Block listing of a contractor - “debarment” is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor.
In the instant case, it might be true that the offence was the first offence committed by the contractor. However, considering the seriousness of the matter that due to the omission and commission on the part of the contractor a serious incident had occurred as there was a collapse of a ten meter slab while constructing a flyover in which one person died and eleven others injured, as such the contractor does not deserve any leniency.
However, to debar him permanently can be said to be too harsh a punishment. But considering the subsequent O.M. dated 26.11.2021 reproduced hereinabove (to which as such we do not agree as observed hereinabove), we are of the opinion that if the blacklisting is restricted to five years, it may be in the fitness of things.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1083 OF 2022
State of Odisha & Ors. ..Appellant (S)
VERSUS
M/s Panda Infraproject Limited ..Respondent (S)
With
CIVIL APPEAL NO.1084 OF 2022
State of Odisha & Ors. ..Appellant (S)
VERSUS
M/s Panda Infra Projects (India) Pvt. Ltd. ..Respondent (S)
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 23.03.2021 passed by the High
Court of Orissa at Cuttack in W.P. (C) No.26408 of 2017,
by which the High Court has allowed the said writ petition
and has quashed and set aside the order passed by the
State, banning the respondent herein from participating or
1
bidding for any work to be undertaken by Government of
Odisha and transacting any business with Government of
Odisha, either directly in the name of propriety bidder or
indirectly under any different name or title, the State of
Odisha has preferred the present C.A. No.1083 of 2022.
2. Feeling aggrieved and dissatisfied with the subsequent
consequential order passed by the High Court vide order
dated 04.06.2021 in W.P. (C) No.16723 of 2021 by which
the High Court, in consequence of the earlier order dated
23.03.2021 passed in W.P. (C) No.26408 of 2017, directed
the State of Odisha to remove the name of the contractor –
respondent herein from the list of blacklisted contractors,
the State of Odisha has preferred the present C.A. No.1084
of 2022.
3. That the respondent – contractor was awarded a contract
for construction of a flyover over the railway level crossing
at Bomikhal Junction in Bhubaneswar. That in pursuance
of the said contract the respondent – contractor
constructed the said flyover. In the year 2017, a ten meter
slab of the flyover collapsed during concreting of the
2
railway over bridge at the level crossing, which resulted in
loss of life and property. One person died and eleven
others were injured. A highlevel inquiry was conducted by
the Chief Engineer (Design) and Chief Engineer (DPI and
Roads). The committee submitted a comprehensive report
after a detailed inquiry and found the contractor –
respondent herein guilty. It was found that the contractor
did not submit the formwork design and adopted his own
arrangement leading to collapse of such a huge structure
during construction. It was also found that the contractor
had not ensured adequate safety measures during the
period of construction; otherwise such an unfortunate fatal
accident could have been avoided. It was found that the
quality assurance had not been maintained as stipulated
in the codes and manuals and as per the agreement. It
was found that there were a lot many deficiencies in
workmanship that could affect the quality of work, as
found in other formwork assemblies. Therefore, the
committee found the contractor responsible for such a
serious accident.
3
3.1 On the basis of such report the State Government took the
matter very seriously and directed that immediate
necessary action be taken for blacklisting the contractor
following the procedure as per the Orissa Public Works
Department (OPWD) Code. Thereafter, a show cause notice
was issued to the contractor and the contractor was asked
to show cause as to why it be not blacklisted for
intentionally violating the relevant clauses of the
Agreement No.15P1/201112. The respondent filed a
detailed reply. That on considering the allegations in the
said show cause notice and reply thereto, the Chief
Engineer (DPI & Roads) Odisha issued an order dated
12.12.2017, whereby the respondent – contractor was
blacklisted with immediate effect, for intentional violation
of condition of the contract leading to injuries and loss of
life. The respondent – contractor was banned from
participating or bidding for any work to be undertaken by
the Government of Odisha and the contractor was also
banned from transacting business with Government of
Odisha, either directly or indirectly.
