Starmin Resources Pvt. Ltd. vs The Mysore Paper Mills Ltd.

B. Manohar, J.—The Petitioner has challenged the order dated 28-12-2009 vide Annexure-P issued by the Respondent blacklisting the Petitioner-Firm for a period of 2 years and also sought for direction to the Respondent to refund the EMD amount of Rs. 5.00 lacs, which was forfeited by the Respondent.

The Petitioner is a Company incorporated under the Companies Act. It is engaged in the business of importing and supplying of Indonesian Steaming Coal. On 11-8-2009 the Petitioner-Company received a communication from the first Respondent informing the Petitioner that they have floated a tender on 5-8-2009 for purchase of 45,000 MT on Non-coking steaming imported coal. The said tender was also published in the newspaper Economic Times and requested the Petitioner to participate in the said tender. Pursuant to the same, the Petitioner participated in the tender. The Respondent vide letter dated 10-10-2009 informed the Petitioner that their offer has been qualified for e-Reverse auction and Price Bid opening. The e-Reverse auction was scheduled to be held on 12-10-2009 between 2.00 p.m. and 3.00 p.m. The Price Bids were scheduled to be open between 4.30 p.m. to 5.30 p.m., on 12-10-2009 at the Corporate Office of the Respondent. Thereafter, the Petitioner was requested to meet the Respondent on 15-10-2009 for discussions. On 15-10-2009, the Petitioner received a Letter of Intent from the Respondent for supply of 56,250 MT + 10% at the rate of Rs. 4.140/- per MT totaling to Rs. 25,61,62,500/- and the said Steaming Coal shall be delivered at New Mangalore Port. In their letter, they also requested the Petitioner that the stock of coal in the Respondent-Company is alarming and the Petitioner was requested to send 3 rakes of imported coal approximately 12,000 MTs from the Petitioner''s stock at Vishakhapatnam as per the specification in the tender notification. Further, the Respondent issued a Letter of Intent for additional supply of coal of 11,250/- MT of coal. Thereafter, the Respondent by their letter dated 22-10-2009 issued work order for transportation of the coal and other purposes. Further, they also requested the Petitioner to sign the agreement. However, the Respondent has failed to accept the coal, which was stocked in the Vishakhapatnam Yard on the ground that it was not up to the qualified standard prescribed by the Petitioner. The Respondent insisted upon the Petitioner to supply the non-coking steaming coal, since the Respondent was in urgent need of the same. However, the Respondent refused to accept the coal, which was in stock at Vishakhapatnam Yard. In view some technical problem, the Petitioner could not supply the non-coking steaming coal as per the Letter of Intent made by the Respondent. Due to unforeseen circumstances, the Petitioner-Company regrets their inability to accept the Letter of Intent and also sought for an excuse for the inconvenience caused to them. Though the Respondent had accepted the tender of the Petitioner-Company, the Petitioner has not signed any agreement as per the terms and conditions, Further, the Bank Guarantee was also not furnished by the Petitioner. The Respondent insisted upon the Petitioner to supply the coal before entering into any agreement and also before furnishing the Bank Guarantee. In view of the practical difficulty, the Petitioner-company could not import non-coking steaming coal from Indonesia. Accordingly, by their communication dated 18-11-2009 expressed their inability to import the Steaming Coal.

The Respondent company without considering the practical reason for non supply of the Steaming Coal, by their order dated 28-12-2009 forfeited the EMD amount of Rs. 5.00 lacs and blacklisted the Petitioner-Company for a period of two years without issuing notice or without following the procedure or natural justice. The Petitioner further contended that though they had participated in the tender, before entering into an agreement and also before furnishing any Bank Guarantee, a Letter of Intent was issued and demanded for supply of coal. However, the Respondent refused to accept the coal, which was available in the Petitioner yard at Vishakhapatnam on the ground that it is not up to the specified standard. Without following the principle of natural justice, the Respondent blacklisted the Petitioner and it will be a black mark on the Petitioner in the business community. Hence, the Petitioner filed this writ petition seeking for quashing of the same and also sought for return of EMD amount of Rs. 5.0 lacs.

