Delhi High Court
Hyundai Rotem Company vs Delhi Metro Rail Corporation on 8 July, 2016
Author: Sanjeev Sachdeva
Bench: Sanjeev Sachdeva
$~20
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 08.07.2016
+ W.P.(C) 5851/2016
HYUNDAI ROTEM COMPANY ..... Petitioner
versus
DELHI METRO RAIL CORPORATION ..... Respondent
Through:
Advocates who appeared in this case:
For the Petitioner :Mr Parag Tripathi, Sr. Adv. with Mr Arunav Patnaik, Ms Bhabna Das
and Ms Kirat Randhawa, Advocates
.
For the Respondents : Mr Tarun Johri, Mr Satish Chandra, GM-Legal with Mr Puneet Garg,
Law Officer for DMRC Ltd.
CORAM:-
HON'BLE MR JUSTICE SANJEEV SACHDEVA
JUDGMENT
SANJEEV SACHDEVA, J. (ORAL) CM No. 24046-47/2016 (Exemption) Allowed, subject to all just exceptions.
W.P.(C) 5851/2016
1. The petitioner has filed the present petition impugning the order dated 06.07.2016 passed by the respondent blacklisting the petitioner for a period of five years.
2. This is a third order passed by the respondent qua the petitioner W.P.(C) No.5851/2016 Page 1 of 17 for the same conduct. The first two having been set aside by a Division Bench of this court.
3. The petitioner had submitted a bid with the respondent and was successful. The letter of award was issued to the petitioner on 01.04.2013. As per the petitioner, subsequent to the award of contract, a letter was received from the respondent on 05.11.2014 stating that at the time of submission of its bid, the petitioner had not disclosed the debarment order dated 14.12.2011 passed by the Airport Authority of India. The debarment by Airport Authority of India was for a period of 3 years.
4. It is contended that on receipt of the letter dated 05.11.2014, the petitioner carried out an internal inquiry and found that two of the officials, who were handling the Airport Authority of India's pre qualification bid, received the order of debarment but did not disclose it to the senior management of the company. It is further contended that the explanation of the said employees was found to be untenable and appropriate action was taken against them and the factum of action having been taken against the said employees was communicated to the respondent.
5. It is contended that on 16.06.2015, a show-cause notice was issued by the respondent seeking an explanation as to why an action contemplated in terms of Clause 4.33.1 of the General Clauses of Contract (GCC) of the RS10 Contract should not be taken against the W.P.(C) No.5851/2016 Page 2 of 17 petitioner for having indulged in "fraudulent practice" by not disclosing the debarment order of the Airport Authority of India in the bid submitted with the respondent. A detailed response is stated to have been filed to the show-cause notice and a personal hearing was sought.
6. By order dated 29.07.2015, the respondent blacklisted the petitioner for a period of 5 years commencing from 15.07.2015. It is contended that the date i.e. 15.07.2015 is relevant, in as much as, on the said date the Board of Directors of the respondent took a decision to debar the petitioner for a period of five years.
7. The order dated 29.07.2015 was impugned by the petitioner by filing Writ Petition (C) No. 7265/2015. This court by order dated 31.07.2015 in W.P.(C) No. 7265/2015 directed the respondent to give a personal hearing and pass an order thereafter. On 10.08.2015, the respondent passed another order reiterating its earlier order dated 29.07.2015 of blacklisting the petitioner for a period of five years from 15.07.2015. The order dated 10.08.2015 was also impugned by the petitioner by filing W.P. (C) No. 7656/2015. Interim order was not granted in W.P. (C) No. 7656/2015. The petitioner filed an appeal challenging the non-grant of interim order before the Division Bench being LPA No. 547/2015.
