In a significant legal development, the Delhi High Court has delivered a judgment regarding the suspension of Defsys. This case has garnered attention due to its impact on the reputation and business interests of the company. Stay informed about the details and decisions made by the Court in this landmark judgment.
Facts
- Defsys emphasized that it had no direct or indirect transactions with Agusta Westland or related entities mentioned in the notice dated 16.01.2023.
- Defsys sought removal from the list of debarred entities by GOI.
- The suspension of business dealings with Defsys was extended for one year based on legal opinion and MOD Guidelines.
- A committee was constituted to review the suspension after six months, considering Defsys’ representation and CBI’s input.
- Defsys submitted responses to show cause notices and sought meetings with Air Vice Marshal and Defence Secretary.
- The Single Judge issued directions for show cause notices to be issued within two weeks, material to be provided, and opportunity for reply and hearing to be granted.
- The suspension of Defsys was to continue till 08.12.2023 based on committee decision.
- Defsys appealed the judgment seeking to set aside certain paragraphs, while UOI appealed to set aside the entire judgment.
- Defsys provided equipment to MOD and friendly countries with approval.
- Despite being under investigation, Defsys continued to receive awards from GOI and conduct ongoing contracts with MOD.
- The concerned authority accorded a personal hearing to Defsys on 27.12.2023.
- The suspension of business dealings with Defsys has lasted for sixteen months, impacting its reputation, business interests, and employees’ families.
- The directive suspending business dealings with Defsys continues despite the revocation of the suspension relating to Agusta Westland.
- Defsys, an MSME, is struggling to sustain its operations due to the ongoing suspension.
- UOI’s stand of suspending business dealings with an entity solely based on Clause D.2 without considering Clause C.1 (a) to (f) is in conflict with a division bench judgment.
- UOI appealed the division bench judgment to the Supreme Court through Special Leave Petitions 1158-1159/2024 filed on 03.01.2024.
- Cross-appeals were triggered by the judgment of the learned Single Judge dated 05.09.2023.
- The Supreme Court declined to entertain the Special Leave Petitions regarding the December 6, 2023 judgment.
- The Court, while disposing of the Special Leave Petitions, emphasized the need for show cause notice and compliance with natural justice principles.
- The writ petition under consideration was filed during this period.
Analysis
- The provisions of Sections 8(1)(h) and Section 24 of the RTI Act were referenced in the written submissions filed on behalf of UOI.
- UOI failed to comply with the directions, leading to the automatic revocation of the suspension on 09.12.2022.
- An intimation by CBI of a pending investigation does not warrant a ban without a chargesheet.
- UOI received only an ‘ongoing investigation’ status from CBI, which was insufficient evidence to support continuation of suspension.
- The suspension lacked proportionality and overlooked the impact on Defsys.
- Defsys continued supplying defence equipment to GOI despite the suspension.
- No grounds were presented by UOI to justify the suspension of Defsys.
- Defsys was not named as an accused despite being investigated alongside Agusta Westland.
- The suspension of Defsys contradicted the lifting of suspension on Agusta Westland.
- UOI extended the suspension without substantial reasons beyond ‘ongoing investigation’.
- UOI attempted to enforce Clause D.2 independently of Clause C.1, which was deemed untenable.
- Natural justice principles were not fully observed in the handling of Defsys’ case.
- The UOI’s reliance on Section 8(1)(h) of the RTI Act was deemed meaningless due to lack of substantial evidence.
- The suspension could not continue indefinitely without following due process for banning.
- The record presented did not establish a conclusive link between Defsys and Agusta Westland.
- The power to suspend under Clause D.2 did not automatically lead to banning under Clause F.
- The suspension of Defsys needed more clarity and justification, particularly in comparison to Agusta Westland’s case.
- Inter-linkage between grounds of suspension and banning discussed.
- Suspension is a temporary measure while banning is the final decision by UOI/MOD.
- No arguments presented against striking down Clauses D.2 and D.3 of MOD Guidelines.
- Possibly due to Clause D.2’s connection with Clause C.1 (a) to (f) of the Guidelines.
- Clause D.2 provides for suspension not exceeding one year, extendable by six months.
- Total period of suspension cannot exceed maximum banning period for the same cause.
Decision
- Writ petition is disposed of with specific directions.
- Parties will bear their respective costs.
- UOI/MOD can refer to MOD Guidelines for suspending Defsys if involvement with Agusta Westland case is found.
Case Title: DEFSYS SOLUTIONS PRIVATE LIMITED & ANR. Vs. UNION OF INDIA (2024:DHC:4681-DB)
Case Number: W.P.(C)-431/2024
