Block listing permanently - not correct - remanded for fresh determination as per the department guidelines =
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 were mostly, if not
entirely, supplied for consumption to the respondent-BSNL, any order
permanently blacklisting the appellant from entering into contracts making
supplies was tantamount to rendering the appellant jobless and economically
defunct. No such order of blacklisting could, therefore, be sustained as
the punishment implicit in such an order was totally disproportionate to
the gravity of the offence allegedly committed by the appellant. =
In the case at hand according to the respondent-BSNL, the appellant
had fraudulently withdrawn a huge amount of money which was not due to it
in collusion and conspiracy with the officials of the respondent-
corporation.
Even so permanent debarment from future contracts for all
times to come may sound too harsh and heavy a punishment to be considered
reasonable especially 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.
26. The next question then is
whether this Court ought to itself
determine the time period for which the appellant should be blacklisted or
remit the matter back to the authority to do so having regard to the
attendant facts and circumstances.
A remand back to the competent authority
has appealed to us to be a more appropriate option than an order by which
we may ourselves determine the period for which the appellant would remain
blacklisted.
We say so for two precise reasons.
Firstly, 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
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 affirmed,
the period for which such order remains
operative shall be determined afresh by the competent authority on the basis of guidelines which the Corporation may formulate for that purpose.
The needful shall be done by the Corporation and/or the competent authority
expeditiously but not later than six months from today. The parties are
left to bear their own costs.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8944 OF 2013
(Arising out of S.L.P. (C) No.20716 of 2011)
M/s Kulja Industries Limited …Appellant
Versus
Chief Gen. Manager W.T. Proj.
BSNL & Ors. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. The short question that falls for determination in this appeal is
whether the respondent-Bharat Sanchar Nigam Limited (for short ‘BSNL’)
could have blacklisted the appellant for allotment of future contracts for
all times to come. High Court of Judicature at Bombay before whom the
blacklisting order was assailed by the appellant has answered that question
in the affirmative and dismissed Writ Petition No.2289 of 2011 filed by the
appellant giving rise to the present appeal.
3. Two tender notices for supply of Permanent Lubricated HDPE Pipe
(Telecom Ducts) and Installation of O.F. Cable through Blowing Technique
were issued by BSNL in the year 2004 and 2005. It is common ground that the
appellant-company emerged successful in regard to both the tender notices.
It is also not in dispute that several orders for supply of the material
were placed with the appellant-company during the years 2004-2006 and that
goods were supplied to various consignee units of BSNL pursuant to the
same. The appellant’s case is that a “receipt certificate” was issued in
its favour after delivery of the goods and that bills for payment of the
price of the goods were raised in triplicate to the Chief Controller of
Accounts, WTP BSNL, Mumbai from time to time. The appellant’s further case
is that a single account to receive 95% of the payment due from BSNL was
maintained by it and since the amounts received from the respondent-BSNL by
cheques did not carry any particulars of the consignment for which such
payment was being made it could, in no way, discover excess payment, if
any, released by BSNL against the bills sent by the appellant.
4. The appellant’s further case is that on gaining knowledge about the
excess payments received by it, an offer for reconciliation of the accounts
was made to the BSNL and since any such reconciliation was likely to take
30 to 45 days, the appellant offered 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 followed has culminated in a
charge-sheet filed before the Special Judge for CBI cases, Bombay in which
four officials of the BSNL including D. Tripathi-Senior Accounts Officer,
Laxman Dixit-Assistant Accounts Officer, Krishnakumari Patnaik-Junior
Accounts Officer, Poolchand Yadav-Cashier and Lalit Gupta-Director and
Bhavani Sharma-Consultant of the appellant-company have been arraigned as
accused persons.
7. What is important for the present is that by a letter dated 21st April, 2010, BSNL blacklisted the appellant permanently on the ground that the appellant had committed gross misconduct and irregularities by receiving excessive payments amounting to Rs.7,98,55,508/- from BSNL thereby wrongfully causing loss to the said company.
