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TMI Blog2023 (4) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... cklisting. 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 spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso referred to as TS-494 and TS-532 respectively , were floated by the respondent Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited MPMKVVCL , for short . In relation to TS-494, a purchase order was issued by the respondents on 30.06.2017 for the supply of 586 distribution transformers (DTR) - Level I. The period for the supply was specified as six months starting from the third month of the purchase order issue date. However, the appellant received the purchase order through email on 13.09.2017 and physically on 15.09.2017. The appellant made a request to the respondents to modify the delivery schedule due to delay of 75 days in the receipt of the purchase order, as also to adjust the rates as per Goods and Services Tax (GST), which came into effect on 01.07.2017. 3.3. The appellant has averred that despite receiving no response from the respondents, they had proceeded to submit drawings for approval on 04.10.2017, with the intention of commencing production. In addition, the appellant made two separate requests, dated 13.09.2017 and 18.11.2017, for modifications of the delivery schedule and adjustments of rates in accordance with GST. According to the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It has been the case of the appellant that on the intervening night of 20th and 21st August 2018, an extraordinary storm accompanied by heavy rains caused the roof of their plant to collapse. As a result, most of the raw material, which was stored for the manufacture of transformers, was destroyed. Only 50 transformers from the fourth lot of the aforementioned purchase order were saved, as they were complete in all respects and had already been packed up for delivery. These 50 transformers were supplied on 01.09.2018. 4. On 18.09.2019, the respondent No. 2 Chief General Manager (Procurement), MPMKVVCL sent a letter to the appellant in relation to TS-532 that they had decided to defer the balance deliveries of 593 Nos. of transformers under the said contract until further instructions. The relevant contents of said letter read as under: - No. MD/ MK /04/P-III/TS-494/2824 Bhopal, dated 18/09/2019 To, M/s. Isolators Isolators, Plot No. 83 Sector. 1, Industrial Area, Govindpura, Bhopal 462023 MP Sub- Supply of BIS Certified Level- II/0433 KVA.2s KVA Conventional Distribution Transformer against Saubhagya Yojana Deferment of Supply thereof. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In addition you were also informed that the number of DTRs equivalent to unsupplied quantity will be purchased from other firm at the risk and cost of your firm. As per tender clause -12 delivery and supply of material of Annexure-II of TS -494 read with clause 28 cancellation of rate contract of Annexure -II the competent authority has accorded approval for cancellation of PO NO. MD/MK/04/TS-494/P-lll/1988 dated 30.06.2017 for 286 Nos. unsupplied quantity of 25 KVA DTRs with imposition of penalty. Therefore, PO NO. MD/MK/04/TS-494/P-III/1988 dated 30.06.2017 for 286 Nos. of 25 KVA DTRs is hereby cancelled with imposition of penalty on unsupplied quantity. Other punitive action as per terms of the tender will be initiated separately. 6. Subsequently, the respondent No. 2 issued another order dated 21.11.2019 cancelling the supply of the remaining quantity of transformers under TS-532 too. The relevant contents of said letter are also reproduced as under: - No. MD/MK/04/P-III/3593 Bhopal, dated: 21.11.2019 To, M/s lsolators lsolators, Plot No. - 83 Sector-1, Industrial Area, Govindpura, Bhopal-462023 (M.P.) Sub:- Cancellation of Purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief General Manager (Procurement), after referring to the background aspects relating to the purchase orders issued to the appellants; the appellant s failure to effect the necessary supplies within time schedule; and cancellation of the purchase orders, stated as under: - *** *** *** Your firm had offered 100 nos. DTRs for stage inspection against the Purchase order. The inspection was carried out on 04.06.18 and stage clearance letter was issued vide letter no.1469 dtd 05.06.18. In general procedure, after the stage clearance, your firm were required to offer the material for final inspection but the above DTRs were not offered by your firm for final inspection. Therefore, the PO No. MD/MK/04/P-III/TS-532/2166 dated 22.02.18 has been cancelled vide letter no. MD/MK-04/P-III/3593 dated 21.11.2019 with imposition of penalty on unsupplied quantity. With note that other punitive action as per terms of the tender will be initiated separately. As per Tender Clause 17 of Annexure-III. General Terms and Condition:- The Purchaser may upon written notice of default, terminate/cancel the purchase order/contract in whole or for a part quantity with recovery of liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order dated 13.02.2020 but in vain. In the said order dated 13.02.2020, the Chief General Manager (Procurement), after recounting the background aspects including the said show-cause notice dated 26.11.2019, stated and ordered as under:- *** *** *** In view of above default on your part, this office had sent a notice of debarring for violation