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TMI Blog2024 (8) TMI 469X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in dishonest or illegal conduct or are otherwise unable to perform satisfactorily - blacklisting will not only debar the person concerned from dealing with the concerned employer, but because of the disqualification, their dealings with other entities also is proscribed. Even in the terms and conditions of tender in the present case, one of the conditions of eligibility is that the agency should not be blacklisted from anywhere. The appellant, after the award of the tender, has admittedly paid an amount of Rs. 3,71,96,265/-, though, according to the Corporation, the outstanding amount as on the date of the debarment was Rs. 14,63,24,727/-. It is found that the appellant, after the award of the tender, has admittedly paid an amount of Rs. 3,71,96,265/-, though, according to the Corporation, the outstanding amount as on the date of the debarment was Rs. 14,63,24,727/-. However, as would be clear from the facts discussed hereinabove, right from the inception there have been issues between the appellant and the Corporation with regard to the fulfilment of the reciprocal obligations in the bid document. There has been exchange of correspondence between the parties with each side blam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lotted and sought for a joint inspection to identify the rest of them. At this stage, the Corporation issued a letter of 10.09.2014 stating that there was no reason why the appellant was insisting for the Bank Guarantee Format since Bank Guarantee was not the mode of payment. According to the Corporation, the bills for 5 clusters of Rs. 4,62,67,500/- (for only July to September, 2014) had not been paid in spite of service of the bill on 08.07.2014. The Corporation also mentioned that in the joint inspection the appellant s men failed to cover all the areas and thereafter, the appellant was asked to submit a list of allotted locations which, according to the Corporation, the appellant had not furnished. The appellant was warned that in case the payment as demanded was not paid, steps as per the tender clauses would be taken. 6. When the matter stood thus, the appellant wrote a letter on 14.11.2014 setting out all the earlier correspondence and the grievances raised by them and ultimately praying that they be granted diminution, reduction and/or adjustment of the license fee. They prayed that their demand for 174 hoardings be confirmed so that they could make the payment. The Corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. The show cause notice asserted that in spite of repeated requests and/or reminders, the appellant had failed to make payment and refused and/or neglected to perform the obligations as per the terms and conditions of the tender. The Show Cause Notice further clearly alleged as under: In view of the aforesaid breach of the terms and conditions of the tender, you are requested to file a show cause as to why befitting action to blacklist you from participating in any tender process should not be taken all (sic.) you make the outstanding payment and comply with the terms and conditions of the tender. You are required to submit your reply within 15 days from the date of Receipt of this letter, failing which the authority will take appropriate decision in accordance with law. 10. By its reply of 15.09.2015, the appellant responded to the Show Cause Notice. The appellant mentioned therein that the tender document did not empower the Corporation to determine the alleged breach on the part of the company arising out of the contract; that in view of the submission made by the Corporation before the Division Bench, it is only the arbitrator in terms of Clause 18 who can decide the dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company did not adhere to the instruction as made in this respect by writing letters on repeated occasions. Clause-2.1 as incorporated in the tender notice is redundant in respect of the hoardings already in-existence since such hoardings remain fitted with the provision for supply of electricity. In fact, no objection certificate is not required from the KMC in respect of the existing hoardings. All that is necessary is for confirmation of the change of the name of the user/agency. It is on record that the company continued to display the advertisement in the hoardings without requiring the no objection certificate from the KMC until 3rd March 2015 when a letter was issued in this respect. There is no document to show that the company applied to the CESC for electric connection and the CESC required no objection certificate from the KMC. It is on record that the contract period commenced from 1st June 2014 and hence there was no cogent reason to write the letter for No Objection Certificate after about 8 months. No application to the CESC in the name of the petitioners for the purpose illuminated street hoarding was submitted to the concerned authorities. The company used the sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring before us, it was submitted that the arbitrator Justice (Retd.) Narayan Chandra Sil, who ultimately heard the matter, passed an award on 26.04.2024 awarding the claimant a sum of Rs. 2,23,14,565/- after excluding the set off amount of Rs. 78,03,435/- along with interest of 8% per annum from the date of the award till realization. This statement is reiterated in the written submissions. We were also given a copy of the award. The respondent has not disputed the said fact. Proceedings in the High Court: 14. The appellant also filed a Writ Petition, namely, Writ Petition No. 6616(W) of 2016 challenging the order of 02.03.2016. The learned Single Judge of the High Court while setting aside the order of 02.03.2016 held as under: It is well settled by the above authorities that blacklisting is a civil consequence. The rules of natural justice have to be scrupulously followed. This denotes that proper reasons have to be given. The reasons, should have suggested that public interest would be affected if the writ petitioner was continued to be awarded contracts by the respondent Corporation. Or it was to be established that the writ petitioner was a dishonest business organisation, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same by holding that since the appellant was given a hearing and since the order of 02.03.2016 cannot be held to be unreasonable or unfair or disproportionate, there existed sufficient reasons for debarring the appellant. So holding, the Appeal was allowed. The appellant aggrieved is before us in Appeal. This Court while issuing notice in the matter by its order of 27.04.2018 stayed the operation of the impugned judgment. Contentions : 16. We have heard Mr. P.S. Datta, learned senior counsel for the appellant and Mr. Sujoy Mondal, learned counsel for the respondent. We have also perused the written submissions filed by the appellant. The respondent has not filed any written submissions. 