OD17GA1339of 2016 WITH CS102of 2016 IN THE HIGH COURT AT CALCUTTA ORDINARY ORIGINAL CIVIL JURISDICTION PAM DEVELOPMENTS PVT LTD & ANR.
Versus STATE OF WEST BENGAL & ORS.BEFORE: The Hon'ble JUSTICE SANJIB BANERJEE Date : 3rd November, 2016.
Mr.S.N.Mitra,Sr.Advocate appeaRs.Mr.P.Saha,Advocate appeaRs.Mr.A.Pramanick,Advocate appeaRs.Mr.Jayanta Kr.
Mitra,Sr.Advocate appeaRs.Mr.Samrat Sen,Sr.Advocate appeaRs.Mr.Subhabrata Dutta,Advocate appeaRs.The Court : - The suit challenges the steps taken by the defendant State to consider whether the fiRs.plaintiff company should be blacklisted.
There is no dispute that the fiRs.plaintiff could not perform a contract for restoration of a particular road.
The fiRs.plaintiff offers several excuses, including the perceived laches on the part of the defendant State, in not being able to complete the work.
The relevant contract was terminated on or about May 14, 2015 and a penalty has been imposed on the fiRs.plaintiff.
The real purpose of the suit is to question the authority of “Debarment Committee” of the State to consider the plaintiff company’s performance or any action to be taken against the plaintiff company.
By a notice dated March 8, 2016 the engineer-in-charge of the public works department and the ex-officio secretary of the Debarment Committee invited the plaintiff company to attend a hearing before such committee on March 29, 2016.
The plaintiffs contend that the said notice is without jurisdiction as the conditions precedent to the issuance of such notice had not been followed.
At the ad interim stage, no effective order was passed and an appeal carried from the order dated May 11, 2016 resulted in only the plaintiffs being given the liberty to appear before the Debarment Committee and urge whatever grounds that may have been available to the plaintiffs.
The plaintiffs claim to have forwarded a written representation questioning the authority of the Debarment Committee and say that no response has been received to such written representation.
The plaintiffs refer to a Government order of November 16, 2015 under which a procedure was laid down for suspension or debarment of contractors engaged by the State.
The plaintiffs place various provisions from such Government order to suggest that there was no initial complaint by any bidder or steps taken by any official for the Debarment Committee to assume jurisdiction in the matter.
The plaintiffs rely on the celebrated judgment reported at AIR1975SCC266(Erusian Equipment and Chemicals Limited v.
State of West Bengal) and place paragraph 16 therefrom to suggest the grave circumstances in which the State may debar a contractor.
The plaintiffs claim that since there is no allegation of forgery or fabrication or like fraudulent conduct against the plaintiff company, there is no question of the plaintiff company being debarred.
The other limb of the plaintiffs’ submission, as noted above, is that the procedure recognised under the Government order dated November 16, 2015 has not been followed in this case.
Certain fundamental aspects must be clarified at the outset.
Merely because the State is a contracting party, it does not imply that the State has no latitude in choosing who the State would do business with.
Of course, the State cannot be arbitrary or whimsical in its choice; but so long as cogent grounds exist for the State not finding a party desirable to do business with, the scope of judicial review would be rather limited, whether in the writ jurisdiction or if the action of the State is challenged by way of a suit.
Ordinarily, unlike a private party who may choose not to do business with another for the flimsiest of reasons, the State action must be informed by reasons and the reasons ought to be reasonable.
It is also necessary that a party being debarred or blacklisted be given appropriate notice for such party to have an opportunity to demonstrate that the perceived default on its part may not have been so grave or deliberate to warrant the extreme penalty.
However, subject to such reservations, it is open to a State as a contracting party to debar or disallow a defaulting party from applying to obtain further State contracts or participating in any future bids for a specified period of time, or even permanently, if the defaulter is a repeat offender or the like.
The passage at paragraph 16 of the judgment in Erusian Equipment is only illustrative and not exhaustive of the circumstances in which a contractor may be blacklisted.
There may be a host of other reasons for which a defaulting contractor may be blacklisted - even for persistent and deliberate default when an element of wrongdoing appears apparent.
But the extent of the wrongdoing or the assessment of the gravity of the default is within the domain of the State and the same is justiciable only as to the fairness of the procedure adopted and as covered by the doctrine of proportionality.
In the instant case, the relevant contract was terminated long prior to the Government order of November 16, 2015 laying down a procedure for suspending or blacklisting contractors or prospective contractORS.In any event, the relevant Government order cannot be read as an edict in stone and has to be regarded merely as guidelines for the officials of the State to follow.
As far as a contractor is concerned, as long as the contractor is made aware of a possibility of the contractor being blacklisted and the contractor is afforded an opportunity to dissuade the State from taking the extreme step, the State cannot be faulted on the ground of procedure.
On reasonableness, the grounds for challenge are even more exalted as the Court will interfere only if the charge is of extreme perversity or it appears to the Court that even the meanest of minds could not have imposed the impugned penalty in the given circumstances.
The second limb is not apt for consideration in the present case as the contractor, true to the Indian spirit, has come to Court to preempt a process of consideration rather than participate in the consideration and wait for its turn to question the perceived unreasonableness of the decision-making process.
Indeed, all that the State has done in this case is to make the plaintiff company aware that the State may debar the plaintiff company from participating in future tendeRs.The plaintiffs have taken the notice to be a precursor to the inevitable and have attempted to bypass the mechanism of this State to run to Court and avoid the assessment altogether.
In a sense, it is doubtful as to whether there is an arguable cause of action that has been carried by the plaintiffs to the Court.
GA No.1339 of 2016 is disposed of by requiring the State through its relevant Debarment Committee to afford the plaintiff company a further date within four weeks from today to attend a hearing whereat it will be open to the committee to take an appropriate decision in accordance with law.
Till such time that the plaintiff company appears for the hearing, provided a date of hearing is disclosed as expeditiously as possible, it will be open to the State to not allow the plaintiff company to participate in any future tender.
The plaintiffs will also pay costs of the present application assessed at Rs.50,000/-.
The State will be entitled to such costs.
Urgent certified website copies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
(SANJIB BANERJEE, J.) S.Chandra/dg2