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TMI Blog2013 (10) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... ially when (a) the appellant is supplying bulk of its manufactured products to the respondent-BSNL and (b) The excess amount received by it has already been paid back. Because blacklisting is in the nature of penalty the quantum whereof is a matter that rests primarily with the authority competent to impose the same. In the realm of service jurisprudence this Court has no doubt cut short the agony of a delinquent employee in exceptional circumstances to prevent delay and further litigation by modifying the quantum of punishment but such considerations do not apply to a company engaged in a lucrative business like supply of optical fibre/HDPE pipes to BSNL. Secondly, because while determining the period for which the blacklisting should be effective the respondent- Corporation may for the sake of objectivity and transparency formulate broad guidelines to be followed in such cases. Different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines. While, it may not be possible to exhaustively enumerate all types of offences and acts of misdemeanour, or violations of contractual obligations by a contractor, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to adjust the excess amount credited to its account towards the outstanding bills on an ad hoc basis. A letter dated 10th May, 2006 was, according to the appellant, addressed to the respondent-BSNL in that regard. 5. The respondent-BSNL on the other hand has a different story to tell. According to it four of its officers had abused their official position and fraudulently generated 'voucher numbers' on the duplicate and triplicate copies of the bills submitted by the appellant to facilitate payments as if the said bills were genuine thereby causing wrongful loss to the respondent-BSNL and a corresponding gain to the appellant. There was in this process an excess payment of Rs.7.98 crores made and credited to the account of the appellant by the accounts officer of respondent-BSNL. 6. Taking note of the fraudulent payments made to the appellant, the BSNL lodged an FIR with CBI ACB Mumbai against one of its Senior Accounts Officers and a Director of the appellant-company alleging commission of offences punishable under Section 120B read with Section 420 Indian Penal Code and Section 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988. Investigation that follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing duplicate and triplicate copies of the bills that stood already cleared for payment. These bogus and fraudulent claims made under bogus and fabricated bills were then processed by some of the officers of the BSNL for payment resulting in double and at times triple payment in favour of the appellant. The relevant portion of the blacklisting order is to the following effect: Hence, the supplier with a clear intention to defraud BSNL, WTP, Mumbai, have prepared duplicate and triplicate copies of bills already processed for payment and have again put up the same for payment with BSNL. Thus, in short these were bogus and/or fraudulent claims made on the basis of forged and/or fabricated bills/documents. Thereafter, by joining hands with some of the erring officers of BSNL, the supplier has got the afore mentioned duplicate and triplicate copies of bills processed for payment and have fraudulently received double/triple payment(s) for supplying material only once. Therefore, by not only claiming but also receiving double and/or triple payment on the basis of forged/fabricated/duplicate and triplicate copies of same bills, the supplier has committed gross fraud on the public exch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to be payable to the Petitioner, that was paid to him. Mere payment of the amount does not wipe out the fact that the Petitioner had submitted the Bills claiming double payment. In our opinion, in view of this finding, no interference is called for in the order impugned. The Petition is rejected. No costs. 10. The present appeal calls in question the correctness of the above order of the High Court as noticed earlier. 11. Appearing for the appellant-company, Mr. Mukul Rohatgi, strenuously argued that debarring the appellant permanently and for all times to come was wholly arbitrary and unjustified. It was contended that the blacklisting order had serious civil consequences for the person blacklisted making it obligatory for the Authority passing the order to act fairly and reasonably. Inasmuch as respondent-BSNL had blacklisted the appellant permanently, the decision was neither fair nor reasonable. Paras 31 and 32 of the bid document also, according to the learned counsel, provides for blacklisting only for a suitable period . This implies that blacklisting had to be for a definite period and not for all times to come. Since the products manufactured by the appellant wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supplier does not perform satisfactory in the field in accordance with the specifications or (c) fails to honour his bid without sufficient grounds. 16. A literal construction of the provisions of paras 31 and 32 extracted above would mean that the power to disqualify or blacklist a supplier is available to the purchaser only in the three situations enumerated in paras 31 and 32 and no other. Any such interpretation would, however, give rise to anomalous results. We say so because in cases where a supplier is found guilty of much graver offences, failures or violations, resulting in much heavier losses and greater detriment to the purchasers in terms of money, reputation or prejudice to public interest may go unpunished simply because all such acts of fraud, misrepresentation or the like have not been specifically enumerated as grounds for blacklisting of the supplier in paras 31 and 32 of the tender document. That could in our opinion never be the true intention of the purchaser when it stipulated paras 31 and 32 as conditions of the tender document by which the purchaser has reserved to itself the right to disqualify or blacklist bidders for breach or violation committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist. 18. Subsequent decisions of this Court in M/s Southern Painters v. Fertilizers Chemicals Travancore Ltd. and Anr. AIR 1994 SC 1277; Patel Engineering Ltd. Union of India (2012) 11 SCC 257; B.S.N. Joshi Sons Ltd. v. Nair Coal Services Ltd. Ors. (2006) 11 SCC 548; Joseph Vilangandan v. The Executive Engineer, (PWD) Ernakulam Ors. (1978) 3 SCC 36 among others have followed the ratio of that decision and applied the principle of audi alteram partem to the process that may eventually culminate in the blacklisting of a contractor. 19. Even the second facet of the scrutiny which the blacklisting order must suffer is no longer res integra. The decisions of this Court in Radha krishna Agarwal and Ors. v. State of Bihar Ors. (1977) 3 SCC 457; E.P. Royappa v. State of Tamil Nadu and Anr. (19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable . It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and non-discrimination in the type of the transactions and nature of the dealing as in the present case. 20. The legal position governing blacklisting of suppliers in USA and UK is no different. In USA instead of using the expression Blacklisting the term debarring is used by the Statutes and the Courts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticipate in State or local contracts or assistance agreements on a basis of conduct similar to one or more of the causes for debarment specified in this part. (e) Whether and to what extent did the contractor plan, initiate or carry out the wrongdoing. (f) Whether the contractor has accepted responsibility for the wrongdoing and recognized the seriousness of the misconduct. (g) Whether the contractor has paid or agreed to pay all criminal, civil and administrative liabilities for the improper activity, including any investigative or administrative costs incurred by the government, and have made or agreed to make full restitution. (h) Whether contractor has cooperated fully with the government agencies during the investigation and any court or administrative action. (i) Whether the wrongdoing was pervasive within the contractor s organization. (j) The kind of positions held by the individuals involved in the wrongdoing. (k) Whether the contractor has taken appropriate corrective action or remedial measures, such as establishing ethics training and implementing programs to prevent recurrence. (l) Whether the contractor fully investigated the circumstances surrounding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difying the quantum of punishment but such considerations do not apply to a company engaged in a lucrative business like supply of optical fibre/HDPE pipes to BSNL. Secondly, because while determining the period for which the blacklisting should be effective the respondent- Corporation may for the sake of objectivity and transparency formulate broad guidelines to be followed in such cases. Different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines. While, it may not be possible to exhaustively enumerate all types of offences and acts of misdemeanour, or violations of contractual obligations by a contractor, the respondent-Corporation may do so as far as possible to reduce if not totally eliminate arbitrariness in the exercise of the power vested in it and inspire confidence in the fairness of the order which the competent authority may pass against a defaulting contractor. 27. In the result, we allow this appeal, set aside the order passed by the High Court and allow writ petition No.2289 of 2011 filed by the appellant but only to the extent that while the order blacklisting the appellant shall stand aff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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