M/S Sarr Freight Corporation vs Engineers India Limited And Anr

VIBHU BAKHRU, J

Issue notice. The learned counsel appearing for respondent no.1 accepts notice. The petition is taken up for final hearing.

The petitioner has filed the present petition, inter alia, impugning an order dated 25.06.2018 (hereafter „the impugned order‟) passed by

respondent no.1 (hereafter „EIL‟). By the impugned order, the petitioner has been debarred from participating in any contract or entering into any

transaction for a period of three years from the date of the impugned order.Â

The impugned order was premised on a finding that the petitioner had submitted a false certificate dated 15.02.2017 purportedly issued by the

Indian Register of Shipping. The said certificate (Interim Certificate of Class Preview) dated 15.02.2017 bearing no. CAL16F001 (hereafter „the

Certificate‟) was purportedly issued by the Surveyor to Indian Register of Shipping. However, issuance of the said certificate is not reflected on the

website of the concerned authority. The enquiries made by EIL indicated that the Certificate was forged/fabricated. In view of the above, the

petitioner was issued a Show Cause Notice dated 21.08.2017. The petitioner responded to the said notice by a letter dated 28.08.2017, whereby it

asserted that the Certificate furnished by the petitioner was correct but had expired. The petitioner also sought further time to submit documentary

proof in support of its claim.Â

Thereafter, the petitioner was afforded an opportunity to be heard in a meeting held on 19.09.2017 before a committee of two officers of EIL. The

petitioner‟s Managing Director appeared before the said committee and sought further time to take up the matter with the Indian Register of Shipping

Authority, Kolkatta. The said request was granted; however, the petitioner failed to submit any clarification or proof as required. On 17.10.2017, the

petitioner once again requested for four weeks additional time to seek the clarification from the Indian Register of Shipping Authority on account of

the festive season. This request too was granted. However, the petitioner failed to submit any material to establish the authenticity of the Certificate

furnished by it.Â

In view of the aforesaid, EIL has passed the impugned order debarring the petitioner from participating in any tender.Â

Submission

Mr Makhija, the learned counsel appearing for the petitioner has sought to assail the impugned order, essentially, on three grounds. First, he

submitted that the Certificate (which is alleged to be forged) was furnished as a part of the bid documents submitted for a project floated by

respondent no.2 (hereafter „BPCL‟) and, therefore, the petitioner could not be blacklisted by EIL. He earnestly contended that EIL was only acting

as an agent for BPCL and, thus, any grievance regarding any incorrect or forged document, which formed a part of its tender, could be raised only by

BPCL/respondent no.2.Â

Second, he submitted that the Notice Inviting Tender (NIT) did not specifically include any provision for blacklisting a bidder on account of

furnishing any incorrect Certificate. Lastly, he submitted that the procedure adopted to blacklist the petitioner is contrary to the policy of EIL. He

referred to the “Procedure for Suspension/Banning of Business Dealings†published on the website of EIL, which specifically requires that if the

party concerned requires an oral hearing, the same would be afforded by the subcommittee for SCEC-I which comprises of ED (SCM), ED

(Projects), GM/CGM (Construction), GM (Planning), HOD (Legal) as members and HOD (PDD) as the convener.Â

Reasons and Conclusion

The petitioner‟s contention that the action of EIL in blacklisting the petitioner is not sustainable, as the Certificate in question was submitted

pursuant to a bid floated by BPCL, is unmerited. The principal consideration is not whether the petitioner had submitted a bid for a contract with EIL,

but whether it had dealings with EIL during the course of which this Certificate was furnished. And, more importantly, whether EIL had acquired

knowledge of the misconduct on the part of the petitioner. Plainly, the Certificate in question was considered by EIL in course of its appointment as a

consultant to BPCL and, thus, EIL was well within its right to refrain from entering into any transaction or dealing with the petitioner in future.Â

Insofar as the contention that the punitive measure of blacklisting is not provided in the NIT is concerned, the said contention is unmerited as well.

First of all the NIT include several documents including the Special Conditions of Contract (SCC) is applicable to the contract in question. Article 65

of the SCC includes a specific provision with regard to fraudulent practices. The relevant sub-clause (d) of Article 65.1 of the SCC clause reads as

under:-

“d) Further, such bidder/contractor shall be put on Blacklist/Holiday/Negative List of OWNER/EIL debarring them from future business with

Owner & EIL for a time period, as per the prevailing policy of OWNER & EIL.â€​

Mr Makhija had contended that the said clause would not be applicable as the said contract has not been signed. This contention is also

unpersuasive, as the SCC were included as a part of the tender documents and any contractor bidding for the same had expressly agreed to abide the

same. However, even if it is accepted â€" which this Court does not â€" that a specific condition for blacklisting a contractor was not indicated as a

part of the tender conditions; nonetheless, any authority would have an inherent right to refrain from dealing with the said contractor who is found to

have indulged in unacceptable practices.

11.  In Patel Engineering Limited v. Union of India & Another: (2012) 11 SCC 257, the Supreme Court had observed as under:-

“The State can decline to enter into a contractual relationship with a person or class of persons for legitimate purpose. The authority of the State of

blacklist a person is necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any

purpose etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is

to act fairly and rationally without in any way being arbitrary - thereby such a decision can be taken for some legitimate purposeâ€​

The contention that EIL has not followed its own policy as declared on the website appears to be merited inasmuch as it is not disputed that the

petitioner was not afforded an opportunity by the sub-committee constituted in accordance with the said policy. Ms Rathore, the learned counsel

appearing for EIL submitted that the Supplier Contractor Evaluation Committee â€" I (SCEC-I) had recommended the imposition of the punitive

measure as has been imposed on the petitioner. The said recommendation was initially considered by SCEC-II in the meeting held on 06.03.2018 and

the matter was deferred. This recommendation was reiterated by SCEC-I and was accepted by SCEC-II at a meeting held on 14.06.2018. She also

produced the extracts of the minutes of the said meeting. However, it is not disputed that a hearing was not afforded to the petitioner by SCEC-I or

the sub-committee as constituted in terms of the policy (procedure for suspension/banning of business dealings). Ms Rathore submits that there would

be no difficulty in providing the petitioner a hearing before SCEC-I or a sub-committee constituted in terms of the policy and considering the matter

of blacklisting the petitioner afresh.Â

In view of the above, the impugned order is set aside. EIL is at liberty to take such action as it deems fit, after affording the petitioner an

opportunity to be heard before SCEC-I or the sub-committee as constituted in terms of its policy. It is clarified that EIL is not required to issue a fresh

show cause notice. However, the petitioner would be at liberty to produce any material that the petitioner so desires in support of its explanation at the

time of hearing or prior thereto. The SCEC-I/ sub-committee shall also consider the petitioner‟s case having regard to its policy and the decision of the

Supreme Court in Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL & Ors: AIR 2014 SC 9.Â

The petition is disposed of in the above terms.Â

Order dasti under the signature of Court Master. Â