2013 (9) TMI 707 - SC - Indian Laws

Blacklisting of company - Bar for participating in future bids - Company not reliable - Deal given to another bidder after petitioner chose to back out - Held that - There is no illegality or irrationality in the conclusion reached by the 2nd respondent that the petitioner is not (commercially) reliable and trustworthy in the light of its conduct in the context of the transaction in question. We cannot find fault with the 2nd respondent s conclusion because the petitioner chose to go back on its offer of paying a premium of Rs.190.53 crores per annum, after realising that the next bidder quoted a much lower amount. Whether the decision of the petitioner is bona fide or mala fide, requires a further probe into the matter, but, the explanation offered by the petitioner does not appear to be a rational explanation - The dereliction, such as the one indulged in by the petitioner, if not handled firmly, is likely to result in recurrence of such activity not only on the part of the petitioner, but others also, who deal with public bodies, such as the 2nd respondent giving scope for unwholesome practices. No doubt, the fact that the petitioner is blacklisted (for some period) by the 2nd respondent is likely to have some adverse effect on its business prospects - Power of judicial review will not be invoked to protect private interest at the cost of public interest, or to decide contractual disputes - The prejudice to the commercial interests of the petitioner, as pointed out by the High Court, is brought about by his own making. Therefore, it cannot be said that the impugned decision of R-2 lacks proportionality - Decided against petitioner.

Summary

Issues Involved:
1. Authority to blacklist the petitioner.
2. Compliance with principles of natural justice.
3. Proportionality of the punishment.

Detailed Analysis:

1. Authority to Blacklist the Petitioner:
The petitioner argued that the decision to blacklist them for one year was without legal authority. The bid document allowed the forfeiture of bid security but did not explicitly authorize blacklisting except in cases of "Fraud and Corrupt Practices." The Supreme Court, however, held that the authority of the National Highways Authority of India (NHAI) to blacklist a bidder is inherent in its executive power to enter into contracts, as conferred by Section 3 of the National Highways Authority Act. The Court stated, "The authority of the 2nd respondent to enter into contracts, consequently, the concomitant power not to enter into a contract with a particular person, does not flow from Article 298, as Article 298 deals with only the authority of the Union of India and the States." The Court emphasized that the power to blacklist is a necessary concomitant to the executive power of the State to carry on trade or business and to make contracts for any purpose.

2. Compliance with Principles of Natural Justice:
The petitioner contended that they should have been given an oral hearing before the decision to blacklist was made, citing the principles of audi alteram partem. The Supreme Court agreed with the High Court's conclusion that there is no inviolable rule mandating a personal hearing before every decision of the State. The Court referred to Union of Indian and another v. Jesus Sales Corporation, stating, "There is no inviolable rule that a personal hearing of the affected party must precede every decision of the State." The petitioner was given a reasonable opportunity to explain its case through written submissions before the impugned decision was taken.

3. Proportionality of the Punishment:
The petitioner argued that the punishment of blacklisting for one year was disproportionate to the wrong committed. The Supreme Court examined the purpose of the blacklisting and its adverse effects on the petitioner. The Court noted that the NHAI's decision was based on the petitioner's unreliability and the significant financial loss caused by their refusal to enter into the contract. The Court stated, "We cannot say the reasoning adopted by the 2nd respondent either irrational or perverse." The Court also emphasized that the dereliction by the petitioner, if not handled firmly, could lead to unwholesome practices. The Court concluded that the impugned decision did not lack proportionality, stating, "The prejudice to the commercial interests of the petitioner, as pointed out by the High Court, is brought about by his own making."

Conclusion:
The Supreme Court upheld the decision of the High Court and dismissed the Special Leave Petition (S.L.P.), concluding that the NHAI was within its rights to blacklist the petitioner, complied with principles of natural justice by providing a reasonable opportunity to be heard, and the punishment was proportionate to the wrong committed.