Telangana High Court
Colorplast Systems Private Limited vs State Of Telangana on 13 March, 2025
Author: Nagesh Bheemapaka
Bench: Nagesh Bheemapaka
HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA
I.A.No.4 of 2024
AND
WRIT PETITION No. 26439 OF 2024
O R D E R:
I.A.No. 4 of 2024:
This Application has been taken out to implead petitioner as the 4th respondent to the Writ Petition.
2. Petitioner claims to be NGO and one of the leading organisations to have the existing policies implemented in the transport sector all across the country. It is stated, petitioner received an anonymous communication dated 01.05.2024 from a whistle blower who happened to be an ex-employee of writ petitioner company regarding use of substandard non-SCOSTA compliant and possibility of chips of unknown origin being used in the smart cards being supplied under tender awarded to them. Petitioner therefore, wrote its communication to the respondent Transport Department on 07.05.2024 and met Transport officials of Telangana and cautioned them in that regard. As there was no response, the issue was brought to the notice of the higher authorities in the department besides 2 Media. Then, the Department finally initiated an inquiry and sent 20 random sample cards for testing to National Testing Agency i.e. National Informatics Centre (NIC). The NIC, MIETY, Smart Card Technology Division on 10.06.2024 confirmed that 12 cards were non-compliant for Chip-Make Samsung & CAS hip model - S3K 140A i.e. 60% of cards were found to be SCOSTA non-compliant cards. It is learnt that writ petitioner was given show cause notice, however, in view of the probable inaction on the part of respondent authorities to take action, petitioner by communication dated 31.08.2024 again wrote to respondent authorities to take action against writ petitioner. At last, the Transport Department issued letter dated 18.09.2024 debarring petitioner and initiated legal action as per Rules. According to petitioner, writ petitioner is violating all the MoRTH norms of SCOSTA cards which is in contravention of the Telecom Regulatory Laws and Data Security Standards established by the Telecom Regulatory Authority of India.
3. Writ Petitioner filed counter stating that the sole intention behind filing the Impleadment Application appears to 3 be an attempt to introduce speculative claims, and Raahat is not entitled to any of the reliefs sought in the Application.
It is well established in law that in writ jurisdiction, focus is on the decision-making process of the authority or the State, which, in this case, is the 2nd respondent, which issued the impugned letter. The decision-making process of the 2nd respondent is the subject of this Writ Petition and no other party, including Raahat, can substitute or defend the authority's actions. Hence, Raahat has no role in defending the impugned letter issued by the 2nd respondent. The involvement of any other party is unnecessary unless the 2nd respondent admits that the impugned letter was issued without proper application of mind or was issued at the behest of Raahat. In such a case, it would be deemed a mala fide exercise, and the letter itself should be quashed. However, since no such admission has been made, there is no basis for impleading Raahat. It is also stated, Raahat lacks locus standi in this matter, as it is neither a necessary nor a proper party to Writ Petition. As established in Ravi Yashwant Bhoir v. Collector {(2012) 4 SCC 407}, a person cannot have locus merely on the 4 grounds of public interest or sentimental grievances. Raahat is attempting to implead itself solely on the basis of a general public interest, even though it has no direct stake in the matter. Raahat did not participate in the tender process, and thus, it cannot challenge the decision-making process of the 2nd respondent. Furthermore, in Airport Authority of India v. Centre for Aviation Policy, Safety & Research (CAPSR) (2022 SCC On Line SC 1334), the Hon'ble Supreme Court ruled that a non-governmental organization (NGO) like Raahat does not possess locus in matters related to tenders, especially when it did not participate in the tender process. This establishes that Raahat's attempt to intervene in the present case is not permissible, as it is neither a participant nor aggrieved by the tender process or the decision made by the 2nd respondent. Therefore, the present Impleadment Application should be dismissed in its entirety.