4
3.2 Aggrieved by the order of blacklisting dated 12.12.2017,
the contractor filed Writ Petition (C) No.26408 of 2017
seeking quashing of the order of blacklisting and by the
impugned judgment and order, the High Court has set
aside the order of blacklisting mainly on the ground that
the order of blacklisting is in violation of principles of
natural justice. The impugned judgment and order passed
by the High Court quashing and setting aside the order of
blacklisting is the subject matter of Civil Appeal No.1083
of 2022.
3.3 That thereafter the contractor filed another Writ Petition
(C) No.16723 of 2021, making a grievance that despite the
order of blacklisting set aside by the High Court in Writ
Petition (C) No.26408 of 2017, the contractor’s name
continues to be shown as the blacklisted in the official
portal of the Government of Odisha. By the order dated
04.06.2021, the High Court has disposed of the said writ
petition by directing the State to pass appropriate orders to
stop showing on the official portal of the Government of
Odisha the name of the contractor – respondent herein as
5
a blacklisted company to enable the contractor to seek
renewal of its licence as well participate in future tenders.
The order dated 04.06.2021 passed by the High Court in
Writ Petition (C) No.16723 of 2021 is the subject matter of
Civil Appeal No.1084 of 2022.
4. Shri Ashok Kumar Parija, learned Advocate General has
appeared on behalf of the State of Odisha and Shri Sibo
Sankar Misra, learned Advocate has appeared on behalf of
the respondent – contractor.
5. Shri Ashok Kumar Parija, learned Advocate General
appearing on behalf of the State of Odisha has vehemently
submitted that in the facts and circumstances of the case,
the High Court has materially erred in quashing and
setting aside the order passed by the State of Odisha
blacklisting the respondent – contractor.
5.1 It is contended that the High Court has erred in holding
that the order of blacklisting was in violation of the
principles of natural justice.
6
5.2 It is submitted that as such before blacklisting the
respondent – contractor a show cause notice was issued
and served upon the respondent. The procedure as
required as far as AppendixXXXIV of OPWD Code was
followed and thereafter, after considering the reply
submitted by the contractor, the order of blacklisting was
passed. It is submitted that therefore, the High Court has
erred in holding that the order of blacklisting was in
breach of principles of natural justice.
5.3 It is further submitted by Shri Parija, learned Advocate
General appearing on behalf of the State that the High
Court has also erred in concluding that the blacklisting
order was predecided as the same was passed on the
basis of the recommendations made in the inquiry report.
It is urged that in fact the findings recorded by the inquiry
committee can be said to be the basis for initiating the
action of blacklisting against the contractor. It is
submitted that therefore, the findings recorded by the
inquiry committee can be said to be a prima facie opinion
while initiating the proceedings for blacklisting. It is
7
submitted that merely because show cause notice was
issued and the blacklisting order was passed on
consideration of the inquiry report, that by itself it cannot
be said that the blacklisting order was predecided.
5.4 It is further submitted by Shri Parija, learned Advocate
General, appearing on behalf of the State that even
otherwise, while passing the impugned judgment and
order quashing and setting aside the blacklisting order,
the High Court has not at all considered the seriousness of
the allegations against the contractor. It is submitted that
it was a case of grave lapse and omission and commission
on the part of the contractor; a serious incident occurred
in which one person died and eleven others were injured. It
is submitted that therefore, the High Court ought not to
have interfered with the order passed by the State
Government blacklisting the respondent – contractor
6. The present appeals are vehemently opposed by Shri Sibo
Sankar Misra, learned counsel appearing on behalf of the
respondent – contractor.
8
6.1 It is submitted that in the facts and circumstances of the
case the High Court has rightly observed and held that the
order of blacklisting was predetermined and the same was
in breach of principles of natural justice.