of PO Terms Conditions, asking you to clarify as to why strict action as per tender terms should not be taken against you for blatant violation of Purchase Order and for the large insensitivity shown by you to a number of Government Development Schemes. You were also intimated that why your firm should not be debarred as per Tender Provisions stated above. You were also given 15 day's time to furnish a reply of notice of debarring to this office personal hearing. Your firm vide letter no.I I/BPL/19-20/Reply/1025 dated 30.11.2019 has submitted reply to debarring notice and your firm could not produce any document/statement which restrains the firm from debarring. Your firm has violated Tender conditions as stipulated in TS-494 and TS-532. Therefore, after given full opportunity and due consideration, the compete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm M/s Isolators Isolators, Bhopal having registered office at Plot No.- 83 Sector-I, Industrial Area, Govindpura, Bhopal-462023 (M.P.) is hereby debarred for participating in tenders of MPMKVVCL for a period of years from the date of issuance of this letter. All of your associated concerns and their Business dealings with this Company have also been the same period (sic). 11. Later, the respondent No. 2 also issued another order dated 17.08.2020, imposing penalty on the appellant to the tune of Rs.27,98,960/- in relation to TS-532, being 10% of the ex-works price of the quantity not delivered together with GST @ 18%. The relevant contents of the said order dated 17.08.2020 read as under: - *** *** *** Purchase order MD/MK/04/P-III/TS-532/2166 dated 22.02.2018 for supply of 593 nos BIS Certified, Level-II, 11/0. 433 KV. 25 KVA Conventional Distribution Transformers was issued to your firm. For not making complete supply as per the conditions of tender no. 532 and for violating the terms and conditions of the tender, this office vide letter no. MD/MK/P III/3593 dated 21/11/2019 had imposed penalty for non-supply of 593 items and cancelled your order. As per letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acklisting or debarring was ordered after giving full opportunity to the contractor, who was at fault in not supplying the material as per the terms of the contract; that there was nothing illegal or arbitrary in exercise of powers when the respondents took recourse to the relevant clauses of the purchase order; and that reliance of the appellant on force majeure clause was also misplaced, for no such information was furnished within 15 days, as required by the terms of the contract. 14. Having taken note of the rival submissions, respectively in paragraphs 5 and 6 of the order impugned, in the next paragraph, the High Court proceeded to state its opinion that the order of blacklisting contained justified and plausible reasons and no case for exercising extraordinary powers under Article 226 of the Constitution of India was made out. The High Court observed that the appellant failed to substantiate the lapses in not supplying the required transformers as per contract. Thereafter, the High Court merely observed that the second order of debarment was passed on 30.07.2020 but factually, the appellant-firm was debarred by the order dated 13.02.2020 and therefore, provided a slight m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with law. By the order dated 24.09.2021, the said SLP(C) No. 13571 of 2021 was, accordingly, dismissed as withdrawn with liberty as prayed. Thereafter, the appellant filed a review petition in the High Court that came to be summarily rejected by the High Court with a short order dated 13.12.2021 that reads as under:- On hearing learned counsels, we do not find any error apparent on the face of the record that calls for any interference. In the absence of any error on the face of the record, this review petition is dismissed. 16. Assailing the orders so passed by the High Court, learned senior counsel for the appellant has essentially put forward two principal contentions. In the first place, it has been argued that the show-cause notice dated 26.11.2019 was only about debarment but then, the respondents proceeded to pass the orders debarring the appellant for 3 years as also imposing penalty. Even in regard to the question of penalty, according to the learned counsel, as per Clause 4 of the contract, the quantum of penalty could have been from % to 10% for delay in delivery but the respondents have chosen to impose the maximum thereof without assigning any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, while preliminarily entertaining the petitions seeking leave to appeal, this Court had taken note of the facts regarding earlier filing of the petition, being SLP(C) No. 13571 of 2021 against the order dated 23.04.2021 passed in W.P. No. 12075 of 2020; and the appellant having withdrawn on 24.09.2021 with liberty to take recourse to other appropriate remedy in accordance with law. As noticed, thereafter, the appellant filed a review petition in the High Court that came to be summarily rejected by the High Court after finding no error apparent on the face of the record. In this backdrop, this Court had left the question of maintainability of the petitions, particularly in challenge to the original order dated 23.04.2021 open. 17.1. In regard to the above question, learned senior counsel has referred to a decision of this Court in the case of A.P. State Financial