4. Admittedly, petitioner did not participate in the tender process. It is only on an anonymous communication dated 01.05.2024 from a whistle blower who happened to be an ex-employee of writ petitioner company regarding use of 5 substandard non-SCOSTA compliant and possibility of chips of unknown origin being used in the smart cards being supplied under tender awarded to them, petitioner addressed the Transport Department on 07.05.2024 which resulted in passing impugned order debarring petitioner from participating in tenders and initiated legal action as per Rules, meaning thereby, action has already been initiated against writ petitioner. In those circumstances, petitioner, whether impleaded or not, would not make any difference in the case. In the judgments relied on by writ petitioner in the counter, it is categorically held that a person cannot have locus merely on the grounds of public interest or sentimental grievances and NGO like petitioner does not possess locus in matters related to tenders, especially when it did not participate in the tender process. Further, petitioner is the dominus litis, that is, master of the case. They may choose the persons against whom they wish to litigate, however, subject to the riders of Order I Rule 10(2) of the Code of Civil Procedure which provides for impleadment of necessary or proper parties. Necessary party is one without whom no order can be made effectively; a proper party is one in whose absence an effective order can be made but whose presence is necessary for a 6 complete and final decision on the question involved in the proceeding. Petitioner, in the considered opinion of this Court, is neither a necessary nor a proper party since they have no direct stake in the matter as they did not even participate in the tender process and their presence is not necessary for a complete and final decision on the issue in question.
5. The Application is therefore, dismissed.
WRIT PETITION No. 26439 of 2024:
6. Letter of Debarment dated 18.09.2024 issued by the 2nd respondent - Commissioner, Transport Department is assailed in this Writ Petition.
7. Vide letter impugned, petitioner was debarred from participating in any tenders related to the 1st respondent - State in its Transport Department. Therefore, it could not participate in the Request for Proposal (RFP) for procurement of Pre-Printed PVC 64K SCOSTA Certified Smart Cards, dated July 2024.
8. The facts leading to the present Writ Petition are as follows:
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Petitioner, a leading technology company in the smart card industry, was awarded tender for supplying customized Pre-Printed 64K SCOSTA Certified Smart Cards for Registration Certificates (RC) and Driving Licenses (DL) for 2020-21 and 2021-22 and they successfully supplied 24.5 million smart cards under this contract, for which the Joint Transport Commissioner issued Letter of Satisfaction dated
09.01.2023. However, in 2022-23, the said contract was awarded to Kyros Technologies, a Hyderabad-based company. In 2023, the 3rd respondent - Telangana Technology Services Limited issued a Request for Proposal (RFP) for procurement of 40 lac smart cards. Petitioner successfully participated and was declared the lowest bidder (L1) securing the contract for 12 million smart cards. The Notification of Award (NOA) dated 15.06.2023 (ANNEXURE-P-6) confirmed petitioner's success, and petitioner was required to submit a performance guarantee of Rs. 63,58,000/- (5% of contract value), which was duly provided. Contract was signed between petitioner and the 1st respondent on 27.06.2023 and various purchase orders were issued by the Joint Transport Commissioner. By 30.04.2024, 8 petitioner delivered 36 lac smart cards as per the contract, and they were accepted and used by the 1st respondent.
While so, on 24.06.2024, the 2nd respondent issued Show Cause Notice alleging non-conformity to quality standards, referring to certain letters dated 24.05.2024 and 29.05.2024, which were not provided to petitioner and attached test results from the National Informatics Centre (NIC) dated 10.06.2024. These test results alleged that petitioner had supplied non-compliant smart cards. They disputed these test results, stating that sample selection process for testing was not transparent and that they were not informed or involved in the sampling process. Petitioner responded on 06.07.2024 and on 08.08.2024, they bid for July 2024 RFP, but shortly thereafter, they came to know of the impugned letter.
9. This Court vide order dated 25.09.2024, taking into consideration the contentions of learned Senior Counsel that there is no clause in the terms and conditions of the tender whereby respondent could debar petitioner from participating in the tender if any defective sample smart cards are supplied and further also conserving that the detailed reply submitted by 9 petitioner in reply to the show cause notice is not being considered, prima facie, opined that the impugned letter is in violation of the principles of natural justice and thus, granted interim suspension of the said letter.