6.2 It is submitted that before a show cause notice was issued
to the respondent – contractor, a communication/letter
dated 10.10.2017 was written by the Under Secretary in
the Works Department to the Chief Engineer which shows
that the Government had already ordered blacklisting of
the contractor and the EngineerinChief was directed to
take immediate action for blacklisting the contractor. It is
submitted that as rightly observed that the action of
blacklisting the contractor was predetermined. It is
submitted that it is rightly observed by the High Court that
giving a show cause notice was an empty formality which
was not going to change the decision already taken to
blacklist the contractor.
9
6.3 It is further submitted that even in the show cause notice
there was no reference to the letter dated 10.10.2017
and/or to the report of the committee.
6.4 It is further submitted that even after the show cause
notice containing serious allegations of violations by the
contractor, the contractor was asked to execute the
balance work, on a revised design, which the contractor –
respondent admittedly completed to the satisfaction of the
Department by 31.03.2018. It is submitted that therefore,
the High Court has rightly quashed the order of
blacklisting the respondent – contractor.
6.5 In the alternative, it is contended by learned counsel
appearing on behalf of the respondent – contractor that in
the facts and circumstances of the case, the order of
blacklisting the respondent – contractor permanently can
be said to be too harsh and/or disproportionate to the
charge/misconduct proved against the respondent –
contractor.
10
6.6 It is urged that it was the first offence by the respondent –
contractor. That after the impugned order passed by the
Government, the Government of Odisha, Works
Department passed an office memorandum dated
26.11.2021, which provides that the blacklisting period
per offence shall be limited to three years subject to an
overall maximum cumulative period of ten years for
multiple offences. It is submitted that the respondent has
completed a period of 4 ½ years of its blacklisting. It is
submitted that therefore the order of blacklisting
respondent – contractor permanently also deserves to be
quashed and set aside.
6.7 Making the above submissions and relying on the
decisions of this Court in the cases of Erusian Equipment
& Chemicals Ltd. Vs. State of West Bengal and Anr.
(1975) 1 SCC 70, Kulja Industries Limited Vs. Chief
General Manager, Western Telecom Project Bharat
Sanchar Nigam Limited and Ors. (2014) 14 SCC 731
and M/s. Daffodills Pharmaceuticals Ltd. & Anr. Vs.
State of U.P. & Anr. 2019 (17) Scale 758, it is prayed to
11
dismiss the present appeals and/or in the alternative to
reduce the period of blacklisting.
7. We have heard learned counsel appearing on behalf of the
respective parties at length.
8. By the impugned judgment and order, the High Court has
set aside the order passed by the Government of Odisha
blacklisting the respondent contractor mainly on the
ground that the same was predetermined and in breach of
principles of natural justice.
8.1 However, it is required to be noted that the action of
blacklisting followed a highlevel inquiry conducted by two
members committee, Chief Engineer (Designs) and Chief
Engineer (DPI & Roads). After studying the contract
provisions and drawings, as also inquiry on the spot and
after a detailed consideration of the general behaviour and
collapse of the formwork, a comprehensive report was
submitted and the following observations were made in
respect of the respondent – contractor:
“(b) In respect of the Contractor
12
(i) The Contractor has not submitted the
formwork design and has adopted his own
arrangement leading to such occurrence of
collapse of such huge structure during
construction. Design of the formwork is
the responsibility of the Contractor and
the Contractor shall also be entirely
responsible for adequacy and safety of
formwork, notwithstanding any approval
or review of drawing and design by the
Engineer.
(ii) The Contractor has not ensured adequate
safety measures during construction
activities with which such unfortunate
fatal accident could have been avoided,
even in case of failure.
(iii) Quality assurance has not been
emphasized as stipulated in the codes and
manuals and as per the Agreement.
(iv) There are lot many deficiencies in
workmanship that may affect the quality
of work, as found in other formwork
assemblies."