The appellant denied
these allegations, inter alia, contending that BSNL Policy/Manual did not
provide for punitive action in the nature of blacklisting and that excess
payment at best was an irregularity which had been cured by refund of the
amount in question. The appellant also alleged that reconciliation of
accounts revealed that the appellant was entitled to an amount, far in
excess of the payments received by it. That assertion was repeated in a
legal notice sent by the appellant-company but since BSNL took no
corrective action in terms of the reconciliation, W.P. No.4536 of 2010 was
filed before the High Court of Judicature at Bombay in which it assailed
the blacklisting order. The High Court allowed the petition on the short
ground that the appellant had not been afforded any opportunity of being
heard before the blacklisting order was issued by the respondent. The High
Court did not go into the merits of the dispute but reserved liberty to the
appellant to raise all such contentions as were open to it if and when BSNL
issued a show cause notice for blacklisting it again. The BSNL was left
free to pass a fresh order and take a final decision in the matter within
six weeks from the date of the issue of the show cause notice.
8. A show cause notice was accordingly issued by BSNL on 4th November,
2010 to which the appellant filed a reply. The appellant was also called
for a personal hearing in support of its reply to the show cause notice as
directed by the High Court. By an order dated 15th January, 2011 BSNL once
again directed the blacklisting of the appellant, inter alia, holding that
the appellant had defrauded BSNL by using 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 exchequer.
The fraudulent act on the part of supplier got completed by not
only claiming such bogus payments but also by receiving the same
from BSNL. Moreover, by letter dated 10th May, 2006, the
supplier has not only acknowledged but have also accepted the
fact of claiming as also accepting aforesaid bogus payments and
hence the supplier had agreed for reconciliation of same after
deducting such bogus payments. If the accounts would not have
reconciled, the supplier would have caused huge losses to the
public exchequer.
Hence, there is every apprehension that if the supplier is
allowed to deal in any manner with the BSNL in future, the
supplier will venture into committing same and/or similar fraud
(s) on the public exchequer and therefore, it is not at all in
the interest of public exchequer that the supplier continues to
be authorised supplier of BSNL.
Hence, in view of the all the above facts and
circumstances and the entire record and proceedings of this
case, it is possible for this organisation to take a view to
permanent banning and impose penalty upon the supplier so as to
prevent the supplier from dealing with entire BSNL, throughout
the country in any manner, consequently stopping all the future
business transactions of entire BSNL with the supplier.
Hereby M/s. Kulja Industries Ltd., Solan (Himachal
Pradesh) is permanently banned and is consequently prevented
from having any business dealing with entire BSNL through the
country.
This is issued with the approval of the competent
authority.
Sd/-
AGM (MM) 15.1.2011
O/o CGM, WTP, Mumbai-54”
9. Aggrieved by the above order the appellant once again approached the
High Court in W.P. No. 2289 of 2011 which was heard and dismissed by a
Division Bench of the High Court in terms of the order impugned in this
appeal. The High Court was of the opinion that reconciliation of the
account had proved that the appellant had received payment twice over for
the supplies made by it and that merely because the excess payment received
had been subsequently refunded by the appellant did not obliterate the act
of misconduct and fraud. The High Court observed:
“In the order impugned, the Authority has stated that on
the reconciliation of the account, it was found as a fact that
the Petitioner has received payment twice for the supply of the
same material, because the supply was ongoing and the amount was
found 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 were mostly, if not
entirely, supplied for consumption to the respondent-BSNL, any order
permanently blacklisting the appellant from entering into contracts making
supplies was tantamount to rendering the appellant jobless and economically
defunct. No such order of blacklisting could, therefore, be sustained as
the punishment implicit in such an order was totally disproportionate to
the gravity of the offence allegedly committed by the appellant.
12. On behalf of the respondent-BSNL, it was argued by Mr. Bansal that
the blacklisting order under challenge was not relatable to paras 31 and 32
of the bid document. The order simply declared the petitioner-company
ineligible for allotment of any contract in future in terms of para 2.3 of
the tender document, the relevant portion wherefore reads as under:
“2.3 Disqualification Clause: The supplier/ Manufacturers in
the following category are not eligible to bid in the said
tender.
i ....
ii. Firms against whom investigation cases are registered with
the CBI or other statutory investigations agencies of
State/Central Govt.
iii ....”