The Respondents have filed detailed statement of objections contending that pursuant to the tender notification issued by the Respondent, the Petitioner has deposited the EMD amount and participated in the tender. As the Petitioner was a successful tenderer, the Letter of Intent was issued for supply of non-coking Steaming Coal since the stock of coal in the Respondent-company was alarming. The Petitioner accepted the letter of Intent and agreed to supply the same. However at the nick of the moment, they expressed their inability to supply the coal though they were the successful bidder. Because of the action of the Petitioner, the Respondent suffered huge loss to the tune of Rs. 1,31,40,100/- and they had to purchase the coal from some other company at higher rate. The Petitioner-company has agreed to supply the coal at the rate of Rs. 4,140/- per MT. As per the conditions of the tender notification, if the successful tenderer fails to sign the contract within 21 days of receipt of the Contract Form, the EMD amount deposited by the Petitioner can be forfeited. Further as per Clause 13.7 of the tender agreement, if a Tenderer withdraws their tender during the period of tender validity specified by the Tenderer on the Tender form or does not accept the correction of errors pursuant to instructions to tenderer or in case of a successful Tenderer, if the Tenderer fails to sign the Contract in accordance with the instructions to the Tenderers Clause 30; or to furnish performance security in accordance with the instructions to the Tenderers, the Earliest Money Deposit can be forfeited and they can be blacklisted. In the instant case, having participated in the tender proceedings and being the successful bidder and after accepting Letter of Intent, the Petitioner cannot go back and express their inability to supply the Coal. In view of the action of the Petitioner, the Respondent had to purchase the coal by paying higher rate. The action of the Petitioner caused loss of more than Rs. 1,31,40,100/- Taking into consideration all these aspects of the matter, the Respondents have passed the order blacklisting the name of the Petitioner-Company for a period of 2 years, by forfeiting the EMD amount. There is no irregularity or infirmity in the order passed by the Respondent and sought for dismissal of the writ petition.

Sri Shreyas Jayasimha, learned Counsel for the Appellant contended that the action of the Respondent in blacklisting the Petitioner-Company is contrary to law and without following the procedure prescribed under law. No notice has been issued and the Petitioner was not heard before imposing the penalty of forfeiting the EMD amount and blacklisting the Petitioner-Company. He further contended that it is a settled law that before a person''s reputation could be affected, he is entitled to have an opportunity of being heard and also relied upon the judgments reported in M/s. Southern Painters Vs. Fertilizers and Chemicals Travancore Ltd. and another, in the case of Joseph Vilangandan Vs. The Executive Engineer, (Pwd), Ernakulam and Others, in the case of Joseph Vilangandan v. The Executive Engineer (Pwd) Ernakulam and Ors. Anr. decision reported in AIR 1975 SC 226 in the case of Erusian Equipment And Chemicals Ltd. v. State of West Bengal and Anr. and unreported judgment of Union of India (Uoi) and Ors. v. A.K. Mithiborwala and Ors.

On the other hand Sri. Shimoga Nagaraj, Advocate appearing for the Respondents contended that as per the tender notification dated 5-9-2009, the Petitioner is the lowest tenderer and his tender was accepted and Letter of Intent was issued on 15-10-2009 for supply of 56,250 MT non-coking Steaming Coal at the rate of Rs. 4,140/- per MT. However, the Petitioner has failed to supply the said coal. As per the conditions of the tender notification, he has to sign the agreement within 21 days of receipt of the Contract Form. However the Petitioner failed to sign the agreement and expressed his inability to supply the coal when there was dearth in the stock of coal in the Respondent-Company. The Respondent believing the Petitioner that they would supply the coal issued a Letter of Intent. After lapse of one month on 18-11-2009, the Petitioner expressed their inability to supply the Coal and thereby caused huge loss to the Respondent. There is no infirmity in forfeiting the EMD amount and also blacklisting the Petitioner. It is their contention that for blacklisting a person, natural justice need not be followed and also relied upon the judgment reported in Joseph Vilangandan Vs. The Executive Engineer, (Pwd), Ernakulam and Others, cited supra and In M/s. Police Uniform Production Centre Vs. The Director General and Inspector General of Police A.P., in the case of Police Uniform Production Centre v. The Director General And Inspector General of Police, AIR 1969 Kerala 81 in the case of R.S. Dass Ors. Vs. Union of India (UOI) and Others, in the case of R.S. Dass v. Union of India and Ors. Relying upon the judgment of the Hon''ble Supreme Court which reads as under:

