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TMI Blog2013 (9) TMI 707X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Special Leave Petition (C) No. 23059 of 2011 - - - Dated:- 11-5-2012 - Altamas Kabir And J. Chelameswar,JJ. JUDGMENT Chelameswar, J. The National Highways Authority of India (R-2) had decided to undertake development and operation / maintenance of six laning of Dhankuni Kharagpur Section of NH-6 in the States of West Bengal and Orissa under NHDP Phase-V on design, build, finance, operate and transfer (DBFOT) toll basis project through public private partnership . For the said purpose, R-2 decided to invite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner made a representation to the Ministry for Road, Transport and Highways seeking, in substance, the intervention of the Ministry and annulment of the decision of R-2 to debar the petitioner. As there was no response from the Ministry, the petitioner approached the High Court of Delhi through a writ petition under Article 226 of the Constitution with a prayer to quash the abovementioned order of R-2 dated 20-05-2011. A Division Bench of the High Court upheld the order passed by R-2 and dismissed the petition and held as follows: the respondent No.2 was well within its rights to take appropriate action against the petitioner, and taking into consideration the enormity of the loss, we are of the considered view that respondent No.2 has dealt with the petitioner rather lightly. Hence, the S.L.P. 6. The learned counsel for the petitioner Mr. Mukul Rohatgi, argued that the decision of the 2nd respondent to blacklist the petitioner from participating, for a period of one year, in the future projects of the 2nd respondent is without any authority of law. The learned counsel argued that, no doubt, according to (Clause 2.20.6 of) the bid document, the 2nd respondent is ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on any express statutory provision. 11. The concept of Blacklisting is explained by this Court in M/s. Erusian Equipment Chemicals Limited v. Union of India and others, (1975) 1 SCC 70, as under: Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The nature of the authority of State to blacklist persons was considered by this Court in the abovementioned case 12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equality and absence of arbitrariness and discrimination in such transactions. Hohfeld treats privileges as a form of liberty as opposed to a duty. The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.. The effect of excluding a person from entering into a contractual relationship with State would be to deprive such person to be treated equally with those, who are also engaged in similar activity. 12. It follows from the above Judgment that the decision of State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into contractual relationship with such persons is called blacklisting. State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of State to blacklist a person is a necessary concomitant to the executive power of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Concession Agreement; or (iii) to furnish the Performance Security within the period prescribed therefor in the Concession Agreement; 14. The other stipulation under the bid document, which is relevant for our present purpose, is Clause 4, which deals with Fraud and Corrupt Practices , which requires the bidders, its employees, agents, etc., to observe the highest standard of ethics during the bidding process and during the subsistence of Concession Agreement, etc. The Clause purports to declare the right of the 2nd respondent either to decline to enter into a contractual relationship with a bidder or terminate the agreement entered into with a successful bidder, if the 2nd respondent comes to the conclusion that either the bidder or his agent, etc., committed any; (i) corrupt; (ii) fraudulent; (iii) undesirable; or (iv) restrictive practice (collectively we call them unacceptable practices ). It also enables the 2nd respondent to forfeit and appropriate the Bid Security or Performance Security, as the case may be, towards damages. It is further stipulated in Clause 4.2 that whenever it is found that bidder or his agent, etc., indulged in any one of the abovement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gazette, appoint in this behalf, there shall be constituted for the purposes of this Act an Authority to be called the National Highways Authority of India. (2) The Authority shall be a body corporate by the name aforesaid having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract and shall by the said name sue and be sued. of the National Highways Authority Act. The nature of the said power is similar to the nature of the power flowing from Article 298 of the Constitution, though it is not identical. The 2nd respondent, being a statutory Corporation, is equally subject to all constitutional limitations, which bind the State in its dealings with the subjects. At the same time, the very authority to enter into contracts conferred under Section 3 of the NHA Act, by necessary implication, confers the authority not to enter into a contract in appropriate cases (blacklist). The bid document can neither confer powers, which are not conferred by law on the 2nd respondent, nor can it substract the powers, which are conferred by law either by express provision or by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts, and your reply in response to the Show Cause Notice, NHAI is of the considered view that no justifiable grounds have been made out in support of your action of non-acceptance of LOA. Keeping in view the conduct of the addressees, NHAI find that they are not reliable and trustworthy and have caused huge financial loss to NHAI. 20. The learned counsel for the petitioner argued that Clause 4 of the bid document stipulates blacklisting to be one of the actions that can be taken against a bidder or contractor, if the 2nd respondent comes to the conclusion that such a person is guilty of any one of the unacceptable practices, referred to earlier. Imposing the same penalty on a person, who is not guilty of any one of the unacceptable practices, though such a person is guilty of dereliction of some legal obligation, would amount to imposition of a punishment, which is disproportionate to the dereliction. In support of the submission, the learned counsel relied upon the Judgment of this Court in Teri Oat Estates (P) Ltd. v. U.T.Chandigarh and others, (2004) 2 SCC 130. 21. It was a case, where allotment of a piece of land, made under the Capital of Punjab (Development and Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 2nd respondent in the impugned order, while rejecting the explanation offered by the petitioner, recorded as follows: Further the fact remains that clarification / amendments communicated by NHAI were minor and cannot be attributed as a cause for occurrence of an error of major nature and magnitude. With project facilities clearly spelt out in the RFP document, the project cost gets frozen well in advance and similarly traffic assessment projections, which largely impact the financial assessment, are also not expected to be left for last few days of bid submission. Therefore stating that an error of this nature and magnitude occurred is neither correct nor justified (Emphasis supplied) 25. We cannot say the reasoning adopted by the 2nd respondent either irrat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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