13. It was further contended by the learned counsel that even if the
order was held to be referable to paras 31 and 32 of the bid document, an
order permanently blacklisting the appellant was also justified having
regard to the nature of the fraud committed by it in collusion with the
officers of the respondent-corporation and involving a huge amount of
nearly eight crores.
14. We may at the outset deal with the contention whether paras 31 and 32
of the bid document to which Mr. Rohtagi has made reference is the only
source of the power to blacklist a defaulting contractor. These paras are
as under:
“31. Purchaser reserves the right to disqualify the supplier for
a suitable period who habitually failed to supply the equipment
in time. Further, the suppliers whose equipment do not perform
satisfactory in the field in accordance with the specifications
may also be disqualified for a suitable period as decided by the
purchaser.
32. Purchaser reserves the right to blacklist a bidder for a
suitable period in case he fails to honour his bid without
sufficient grounds.”
15. A plain reading of the above would show that BSNL, the purchaser has
reserved the right to disqualify any supplier who
(a) habitually fails to supply the equipment in time or (b) the
equipment supplied by 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 by them. If bidders who commit a breach of a lesser degree could
be punished by an order of blacklisting there is no reason why a breach of
a more serious nature should go unpunished, be ignored or rendered
inconsequential by reason only of an omission of such breach or violation
in the text of paras 31 and 32 of the tender document. Paras 31 and 32
cannot, in that view, be said to be exhaustive; nor is the power to
blacklist limited to situations mentioned therein.
17. That apart the power to blacklist a contractor whether the contract
be for supply of material or equipment or for the execution of any other
work whatsoever is in our opinion inherent in the party allotting the
contract. There is no need for any such power being specifically conferred
by statute or reserved by contractor. That is because ‘blacklisting’ simply
signifies a business decision by which the party affected by the breach
decides not to enter into any contractual relationship with the party
committing the breach. Between two private parties the right to take any
such decision is absolute and untrammelled by any constraints whatsoever.
The freedom to contract or not to contract is unqualified in the case of
private parties. But any such decision is subject to judicial review when
the same is taken by the State or any of its instrumentalities. This
implies that any such decision will be open to scrutiny not only on the
touchstone of the principles of natural justice but also on the doctrine of
proportionality. A fair hearing to the party being blacklisted thus becomes
an essential pre-condition for a proper exercise of the power and a valid
order of blacklisting made pursuant thereto. The order itself being
reasonable, fair and proportionate to the gravity of the offence is
similarly examinable by a writ Court. The legal position on the subject is
settled by a long line of decisions rendered by this Court starting with
Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975)
1 SCC 70
where this Court declared that blacklisting has the effect of
preventing a person from entering into lawful relationship with the
Government for purposes of gains and that the Authority passing any such
order was required to give a fair hearing before passing an order
blacklisting a certain entity. This Court observed:
“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. 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. (1974) 4 SCC 3; Maneka Gandhi v.
Union of India and Anr. (1978) 1 SCC 248; Ajay Hasia and Ors. v. Khalid
Mujib Sehravardi and Ors., (1981) 1 SCC 722; R.D. Shetty v. International
Airport Authority of India and Ors., (1979) 3 SCC 489 and Dwarkadas
Marfatia and sons v. Board of Trustees of the Port of Bombay (1989) 3 SCC
751 have ruled against arbitrariness and discrimination in every matter
that is subject to judicial review before a Writ Court exercising powers
under Article 226 or Article 32 of the Constitution. It is also well
settled that even though the right of the writ petitioner is in the nature
of a contractual right, the manner, the method and the motive behind the
decision of the authority whether or not to enter into a contract is
subject to judicial review on the touchstone of fairness, relevance,
natural justice, non-discrimination, equality and proportionality. All
these considerations that go to determine whether the action is sustainable
in law have been sanctified by judicial pronouncements of this Court and
are of seminal importance in a system that is committed to the rule of law.
We do not consider it necessary to burden this judgment by a copious
reference to the decisions on the subject. A reference to the following
passage from the decision of this Court in M/s Mahabir Auto Stores & Ors.
v. Indian Oil Corporation Ltd., (1990) 3 SCC 752 should, in our view,
suffice:
“11. It is well settled that every action of the State or an
instrumentality of the State in exercise of its executive power,
must be informed by reason. In appropriate cases, actions
uninformed by reason may be questioned as arbitrary in
proceedings under Article 226 or Article 32 of the Constitution.