17. The learned senior counsel for the appellant contends that the Corporation could at best have imposed only a penalty for making late payments or in the case of default of payments under clause 9 and there could not have been blacklisting; that blacklisting can be only made when there was deviation of clauses 2.8, 11 14 and that the Show Cause Notice precisely setting out why the blacklisting was to be imposed need to have been given; that the grounds of blacklisting are not the one stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved that 20. 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 fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction . 23. In Mr. B.S.N. Joshi (supra), this Court held that 41. When a contractor is blacklisted by a department he is debarred from obtaining a contract, but in terms of the notice inviting tender when a tenderer is declared to be a defaulter, he may not get any contract at all. It may have to wind up its business. The same would, thus, have a disastrous effect on him. Whether a person defaults in making payment or not would depend upon the context in which the allegations are made as also the relevant statute operating in the field. When a demand is made, if the person concerned raises a bona fide dispute in regard to the claim, so long as the dispute is not resolved, he may not be declared to be defaulter. (Emphasis supplied) 24. This Court in Kulja Industries Ltd. (supra) after setting out the legal position governing blacklisting/debarment in USA and UK held that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson concerned raises a bona fide dispute, blacklisting/debarment as a penalty ought not to be resorted to. Debarring a person albeit for a certain number of years tantamounts to civil death inasmuch as the said person is commercially ostracized resulting in serious consequences for the person and those who are employed by him. 27. Too readily invoking the debarment for ordinary cases of breach of contract where there is a bona fide dispute, is not permissible. Each case, no doubt, would turn on the facts and circumstances thereto. 28. Examining the facts of this case from that perspective, we find that the appellant, after the award of the tender, has admittedly paid an amount of Rs. 3,71,96,265/-, though, according to the Corporation, the outstanding amount as on the date of the debarment was Rs. 14,63,24,727/-. However, as would be clear from the facts discussed hereinabove, right from the inception there have been issues between the appellant and the Corporation with regard to the fulfilment of the reciprocal obligations in the bid document. There has been exchange of correspondence between the parties with each side blaming the other for not performing the reciprocal obligatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he award. What it does signify is that there was a bona fide contractual dispute between the parties and we hold that the learned Single Judge was right in setting aside the order of debarment on the ground that there was a bona fide civil dispute between the parties. 32. What renders the matter a fortiori is that when APOT No. 89 of 2015 along with GA 782 of 2015 filed against the order of the learned Single Judge dismissing Writ Petition No. 261 of 2015, the counsel for the Corporation had submitted to the Court that the Show Cause Notice was being withdrawn at that stage and appropriate proceeding was to be taken before the arbitrator. In spite of the statement, the Corporation did not invoke arbitration. 33. The appellant invoked arbitration and no doubt a counter claim was filed by the Corporation before the arbitrator. Ultimately, the counter claim was decreed for Rs. 78,03,435/- and the claim was decreed for Rs. 3,01,18,000/- and after ordering set off, an award has been passed for Rs. 2,23,14,565/-. 34. The issues framed by the arbitrator also indicate that the assertions and counter assertions of the appellant and the Corporation were clearly in the nature of a bona fide c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g noticed the fact that any decision to blacklist will be open to scrutiny on the anvil of the doctrine of proportionality has failed to apply the principle to the facts of the case in the correct perspective. The Division Bench has also failed to correctly appreciate the ratio of the decision in B.S.N. Joshi (supra). 38. There has been no enquiry by the Division Bench as to whether the conduct of the appellant was part of the normal vicissitudes in business and common place hazards in commerce or whether the appellant had crossed the rubicon warranting a banishment order, albeit for a temporary period in larger public interest. 39. One such case where this Court found the Lakshman Rekha to be breached by the party blacklisted was Patel Engineering Limited vs. Union of India and Another, (2012) 11 SCC 257. In that case, while upholding the order of blacklisting, this Court recorded the following: 33. From the impugned order it appears that the second respondent came to the conclusion that: (1) the petitioner is not reliable and trustworthy in the context of a commercial transaction; (2) by virtue of the dereliction of the petitioner, the second respondent suffered a huge financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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