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TMI Blog2015 (2) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... acilities extended to the petitioner by ICICI bank Ltd.. The said documents have been rejected by GAIL as the same had not been submitted at the relevant point of time. In view thereof, the approach of GAIL in this respect may not be apposite. Although such documents would have no bearing whether petitioner was guilty of alleged misconduct i.e. submission of fabricated documents, the same would be germane to consider the question whether the petitioner had acquired any benefit which he was not otherwise entitled to. And, this would have a bearing on the punitive measure to be imposed. If the working capital facilities extended by ICICI bank Ltd. to the petitioner would enable the petitioner to qualify for the tender then the petitioner would have obtained no benefit which he otherwise was not entitled to. No interference is called for insofar as blacklisting the petitioner is concerned. However, to the extent that the petitioner has been debarred from all future business with GAIL, the impugned order is set aside. The matter is remanded to GAIL to consider the period of blacklisting afresh in view of the aforesaid observations and in the context of the period as specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er would furnish documentary evidence by way of copies of work order, completion certificate, balance sheet or audited financial statements including the profit and loss account etc. along with the bid, to establish that the qualification criteria was met. 2.3 Apart from E-Tender 2161, the respondent also invited E-Tender No.8000002119 - for annual rate contract for construction of pipelines and associated facilities in Northern Region for supplying gas to new/existing consumers (hereinafter 'E-Tender 2119') and E-tender No.8000003564 - for annual rate contract for construction of pipelines and associated facilities in Northern Region for supplying gas to new/existing consumers (hereinafter 'E-Tender 3564'). 2.4 On 06.09.2010, the petitioner submitted its bid for Parts D and E of E-Tender 2161 and E-Tender 2119. Along with its bids, the petitioner submitted an audited financial statement dated 21.08.2010, which reflected the petitioner's company's working capital as on 31.03.2010 to be `6.96 crores approximately. The respondent awarded the contract for E-Tender 2161 and E-Tender 2119 to the petitioner based on the information and documents supplied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal (LPA No.167/2014) before a Division Bench of this court against the order dated 21.01.2014. 2.9 After considering the arguments and documents filed by the petitioner, the respondent passed the impugned order banning the respondent for an indefinite period. Thereafter on 24.03.2014, the Learned Division Bench of this court disposed off the LPA No 167/2014 on the ground that as a reasoned order has been passed by the competent authority, the appeal had become infructuous. 3. The learned counsel appearing for the petitioner advanced his arguments on the assumption that the allegation of submitting a false and fabricated financial statement alongwith its bids for part D E of E-Tender 2161 and E-Tender 2119, was made out. He argued that even assuming that allegations levelled against the petitioner were true, nonetheless, the punitive measure inflicted upon the petitioner was too harsh and shockingly disproportionate to the alleged misconduct. He submitted that the petitioner employed over 300 persons and blacklisting the petitioner would, in effect, render the said workers jobless. He contended that the petitioner's expertise was in laying gas pipelines and GAIL was th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raj Vinod and Associates (i.e. auditors appointed under the Companies Act, 1956). The financial statement as on 31.08.2010 reflected the net current assets as on 31.03.2010 to be `3.01 crores. It is also relevant to note that Vishal Aggarwal, subsequently, denied his signatures on the financial statement dated 21.08.2010 and has filed a complaint with the Karol Bagh Police Station claiming that his signatures on the financial statement dated 21.08.2010 were forged. The explanation furnished by the petitioner that there were certain cheques in hand which had been accounted for but had subsequently become stale and, therefore, were excluded from the calculation of net assets has been disbelieved by the respondent and in my view, rightly so. Even if it is accepted that cheques, representing borrowed funds, were in petitioner's possession that would not alter the net working capital available with the petitioner. In any event, the explanation that the said cheques enhanced the petitioner's working capital is illusory as, admittedly, the cheques were not encashed. 6. The learned counsel for GAIL also pointed out that the petitioner submitted another statement as on 31.03.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... termination of the contract. 11. Article 35 of the IFB provides for measures in respect of corrupt and fraudulent practices. Sub-article 35.1 of the IFB defines corrupt practices and fraudulent practices as under:- i) Corrupt Practice means the offering, giving, receiving or soliciting of anything of value to influence the action of public official in contract execution; and ii) Fraudulent Practice means a misrepresentation of facts in order to influence the execution of a Contract to the detriment of the Owner, and includes collusive practice among bidders (prior to or after bid submission) designed to establish bid prices at artificial non-competitive levels and to deprive the Owner of the benefits of free and open competition. 12. A bidder is required to observe the highest standard of ethics during execution of a contract and in terms of Sub-article 35.2 of the IFB, any proposal for an award would be rejected if it is determined that the contractor has engaged in corrupt or fraudulent practice in competing for the contract in question. In terms of Sub-article 35.3 of the IFB, the contractor is also liable to be declared ineligible for a period as specified und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g plans, technical proposals and business details, including information contained or transmitted electronically for purposes of competition or personal gain and will not pass the information so acquired on to others. d) The Bidder/ Contractor will, when presenting his bid undertakes, to disclose any and all payments made, is committed to or intends to make to agents, brokers or any other intermediaries in connection with the award of the contract. 2 The Bidder/ Contractor will not instigate and allure third persons/parties to commit offences outlined above or be an accessory to such offences. 