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2023 Supreme(SC) 373

SUPREME COURT OF INDIA
DINESH MAHESHWARI, SANJAY KUMAR, JJ.
Isolators and Isolators through its Proprietor Mrs. Sandhya Mishra – Appellants
VERSUS
Madhya Pradesh Madhya Kshetra Vidyut Vitran Co. Ltd. & Anr. - RESPONDENT(S)
CIVIL APPEAL NOS. 2890-2891 OF 2023 (ARISING OUT OF SLP(C) NOS. 10362-10363 OF 2022)
Decided On : 18-04-2023

Advocates appeared:
For the Petitioner(s): Mr. Vinay Navare, Sr. Adv. Mr. R.m.sharma, Adv. Mr. Prashant R. Dahat, Adv. Mr. Ashok Kotangale, Adv. Mr. T. R. B. Sivakumar, AOR
For the Respondent(s): Mr. Bharat Siongh, AAG Mr. Ashis Pandey, Adv. Mr. Kshitiz Singh, Adv. Mr. Amit Pawan, AOR

Headnote:(A) Constitution of India - Article 226 - Debarment order - The appeal challenges a High Court order modifying the terms of debarment imposed on the appellant for supply delays, concluding that the appellant was unjustly penalized for delays caused by circumstances beyond their control, particularly a storm affecting their manufacturing. (Paras 5, 13, 24)

(B) Principles of Natural Justice - The necessity for a specific show-cause notice regarding the penalty imposition was emphasized, as it requires detailed notice for any adverse action against an entity, underscoring that blacklisting entails severe consequences for civil and business rights. (Paras 20, 23)

Facts of the case:
The appellant, a transformer manufacturer, faced debarment after failing to complete transformer supplies due to an extraordinary storm and alleged communication lapses from the respondent about order modifications and delays.

Findings of Court:
The court found the debarment order unjust without due consideration of the tempest's impact on production, asserting the need for proper notice before imposing penalties.

Issues: The key issues addressed included whether the appellant's responses to the show-cause notice were adequate and if proper notice was given for penalties.

Ratio Decidendi: The court ruled that the initial show-cause notice failed to adequately inform the appellant about potential penalties, violating principles of natural justice.

Result: Appeals allowed, and the debarment and penalty orders were set aside.

Table of Content
1. challenge to orders regarding supply contracts (Para 2 , 3 , 4 , 5 , 6)
2. sequence of communications leading to debarment (Para 7 , 8 , 9 , 10)
3. arguments presented by the parties (Para 12 , 13 , 14)
4. legal principles regarding show-cause and penalty (Para 16 , 18 , 19)
5. court's observations on natural justice (Para 20 , 21 , 22)
6. decision to annul previous orders (Para 23 , 24 , 25)
7. final decision and implications (Para 26)

JUDGMENT :

DINESH MAHESHWARI, J.

Leave granted.

2. 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. The appellant has also challenged the order dated 13.12.2021 in Review Petition No. 894 of 2021, whereby the High Court dismissed the review petition against the said order dated 23.04.2021.

3. Shorn of unnecessary details, the case of the appellant has been as follows:

3.1. The appellant, being a proprietorship firm, has been in the business of manufacturing and repairing of transformers, having its plant at 83, Sector I, Industrial Area, Govindpura, Bhopal for past 30 years. The only customers of the appellant are the distribution companies (Discoms).

3.2. Two tenders, bearing numbers 494 and 532 1[Hereinafter also referred to as ‘TS-494’ and ‘TS-532’ respectively.], were floated by the respondent Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited2[‘MPMKVVCL’, for short.]. In relation to TS-494, a purchase order was issued by the respondents on 30.06.2017 for the supply of 586 distribution transformers (DTR) - Level I. The period for the supply was specified as six months starting from the third month of the purchase order issue date. However, the appellant received the purchase order through email on 13.09.2017 and physically on 15.09.2017. The appellant made a request to the respondents to modify the delivery schedule due to delay of 75 days in the receipt of the purchase order, as also to adjust the rates as per Goods and Services Tax (GST), which came into effect on 01.07.2017.

3.3. The appellant has averred that despite receiving no response from the respondents, they had proceeded to submit drawings for approval on 04.10.2017, with the intention of commencing production. In addition, the 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. According to the appellant, on 28.11.2017, the department responded only to the request for approval of drawings and disregarded the request for rescheduling of supplies.

3.4. A revised order, incorporating GST, was issued by the respondents on 02.01.2018. 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. Thereafter, a notice dated 13.02.2018 was issued alleging that the appellant was responsible for the delay in supply. The appellant, by letter dated 18.02.2018, responded that there was no delay on their part while again seeking modification of the delivery schedule.

3.5. It has been the case of the appellant that despite making five separate requests to reschedule the supply, no response was received from the respondents. The appellant submitted yet another letter dated 07.03.2018, requesting for extension of time. The appellant has stated the grievance that despite their efforts to supply Level-I transformers, starting from 02.05.2018 and delivering 300 transformers, the respondents did not r

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