8.2 Thereafter, the State Government studied the report
submitted by a highlevel committee and having
considered the case of lapse on the part of the contractor,
a serious incident had taken place of collapse of a ten
meter slab and in the said incident, one person died and
eleven others were injured. Hence, a decision was taken to
blacklist the contractor after following the proceedings as
per the OPWD Code. Thereafter, a show cause notice was
13
issued upon the respondent – contractor and the
respondent – contractor was called upon to show cause as
to why he be not blacklisted. The said show cause notice
was issued in terms of the provisions and the procedures
in the OPWD Code. The respondent – contractor replied to
the same. After considering the allegations in the show
cause notice and the reply submitted by the contractor,
thereafter the Government passed an order of blacklisting.
Merely because the show cause notice was issued after the
inquiry committee report was considered and thereafter
the State Government took the decision to initiate
proceedings for blacklisting, that by itself it cannot be said
that the order of blacklisting was predetermined as
observed by the High Court. The communication dated
10.10.2017 by the State Government to the Chief Engineer
can be said to be a proposed decision to initiate the
proceedings for blacklisting. In the communication dated
10.10.2017, it has been specifically mentioned that the
action be taken for blacklisting after following the
procedure as per the OPWD Code. Before any show cause
notice is issued for any action when a tentative decision is
14
taken, it cannot be said that subsequent decision followed
by a show cause notice and the proceedings as per the
OPWD Code can be said to be predetermined. Before
initiation of any proceedings for blacklisting, there can be
a tentative decision on the basis of the material available
forming a tentative/prima facie opinion that action is
required. In the instant case a committee submitted a
detailed report which was the basis for issuance of the
show cause notice to the respondent. The action initiated
against the respondent was not in a vacuum but after
considering the committee’s report and after following the
due procedure as required. Therefore, the High Court has
erred in holding that the blacklisting order was predetermined.
8.3 So far as the findings recorded by the High Court that the
blacklisting order was in breach of principles of natural
justice is concerned, it is to be noted that the blacklisting
order was passed after issuing a show cause notice to
which the contractor – respondent was called upon to reply
and show cause as to why he be not blacklisted. A detailed
15
show cause notice was issued with specific allegations to
which the respondent – contractor submitted a detailed
reply. After considering the allegations in the show cause
notice, considering the reply and also by considering the
material available on record the order of blacklisting was
passed. We fail to appreciate, how in such a case the
blacklisting order can be said to be in breach of principles
of natural justice.
8.4 In the case of Grosons Pharmaceuticals (P) Ltd. & Anr.
v. State of U.P., (2001) 8 SCC 604, the order of
blacklisting was challenged by the contractor on the
ground that the contractor was not supplied with all the
materials on the basis of which charges against him were
based. It was the case on behalf of the contractor that nonsupply of such material resulted in violation of principles
of natural justice. To that, this Court observed that it was
sufficient requirement of law that an opportunity of show
cause was given to the appellant before it was blacklisted.
This Court observed that the contractor was given an
opportunity to show cause and it did reply to the show16
cause to the State Government and therefore the
procedure adopted by the Government while blacklisting
the contractor was in conformity with the principles of
natural justice.
8.5 In the present case as observed hereinabove, show cause
notice was issued upon the contractor by which the
contractor was called upon to show cause why he be not
blacklisted; the show cause notice was replied to by the
contractor and thereafter, after considering the material
on record and the reply submitted by the contractor and
having found the serious lapses which led to a serious
incident in which one person died and eleven others were
injured, the State Government took a conscious decision to
blacklist the contractor. Therefore, it cannot be said the
order blacklisting the contractor was in violation of
principles of natural justice.
8.6 As observed by this Court in the case of Gorkha Security
Services v. Govt. (NCT of Delhi) & Ors., (2014) 9 SCC
105, the fundamental purpose behind the serving of a
17
showcause notice is to make the noticee understand the
precise case set up against him which he has to meet. This
would require the statement of imputations detailing out
the alleged breaches and defaults he has committed, so
that he gets an opportunity to rebut the same. Another
requirement is the nature of action which is proposed to be
taken for such a breach.
