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TMI Blog2018 (1) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... tracts with and its decision not to deal with a party who has been found to have secured a contract by submitting incorrect information, cannot be questioned. However, DMRC, being a State, is enjoined to act reasonably and fairly; its decisions must be informed by reason and cannot be arbitrary. Thus, it is essential that the punitive measure imposed by DMRC be commensurate with the offending conduct of the petitioner. It is also well settled that the period of debarment cannot be permanent. In Kulja Industries Ltd. [ 2013 (10) TMI 733 - SUPREME COURT ], the Supreme Court had also noticed that the legal position governing blacklisting of suppliers in United States of America (USA) and United Kingdom (UK), was no different. The Court also noted that in USA, the Federal Government had issued comprehensive guidelines, which also stipulated the factors that would influence the decision of debarment. As regards the period of blacklisting is concerned, the Supreme Court had observed that for the sake of objectivity and transparency , the respondent therein may frame guidelines to be followed in various cases. The order of blacklisting an entity may be subject to judicial review if it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court had suggested that the period of debarment be reduced to three years. However, it would be apposite for DMRC to reconsider the period of blacklisting keeping in view the observations and principles as noticed above. It is so directed. Petition disposed off. - Hon ble Mr. Justice Vibhu Bakhru For the Petitioner : Mr. Kapil Sibal, Senior Advocate, Mr. Sudhir Sachdeva, Senior Advocate with Mr. Arunav Patnaik, Mr. Shikhar Saha and Mr. Karun Pahwa. For the Respondent : Mr. A. K. Singla, Senior Advocate with Mr. Tarun Johri, Mr. Ankur Gupta and Mr. Puneet Garg. JUDGMENT VIBHU BAKHRU, J 1. The petitioner has filed the present petition, inter alia, impugning an order dated 06.07.2016 (hereafter the impugned order ) passed by the Managing Director of the respondent corporation (hereafter DMRC ) blacklisting the petitioner and holding the petitioner to be ineligible for award of any contract by DMRC either as a firm or as a part of JV firm/JV SPV in any name and style for a period of five years with effect from 15.07.2015. 2. The aforesaid order has been passed on the basis that the petitioner had secured the contract (RS-10) with DMRC for supply of Metro Cars on the basis of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re unreasoned and the authority which had passed the said orders had not afforded the petitioner any opportunity of being heard. 9. The Managing Director of DMRC heard the representatives of the petitioner on 19.01.2016 and thereafter, passed the impugned order. 10. The present writ petition was moved on 08.07.2016. This Court found no infirmity with the decision of the Managing Director of DMRC in holding that the petitioner was guilty of a fraudulent practice as defined under clause 4.33.1 of GCC. The contentions advanced on behalf of the petitioner to contest the findings of the Managing Director as returned in the impugned order and the decision making process were rejected; however, this Court issued a limited notice on the question whether the punishment of blacklisting the petitioner for a period of five years, was highly disproportionate. 11. Aggrieved by the aforesaid decision, the petitioner preferred an appeal before the Division Bench of this Court in LPA No. 397/2016 captioned Hyundai Rotem Company v. Delhi Metro Rail Corporation. The Division Bench of this Court upheld the decision of this Court accepting that the allegation of fraudulent practice had been established ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order that such a lapse does not occur in future. 17. Mr Sibal also submitted that the petitioner had successfully bid for supplying trains for Delhi Metro in the past (RS-1 for 280 cars during the period 2001 to 2007; RS-3 for 196 cars during the period 2007 to 2011; RS-9 for 92 cars during the period 2013 to 2015) and had also delivered 50 train cars in performance of the contract in question (RS-10). He submitted that in addition, the petitioner had supplied 150 train cars for Bangalore Metro Phase-I and 171 train cars for Hyderabad Metro. He submitted that this clearly established that the petitioner was not wanting in performance of the contracts awarded to the petitioner and this factor ought to have been considered while passing the impugned order. 18. Next, Mr Sibal contended that the petitioner had been deprived of bidding for over 23 contracts with the aggregate value of several thousand crores. He handed over a tabular statement of the number of contracts for which the petitioner could not bid on account of the punitive measure imposed in terms of the impugned order. He stated that this had already caused substantial loss to the petitioner and that the punitive measure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arred by JICA/Government of India/any State Government in India or any Central or State Government Undertaking. He also referred to the Note-2 at the end of the Checklist, which clearly stated that if the answer to any of the specified questions was in the affirmative, the same would disqualify the applicant. He submitted that the petitioner provided an incorrect answer to the queries listed in the Checklist, and therefore would have been disqualified from participating in the bidding for the contract in question. He contended that in the given circumstances, the petitioner s debarment for a period of five years could not be considered as harsh or disproportionate. Reasoning and Conclusion 23. At the outset, it is necessary to observe that there is no dispute that if the petitioner had filled in the correct information in the tender documents, the petitioner would have been disqualified from participating in the bids for the RS-10 Contract. The relevant extract of the Filter of Applicants Checklist filled in by the petitioner is set out below:- S. No. Criteria Yes No xxxx xxxx xxxx xxxx 6. Has the Applicant being debarred by JICA/Government of India/any State Government in India/Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regulations under which such contracts were allotted. What is notable is that the debarment is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor. 27. In Kulja Industries Ltd. (supra), the Supreme Court had also noticed that the legal position governing blacklisting of suppliers in United States of America (USA) and United Kingdom (UK), was no different. The Court also noted that in USA, the Federal Government had issued comprehensive guidelines, which also stipulated the factors that would influence the decision of debarment. As