8. The Division Bench by judgment dated 23.11.2015, allowed the LPA No. 547/2015 and the two Writ Petitions filed by the petitioner W.P.(C) No.5851/2016 Page 3 of 17 quashing the orders dated 29.07.2015 and 10.08.2015. The Division Bench, by its order dated 23.11.2015, held as under:
"21. The order in the present case dated 10.08.2015 is without any reasons. Respondent was obliged to deal with the submissions of the appellant in a broad manner before passing the order debarring the appellant. If after a hearing, a non-speaking order is passed, the person affected by adverse order would be at a loss to know the reason for the adverse order. Even if the decision is right, the person against whom it was made should be told why the decision has been made. The absence of reasons leads to denial of justice. Accordingly, in our view the impugned order dated 10.08.2015 is passed in violation of the principles of natural justice. The same is liable to be quashed.
22. We may also deal with second submission of the learned senior counsel for the appellant. The impugned order dated 10.08.2015 is passed by the Executive Director of the respondent. The order, however states that the "Competent Authority" has reiterated its earlier decision of debarring the appellant company for five years. The name of the competent authority is not stated. As per the counter affidavit filed by the respondent, the competent authority, namely MD of the respondent had nominated a committee comprising of Director/ Rolling Stock (DRS), Director/Finance (DF) and General Manger (Legal) of the respondent who have heard the appellant. It is admitted that the competent authority is the Managing Director of the respondent. Hence, the impugned order dated 10.08.2015 though communicated by another officer has been passed by the Managing Director of the respondent, i.e. the "competent authority". But the hearing has been given by a committee comprising of two Directors and one General W.P.(C) No.5851/2016 Page 4 of 17 Manager. It is obvious that the authority which granted the personal hearing to the appellant is not the authority who has passed the impugned order dated 10.08.2015.
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24. Hence, the procedure adopted by the respondent, i.e. one authority hearing and another authority passing the order, defeats the very purpose of personal hearing. The appellant lost an opportunity to try and persuade the competent authority to accept its contentions. The competent authority was also deprived of an opportunity to hear the submissions of the appellant and to understand the merits of the contentions of the appellant.
25. The procedure followed by the respondent is wholly contrary to the principle of natural justice. The impugned order dated 10.08.2015 is vitiated on this ground also and is liable to struck down.
26. In view of the above, we quash the order dated 10.08.2015 passed by the respondent debarring the appellant company for a period of 5 years.
27. Regarding the order dated 29.07.2015 passed by the respondent which is the subject matter of the first Writ Petition being W.P.(C) No.7265/2015, it is impliedly overruled by the subsequent order dated 10.08.2015 passed by the respondent debarring the appellant for a period of five years. However, from the records placed before us there appears to be no formal order withdrawing the order dated 29.07.2015. We accordingly also quash the order dated 29.07.2015 passed by the respondent.
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9. The Division Bench by its order dated 23.11.2015, quashed the debarment orders on the premise that the orders did not give any reason and absence of reasons lead to denial of justice. The Division Bench also found that though the hearing was granted to the petitioner by a Committee nominated by the Managing Director but, the decision was rendered by the Managing Director, who as per the respondent, is the competent authority. The Division Bench held that the authority which granted the personal hearing to the petitioner was not the authority that had passed the impugned order. On these two grounds, the Division Bench struck down the debarment order.
10. Consequent to the order dated 23.11.2015 of the Division Bench, the Managing Director has passed the impugned order dated 06.07.2016. The order has been passed by the competent authority, the Managing Director. The order is a detailed speaking order and has been passed after hearing the petitioner and deals with the various contentions raised by the petitioner.
11. The order is assailed by the learned senior counsel for the petitioner contending that order for debarment under Clause 4.33.1 a(ii) of the GCC Contract could have been passed only if there was a fraudulent practice. He contends that the fraudulent practice requires a fraudulent intention to deceive. He submits that mere negligence or non-disclosure of facts which were not in the knowledge of the petitioner would not amount to fraudulent practice as defined in the W.P.(C) No.5851/2016 Page 6 of 17 said clause and thus the petitioner could not be debarred. He further submits that the petitioner has been debarred for a period of five years and the punishment is highly disproportionate to the alleged act. It is contended that the respondent normally passes orders of debarment extending to only a few months.