Reliance in this connection may be placed on the observations of
this Court in Miss Radha Krishna Agarwal and Ors. v. State of
Bihar and Ors., [1977] 3 SCR 249 …... In case any right
conferred on the citizens which is sought to be interfered, such
action is subject to Article 14 of the Constitution, and must be
reasonable and can be taken only upon lawful and relevant
grounds of public interest. Where there is arbitrariness in
State action of this type of entering or not entering into
contracts, Article 14 springs up and judicial review strikes
such an action down. Every action of the State executive
authority must be subject to rule of law and must be informed by
reason. So, whatever 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.
The Federal
Government considers ‘suspension and debarment’ as a powerful tool for
protecting taxpayer resources and maintaining integrity of the processes
for federal acquisitions.
Comprehensive guidelines are, therefore, issued
by the government for protecting public interest from those contractors and
recipients who are non-responsible, lack business integrity or engage in
dishonest or illegal conduct or are otherwise unable to perform
satisfactorily.
These guidelines prescribe the following among other
grounds for debarment:
a) Conviction of or civil judgment for --
(1) Commission of fraud or a criminal offense in connection with
obtaining, attempting to obtain, or performing a public or
private agreement or transaction;
(2) Violation of Federal or State antitrust statutes, including those
proscribing price fixing between competitors, allocation of
customers between competitors, and bid rigging;
(3) Commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false
statements, tax evasion, receiving stolen property, making false
claims, or obstruction of justice; or
(4) Commission of any other offense indicating a lack of business
integrity or business honesty that seriously and directly
affects your present responsibility;
(b) Violation of the terms of a public agreement or transaction so
serious as to affect the integrity of an agency program, such
as—
(1) A willful failure to perform in accordance with the terms of one
or more public agreements or transactions;
(2) A history of failure to perform or of unsatisfactory performance
of one or more public agreements or transactions; or
(3) A willful violation of a statutory or regulatory provision or
requirement applicable to a public agreement or transaction;
(c) xxxx
(d) Any other cause of so serious or compelling a nature that it
affects your present responsibility.
21. The guidelines also stipulate the factors that may influence the
debarring official’s decision which include the following:
a) The actual or potential harm or impact that results or may
result from the wrongdoing.
b) The frequency of incidents and/or duration of the wrongdoing.
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 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 the cause for debarment and, if so, made the result
of the investigation available to the debarring official.”
22. As regards the period for which the order of debarment will remain
effective, the guidelines state that the same would depend upon the
seriousness of the case leading to such debarment.
23. Similarly in England, Wales and Northern Ireland, there are statutory
provisions that make operators ineligible on several grounds including
fraud, fraudulent trading or conspiracy to defraud, bribery etc.
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, falsification of records and other breaches of 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.
25. In the case at hand according to the respondent-BSNL, the appellant
had fraudulently withdrawn a huge amount of money which was not due to it
in collusion and conspiracy with the officials of the respondent-
corporation.
Even so permanent debarment from future contracts for all
times to come may sound too harsh and heavy a punishment to be considered
reasonable especially 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.
26. The next question then is
whether this Court ought to itself
determine the time period for which the appellant should be blacklisted or
remit the matter back to the authority to do so having regard to the
attendant facts and circumstances.
A remand back to the competent authority
has appealed to us to be a more appropriate option than an order by which
we may ourselves determine the period for which the appellant would remain
blacklisted.
We say so for two precise reasons.
Firstly, 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
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 affirmed,
the period for which such order remains
operative shall be determined afresh by the competent authority on the basis of guidelines which the Corporation may formulate for that purpose.
The needful shall be done by the Corporation and/or the competent authority
expeditiously but not later than six months from today. The parties are
left to bear their own costs.
.………………….……….…..…J.
(T.S. THAKUR)
………..…………………..…..…J.
