 22:05:32

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