10. Learned Senior Counsel Sri A. Venkatesh appearing for Sri Sai Sanjay Surapaneni submits that impugned letter is violative of terms and conditions of the tender and principles of natural justice as well as Article 19(1)(g) of the Constitution. The show cause notice dated 24.06.2024 was issued to petitioner holding that sample smart cards supplied by them were tested by NIC, New Delhi and it was found that samples of Driving License and Registration Certificate smart cards with Sl.No.xxxxxxx/24 are not in compliance with smart Card Operating System for Transport Application (SCOSTA). It is submitted that sample smart cards supplied by petitioner are non-compliant is not correct for the chip model which was indicated at Sl.Nos. 1 to 8 show chip model and chip-make whereas the one at Sl.No. 9 to 20 do not refer to them.
According to learned counsel, the 2nd respondent at the behest of one NGO issued the impugned letter without 10 application of mind. It is submitted that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary. In support of the said contention, learned counsel relied on the judgments of the Hon'ble Supreme Court in Mahabir Auto Stores v Indian Oil Corporation 1, CCT v. Shukla 2, Erusian Equipment & Chemicals Limited v. State of West Bengal 3, Gorkha Security Services v. Govt. of NCT of Delhi 4, Kulja Industries Ltd. V. Western Telecom Project BSNL 5, Oryx Fisheries Pvt. Ltd vs. Union Of India 6.
11. Learned Government Pleader for Transport based on the averments in the counter filed by The Joint Transport Commissioner, submits that a letter from the Chairman of the Safe Community Foundation dated 08.05.2024 was received alleging that cards supplied by petitioner to the 2nd respondent were substandard, specifically citing cheap quality chips. In 1 AIR 1990 SC 1031 2 (2010) 4 SCC 785 3 (1975) 1 SCC 70 4 [(2014) 9 SCC 105] 5 (2014) 14 SCC 731 6 (2010) 13 SCC 427 11 accordance with the Government instructions dated 16.05.2024, Department sent samples of the cards to the National Informatics Centre (NIC) for testing on 24.05.2024 and 29.05.2024. The NIC's findings, communicated via letter dated 10.06.2024, indicated that while some sample cards were compliant, others, notably those with the chip make "Samsung" and chip model "S3FT9A," were non-compliant due to their SCOSTA certificate's validity expiring on 16.09.2023. In view thereof, the 2nd respondent issued Show Cause Notice to petitioner on 24.06.2024, for which they came up with explanation on 08.08.2024, which was deemed unsatisfactory. Learned Government Pleader argues that Petitioner's supply of non-compliant cards constitutes a clear violation of the contractual terms. According to the Request for Proposal (RFP) 2023, the vendor was required to supply materials that meet the specified standards and certifications. In the case of non- compliance, the agreement stipulates stringent disciplinary actions, including forfeiture of the Bank Guarantee and deduction of amounts for defective cards, along with any applicable penalties. These actions are currently under process, 12 with final decisions expected to be issued by the competent authority soon.
Learned Government Pleader also submits that petitioner's claim that no opportunity for hearing was provided is refuted by respondents, who emphasize that the show cause notice dated 24.06.2024 and reply thereto fulfil the procedural requirements for addressing the issue. The respondents also maintain that the 3rd respondent, as the Nodal Agency for all IT- related procurement, initiated the process by issuing a tender for the procurement of 64K SCOSTA Smart Cards. The 3rd respondent invited tenders for supply of these cards, with the Techno Financial Committee (TFC) evaluating the bids and selecting petitioner as the lowest bidder on 06.11.2020. The contract, which had validity till 20.11.2021, was based on a rate contract for supply of Smart Cards and was later renewed on 21.06.2023.