(VIKRAMAJIT SEN)
New Delhi
October 4, 2013
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 were mostly, if not
entirely, supplied for consumption to the respondent-BSNL, any order
permanently blacklisting the appellant from entering into contracts making
supplies was tantamount to rendering the appellant jobless and economically
defunct. No such order of blacklisting could, therefore, be sustained as
the punishment implicit in such an order was totally disproportionate to
the gravity of the offence allegedly committed by the appellant. =
In the case at hand according to the respondent-BSNL, the appellant
had fraudulently withdrawn a huge amount of money which was not due to it
in collusion and conspiracy with the officials of the respondent-
corporation.
Even so permanent debarment from future contracts for all
times to come may sound too harsh and heavy a punishment to be considered
reasonable especially 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.
26. The next question then is
whether this Court ought to itself
determine the time period for which the appellant should be blacklisted or
remit the matter back to the authority to do so having regard to the
attendant facts and circumstances.
A remand back to the competent authority
has appealed to us to be a more appropriate option than an order by which
we may ourselves determine the period for which the appellant would remain
blacklisted.
We say so for two precise reasons.
Firstly, 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
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 affirmed,
the period for which such order remains
operative shall be determined afresh by the competent authority on the basis of guidelines which the Corporation may formulate for that purpose.
The needful shall be done by the Corporation and/or the competent authority
expeditiously but not later than six months from today. The parties are
left to bear their own costs.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8944 OF 2013
(Arising out of S.L.P. (C) No.20716 of 2011)
M/s Kulja Industries Limited …Appellant
Versus
Chief Gen. Manager W.T. Proj.
BSNL & Ors. …Respondents
J U D G M E N T
T.S. THAKUR, J.
1. Leave granted.
2. The short question that falls for determination in this appeal is
whether the respondent-Bharat Sanchar Nigam Limited (for short ‘BSNL’)
could have blacklisted the appellant for allotment of future contracts for
all times to come. High Court of Judicature at Bombay before whom the
blacklisting order was assailed by the appellant has answered that question
in the affirmative and dismissed Writ Petition No.2289 of 2011 filed by the
appellant giving rise to the present appeal.
3. Two tender notices for supply of Permanent Lubricated HDPE Pipe
(Telecom Ducts) and Installation of O.F. Cable through Blowing Technique
were issued by BSNL in the year 2004 and 2005. It is common ground that the
appellant-company emerged successful in regard to both the tender notices.
It is also not in dispute that several orders for supply of the material
were placed with the appellant-company during the years 2004-2006 and that
goods were supplied to various consignee units of BSNL pursuant to the
same. The appellant’s case is that a “receipt certificate” was issued in
its favour after delivery of the goods and that bills for payment of the
price of the goods were raised in triplicate to the Chief Controller of
Accounts, WTP BSNL, Mumbai from time to time. The appellant’s further case
is that a single account to receive 95% of the payment due from BSNL was
maintained by it and since the amounts received from the respondent-BSNL by
cheques did not carry any particulars of the consignment for which such
payment was being made it could, in no way, discover excess payment, if
any, released by BSNL against the bills sent by the appellant.
4. The appellant’s further case is that on gaining knowledge about the
excess payments received by it, an offer for reconciliation of the accounts
was made to the BSNL and since any such reconciliation was likely to take
30 to 45 days, the appellant offered 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 followed has culminated in a
charge-sheet filed before the Special Judge for CBI cases, Bombay in which
four officials of the BSNL including D. Tripathi-Senior Accounts Officer,
Laxman Dixit-Assistant Accounts Officer, Krishnakumari Patnaik-Junior
Accounts Officer, Poolchand Yadav-Cashier and Lalit Gupta-Director and
Bhavani Sharma-Consultant of the appellant-company have been arraigned as
accused persons.
7. What is important for the present is that by a letter dated 21st April, 2010, BSNL blacklisted the appellant permanently on the ground that the appellant had committed gross misconduct and irregularities by receiving excessive payments amounting to Rs.7,98,55,508/- from BSNL thereby wrongfully causing loss to the said company.