12. It is contended that the petitioner was not aware of the debarment order and it was only those two officials/employees of the petitioner who were aware of the debarment order and they had not disclosed the same to the management. It is contended that as the management was not aware of the debarment order, it could not be said to have indulged in "fraudulent practice" by its non-disclosure in the bid submitted with the respondent.
13. Learned senior counsel submits that the order has been passed merely on presumption of knowledge and does not record that the contention of the petitioner that it was not aware of the said order as not accepted as correct and disbelieved. He contends that the order should have at least recorded that the case set up by the petitioner is false or not correct. It is contended that nondisclosure of the debarment order, which is presumed to be in the knowledge of the petitioner, could not be said to be a fraudulent practise and concealment with an intention to deceive. He further submits that the impugned order has to stand on its own footing and cannot be supplemented by reasons, over and above those contained in the same.W.P.(C) No.5851/2016 Page 7 of 17
14. Learned counsel for the respondent, on the other hand, contends that the petitioner was very much aware of the debarment order passed by the Airport Authority of India. It is contended that the debarment order was available on the website of the Airport Authority and was thus in public domain. It is contended that the management of the petitioner cannot contend that they were not aware of the said order which was in public domain. It is submitted that the debarment order was valid for a period of 3 years and it could not be believed that the management was unaware of the debarment order for a period of 3 years. It is further contended that even though the respondent had intimated the petitioner of the debarment order on 05.11.2014, i.e. within the period during which it was in force, still no steps were taken by the petitioner for having the said debarment order set aside. It is submitted that even though the respondent was entitled but it did not terminate the contract as the project is an important one and the drastic step of termination would have substantially delayed the execution and completion of the project which would not be in public interest.
15. It is further submitted that the petitioner being a company acts through its employees and knowledge of its employees would be sufficient knowledge of the management and non disclosure of a material fact would amount to intentional concealment and would satisfy the requirement of fraudulent practice as defined under Clause 4.33.1 of the GCC. It is further contended that the so-called action W.P.(C) No.5851/2016 Page 8 of 17 taken by the petitioner against the employees is only eyewash and an afterthought.
16. The reason for the blacklisting of the petitioner is that while submitting its bid, the petitioner was obliged to disclose any order of debarment against it. The petitioner was debarred by the Airport Authority but the order of debarment was not disclosed.
17. Fraudulent practice has been defined by Clause 4.33.1 of the GCC as under:-
"fraudulent practice" means a concealment or misrepresentation of facts in order to influence a procurement process or the execution of a Contract to the detriment of the Employer, and includes collusive practice among Bidders (prior to or after bid submission) designed to establish bid prices at artificial non- competitive levels and to deprive the ,Employer of the benefits of free and open competition.
18. It is not in dispute that Airport Authority of India had debarred the petitioner on 14.12.2011 for a period of three years. It is also not disputed that two officials/employees of the petitioner company were aware of the debarment order. The fact that action has been taken by the petitioner against those officials/employees establishes that the petitioner admits that the said two officials/employees were aware of the debarment order. It is also admitted that the even after the receipt of the letter of the respondent dated 05.11.2014, wherein the factum of the debarment order is mentioned, no steps to have it set aside were W.P.(C) No.5851/2016 Page 9 of 17 taken by the petitioner till 14.12.2014 (i.e. the subsistence of the debarment order by the Airport Authority of India).
19. The impugned order is a detailed speaking order dealing with the various contentions raised by the petitioner. With regard to the contention of the petitioner that the petitioner has not committed any fraudulent practice, it records as under:-
"e) Hyundai Rotem has not Committed a "Fraudulent Practice"as per Clause 4.33.1 GCC.
The clause 4.33.1a(ii) of the GCC of the contract „RS10‟read as follows:"fraudulent practice" means a concealment or misrepresentation of facts in order to influence a procurement process or the execution of a Contract to the detriment of the Employer, and includes collusive practice among Bidders (prior to or after bid submission) designed to establish bid prices at artificial non-competitive levels and to deprive the Employer of the benefits of free and open competition.
It was very clear that concealment or misrepresentation of fact in order to influence the procurement process is a Fraudulent Practice. Thus M/s HRC‟s contention that there was no fraudulent intent hence no fraudulent practice as per the said contract clause, is not correct.