8.7 As per the law laid down by this Court in a catena of
decisions “debarment” is recognised and often used as an
effective method for disciplining deviant
suppliers/contractors who may have committed acts of
omission and commission. It is for the State or appropriate
authority to pass an order of blacklisting/debarment in the
facts and circumstances of the case. Therefore, the High
Court has erred and has exceeded its jurisdiction in
exercise of powers under Article 226 of the Constitution of
India by quashing and setting aside the blacklisting order,
that too, without adverting to the serious allegations and
the act of omission and commission on the part of the
contractor which led to a serious incident of collapse of ten
18
meter slab while concrete work of the deck was going on
and due to which one person died and eleven others were
injured. It was specifically found that the safety
arrangements were lacking severely in the construction
work zone. It was also found that quality assurance was
not emphasised as stipulated in the codes and manuals
and as per the Agreement. Therefore, the High Court ought
to have considered the seriousness of the incident in which
due to omission and commission on the part of the
contractor in constructing the flyover one person died and
eleven others were injured.
9. The next question which is posed for consideration of this
Court is, whether, in the facts and circumstances of the
case the contractor was required to be
debarred/blacklisted permanently?
9.1 In the case of Kulja Industries Limited (supra), this
Court has observed that “debarment” is never permanent
and the period of debarment would invariably depend
upon the nature of the offence committed by the erring
contractor.
19
In the said decision this Court emphasised on
prescribing guidelines by determining the period for which
the blacklisting should be effective. It is observed and held
by this Court that while determining the period for which
the blacklisting should be effective, for the sake of
objectivity and transparency it is required to formulate
broad guidelines to be followed. It is further observed that
different periods of debarment depending upon the gravity
of the offences, violations and breaches may be prescribed
by such guidelines. In the present case, after the order of
blacklisting was passed, the State Government has
formulated guidelines by O.M. dated 26.11.2021 which
provides as under:
“The blacklisting period per offence shall be limited to 03
(Three) years subject to an overall maximum cumulative
period of 10 (Ten) years for multiple offences”
However, we may observe that we do not approve of
the guidelines issued by the State Government by O.M.
dated 26.11.2021. Duration of blacklisting cannot be
solely per offence. Seriousness of the lapse and the
incident and/or gravity of commission and omission on
20
the part of the contractor which led to the incident
should be the relevant considerations. In a given case, it
may happen that the commission and omission is very
grave and because of the serious lapse and/or negligence,
a major incident would have taken place. In such a case,
it may be the contractor’s first offence, in such a case,
the period/duration of the blacklisting/banning can be
more than three years. However, as the said guidelines
are not under challenge, we rest the matter there and
leave it to the State Government to suitably amend
and/or modify the said office memorandum. However,
what we have observed above can be a guide while
determining the period of debarment/blacklisting.
In the instant case, it might be true that the offence
was the first offence committed by the contractor.
However, considering the seriousness of the matter that
due to the omission and commission on the part of the
contractor a serious incident had occurred as there was a
collapse of a ten meter slab while constructing a flyover
in which one person died and eleven others injured, as
21
such the contractor does not deserve any leniency.
However, to debar him permanently can be said to be too
harsh a punishment. But considering the subsequent
O.M. dated 26.11.2021 reproduced hereinabove (to which
as such we do not agree as observed hereinabove), we are
of the opinion that if the blacklisting is restricted to five
years, it may be in the fitness of things.
10. In view of the above discussion and for the reasons stated
above, present appeal, i.e., C. A. No. 1083 of 2022 is
allowed in part. The impugned judgment and order
passed by the High Court quashing and setting aside the
order dated 12.12.2017 blacklisting the respondent
herein – contractor is hereby quashed and set aside.
However, the period of blacklisting is ordered to be
restricted to five years from the date of passing of the
order of blacklisting. Civil Appeal No.1083 of 2022 is
allowed to the aforesaid extent.
22
In view of the order passed in Civil Appeal No.1083 of
2022, Civil Appeal No.1084 of 2022 stands dismissed. In
the facts and circumstances of the case, there shall be no
order as to costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(B.V. NAGARATHNA)
New Delhi,
February 24, 2022.
23