Rules of natural justice are not rigid rules, they are flexible and their application depends upon the setting and the background of statutory provision, nature of the right which may be effected and the consequences which may entail its application depends upon the facts and circumstances of each case These principles do not apply to all cases and situations. The applications of these uncodified rules are often excluded by express provision or by implication.

And also contended that the Petitioner is not entitled for any notice of personal hearing before blacklisting and sought for dismissal of the writ petition.

I have carefully gone through the arguments addressed by the learned Counsel for the parties and perused the order impugned passed by the Respondent.

It is not in dispute that the Petitioner participated in the tender and became the successful bidder. The Letter of Intent has been issued for supply of non-coking steaming coal. After one month, the Petitioner-company expressed their inability to supply the imported coal, which is beyond their control. The case of the Petitioner-Company is that, even though they are the lowest Tenderer and their tender was accepted, but they have not signed any agreement nor executed any Bank Guarantee. Before signing the agreement, the Respondent insisted the Petitioner to supply the cord or the coal which is available at Vishakhapatnam Yard may be supplied to them. However, the coal available at Vishakhapatnam is not up to the quality prescribed by the Respondent and the Respondent has not accepted the same. There is some delay is getting the coal from Indonesia. In view of that, the Petitioner-Company expressed their inability to supply the coal.

On the other hand, the Respondent-company contended that the Petitioner-Company is one of the reputed company engaged in the business of importing and supply of non-coking steaming coal. Since they are the lowest tenderer, their tender was accepted and the Letter of Intent was issued for supply of the imported coal. The Petitioner-company kepi quite for more than a month and later expressed their inability to supply the coal, thereby causing heavy loss to the Respondent-company to the tune of more than Rs. 1.00 crore. If the Petitioner-Company had expressed their inability in the beginning, the Respondent would have contacted some other companies for supply of coal. As per the tender notification, the Petitioner-company was fully aware of the consequence. Hence, it is not open to the Petitioner-Company to contend that before passing the order, blacklisting the Petitioner, no notice has been issued to them.

The facts urged by both the parties make it clear that before passing the order of blacklisting and forfeiting the EMD amount, of the Petitioner-firm, no notice has been issued and the Petitioner was not heard. The Hon''ble Supreme Court not agreeing with the law declared in the judgments reported in AIR 1969 Kerala 81, AIR 1990 AP 19 and also in a judgment reported in Raghunath Thakur Vs. State of Bihar and Others, it has clearly held that:

Indisputably, no notice had been given to the Appellant of the proposal of blacklisting the Appellant It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the Respondent is right But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of the natural justice. It has to be realized that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order.

Further, in subsequent judgments reported in M/s. Southern Painters Vs. Fertilizers and Chemicals Travancore Ltd. and another, cited supra, the Hon''ble Supreme Court has clearly held that before blacklisting any person or debarring him from taking any government work, notice must be issued and opportunity must be given. The Supreme Court while discussing the Fundamentals of fair play held that "Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship the government for purposes of games. The fact that disability is created by the order of Blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play requires that the person concerned should be given an opportunity to represent his case before he is put on the blacklist." The subsequent judgment of the Hon''ble Supreme Court also clearly held that audi alteram partem has to be followed and without following the procedure, no person should be condemned or take away his civil rights. In the instant case, after Petitioner-company expressed their inability to supply the coal, no notice was issued nor the Petitioner was heard before blacklisting them or forfeiting their EMD amount. Hence, the order passed by the Respondent is contrary to law and in violation of principles of natural justice and cannot be sustainable in the eye of law. Accordingly, I pass the following:

The writ petition is allowed and the order dated 28-12-2009 passed by the Respondent is quashed. However the Respondent is reserved liberty to take action after affording opportunity to the Petitioner, in accordance with law.