It is submitted, in accordance with the terms of the contract, petitioner supplied 64K Smart Cards in multiple phases, based on purchase orders issued by the 2nd respondent, starting from 24.08.2023. However, a report from 13 NIC dated 10.06.2024 indicated that certain sample cards were non-compliant with SCOSTA standards due to the absence of chip model and chip make information. As per NIC report, some of the sample cards were found compliant with SCOSTA certification, while others were not. Despite Petitioner's request for a re-test of the sample cards on 06.07.2024, it is maintained that non-compliance issue was substantial and could not be resolved simply by replacing the defective cards. It is argued that security and protection of personal data are paramount, and allowing non-compliant cards to remain in circulation would jeopardize the privacy of individuals. This respondent also clarified that each card supplied by Petitioner bears a unique serial number, allowing identification of the source of each card. The list of cards submitted matches the non- compliant cards identified by NIC. Furthermore, the terms of the RFP 2023 clearly stipulate that bidder must supply only SCOSTA certified cards and comply with all amendments issued by NIC. Non-compliance with these requirements triggers stringent disciplinary actions, including debarring from future tenders, as clearly outlined in Clause B.1.b of the RFP 2023. 14
In the present case, it is submitted, respondents have taken necessary action in accordance with tender conditions, including debarring of petitioner for failing to supply SCOSTA certified cards. Petitioner's actions have been deemed a violation of trust, with the supply of defective cards considered an act of cheating. Protecting the security of personal data is their top priority, and any action taken against petitioner is in line with the contractual obligations and the requirements set forth in the tender. Petitioner's claim that Impugned Letter dated 18.09.2024 did not provide specific reasons for debarring them is countered by respondents, who assert that NIC report clearly identified the cards as non-compliant, thus justifying the decision of debarring petitioner. It is submitted that Writ Petition lacks merit and should be dismissed.
12. A perusal of the impugned order discloses that on the complaint received from the now impleaded 4th respondent stating that the cards supplied by petitioner to Telangana Transport Department are substandard and cheep quality, at the request of the government vide memo dated 16.05.2024, to take necessary action, the Department, vide letters dated 15 24.05.2024 and 29.05.2024 sent some sample cards to NIC for testing the quality and to furnish the report whether cards supplied by petitioner are complying with SCOSTA certificate issued by NIC or not. The report dated 10.06.2024 was furnished stating that some cards are in compliant and some are not. Therefore, show cause notice was issued on 24.06.2024 for which petitioner submitted explanation on 08.08.2024 which was found to be not satisfactory. In view of the same, the contention of learned counsel for petitioner that no opportunity was afforded to petitioner cannot be accepted. As per NIC report, petitioner supplied non-compliant cards which amounts to violation of contractual conditions among other issues, the Transport Department decided to debar petitioner from participating in any tender related to Transport Department.
13. It is to be noted that security and protection of personal data is of paramount importance, therefore, allowing non-compliant cards to remain in circulation would jeopardize the privacy of individuals. The terms of RFP 2023 clearly stipulate that bidder must supply only SCOSTA certified cards and comply with all amendments issued by NIC. Non- 16 compliance with these requirements triggers stringent disciplinary action, including debarring from future tenders, as clearly outlined in Clause B.1.b of RFP 2023. According to respondents, protecting the security of personal data is their top priority and non-compliance with the requirements triggers stringent disciplinary action, including debarring from future tender. Hence, it can be said that action taken against petitioner is in line with the contractual obligations and the requirements set forth in the tender.
14. Petitioner's claim that impugned letter did not provide specific reasons for debarring them is countered by respondents stating that NIC report clearly identified some of the cards as non-compliant, that itself is a ground for debarring petitioner. In view of the same, the judgments relied on by leaned counsel for petitioner need not be taken into consideration.
15. For the foregoing reasons, the Writ Petition lacks merit and is liable to be dismissed. The Writ Petition is accordingly, dismissed. No costs.
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16. Consequently, the miscellaneous Applications, if any shall stand closed.
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NAGESH BHEEMAPAKA, J 13th March 2025 ksld