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IN THE HIGH COURT OF JUDICATURE AT PATNA
ASHUTOSH KUMAR and NAWNEET KUMAR PANDEY, JJ.
CWJC No. 13184 of 2022
(1.12.2022)
Karnataka State Electronics
Development Corporation Ltd. ... Petitioner
vs.
State of Bihar & Ors. ... Respondents
Government Contract – Black-listing – Services provided by vendor through agency of petitioner was not to satisfaction of Department but black-listing petitioner on grounds with which petitioner was never confronted, would not be justifiable, regardless of proposition of law that a party to a contract in such business venture ought to have some freedom in getting work executed and evaluating quality of work for it to continue or repeat such arrangement with agency/ petitioner – Order of black-listing, even it be for a limited period, creates disability and for saddling a company with such disability, there should be objective satisfaction of authority passing such order – Authority of State to black-list a company is a necessary concomitant of executive power of State to carry on trade or business and making contracts for any purpose and there is no need of any statutory ground of such power, but there is an inherent limitation, which is of fairness and rationality in the decision – Notice was not complete in itself as it did not intimate noticee about positive displeasure of Department regarding work carried out uptill then and intention to black-list petitioner, if explanations were not found to be plausible or satisfactory – There was no final conclusion of Department that services rendered by vendor with agency of petitioner was unsatisfactory – Order of black-listing does not appear to be in conformity with legal requirements – Order of black-listing set aside and after giving fresh notice to petitioner and adverting to reply, fresh decision shall be taken by Department regarding black-listing. (Paras 21, 22, 24, 25 and 26)
Ashutosh Kumar, J.—Heard the learned counsel for the parties.
2. The petitioner is a Government of Karnataka Enterprise having pan India presence, which has been working in the field of software development and I.T. since decades.
3. The grievance of the petitioner is that without considering the reply of the petitioner dated 20.05.2022 pursuant to the show-cause issued to it on 04.05.2022, the respondents have blacklisted the petitioner for a period of one year.
4. The petitioner was selected as an Agency for design, supply, installation, commissioning, operations and maintenance for Integrated Excise Management System (IEMS) for the Department of Prohibition Excise and Registration, Govt. of Bihar after the petitioner was declared successful in the tender.
5. The petitioner had to work as a total solution and service provider to undertake the projects of development and implementation of the solution, its roll-outs and sustained operations.
6. An agreement (Master Service Agreement), (hereinafter referred to as “MSA”) was signed between the parties, namely, the petitioner and the Bihar State Beverage Corporation Limited (BSBCL) on 16.01.2017. Under the MSA, Datacon Technologies Pvt. Ltd. was empanelled as agency to undertake the entire implementation of IEMS and call centre projects. It has also been pointed out by the petitioner that under the MSA, there was a detailed provision for dispute resolution which included escalation, mediation, arbitration and conciliation Act, which could have been invoked by the Department in case of any grievance against the petitioner.
7. It is the case of the petitioner that several times, issues with respect to unavailability of infrastructure non- functional internet facilities at check-posts and delayed payment for services rendered, were brought to the notice of the Department but those were never addressed. In fact, the delay in various modules of projects was due to the Department not addressing those grievances of the petitioner or of the Datacon Technologies Pvt. Ltd.
8. The requirements under the agreement were also changed a number of times, which was a definite departure from the MSA or RFP document.
9. So far as the petitioner is concerned, the entire hardware items were moved at Patna way-back in August, 2017 but the work for Data Centre could not begin till 2019 as the exact location could not be finalized. Notwithstanding the aforesaid, most of the modules of IEMS software were completed. In the meantime, the respondent/Department blacklisted the empanelled agency of the petitioner, namely, Datacon Technologies Pvt. Ltd on 04.05.2022 for a period of one month and thereafter such empanelled agency and the petitioner were issued show-cause notices as to why it should not be blacklisted.
10. The reply to the show-cause by the petitioner and the empanelled agency /Datacon Technologies Pvt. Ltd which in fact was entrusted with the entire task of implementation of IEMS, were not considered and the empannelled agency as well as the petitioner, both, were blacklisted on 03.06.2022
11. Be it noted that the call centre module, which was part of IEMS was being run on an agreement between the petitioner and BELTRON since 2018 but no issue was ever raised by BELTRON either with respect to salary of the employees or the working of the call centers.
12. A perusal of the order of blacklisting suggests that the Department was aggrieved because of the delay in making the projects “go live” which was attributed to non-implementation of various modules of IEMS software and its poor management.
13. In the notice, it was declared by the Department that the vendor / petitioner would be obligated to take up the issue of poor management of IEMS and call centers with the empanelled agency and resolve those to the satisfaction of the Department within 30 days. The vendor / petitioner was given the liberty to consider changing the empanelled agency if it was not able to address the grievance of the Department. The n
The legal requirement of clarity and opportunity for representation in the notice for blacklisting, and the authority of the Department to terminate contracts and blacklist entities.
The court emphasized the importance of providing a clear and proper opportunity to the party being blacklisted to explain and take remedial measures before being debarred or blacklisted.
A valid blacklisting order requires clear communication of intent and grounds, ensuring the affected party's right to a fair opportunity to respond.
The judgment emphasizes the importance of fair play, natural justice, non-discrimination, equality, reasonableness, and proportionality in the process of blacklisting, and the need for a valid, parti....
The main legal point established in the judgment is the requirement for a fair hearing, specific show cause notices, and proportionate punishment before imposing blacklisting in government contracts.
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