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Saturday, October 5, 2013

Block listing permanently - not correct= M/s Kulja Industries Limited …Appellant Versus Chief Gen. Manager W.T. Proj. BSNL & Ors. …Respondents= published in judis.nic.in/supremecourt/filename=40855

 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had fraudulently withdrawn a huge amount of money which was not  due  to  it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

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