Punjab-Haryana High Court
Era Infra Engineering Ltd vs Haryana Vidyut Prasaran Nigam Limited & ... on 2 May, 2013
Equivalent citations: AIR 2013 (NOC) 420 (P. & H.)
Bench: Ajay Kumar Mittal, G.S.Sandhawalia
CWP No.3808 of 2013 1
IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH
CWP No.3808 of 2013(O & M)
Date of decision:02.05.2013
Era Infra Engineering Ltd. .....Petitioner
Versus
Haryana Vidyut Prasaran Nigam Limited & another ......Respondents
CORAM: HON'BLE MR.JUSTICE AJAY KUMAR MITTAL
HON'BLE MR.JUSTICE G.S.SANDHAWALIA
Present: Mr.Sanjiv Bansal, Advocate, for the petitioner.
Mr.P.S.Punia, Advocate, for respondents No.1 & 2.
****
1. Whether Reporters of local papers may be allowed to see the judgment? Yes
2. Whether to be referred to the Reporters or not? Yes
3. Whether the judgment should be reported in the Digest? Yes **** G.S.Sandhawalia J.
1. The present writ petition has been filed under Articles 226/227 of the Constitution of India for issuance of writ in the nature of certiorari for quashing the communication dated 17.01.2013 whereby the petitioner has been blacklisted for a period of 3 years for doing further business with the respondent-Nigam.
2. The pleaded case of the petitioner is that the respondent-Nigam had come out with a bidding document for supply, erection and commissioning of 400 KV Line from 400 KV sub-station at Daulatabad (Gurgaon) to 400 KV sub- station at Sector 72, Gurgaon with Quad Moose Conductor. The notice inviting tenders was published in September, 2009 and the total length of the work line was 23.35 Kms. The petitioner, in a joint venture with M/s Optima Energostroy, was awarded the contract by the High Powered Purchase Committee constituted by the Government of Haryana and two separate letters of award dated 26.03.2010 had been issued in its favour, one for erection and the other for supply of material. Two bank guarantees for a sum of `3,05,79,371/- and two CWP No.3808 of 2013 2 bank guarantees for a sum of `34,20,630/- had been furnished by the petitioner. As per the terms of the agreement, the petitioner was required to ensure the testing and commissioning of the transmission line within 9 months from the date of issue of letter of award. However, the responsibility to provide the right of way was that of the respondent-Nigam. The said responsibility of providing right of way could not be resolved by the respondent-Nigam and even though the petitioner had written on 26.04.2010 for taking the remedial measures for getting the route corridor finalized. Thereafter also, communications dated 24.05.2010 and 25.05.2010 were sent to the respondents but no approval was granted. The petitioner felt handicapped on account of not providing right of way and various communications inter se the parties were made and communication dated 11.08.2010 was addressed to the petitioner whereby an alternate route corridor was suggested. Eventually, on 08.03.2011, the respondents called upon the petitioner to give its alternate route at the same rate and terms which led to reduction of the scope of work from 23.35 Kms. to 18 Kms. and the petitioner sought revision in rates to cover up the cost escalation. The petitioner had requested vide communication dated 03.06.2011 to terminate the contract and to compensate the petitioner. Thereafter, memo dated 18.01.2012 was sent to the petitioner vide which the petitioner was called upon to show cause as to why the work be not got executed at the risk and cost of the petitioner. Various communications inter se between the parties were addressed and eventually, the respondents wrote to the Bankers to remit the bank guarantees in its favour and notice inviting tenders dated 24.08.2012 was issued where the work was sought to be awarded by inviting fresh tenders by inserting the clause of risk purchase. The petitioner filed CWP No.16569 of 2012 challenging the said tenders and also challenging the show cause notice which had been issued to it on 16.08.2012 whereby it was asked as to why it be not blacklisted for a period of 3 years apart CWP No.3808 of 2013 3 from seeking quashing of the communication dated 13/14-08.2012 whereby all the bank guarantees were sought to be encashed. Interim orders dated 10.09.2012 were passed by this Court and thereafter, the writ petition was disposed of on 27.11.2012 with a direction that as per Clause 51 of the contract, three Arbitrators had to be appointed. It was further directed that interim order dated 10.09.2012, which had become final, would be complied with. Thereafter, the impugned order came to be passed on 17.01.2013, blacklisting the petitioner for a period of 3 years, with immediate effect and sending the copies of blacklisting to all the power corporations/companies, resultantly, leading to the filing of the present writ petition.