15. GAIL further specified that any transgression of the integrity pact would disqualify the bidder from the tendering process. The relevant extract from paragraph no.3 of the integrity pact is quoted below:- If the Bidder, before the award of contract, has committed a transgression through a violation of any provisions of Section 2 or in any other form so as to put his reliability or credibility as Bidder into question, the Principal shall be entitled to disqualify, put on holiday or blacklist the Bidder including from the future tender process or to terminate the contract, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluation . The said form specifies the criteria for evaluation of the performance of a contractor. The substance of the said form is to apprise the contractors the method by which their performance would be evaluated on the basis of the indicated parameters. In this context, clause 1.5 of the said form must be read as a caution to a contractor that he is liable to be blacklisted in future. This does not necessarily imply that the contractor would be barred for all times to come. But, must be read only to mean that submission of forged documents in respect of any of the qualifying/eligibility criteria would invite an action of blacklisting which would result in debarring the contractors from future contracts with GAIL. 19. Secondly, it is now well settled that blacklisting for an indefinite period is not permissible. The Supreme Court in Kulja Industries Ltd. v. Chief General Manager, BSNL: AIR 2014 SC 9 had held as under:- 24. Suffice it to say that 'debarment' is recognised and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Indian Supreme Court has applied the principle of proportionality to legislative action since 1950, as stated in detail below. 28. By proportionality , we mean the question whether, while regulating exercise of fundamental rights, the appropriate or least-restrictive choice of measures has been made by the legislature or the administrator so as to achieve the object of the legislation or the purpose of the administrative order, as the case may be. Under the principle, the court will see that the legislature and the administrative authority maintain a proper balance between the adverse effects which the legislation or the administrative order may have on the rights, liberties or interests of persons keeping in mind the purpose which they were intended to serve . The legislature and the administrative authority are, however, given an area of discretion or a range of choices but as to whether the choice made infringes the rights excessively or not is for the Court. That is what is meant by proportionality. 25. In R. (Daly) v. Secy. of State for the Home Deptt.: (2001) 3 ALL ER 433 (HL), the House of Lords had held that the criteria of proportionality was more precise and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictions is also described as the least injurious means or minimal impairment test so as to safeguard the fundamental rights of citizens and to ensure a fair balance between individual rights and public interest. Suffice it to say that there has been an overlapping of all these tests in its content and structure, it is difficult to compartmentalise or lay down a straitjacket formula and to say thatWednesbury has met with its death knell is too tall a statement. Let us, however, recognise the fact that the current trend seems to favour proportionality test but Wednesbury has not met with its judicial burial and a State burial, with full honours is surely not to happen in the near future. 37. Proportionality requires the court to judge whether action taken was really needed as well as whether it was within the range of courses of action which could reasonably be followed. Proportionality is more concerned with the aims and intention of the decision- maker and whether the decision-maker has achieved more or less the correct balance or equilibrium. The court entrusted with the task of judicial review has to examine whether decision taken by the authority is proportionate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngdoing. (c) Whether there is a pattern or prior history of wrongdoing. (d) Whether contractor has been excluded or disqualified by an agency of the Federal Government or have not been allowed to participate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f) The petitioner has been unable to complete the ongoing projects on account of financial constraints resulting from the blacklisting order; g) GAIL Gas Ltd. had also debarred the petitioner in view of the impugned order and has invoked the performance guarantees of `1.76 crores. h) The petitioner's annual turnover - which was in excess of `100 crores - has been reduced to nil. 36. If one juxtaposes the same with the consequences of fraudulent and corrupt practices as provided in the integrity pact, the measure of blacklisting for an indefinite period appears relatively harsh and disproportionate to the alleged misconduct. 37. The question whether a punitive measure is disproportionate must also be viewed in the context of the standards set by GAIL themselves. In the event a contractor is found to have bribed the officials of GAIL and secured the contract, he would be visited with the maximum penalty of a three year holiday. By applying this standard, the punishment of blacklisting for an indefinite period appears to be, clearly, disproportionate and arbitrary. 38. It is well settled that the High Court while exercising powers of judicial review would be reluc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, the approach of GAIL in this respect may not be apposite. Although such documents would have no bearing whether petitioner was guilty of alleged misconduct i.e. submission of fabricated documents, the same would be germane to consider the question whether the petitioner had acquired any benefit which he was not otherwise entitled to. And, this would have a bearing on the punitive measure to be imposed. If the working capital facilities extended by ICICI bank Ltd. to the petitioner would enable the petitioner to qualify for the tender then the petitioner would have obtained no benefit which he otherwise was not entitled to. 42. In view of the aforesaid, no interference is called for insofar as blacklisting the petitioner is concerned. However, to the extent that the petitioner has been debarred from all future business with GAIL, the impugned order is set aside. The matter is remanded to GAIL to consider the period of blacklisting afresh in view of the aforesaid observations and in the context of the period as specified in the integrity pact (i.e. minimum of six months to maximum of three years). Pending applications also stand disposed of. No order as to costs. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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