M/s HRC‟s contention that the company cannot be presumed to have any knowledge on facts, which its Agent had deliberately suppressed, cannot be agreed because it is the responsibility of M/s HRC to ensure that factually correct information shall be submitted in their offer.
M/s HRC‟s contention that the company cannot be made W.P.(C) No.5851/2016 Page 10 of 17 legally responsible for unlawful act of its agent is again not tenable. The company performs its contractual obligations through its representatives and any declaration made by the authorized representative has to be considered as the Company‟s position.
M/s HRC‟s contention that there is no detriment to DMRC is incorrect and wrong. On account of concealment of such facts by M/s HRC in their offer, DMRC evaluated process has been affected and the award has happened in M/s HRC‟s favour, who indulged in fraudulent practice. This has resulted in not only impacting image of the DMRC adversely but also deprived the legally lowest acceptable bidder the award of the contract. However, this is not relevant in applying provisions of Contract Agreement.
M/s HRC‟s contention that company has not committed a breach of the contract is not tenable as in their own admission. M/s HRC has admitted that the information regarding debarment was not disclosed in their offer. M/s HRC is trying to cover its unreasonable and fraudulent actions by putting the entire blame of the said actions upon two of its officials, when admittedly the information of blacklisting of M/s HRC for a period of three years was already in public domain and it is expected that the Management of the M/s HRC should have been fully aware of the blacklisting orders passed by the AAI. Rather M/s HRC is fully and directly responsible for the actions of its authorised employees, which would have led to their debarment by AAI.
As per contract conditions a "fraudulent practice"
means a concealment or misrepresentation of facts in order to influence a procurement process. The instant case falls under the category i.e. concealment or W.P.(C) No.5851/2016 Page 11 of 17 misrepresentation of facts in order to influence a procurement process.
The initial Filter Evaluation Criteria specifically states that the answering to question No. 6 (regarding debarment) would disqualify the tenderer. HRC furnished false information to DMRC and suppressed a material information from DMRC, which if furnished correctly would have had a bearing upon the qualification of HRC in the tender under reference and their offer would have been out-rightly rejected.
The Tender document/Contract Agreement unambiguously and clearly provides that non-disclosure of above information will be considered as fraudulent. I therefore, apply the express provision of the Contract that above action of M/s HRC amounts to fraudulent practice."
20. The impugned order records that the concealment or misrepresentation of facts so as to influence the procurement process is a fraudulent practice. The contention of the petitioner that there was no fraudulent intent has not been found to be correct. The contention of the petitioner that the company could not be presumed to have any knowledge of the facts which its agents had deliberately suppressed was also not accepted by the competent authority on the ground that it was the responsibility of the petitioner to ensure that factually correct information would be submitted in their offer. The contention of the petitioner that it cannot be made legally responsible for unlawful acts of its agents has been held to be not tenable.
W.P.(C) No.5851/2016 Page 12 of 1721. In my view, the rationale given in the impugned order is plausible and in facts of the present case justified. A company operates and performs its contractual obligations through its representatives and employees. A declaration made by the authorized representative has to be considered to be that of the Company.
22. The contention of the learned senior counsel for the petitioner, that as the competent authority has not recorded that he did not believe and agree with the contention of the petitioner that the employees had not made the petitioner aware of the debarment order, the impugned order is vitiated, in my view is untenable. The petitioner being a Company performs its functions through its officials/employees and it would be purely an internal matter as to whether the officials/employees made the senior management aware of the debarment order or not. The fact that the petitioner had been debarred is not in dispute. It is not denied by the petitioner that the factum of debarment was a material fact which would have had a direct bearing on the decision of the respondent to award the tender. It could also not be denied by counsel for the petitioner, that if the petitioner had knowledge and did not disclose the debarment order, that in itself would satisfy the test of fraudulent practise.