3. In the written statement, the respondents took various objections including that the petitioner was under obligation to provide alternative route alignments and plan for erection of line. The Central Electricity Authority had approved the alternate route on 21.02.2011 with the consent of the petitioner but it had sought to wriggle out of contract on one pretext or other and on account of its default, it could not even complain of the delay in approval. Accordingly, the said order was justified on the ground that there was delay in execution of the work for which the petitioner was responsible and the order had been passed by following due procedure.
4. Counsel for the petitioner has relied upon the judgment passed in SPS Engineering Ltd. Vs. Indian Oil Corporation Ltd. 113 (2004) DLT 70 which was up-held in appeal in Indian Oil Corporation Ltd. Vs. SPS Engineering Ltd. 128 (2006) DLT 417 to contend that once the matter had been referred for arbitration inter se the parties, then the respondents were not justified in passing the order of blacklisting and the determination by the Arbitrator could have settled all the issues.
5. Counsel for the State, on the other hand, defended the order on account CWP No.3808 of 2013 4 of the fact that the show cause notice had been issued and reply had been filed and due to the non-compliance of the terms of the agreement, the petitioner had been rightly blacklisted.
6. After hearing counsel for the parties, we are of the opinion that the action of the respondents in blacklisting the petitioner for a period of 3 years and depriving it from doing further business with it is totally arbitrary and cannot be sustained. The details regarding the controversy have already been mentioned inter se the parties to which there is no dispute. The petitioners had earlier approached this Court by way of filing CWP No.16569 of 2012 whereby the following reliefs were prayed for:
"a) Quash the communication bearing Memo No.CH-61/HDP-1731 and HDP-1732/Vol-III/XEN Projects (S/Stn) dated 16.08.2012 (Annexure P-1) as also the office memo No.CH-82/HDP1732/Vol-
III/XEN Projects (S/Stn) dated 18.01.2012 (Annexure P-2), whereby, the respondent-Nigam has decided to re-allot the work through open tender at the "Risk & Cost" of the petitioner as also has decided to require the petitioner to show cause as to why the petitioner be not blacklisted for period of 3 years as also the NIT bearing Tender Enquiry No. REC-118 dated 24.08.2012 (Annexure P-3), whereby fresh tenders for the work already allotted to the petitioner have been invited by inserting th;e clause "against risk purchase" as also communication dated 13/14.08.2012 (Annexure P-4), whereby the performance Bank guarantee (PBG) furnished by the petitioner has been got encashed, in a wholly arbitrary and illegal manner and without there being any default attributable to the petitioner;
b) Direct the respondent-Nigam to deposit the encashed amount of Bank Guarantees in the form of FDR with the Bankers, during the pendency of the present petition and till the final settlement of dispute between the parties."
7. Thus, at that point, the challenge was to the show cause notice dated 24.08.2012 whereby the petitioner had been put to caveat that why it should not be blacklisted for a period of 3 years apart from the dispute regarding fresh tenders at the risk of the petitioner and encashment of the bank guarantees. The CWP No.3808 of 2013 5 petitioner had also filed its reply dated 24.08.2012 bringing to the notice of the respondents that the work had to be done within a period of 9 months and the validity of the contract had expired in December, 2010 and on 08.03.2011, the respondents had itself sought the consent for executing the contract on an alternate route which had not been agreed to. The petitioner had been ready and willing to execute the contract and make requisite arrangement and carry out repeated surveys subject to being suitably compensated. Eventually, on 10.09.2012, the following order was passed by this Court:
"Learned counsel for the respondents prays for the time to file reply.
Adjourned to 04.10.2012.
Reply be filed before the date fixed with a copy in advance to the counsel opposite.
Learned counsel for the petitioner submitted that the respondents have encashed the bank guarantee for which the bank is pressing the petitioner to deposit Rs.6.80 crores i.e. the amount of the bank guarantee.
Learned counsel for the respondents states that the petitioner has paid a sum of Rs.3.40 crores as mobilization advances. Besides this amount, the interest thereon for the period till date would come to Rs.1.08 crores. According to the learned counsel for the respondents, the petitioner is not entitled for the said amount even if the writ petition is accepted.
After hearing learned counsel for the parties, it is considered appropriate that the amount of Rs.4.50 crores out of the bank guarantee of Rs.6.80 crores shall be deposited by the petitioner whereas the balance amount of Rs.2.30 crores shall be deposited by the respondents. This order shall, however, be subject to the final adjudication by this Court."
