2017 (8) TMI 864 - HC - Indian Laws

Banning/blacklisting orders - Barring the petitioner from participating in the bidding process of GAIL in future for a period of 10 years - Held that - The very foundation of the Show Cause Notice, that the petitioner failed to check and point out fictitious documentation submitted by M/s Elgin towards supply of audio visual equipment in the contract, which have been claimed to be smuggled goods, which was investigated by Directorate of Revenue Intelligence and thus the petitioner is guilty of abetment of smuggling and other nefarious activities prohibited by the Law, does not exist. GAIL has not referred to any documentation that was submitted by the Petitioner or M/s Elgin Electronics to GAIL, at the time of execution of the work, which has been found to be fictitious. There was no investigation done by Directorate of Revenue Intelligence with regard to the equipment used for the project of GAIL. There is no finding that the equipment used for the GAIL project is smuggled or that the petitioner is guilty of abetment of smuggling and other nefarious activities prohibited by the Law. The justification given on behalf of GAIL for the impugned banning order, that the petitioner is liable to be banned as the Petitioner has failed to produce the Tax Paid invoices or explain their absence is not sustainable. GAIL has failed to show that there was any requirement for the petitioner to have produced the tax paid invoices at the time of execution of the work and if so, then why was a completion certificate issued in the year 2006, certifying the successful completion of the work. The fact that GAIL has issued the completion certificate shows that GAIL was satisfied that all was in order and the contract has been completed to their satisfaction as per its terms and conditions. Having accepted the successful completion of the contract, GAIL cannot seek to reopen the same and impose an obligation on the petitioner to now produce documents in support of the equipment purchased and used in the contract. More so, when there were no issues for nearly six years from the date of acceptance of successful completion of the contract. Since the very foundation of the Show Cause Notice and the banning order does not exist, the impugned order dated 21.10.2013 cannot be sustained. The same is accordingly quashed. With the quashing of the impugned order dated 21.10.2013, the petitioner shall be entitled to all consequential benefits of participation in future tenders, unblocking of vendor code and release of all pending payments that had been denied and/or withheld on account of the impugned order.

Issues Involved:
1. Quashing of the debarment order issued by GAIL.
2. Unblocking of the vendor’s code and release of the amount due to the petitioner.
3. Validity and implications of the completion certificate issued by the petitioner.
4. Allegations of smuggling and involvement in nefarious activities.
5. Investigation and findings by the Directorate of Revenue Intelligence (DRI).

Issue-wise Detailed Analysis:

1. Quashing of the Debarment Order Issued by GAIL:
The petitioner sought the quashing of the order dated 21.10.2013, wherein GAIL barred the petitioner from participating in future bidding processes for a period of 10 years. The court observed that the debarment order was based on the proceedings of the Directorate of Revenue Intelligence (DRI) and the alleged involvement of the petitioner in smuggling activities. However, the court found that the DRI's investigation did not concern the equipment supplied for the GAIL project but rather goods detained in 2010. The court concluded that the foundation of the show cause notice and the banning order did not exist, thus quashing the impugned order dated 21.10.2013.

2. Unblocking of the Vendor’s Code and Release of the Amount Due to the Petitioner:
The court noted that the relief regarding unblocking the vendor’s code and releasing the amount due to the petitioner was contingent upon the issue of debarment. With the quashing of the debarment order, the petitioner was entitled to all consequential benefits, including participation in future tenders, unblocking of the vendor code, and release of all pending payments that had been denied or withheld due to the impugned order.

3. Validity and Implications of the Completion Certificate Issued by the Petitioner:
The petitioner denied issuing a completion certificate for ?1.27 crores to M/s. Elgin Electronics, asserting that only a work of ?1 crore was subcontracted. The court found that GAIL's show cause notice raised an issue regarding a false completion certificate. However, GAIL admitted that the banning order was not based on the completion certificate issue but solely on the DRI investigation. Therefore, the court did not find the completion certificate issue relevant to the debarment order.

4. Allegations of Smuggling and Involvement in Nefarious Activities:
GAIL's show cause notice accused the petitioner of abetting smuggling activities by failing to check fictitious documentation submitted by M/s. Elgin Electronics. The DRI's investigation found that M/s. Elgin Electronics had raised fictitious invoices to cover the sale of illicitly imported microphones. However, the court noted that the DRI's proceedings did not concern the equipment supplied for the GAIL project. The court found no evidence connecting the petitioner with smuggling activities or any investigation regarding the equipment used in the GAIL project.

5. Investigation and Findings by the Directorate of Revenue Intelligence (DRI):
The DRI's investigation focused on goods detained under Panchnama dated 13.07.2009, suspected of being smuggled without customs duty payment. The DRI found that M/s. Elgin Electronics had issued a fabricated invoice for mobile phones, which was admitted to be fake. The court highlighted that the DRI's proceedings did not involve the equipment supplied for the GAIL project and that no action was taken by the DRI regarding those goods. Consequently, the court determined that the basis for GAIL's debarment order was unfounded.

Conclusion:
The court quashed the debarment order dated 21.10.2013, issued by GAIL, as the foundation for the show cause notice and banning order did not exist. The petitioner was entitled to all consequential benefits, including participation in future tenders, unblocking of the vendor code, and release of all pending payments. The court allowed the writ petition and did not issue any orders regarding costs.

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