M/S Elecon Power Infra Ltd vs Bses Rajdhani Power Ltd

Prathiba M. Singh, J

This hearing has been done by video conferencing.

The Petitioner has filed the present petition challenging the impugned notice dated 31st October, 2020, by which the Petitioner has been blacklisted

by the BSES Rajdhani Power Ltd. (hereinafter as ‘BSES’), and debarred from performing/participating/associating with the BSES for a period

of three years, w.e.f 1st November, 2020, citing gross breach of the Vendor Code of Conduct of BSES.

The submission of Ms. Nandini Sen, ld. counsel for the Petitioner, is that the said act of blacklisting has been done without proper notice being given

to the Petitioner. Mr. Narender Hooda, ld. Senior counsel for the Respondent, on the other hand, submits that the Rate Contracts between the

Petitioner and the Respondent contain a clause laying down a dispute resolution mechanism, which provides for disputes to be resolved by arbitration

and therefore, the Petitioner ought to invoke the same.

A perusal of the show cause notice dated 4th March, 2020, shows that after setting out the allegations against the Petitioner, the BSES has basically

stated that there maybe termination and blacklisting of the Petitioner. The notice however gives an opportunity to the Petitioner to submit a report on

the action taken on the said allegations, which shall contain the precautionary measures and practices adopted to avoid the occurrence of such issues.

The relevant portion of the show cause notice dated 4th March 2020, after mentioning the various violations by the Petitioner, concludes as extracted

below:

“You may refer to the clause no.30 TERMINATION of the said Rate Contract & their sub Clause No. 30.7, 30.9.

You are aware that as per contract clause no.30 these repeated cases of vigilances are not acceptable and may lead to termination of the

contract and blacklisting from BRPL.

You are requested to submit a action taken report on these issues which shall contain the precautionary measures and practices adapted by

your firm to void such occurrence in future and also submit your detailed reply why action not to be initiated against your firm as per the

contract clause no. 30.

The ATR with your reply should reach us, not later than 15.03.2020.â€​

A perusal of the above shows that a threat was given that the Petitioner may be blacklisted, but the Petitioner was asked to explain the measures

taken by it. It was not a clear notice for blacklisting.

The Petitioner replied to the Respondent on 14th March 2020. In the reply the Petitioner gave a detailed explanation as to the action taken by it in

respect of each of the complaints raised against it. In the reply, the Petitioner also assured that it will be vigilant in the future to ensure that its

employees follow proper working procedure. The reply concludes as under:

“d) We've replaced supervisor from time to time, & shall improve screening & monitoring of supervisors further.

Lastly, improvement of working procedure & keeping vigil are two constants. Issues will come in the future, but we can guarantee you this,

that our loyalty towards your esteemed organization & the work bestowed on us will never fail, as it has not failed in last 19 years.

We have never been blacklisted till now & have no intention to be so.â€​

No further communication was exchanged between the parties. After almost seven months, the Respondent straightaway issued the impugned

order dated 31st October 2020, thus, blacklisting/debarring the Petitioner for a period of three years, and simultaneously terminating the Rate Contract,

w.e.f. 30th November 2020. The said communications are under challenge in the present writ petition.

The Petitioner submitted a letter dated 3rd December, 2020, through its counsel, explaining its position and also highlighting the fact that no hearing

was given prior to passing the blacklisting order. In the said letter, the Petitioner also gave the background and history of the relationship between the

parties. The Respondent was called upon to withdraw the blacklisting order. The Respondent however refused to withdraw the same leading to the

filing of the present writ petition.

The law relating to blacklisting/debarring and the importance of serving of proper notice prior to blacklisting is quite well settled. In Civil Appeals

Nos. 7167-68/2014 titled Gorkha Security Services v. Government (NCT of Delhi) and Ors., dated 4th August, 2014, the Supreme Court observed as

under:

“21. The Central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental

purpose behind the serving of show-cause 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, according to us, is the nature of action which is proposed to be taken for such a

breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the

defaults/ breaches complained of are not satisfactorily explained. When it comes to black listing, this requirement becomes all the more

imperative, having regard to the fact that it is harshest possible action.â€​

Recently in Civil Appeal No. 3687 of 2020 titled UMC Technologies Private Limited v. Food Corporation of India & Anr., dated 1t6h November,

2020, the Supreme Court, while discussing the criteria to be fulfilled for a show cause notice to constitute a valid blacklisting order, has observed as

under:

“21. Thus, from the above discussion, a clear legal position emerges that for a show cause notice to constitute the valid basis of a

blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom, that there is intention

on the part of the issuer of the notice to blacklist the noticee. Such a clear notice is essential for ensuring that the person against whom the

penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible

blacklisting.â€​

In the opinion of this Court, the show cause notice dated 4th March, 2020, does not satisfy the ingredients to constitute a valid order of blacklisting.

From a reading of the notice as a whole, the clear impression one gets is that the Petitioner was called upon to take remedial actions with respect to

the allegations raised against the Petitioner in the said show cause notice, and if the Respondent is not satisfied with the action taken, then the

Respondent may resort to blacklisting. Considering the fact that the Petitioner has been a company which has been dealing with the Respondents for

more than 19 years, and has more than 150 employees along with enormous investment, it deserved a proper opportunity to explain and take remedial

measures before being debarred or blacklisted. The Petitioner was not even given a hearing prior to blacklisting.

Ld. Senior counsel Mr. Hooda, appearing for the Respondent, submits that the BSES is willing to withdraw the blacklisting order and serve a fresh

show cause notice to the Petitioner.

Accordingly, the blacklisting order dated 31st October, 2020 is set aside. Insofar as the termination of the contract is concerned, the Petitioner is

permitted to avail of its remedies, in accordance with law.

With these observations the present petition, along with all pending applications, is disposed of.