The appellant denied
these allegations, inter alia, contending that BSNL Policy/Manual did not
provide for punitive action in the nature of blacklisting and that excess
payment at best was an irregularity which had been cured by refund of the
amount in question. The appellant also alleged that reconciliation of
accounts revealed that the appellant was entitled to an amount, far in
excess of the payments received by it. That assertion was repeated in a
legal notice sent by the appellant-company but since BSNL took no
corrective action in terms of the reconciliation, W.P. No.4536 of 2010 was
filed before the High Court of Judicature at Bombay in which it assailed
the blacklisting order. The High Court allowed the petition on the short
ground that the appellant had not been afforded any opportunity of being
heard before the blacklisting order was issued by the respondent. The High
Court did not go into the merits of the dispute but reserved liberty to the
appellant to raise all such contentions as were open to it if and when BSNL
issued a show cause notice for blacklisting it again. The BSNL was left
free to pass a fresh order and take a final decision in the matter within
six weeks from the date of the issue of the show cause notice.
8. A show cause notice was accordingly issued by BSNL on 4th November,
2010 to which the appellant filed a reply. The appellant was also called
for a personal hearing in support of its reply to the show cause notice as
directed by the High Court. By an order dated 15th January, 2011 BSNL once
again directed the blacklisting of the appellant, inter alia, holding that
the appellant had defrauded BSNL by using 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 exchequer.
The fraudulent act on the part of supplier got completed by not
only claiming such bogus payments but also by receiving the same
from BSNL. Moreover, by letter dated 10th May, 2006, the
supplier has not only acknowledged but have also accepted the
fact of claiming as also accepting aforesaid bogus payments and
hence the supplier had agreed for reconciliation of same after
deducting such bogus payments. If the accounts would not have
reconciled, the supplier would have caused huge losses to the
public exchequer.
Hence, there is every apprehension that if the supplier is
allowed to deal in any manner with the BSNL in future, the
supplier will venture into committing same and/or similar fraud
(s) on the public exchequer and therefore, it is not at all in
the interest of public exchequer that the supplier continues to
be authorised supplier of BSNL.
Hence, in view of the all the above facts and
circumstances and the entire record and proceedings of this
case, it is possible for this organisation to take a view to
permanent banning and impose penalty upon the supplier so as to
prevent the supplier from dealing with entire BSNL, throughout
the country in any manner, consequently stopping all the future
business transactions of entire BSNL with the supplier.
Hereby M/s. Kulja Industries Ltd., Solan (Himachal
Pradesh) is permanently banned and is consequently prevented
from having any business dealing with entire BSNL through the
country.
This is issued with the approval of the competent
authority.
Sd/-
AGM (MM) 15.1.2011
O/o CGM, WTP, Mumbai-54”
9. Aggrieved by the above order the appellant once again approached the
High Court in W.P. No. 2289 of 2011 which was heard and dismissed by a
Division Bench of the High Court in terms of the order impugned in this
appeal. The High Court was of the opinion that reconciliation of the
account had proved that the appellant had received payment twice over for
the supplies made by it and that merely because the excess payment received
had been subsequently refunded by the appellant did not obliterate the act
of misconduct and fraud. The High Court observed:
“In the order impugned, the Authority has stated that on
the reconciliation of the account, it was found as a fact that
the Petitioner has received payment twice for the supply of the
same material, because the supply was ongoing and the amount was
found 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 were mostly, if not
entirely, supplied for consumption to the respondent-BSNL, any order
permanently blacklisting the appellant from entering into contracts making
supplies was tantamount to rendering the appellant jobless and economically
defunct. No such order of blacklisting could, therefore, be sustained as
the punishment implicit in such an order was totally disproportionate to
the gravity of the offence allegedly committed by the appellant.
12. On behalf of the respondent-BSNL, it was argued by Mr. Bansal that
the blacklisting order under challenge was not relatable to paras 31 and 32
of the bid document. The order simply declared the petitioner-company
ineligible for allotment of any contract in future in terms of para 2.3 of
the tender document, the relevant portion wherefore reads as under:
“2.3 Disqualification Clause: The supplier/ Manufacturers in
the following category are not eligible to bid in the said
tender.
i ....
ii. Firms against whom investigation cases are registered with
the CBI or other statutory investigations agencies of
State/Central Govt.
iii ....”