8. The litigation was finally disposed of with a direction to both the parties to nominate their respective Arbitrators, within 30 days who would further appoint a Presiding Arbitrator, failing which, the parties could approach the Court. It was noticed that the interim order dated 10.09.2012 had been complied with by the petitioner but the respondents had not deposited `2.30 crores, as CWP No.3808 of 2013 6 directed. Accordingly, it was directed that respondents should also deposit the said amount and the petitioner would furnish the bank guarantee for a sum of `4.50 crores which would be kept alive subject to the adjudication by the Arbitral Tribunal. It would also be open to the parties to seek interim measures by making appropriate application before the Arbitral Tribunal. Relevant part of the order dated 27.11.2012 reads as under:
"In these circumstances, we dispose of this writ petition with a direction to both the parties to nominate their respective Arbitrators within a period of 30 days from today and the two Arbitrators shall appoint the Presiding Arbitrator. In case, they are not able to decide/appoint the agreed person as Presiding Arbitrator within a period of thirty days, it would be open to the parties to approach the Court by filing application under Section 11 (6) of the Arbitration & Conciliation Act, 1996.
As pointed out, the respondents had already encashed the bank guarantee. The petitioner had also filed an application by making an interim prayer for refund of the amount as it was his contention that after money is released by the bank in favour of the respondents, the bank is pressing the petitioner to deposit ` 6.80 Crores i.e. the amount of the bank guarantee. On this application, orders dated 7.9.2010 were passed directing the petitioner to make payment of ` 4.50 Crores to the bank and balance of ` 2.30 Crores was to be deposited by the respondents with the bank. It is stated that though the petitioner has deposited the aforesaid amount with the bank, the respondents have still not done the needful. Since the aforesaid direction was passed by this Court on 10.09.2012 which has become final, we direct the respondents to deposit a sum of ` 2.30 Crores with the bank. It would, however, be subject to the condition that the petitioner furnishes the bank guarantee for a sum of ` 4.50 crores which shall be kept alive subject to adjudication by the Arbitral Tribunal. It would be open to the parties to seek interim measures under Section 17 of the Arbitration & Conciliation Act, 1996 by making appropriate application before the Arbitral Tribunal."
9. Thus, it would be clear that the dispute inter se the parties had to be resolved by the Arbitrator who would come to the conclusion as to which of the parties was at fault and whether it was the petitioner who had backed out of the CWP No.3808 of 2013 7 agreement or it was due to the non-providing of the right of way by the respondents that the contract had fallen out. Once the matter was still subjudice, it was totally unjustified and uncalled for by the respondents to proceed ahead on the show cause notice for blacklisting and passing the impugned order and it would amount to putting the cart before the horse. The Delhi High Court judgment in SPS Engineering Ltd.'s case (supra) fully applies in the facts and circumstances of the present case. The relevant observations read as under:
"8. The other aspect that is of material importance is that the entire basis for placing the petitioner in the "Holiday List" is founded upon the allegations qua the performance or non-performance with regard to the contracts which were awarded to the petitioner. Therefore, it is not proper or correct on the part of IOCL even to suggest that placement in the "Holiday List" is entirely a non- contractual matter unrelated with the contracts awarded to the petitioner. I fail to see how the very allegations, on the basis of which the petitioner has been placed on the "Holiday List", will not figure in the deliberations before the arbitrator, who would be considering the disputes between the parties in their entirety as directed by a learned Single Judge of this Court in his order dated 17.03.2003. Furthermore, the Committee that was constituted comprised entirely of officers of IOCL. In these circumstances, it would have been proper and appropriate for IOCL to have held its hands and waited for an adjudication by the arbitrator on the entire question of commission of breaches, etc., including the termination of the contracts. The determination by the arbitrator would have settled all these issues. As pointed out above, if the arbitrator held against the petitioner, and found it to be in default, then IOCL would be entitled to place the petitioner in the "Holiday List". In such an eventuality, IOCL could not be faulted. I am in agreement with the contention of the learned counsel for the petitioner that the subject matter of arbitration and the question of placement in the Holiday List are intertwined and cannot be put into separate compartments. The records of the case itself reveal that the placement of the petitioner in the holiday List is not on account of reasons outside the contractual obligations of the parties."
10. The appeal filed by the Corporation was dismissed and the Division Bench held as under:
CWP No.3808 of 2013 8
"16. The learned Single Judge in the impugned judgment held that when the entire matter was pending before the Arbitrator there was no need to have proceeded with the issue of placing the petitioner on the 'holiday list' with the undue haste. We agree with this reasoning. When the matter was subject matter of arbitration, the respondents should have awaited the decision of the Arbitrator before taking such a decision in a hurry."