Corporation v. C.M. Ashok Raju and Ors.: (1994) 5 SCC 359 to submit that the first order of the High Court dated 23.04.2021 cannot be said to have attained finality. He would also submit that the order dated 23.04.2021 suffered from several errors apparent on the face of record, including that the challenge to the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant on that basis, the learned counsel for the respondents has further submitted the additional written submissions and having regard to the questions involved, we deem it appropriate to reproduce the relevant passages of such written submissions as follows: - 4. That a submission on behalf of petitioner has been made before this Hon ble Court that vide letter dated 18.09.2019 (Page 148 Of SLP), the respondent/Electricity Company himself has deferred the supply of 593 transformers of Level-II and as such, there is no fault on the part of the petitioner-firm in supplying 593 transformers. In this respect, it is most humbly submitted that the said submission on behalf of Petitioner is only to cover-up its defaults in not supplying the 593 transformers as per time schedule prescribed. The petitioner herein has not produced any document which can be treated as against the answering respondents and as such, an adverse inference cannot be drawn against the answering respondents. The submissions made by the petitioner are contrary to the material evidence available on records, thus, same are liable to be rejected. The petitioner herein was awarded the contract on 22.02.2018 for supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retext or other. The answering respondents most humbly submit that this Hon ble Court may kindly see the reasons given in detail while cancelling the said Purchase order vide order dated 21.11.2019 and also while declaring the petitioner blacklisted vide order dated 30.07.2020. 19.1. The learned counsel has submitted that keeping in view the past conduct of the appellant and violation of the terms and conditions of contract and purchase order, they had rightly cancelled the same and imposed penalty on unsupplied quantity by another detailed order dated 21.11.2019. It is submitted that even the said order dated 21.11.2019 has never been challenged in any forum and has attained finality. According to the learned counsel, imposition of penalty has been consequential to the aforesaid order dated 21.11.2019 and the same had been as per the terms and conditions of the rate/contract/purchase order. 19.2. With reference to the show-cause notice dated 26.11.2019 and the reply dated 30.11.2019, it has been argued that the order dated 13.02.2020 was passed after extending full opportunity of hearing to the appellant and when the said order was challenged in the High Court in Writ Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1 has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard. 14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show-cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. The relevant extract of the judgment in that case is as follows: (SCC p. 230, para 4) 4. [I]t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. 18. This Court in Gorkha Security Services v. State (NCT of Delhi), (2014) 9 SCC 105 has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. It has been held thus: (SCC p. 115, para 16) 16. It is a common case of the parties that the blacklisting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this case, we are not inclined to agree with the learned counsel that the judgment of the High Court in writ appeals has achieved finality. 22.1. Having regard to the above, and overall circumstances of the case we find no reason to treat the impugned order dated 23.04.2021 as final and deem it appropriate to examine the challenge on merits. 23. As regards the question of penalty, we find 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. The submissions on behalf of the respondents in this regard that the said orders dated 19.11.2019 and 21.11.2019 have attained finality do not take their case any further. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the additional written submissions on behalf of the respondents, made in an effort to meet with the arguments concerning the effect and impact of the said communication dated 18.09.2019. It is at once apparent that the respondents have not been able to rebut the contention urged in this regard on behalf of the appellant. The written submissions on behalf of the respondents do not answer the root question in the matter as to how the appellant could have been made solely responsible for delay or default in supply after the communication dated 18.09.2019 when the respondents themselves informed the appellant that taking of balance delivery was being deferred (until further instructions). In the length and breadth of the arguments on behalf of the respondents, it has nowhere been pointed out if such further instructions were ever issued to the appellant before issuance of the cancellation orders dated 19.11.2019 and 21.11.2019 as also before issuance of show-cause notice dated 26.11.2019. That being the position, we are clearly of the view that the debarment order had been issued against the appellant without due regard to the undeniable factual situation where the entire blame ..... X X X X Extracts X X X X X X X X Extracts X X X X
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