13. It was further contended by the learned counsel that even if the
order was held to be referable to paras 31 and 32 of the bid document, an
order permanently blacklisting the appellant was also justified having
regard to the nature of the fraud committed by it in collusion with the
officers of the respondent-corporation and involving a huge amount of
nearly eight crores.
14. We may at the outset deal with the contention whether paras 31 and 32
of the bid document to which Mr. Rohtagi has made reference is the only
source of the power to blacklist a defaulting contractor. These paras are
as under:
“31. Purchaser reserves the right to disqualify the supplier for
a suitable period who habitually failed to supply the equipment
in time. Further, the suppliers whose equipment do not perform
satisfactory in the field in accordance with the specifications
may also be disqualified for a suitable period as decided by the
purchaser.
32. Purchaser reserves the right to blacklist a bidder for a
suitable period in case he fails to honour his bid without
sufficient grounds.”
15. A plain reading of the above would show that BSNL, the purchaser has
reserved the right to disqualify any supplier who
(a) habitually fails to supply the equipment in time or (b) the
equipment supplied by 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 by them. If bidders who commit a breach of a lesser degree could
be punished by an order of blacklisting there is no reason why a breach of
a more serious nature should go unpunished, be ignored or rendered
inconsequential by reason only of an omission of such breach or violation
in the text of paras 31 and 32 of the tender document. Paras 31 and 32
cannot, in that view, be said to be exhaustive; nor is the power to
blacklist limited to situations mentioned therein.
17. That apart the power to blacklist a contractor whether the contract
be for supply of material or equipment or for the execution of any other
work whatsoever is in our opinion inherent in the party allotting the
contract. There is no need for any such power being specifically conferred
by statute or reserved by contractor. That is because ‘blacklisting’ simply
signifies a business decision by which the party affected by the breach
decides not to enter into any contractual relationship with the party
committing the breach. Between two private parties the right to take any
such decision is absolute and untrammelled by any constraints whatsoever.
The freedom to contract or not to contract is unqualified in the case of
private parties. But any such decision is subject to judicial review when
the same is taken by the State or any of its instrumentalities. This
implies that any such decision will be open to scrutiny not only on the
touchstone of the principles of natural justice but also on the doctrine of
proportionality. A fair hearing to the party being blacklisted thus becomes
an essential pre-condition for a proper exercise of the power and a valid
order of blacklisting made pursuant thereto. The order itself being
reasonable, fair and proportionate to the gravity of the offence is
similarly examinable by a writ Court. The legal position on the subject is
settled by a long line of decisions rendered by this Court starting with
Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975)
1 SCC 70
where this Court declared that blacklisting has the effect of
preventing a person from entering into lawful relationship with the
Government for purposes of gains and that the Authority passing any such
order was required to give a fair hearing before passing an order
blacklisting a certain entity. This Court observed:
“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. 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. (1974) 4 SCC 3; Maneka Gandhi v.
Union of India and Anr. (1978) 1 SCC 248; Ajay Hasia and Ors. v. Khalid
Mujib Sehravardi and Ors., (1981) 1 SCC 722; R.D. Shetty v. International
Airport Authority of India and Ors., (1979) 3 SCC 489 and Dwarkadas
Marfatia and sons v. Board of Trustees of the Port of Bombay (1989) 3 SCC
751 have ruled against arbitrariness and discrimination in every matter
that is subject to judicial review before a Writ Court exercising powers
under Article 226 or Article 32 of the Constitution. It is also well
settled that even though the right of the writ petitioner is in the nature
of a contractual right, the manner, the method and the motive behind the
decision of the authority whether or not to enter into a contract is
subject to judicial review on the touchstone of fairness, relevance,
natural justice, non-discrimination, equality and proportionality. All
these considerations that go to determine whether the action is sustainable
in law have been sanctified by judicial pronouncements of this Court and
are of seminal importance in a system that is committed to the rule of law.
We do not consider it necessary to burden this judgment by a copious
reference to the decisions on the subject. A reference to the following
passage from the decision of this Court in M/s Mahabir Auto Stores & Ors.
v. Indian Oil Corporation Ltd., (1990) 3 SCC 752 should, in our view,
suffice:
“11. It is well settled that every action of the State or an
instrumentality of the State in exercise of its executive power,
must be informed by reason. In appropriate cases, actions
uninformed by reason may be questioned as arbitrary in
proceedings under Article 226 or Article 32 of the Constitution.