11. Another fact which carries weight is that perusal of the order dated 17.01.2013 would go on to show that apart from noticing the history, the order is bereft of any reason. The relevant portion of the order reads as under:
"Your reply dated 24.08.2012 has been considered and found that you have reiterated the points as raised by you earlier. At serial no.3 of your letter under reference you have wrongly said that HVPNL has proposed for amicable solution while it was your firm which has submitted a request to find an amicable solution to the problem vide letter no. Optima-Era Infra JV/Tech/2011- 12/D/2064 dated 22.03.2012.
From the above it is evident that you have miserably failed to execute the work allotted to you as per the terms & conditions of contract agreement despite the repeated reminders and notices and your reply has not been found feasible for acceptance.
Therefore your firm M/s Optima Energostroy is hereby blacklisted for a period of 3 years with immediate effect for doing further business with HVPNL.
This is without prejudice to the other rights of the Nigam.
Sd/-
Chief Engineer/MM HVPNL, Panchkula"
12. Apart from this, no opportunity was afforded to the petitioner while passing the order which has seriously prejudiced it since it cannot carry out commercial transactions with the respondent-Nigam for the next 3 years. The said order having been circulated to the other power corporations/companies, would deprive the petitioner from dealing with the other corporations/companies and applying in other tenders/works in view of the blacklisting which would prejudice the petitioner. The Hon'ble Apex Court in Union of India and others CWP No.3808 of 2013 9 Vs. Jai Prakash Singh and another, AIR 2007 SC 1363 has held as under:
"7. Reasons introduce clarity in an order. On plainest consideration of justice, the High Court ought to have set forth its reasons, howsoever brief, in its order indicative of an application of its mind, all the more when its order is amenable to further avenue of challenge. The absence of reasons has rendered the High Court's judgment not sustainable.
8. Even in respect of administrative orders Lord Denning M.R. in Breen v. Amalgamated Engineering Union 1971 (1) All E.R. 1148 observed "The giving of reasons is one of the fundamentals of good administration". In Alexander Machinery (Dudley) Ltd. v. Crabtree 1974 LCR 120 it was observed: "Failure to give reasons amounts to denial of justice". Reasons are live links between the mind of the decision taker to the controversy in question and the decision or conclusion arrived at". Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the "inscrutable face of the sphinx", it can, by its silence, render it virtually impossible for the Courts to perform their appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system, reasons at least sufficient to indicate an application of mind to the matter before Court. Another rationale is that the affected party can know why the decision has gone against him. One of the salutary requirements of natural justice is spelling out reasons for the order made, in other words, a speaking out. The "inscrutable face of a sphinx" is ordinarily incongruous with a judicial or quasi-judicial performance."
13. In ITC Limited Vs. State of Uttar Pradesh & others (2011) 7 SCC 493, hearing of the person who was to be affected and was deprived of the same was deprecated on the ground that there was violation of the principles of natural justice. In M/s Supra Enterprises Vs. Punjab State Electricity Board through its Chairman & another 2006 (2) PLR 539, in which, one of us (Ajay Kumar Mittal J.) held that blacklisting of a commercial firm has serious civil consequences and it affects the reputation of the firm and the State is expected to proceed with care and responsibility before taking such a drastic step. Relevant observations read as under:
CWP No.3808 of 2013 10
"5. The blacklisting of a commercial firm has serious civil consequences and at the same time it affects the reputation of the firm. The State is expected to proceed with care and responsibility before blacklisting any firm as it is a drastic step to be taken against a person.
6. At the negotiation stage, it shall be too harsh to debar a firm on the ground that it has quoted too high rates for its products. In a commercial transaction if the price or the quality of a product does not suit a person, he may choose not to enter into an agreement but that shall not be a cause or ground for blacklisting a firm. The object of blacklisting is to debar a firm for unbusiness like dealing. Normally, it should be carried out after the contract has been executed between the parties. The action of the State at the same time should not be arbitrary, unfair and discriminatory."
14. Accordingly, in view of the above factors, the order dated 17.01.2013 (Annexure P-46) is hereby quashed with liberty to the respondents to proceed afresh after the decision of the Arbitrator.
15. Writ petition is allowed in the above-said terms.
(G.S.SANDHAWALIA)
JUDGE
02.05.2013 (AJAY KUMAR MITTAL)
sailesh JUDGE