regards the period of blacklisting is concerned, the Supreme Court had observed that for the sake of objectivity and transparency , the respondent therein may frame guidelines to be followed in various cases. The Supreme Court had also summarized certain factors to be used as a guide by the concerned authority for determining the question of blacklisting a party. The relevant extract of the said decision is set out below:- The guidelines also stipulate the factors that may influence the debarring official s decision which include the following: (a) The actual or potenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strained for issuing tenders for future works for period of 3 years. I have also gone through the period of debarment imposed by other govt. organization and the debarment normally ranges from few months of 10 years. I am of the opinion that debarment of M/s HRC for award of contracts by DMRC for a stated period of time may have impact on their business in India from the period of the department. However, this may not necessarily have impact on M/s HRC s business outside India. On the basis of submissions made by M/s HRC in their tender (tender RS 10) offer and subsequent including personal hearing. I am the considered opinion that in the instant case, M/s HRC became eligible for ward of contract RS 10 due to false declaration in their tender offer, which as per express conditions of the tender/contract (clause 4.33 1 c of GCC) shall be as, fraudulent, practice and M/s HRC shall be declared ineligible for award of contract by DMRC for a stated period of time I therefore, decide that M/s HRC shall be ineligible for award of any contract by DMRC either as an individual firm or any other JV firm/JV SPV in any name and style for a period of give (5) years w.e.f. 15th July to 14th July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness is giving way to the doctrine of proportionality. 25. It is interesting to note that the Wednesbury principles may not now be held to be applicable in view of the development in constitutional law in this behalf. See, for example, Huang v. Secy. of State for the Home Deptt. 2006 QB 1 wherein referring to R. (Daly) v. Secy. of State for the Home Deptt. (2001) 2 AC 532 it was held that in certain cases, the adjudicator may require to conduct a judicial exercise which is not merely more intrusive than Wednesbury, but involves a full-blown merit judgment, which is yet more than R. (Daly) [(2001) 2 AC 532, requires on a judicial review where the court has to decide a proportionality issue. 33. In Chairman, All India Railway Recruitment Board Anr. v. K. Shyam Kumar Ors: (2010) 6 SCC 614, the Supreme Court referred to various decisions and summarised the law as under:- 36. Wednesbury applies to a decision which is so reprehensible in its defiance of logic or of accepted moral or ethical standards that no sensible person who had applied his mind to the issue to be decided could have arrived at it. Proportionality as a legal test is capable of being more precise and fastidious than a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. In view of the principles as laid down above, the order of blacklisting an entity may be subject to judicial review if it is concluded that it was not within the range of the action, which ought to have been reasonably taken. The question whether the period of debarment of five years was within the reasonable range would necessarily have to be tested on the basis of a benchmark set by the DMRC. In absence of any such benchmark, the benchmark set by other organizations ought to serve as guidelines. In this case, although it is mentioned that the competent authority had relied on other blacklisting orders passed by other organizations, the same have neither been referred to nor is it discernable whether facts in any of the cases were similar to the one in this case. 36. In the impugned order, it has been merely observed that the order of debarment ranges for a few months to ten years; thus, implying that the concerned authorities could exercise its discretion to debar the petitioner for any period within the said range. Plainly, this would suffer from the vice of arbitrariness. Blacklisting or debarring an entity from participating in contracts is a serious measure and insofar as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in fraudulent practices. Since tender documents had clearly referred to JICA s requirement for observing the highest standards of ethics and also indicated that punitive measures would be taken against the developing contractors, the rules framed by JICA would offer ready guidelines for determining the action to be taken against all delinquent bidders. It is relevant to mention that JICA had also taken punitive measures against the petitioner in terms of Article 5 of JICA Rules on Measures against Persons Engaged in Fraudulent Practices etc in Projects of ODA Loan and Grant Aid and Article 4 of JICA Rules on Sanctions to Suspend Eligibility for Participation in Tenders for Contracts‖. JICA had, on the basis of the incorrect statement made by the petitioner in its bid to DMRC, suspended the petitioner from being considered eligible for participation in various contracts funded by it for a period of four months. 39. The General Financial Rules, 2017 (hereafter the Rules ) published by the Department of Expenditure, Ministry of Finance, Government of India also provides for debarment of bidders in case the bidders breach the Code of Integrity. Rule 151 of the General Rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity directly or indirectly. (f) any coercion or any threat to impair or harm, directly or indirectly, any party or its property to influence the procurement process. (g) obstruction of any investigation or auditing of a procurement process. (h) making false declaration or providing false information for participation in a tender processor to secure a contract; (ii) disclosure of conflict of interest. (iii) Disclosure by the bidder of any previous transgressions made in respect of the provisions of sub-clause(i) with any entity in any country during the last three years or of being debarred by any other procuring entity. 41. It is seen from the above that in terms of clause (h) of Rule 175(1)(i) of the Rules, making a false declaration or providing false information to secure a contract would amount to breach of the Code of Integrity and, in terms of Rule 151(iii), such breach would invite a punitive measure of debarment of a bidder for a period not exceeding two years. 42. Plainly, although it is not mandatory for DMRC to follow the above Rules, DMRC could use the same as a benchmark to determine the quantum of punishment to be imposed on the petitioner in absence of any interna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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