The present appeals are in challenge to the order dated 23.04.2021 as passed by the High Court of Madhya Pradesh, Principal Seat at Jabalpur in Writ Petition No 12075 of 2020 whereby the High Court partly allowed the writ petition and while maintaining the order of debarment as passed against the appellant, modified its term of operation by making the same effective from 13.02.2020 for a period of three years, instead of being effective from 30.07.2020.
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In addition, the 3 appellant made two separate requests, dated 13.09.2017 and 18.11.2017, for modifications of the delivery schedule and adjustments of rates in accordance with GST. However, the request for rescheduling of supplies made by the appellant was ignored and, instead, the order stated that the appellant was already running late in their supply schedule. On the other hand, the appellant had received a purchase order from the respondents for the supply of 593 transformers for Tender No TS- 532, which was for the supply of 63 KVA and 25 KVA level-II transformers. On 22.06.2018, the appellant was directed to supply the aforementioned 63 KVA Transformers to West Zone Discom (Indore) through a purchase order, which was executed without any breach. 1, Industrial Area, Govindpura, Bhopal – 462023 MP Sub- Supply of BIS Certified Level- II/0433 KVA.2s
KVA
Conventional Distribution Transformer against Saubhagya Yojana – Deferment of Supply thereof. Sub:- Cancellation of Purchase Order No MD/MK/04/TS- 494/P-IIl/1988 dated 30.06.2017 for supply of BIS Certified, Level-l, 11/0.433 KV, 25 KVA Conventional Distribution Transformers for unsupplied quantity. The delivery schedule of above Purchase Order was as below- Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 98 98 98 98 97 97
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Your firm has not supplied any quantity even lapse of schedule period of six months i.e.
MD/MK/04/TS-494/P-III/1988 dated 30.06.2017 for 286 Nos. MD/MK/04/TS-494/P-III/2166 dated 22.02.2018 for supply of BIS Certified, EEL- II, 11/0.433 KV, 25 KVA Conventional Distribution Transformers for unsupplied quantity.
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Purchase order MD/MK/04/P-III/TS-532/2166 dated 22.02.2018 for supply of 593 nos BIS Certified, EEL-II, 11/0. Therefore, PO NO.MD/MK/04/TS-532/P-III/2166 dated 22.02.2018 for 593 Nos. Therefore, the PO No MD/MK/04/P-III/TS-532/2166 dated 22.02.18 has been cancelled vide letter no. 17.1, 17.2 &17.3 above, Purchaser may debar the supplier/contractor for further business 9 with Purchaser for a declared period on breach of the Purchase Order.
Please submit your reply within 15 days and in case you want personal hearing then intimate to this office within 07 days from issue Of this letter, failing which, it will be presumed that you have no plausible explanation to offer in your defense and then this office would be constrained to take action towards debarment of your firm for non-performance in material supply. In the said order dated 13.02.2020, the Chief General Manager (Procurement), after recounting the background aspects including the said show-cause notice dated 26.11.2019, stated and ordered as under:- 10 “*** *** *** In view of above default on your part, this office had sent a notice of debarring for violation of PO Terms & Conditions, asking you to clarify as to why strict action as per tender terms should not be taken against you for blatant violation of Purchase Order and for the large insensitivity shown by you to a number of Government Development Schemes. M/s Isolators, Bhopal and its Company/Firms should be debarred for future business for the period of 3 (Three) years. Bhopal-462023 (M.P.) is hereby debarred for participating in tenders of MPMKVVCL for a period of 3(Three) years from the date of issuance of this letter. The High Court, by its order dated 08.07.2020, set aside the order dated 13.02.2020 and permitted the respondents to pass a fresh order within 15 days after affording an opportunity of hearing to the appellant. Ultimately, the orders were maintained to the effect that penalty on rejected and unsupplied transformers shall be recovered from the appellant firm; and the appellant firm and its subsidiary/affiliated company/firms shall stand debarred from participating in tenders of MPMKVVCL for a period of three years from date of issuance of that order. The relevant contents of the said order dated 17.08.2020 read as under: – 12 “*** *** *** Purchase order MD/MK/04/P-III/TS-532/2166 dated 22.02.2018 for supply of 593 nos BIS Certified, Level-II, 11/0. Twenty Seven lakh Ninety Eight Thousand Nine Hundred Sixty only ) Therefore, you are requested to kindly deposit the penalty amount of Rs. On the other hand, it was contended on behalf of the respondents that blacklisting or debarring was ordered after giving full opportunity to the contractor, who was at fault in not supplying the material as per the terms of the contract; that there was nothing illegal or arbitrary in exercise of powers when the respondents took recourse to the relevant clauses of the purchase order; and that reliance of the appellant on force majeure clause was also misplaced, for no such information was furnished within 15 days, as required by the terms of the contract. Thereafter, the High Court merely observed that the second order of debarment was passed on 30.07.2020 but factually, the appellant-firm was debarred by the order dated 13.02.2020 and therefore, provided a slight modification in the manner that the period of 3 years ’ debarment would be reckoned w.e.f. In the circumstances, as have been set forth before us, exercising extraordinary power under Article 226 of the Constitution of India, interference in a decision making process is not permissible when the orders have been passed after following the principle of natural justice and are supported by plausible reasons. 02.2020 till the period of three years.” At this juncture, we may also take note of the fact that as against the aforesaid order dated 23.04.2021 passed in W.P. In the absence of any error on the face of the record, this review petition is dismissed.” Assailing the orders so passed by the High Court, learned senior counsel for the appellant has essentially put forward two principal contentions. The appellant had been supplying transformers to the respondents since the year 1989 without any default or difficulties and in the totality of circumstances, delay in execution of the present purchase orders, that had occurred because of the reasons and circumstances explained by the appellant, debarment for a maximum period of 3 years and imposition of maximum penalty had been highly disproportionate and too harsh. Learned counsel has particularly referred to the fact that as regards TS-494, the appellant had supplied 300 out of 586 transformers and as regards TS-532, the appellant had supplied all the 63 KVA transformers. In the present case, while preliminarily entertaining the petitions seeking leave to appeal, this Court had taken note of the facts regarding earlier filing of the petition, being SLP(C) No 13571 of 2021 against the order dated 23.04.2021 passed in W.P.