Reliance in this connection may be placed on the observations of
this Court in Miss Radha Krishna Agarwal and Ors. v. State of
Bihar and Ors., [1977] 3 SCR 249 …... In case any right
conferred on the citizens which is sought to be interfered, such
action is subject to Article 14 of the Constitution, and must be
reasonable and can be taken only upon lawful and relevant
grounds of public interest. Where there is arbitrariness in
State action of this type of entering or not entering into
contracts, Article 14 springs up and judicial review strikes
such an action down. Every action of the State executive
authority must be subject to rule of law and must be informed by
reason. So, whatever 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.
The Federal
Government considers ‘suspension and debarment’ as a powerful tool for
protecting taxpayer resources and maintaining integrity of the processes
for federal acquisitions.
Comprehensive guidelines are, therefore, issued
by the government for protecting public interest from those contractors and
recipients who are non-responsible, lack business integrity or engage in
dishonest or illegal conduct or are otherwise unable to perform
satisfactorily.
These guidelines prescribe the following among other
grounds for debarment:
a) Conviction of or civil judgment for --
(1) Commission of fraud or a criminal offense in connection with
obtaining, attempting to obtain, or performing a public or
private agreement or transaction;
(2) Violation of Federal or State antitrust statutes, including those
proscribing price fixing between competitors, allocation of
customers between competitors, and bid rigging;
(3) Commission of embezzlement, theft, forgery, bribery,
falsification or destruction of records, making false
statements, tax evasion, receiving stolen property, making false
claims, or obstruction of justice; or
(4) Commission of any other offense indicating a lack of business
integrity or business honesty that seriously and directly
affects your present responsibility;
(b) Violation of the terms of a public agreement or transaction so
serious as to affect the integrity of an agency program, such
as—
(1) A willful failure to perform in accordance with the terms of one
or more public agreements or transactions;
(2) A history of failure to perform or of unsatisfactory performance
of one or more public agreements or transactions; or
(3) A willful violation of a statutory or regulatory provision or
requirement applicable to a public agreement or transaction;
(c) xxxx
(d) Any other cause of so serious or compelling a nature that it
affects your present responsibility.
21. The guidelines also stipulate the factors that may influence the
debarring official’s decision which include the following:
a) The actual or potential harm or impact that results or may
result from the wrongdoing.
b) The frequency of incidents and/or duration of the wrongdoing.
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 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 the cause for debarment and, if so, made the result
of the investigation available to the debarring official.”
22. As regards the period for which the order of debarment will remain
effective, the guidelines state that the same would depend upon the
seriousness of the case leading to such debarment.
23. Similarly in England, Wales and Northern Ireland, there are statutory
provisions that make operators ineligible on several grounds including
fraud, fraudulent trading or conspiracy to defraud, bribery etc.
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, falsification of records and other breaches of 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.
25. In the case at hand according to the respondent-BSNL, the appellant
had fraudulently withdrawn a huge amount of money which was not due to it
in collusion and conspiracy with the officials of the respondent-
corporation.
Even so permanent debarment from future contracts for all
times to come may sound too harsh and heavy a punishment to be considered
reasonable especially 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.
26. The next question then is
whether this Court ought to itself
determine the time period for which the appellant should be blacklisted or
remit the matter back to the authority to do so having regard to the
attendant facts and circumstances.
A remand back to the competent authority
has appealed to us to be a more appropriate option than an order by which
we may ourselves determine the period for which the appellant would remain
blacklisted.
We say so for two precise reasons.
Firstly, 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
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 affirmed,
the period for which such order remains
operative shall be determined afresh by the competent authority on the basis of guidelines which the Corporation may formulate for that purpose.
The needful shall be done by the Corporation and/or the competent authority
expeditiously but not later than six months from today. The parties are
left to bear their own costs.
.………………….……….…..…J.
(T.S. THAKUR)
………..…………………..…..…J.
(VIKRAMAJIT SEN)
New Delhi
October 4, 2013
