2023 (4) TMI 865 - SC - Indian Laws

Violation of principles of natural justice - penalty - debarment from participating in further tenders on account of non-supply of transformers - reason recorded in the orders impugned by the respondents for taking the extreme and extraordinary measure of debarring the appellant - HELD THAT - The impugned order as passed by the High Court in practically denying the principal relief claimed by the appellant cannot be approved and the writ petition filed by the appellant deserves to be allowed to the extent of annulling the effect of debarment and quashing the imposition of penalty. As regards the principles of law applicable to the case, we need not elaborate on various decisions cited at the Bar. Suffice it would be to take note of the decision in UMC Technologies Private Limited 2020 (11) TMI 966 - SUPREME COURT wherein, the substance of the other relevant decisions has also been duly noticed by this Court while explaining the principles governing such actions of debarment/blacklisting. Penalty - HELD THAT - There are force and substance in the contentions urged on behalf of the appellant that such an imposition cannot be approved for two major factors The first and foremost being that in the show-cause notice dated 26.11.2019, the appellant was put to notice only as regards the proposition of debarment and in the said notice, nothing was indicated about the proposed imposition of penalty. Though in the cancellation orders dated 19.11.2019 and 21.11.2019, the respondents purportedly reserved their right to take appropriate steps, those orders cannot be read as show-cause notice specifically for the purpose of imposition of penalty - Looking to the terms of contract, quantification of the amount of penalty (if at all the penalty is considered leviable) could not have been carried out without affording adequate opportunity of response to the appellant. That being the position, the action of the respondents in imposing the penalty without even putting the appellant to notice as regards this proposed action cannot be approved. The authority concerned has proceeded to impose the maximum of penalty to the tune of 10% of the deficit supply without specifying as to why the maximum of penalty was sought to be imposed. In this regard, the relevant factors as indicated by the appellant could not have been ignored altogether. Unfortunately, the High Court has totally omitted to consider this aspect of the grievance of the appellant. The High Court had the opportunity to correct the obvious errors in its order dated 23.04.2021, particularly when the review petition was placed before it for consideration because one part of the matter (concerning penalty) was not even considered and as regards other part too, the pertinent contentions of the appellant did not acquire the requisite attention of the High Court. Unfortunately, the High Court chose to dismiss the review petition without even looking into the relevant factors, including the one concerning the impact of the communication dated 18.09.2019. The High Court having not dealt with the matter in the correct perspective whether in disposal of the writ petition or in disposal of the review petition, both the impugned orders could only be disapproved. Appeal allowed.

Summary

Issues Involved
1. Legality of the debarment order.
2. Imposition of penalty without specific show-cause notice.
3. Consideration of the impact of the deferment communication dated 18.09.2019.

Summary of Judgment

Issue 1: Legality of the Debarment Order
The appellant challenged the debarment order issued by the respondent, MPMKVVCL, which debarred the appellant from participating in future tenders for three years. The High Court initially set aside the debarment order dated 13.02.2020 and directed the respondents to pass a fresh order after affording an opportunity of hearing to the appellant. Subsequently, the respondents issued a detailed order on 30.07.2020, maintaining the debarment and imposing penalties. The High Court, in its order dated 23.04.2021, found the debarment order justified and plausible but modified the effective date of debarment to 13.02.2020. The Supreme Court, however, found that the debarment order had shortcomings, particularly because the respondents failed to provide further instructions after deferring the supply on 18.09.2019. The Supreme Court set aside the debarment order, noting that the entire blame could not be shifted solely to the appellant.

Issue 2: Imposition of Penalty Without Specific Show-Cause Notice
The appellant contended that the show-cause notice dated 26.11.2019 only mentioned debarment and did not indicate the imposition of a penalty. The Supreme Court agreed, stating that quantification of the penalty amount required adequate opportunity for the appellant to respond. The Court found that the imposition of the maximum penalty of 10% without specifying reasons was unjustified. Consequently, the Supreme Court set aside the penalty order dated 17.08.2020.

Issue 3: Consideration of the Impact of the Deferment Communication Dated 18.09.2019
The appellant argued that the deferment communication dated 18.09.2019 from the respondents deferred the balance deliveries of transformers and no further instructions were issued. The Supreme Court found that the respondents failed to rebut this contention and did not provide any further instructions to the appellant before issuing the cancellation orders. The Court concluded that the debarment order was issued without due regard to the factual situation and set it aside.

Conclusion
The Supreme Court allowed the appeals, setting aside the High Court's orders dated 23.04.2021 and 13.12.2021, and quashed the debarment and penalty orders dated 30.07.2020 and 17.08.2020, respectively. The Court annulled the debarment for all practical purposes and directed that no recovery shall be made under the penalty order. If any amount had been recovered, it should be refunded to the appellant within a month, failing which it would carry simple interest at the rate of 9% per annum.