23. The contention of the petitioner that the petitioner was not aware of the debarment order and as such could not have disclosed the same to the respondent at the time when the bid was submitted does W.P.(C) No.5851/2016 Page 13 of 17 not inspire any confidence. Whether a person has knowledge of a fact or not is a state of mind, which can never be proved by someone else, it can only be shown from circumstances. A person seeking to establish knowledge of the other can only show that such circumstances exist that go to establish that a party in all probability has knowledge.
24. In the case of the petitioner, the said two officials/employees who admittedly had the knowledge of the debarment order were not lower rung employees but were officials who were handling the Airport Authority of India's pre qualification bid. Since the two officials/employees were made responsible for dealing with the Airport Authority of India in respect of the bid to be submitted, then the knowledge of the said employees would be deemed to be sufficient knowledge of the company. Further, it may be noted that the petitioner was not only unsuccessful in its bid with the Airport Authority of India but was debarred. It is clearly not believable that the management would not be aware of the reason for being unsuccessful in the tender. The officials/employees would have definitely made the management aware of the reason for the failure to secure the contract. Prudence on the part of the management would be to enquire about the reason for failure. If such an enquiry was made, clearly the management would have become aware of the debarment order. The circumstances clearly establish that the petitioner was aware of the debarment order.
W.P.(C) No.5851/2016 Page 14 of 1725. Admittedly, non-disclosure of material fact of debarment which would have affected the decision of the Respondent to award the contract, would satisfy the requirement of fraudulent practise as defined by clause 4.33.1 of GCC . The fact that the company has not disclosed the said debarment order to the respondent clearly amounts to concealment and misrepresentation of facts and clearly, the same has been in order to influence the procurement process.
26. The reliance placed by the learned senior counsel for the petitioner on the decision in case Smt. Shrisht Dhawan v. M/s Shaw Brothers, AIR (1992) 1 SCC 534 to contend that the fraud is committed only in case there is an intention to deceive and in the present case as the company was not aware of the debarment order there was no intention to deceive, is misplaced. In the present case, the circumstances clearly establish that the petitioner had knowledge of the debarment order and its nondisclosure amounts to concealment and misrepresentation which satisfies the requirement of „fraudulent practise‟ as defined by the clause 4.33.1 of GCC.
27. The other contention raised by the learned senior counsel for the petitioner is that the impugned order is vitiated on the ground that the competent authority i.e. Managing Director was present in the meeting of the Board of Directors of the Respondent held on 15.07.2015 wherein the Board of Directors decided to debar the petitioner for a period of 5 years. It is contended that the Managing W.P.(C) No.5851/2016 Page 15 of 17 Director being a party to the said decision was obliged to comply with the said decision and was not acting impartially with an open mind.
28. The above contention of the learned senior counsel for the petitioner cannot be accepted in view of the fact that the petitioner was aware of the minutes of the meeting of the Board of Directors dated 15.07.2015 at the time when the petitioner had earlier challenged the orders of the Managing Director dated 29.07.2015 and 10.08.2015 and was aware that the competent authority is the Managing Director. Even the order of the Division Bench dated 23.11.2015 records that the Managing Director is the competent authority. No such contention has been raised by the petitioner before the Division Bench that the Managing Director could not act as the competent authority and could not decide the issue of debarment afresh. The petitioner is thus barred by the principles of constructive resjudicata from raising such an issue.
29. In view of the above, I find no merit in the writ petition in so far as the issue of blacklisting of the petitioner is concerned. The Writ Petition to the said extent is dismissed.
30. With regard to the plea of the petitioner that the quantum of punishment of blacklisting for a period of five years is highly disproportionate, issue notice, limited to the said extent, returnable on 07.09.2016.
W.P.(C) No.5851/2016 Page 16 of 1731. Notice is accepted by counsel for the respondent. Counter affidavit be filed within four weeks. The rejoinder, if any, be filed within two weeks. Renotify on 07.09.2016 CM No. 24045/2016 (Stay) In view of the dismissal of the Writ Petition in so far as it challenges the order of blacklisting, the stay application is also dismissed.
SANJEEV SACHDEVA, J JULY 08, 2016 'rs' W.P.(C) No.5851/2016 Page 17 of 17