According to the learned counsel, the appellant having failed to fulfil the terms and conditions of TS- 494, by the order dated 19.11.2019, the respondents rightly cancelled the said purchase order with imposition of penalty for non-supply of 286 transformers. As noticed, the aforesaid communication of deferment dated 18.09.2019 has been strongly relied upon by the learned counsel for the appellant to submit that after such communication, the respondents never issued instructions for supply or for withdrawal of such deferment and, therefore, the blame could have been shifted on the appellant. That a submission on behalf of petitioner has been made before this Hon’ble Court that vide letter dated 18.09.2019 (Page 148 Of SLP), the respondent/Electricity Company himself has deferred the supply of 593 transformers of Level-II and as such, there is no fault on the part of the petitioner-firm in supplying 593 transformers.
The petitioner herein was awarded the contract on 22.02.2018 for supply of 593 transformers of level-II and in that regard a purchase order was issued along with terms and conditions of said Contract to the petitioner. After considering the gross violations of terms and conditions of supply of said transformers, virtually after an expiry of more than one year, when it was found that petitioner is not at all interested in supply the said 593 transformers, the answering respondent had no option but to terminate the said purchase order vide order dated 21.11.2019 which has never been challenged before any competent forum. It is further most respectfully submitted that the letter dated 18.09.2019 of answering respondents cannot be taken into consideration against the answering respondents in view of the fact that despite various opportunities and communications made to the petitioner by the answering respondents for supply of said 593 Transformers, the petitioner has not even pay any heed on that and finally has chosen not to supply the said transformers on one pretext or other. With reference to the show-cause notice dated 26.11.2019 and the reply dated 309, it has been argued that the order dated 13.02.2020 was passed after extending full opportunity of hearing to the appellant and when the said order was challenged in the High Court in Writ Petition No 7579 of 2020 and the High Court directed the respondents to pass a fresh order after affording opportunity of hearing to the appellant, the authority concerned passed detailed speaking order dated 30.07.2020 after giving 22 full opportunity of hearing to the appellant and after duly considering the financial loss suffered by the respondents due to non-supply of transformers. Having given thoughtful consideration to the rival submissions and having examined the record, we are clearly of the view that the impugned order as passed by the High Court in practically denying the principal relief claimed by the appellant cannot be approved and the writ petition filed by the appellant deserves to be allowed to the extent of annulling the effect of debarment and quashing the imposition of penalty. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Custodian General, Evacuee Property, (1980) 3 SCC 1 has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. … The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. State of Bihar, (1989) 1 SCC 229 struck down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. State (NCT of Delhi), (2014) 9 SCC 105 has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. In these cases, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto.” As regards maintainability of these appeals, learned counsel for the appellant has rightly referred to the decision in A.P. In the facts and circumstances of this case, we are not inclined to agree 26 with the learned counsel that the judgment of the High Court in writ appeals has achieved finality.” 1.
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Though in the cancellation orders dated 19.11.2019 and 21.11.2019, the respondents purportedly reserved their right to take appropriate steps, those orders cannot be read as show-cause notice specifically for the purpose of imposition of penalty. This is for the simple reason that imposition of penalty against the appellant cannot be approved because of the want of specific show-cause notice. It has rightly been argued on behalf of the appellant that after such an order of deferment, there had not been any other communication or even indication from the respondents which would have informed the appellant to resume supplies. In the length and breadth of the arguments on behalf of the respondents, it has nowhere been pointed out if such “further instructions” were ever issued to the appellant before issuance of the cancellation orders dated 19.11.2019 and 21.11.2019 as also before issuance of show-cause notice dated 26.11.2019. Before concluding, we are impelled to observe that, in fact, the High Court had had the opportunity to correct the obvious errors in its order dated 23.04.2021, particularly when the review petition was placed before it for consideration because one part of the matter (concerning penalty) was not even considered and as regards other part too, the pertinent contentions of the appellant did not acquire the requisite attention of the High Court.
Case Title: ISOLATORS AND ISOLATORS Vs. MADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN CO. LTD. (2023 INSC 390)
Case Number: C.A. No.-002890-002891 / 2023
