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2016 Supreme(Cal) 703
IN THE HIGH COURT AT CALCUTTA
I.P. MUKERJI, J.
Blue Dreamz Advertising Pvt. Ltd. & Anr. - Petitioners
Versus
The Kolkata Municipal Corporation & Ors. - Respondents
W.P. No. 6616 (W) of 2016
Decided On : 23-12-2016
For the Petitioners:Mr. Kishore Dutta, Sr. Adv., Mr. Arjun Roy Mukherjee, Advocates.
For the K.M.C. :Mr. L.K. Gupta, A.A.G., Mr. Alok Kumar Ghosh, Mr. Gopal Chandra Das, Ms. Piyali Sengupta, Advocates.
For the Municipality :Mr. N.C. Behani, Advocate.
Blacklisting a contractor without proper reasons and without considering a bona fide dispute raised by the contractor is not permissible.
Headnote:
BLACKLISTING - CONTRACTUAL DISPUTE - KOLKATA MUNICIPAL CORPORATION ACT, 1980 (WEST BENGAL ACT LV OF 1980) - SECTIONS 610 TO 621, 202 TO 208 - ARBITRATION AND CONCILIATION ACT, 1996 (ACT 26 OF 1996) - SECTION 12 - The court held that blacklisting a contractor is a civil consequence and the rules of natural justice must be scrupulously followed. The court set aside the blacklisting order passed by the Kolkata Municipal Corporation against the petitioner, a contractor, as the Corporation failed to provide proper reasons for the blacklisting and did not consider the petitioner's bona fide dispute.
Fact of the Case:
The petitioner, Blue Dreamz Advertising Private Limited, won a tender for displaying advertisements on hoardings in the Kolkata Municipal Corporation area. The petitioner claimed that they could not locate 50 out of the 250 hoardings and sought a reduction in the license fee. The Corporation raised a demand for the full amount and issued a show-cause notice to the petitioner. The petitioner replied to the notice and the matter was referred to arbitration. Despite the arbitration proceedings, the Corporation blacklisted the petitioner for five years.
Finding of the Court:
The court held that the blacklisting order was not sustainable as the Corporation failed to provide proper reasons for the blacklisting and did not consider the petitioner's bona fide dispute. The court set aside the blacklisting order.
Issues: 1. Whether the blacklisting order passed by the Corporation was valid. 2. Whether the petitioner raised a bona fide dispute.
Ratio Decidendi: 1. Blacklisting is a civil consequence and the rules of natural justice must be scrupulously followed. 2. The Corporation failed to provide proper reasons for the blacklisting. 3. The petitioner raised a bona fide dispute regarding the number of hoardings and the license fee.
Final Decision: The court set aside the blacklisting order passed by the Kolkata Municipal Corporation against the petitioner.
I.P. MUKERJI, J.
1. Blue Dreamz Advertising Private Limited, the writ petitioner does the business of displaying advertisements of their clients. They do so in various places of West Bengal including the area covered by the Kolkata Municipal Corporation.
2. The respondent Corporation on 6th February, 2014 invited tenders for display of advertisements on bus shelters, kiosks and hoardings which were under their control and ownership. The writ petitioner was successful in this tender process. On 28th February, 2014 they were awarded a contract by the respondent Corporation to display advertisements in five clusters, each comprising of 50 hoardings, in total 250 hoardings in the Kolkata Municipal Corporation area. It was for a period of one year commencing from 1st July, 2014 till 30th June, 2015. The writ petitioner had to make payment of a sum of Rs. 3,70,00,000/- per cluster for the entire contract period. Payment was to be made quarterly in advance. Payment per quarter was Rs. 4,62,50,000/-.
3. The letter of the writ petitioner dated 14th November, 2014 to the respondent Corporation is very important. They said that it was the obligation of the respondent to identify and handover these 250 street hoardings and the bus shelters to the petitioner. 250 street hoardings could not be located by them. They were only able to locate 200 of them. The respondent Corporation should only demand payment for 174 hoardings. In other words the writ petitioner claimed novation of the contract by reduction of the number of hoardings and the licence fee.
4. At this point of time it is very important to note that the disputes between the parties were referred to the Joint Municipal Commissioner (Revenue), Kolkata Municipal Corporation as the arbitrator. The learned arbitrator held a hearing on 13th December, 2014. A joint inspection by the respondent Corporation and the writ petitioner was also made. It further appears that the petitioner made an application before the learned arbitrator under Section 12 of the said Act which is still pending.
5. On 16th December, 2014 the respondent raised a demand of Rs. 7,75,44,330/- upon the petitioner in respect of the said hoardings from July to December 2014.
6. On 27th August, 2015 they were issued a show cause notice by the respondent Corporation. It said that an amount of Rs. 16,84,34,431/- which included interest was due and payable by them as licence fee. Furthermore, they allegedly did not execute the agreement for street hoardings, did not submit the bank guarantee and had illegally “shifted” the hoardings.
7. On 15th September, 2015 the writ petitioner made their reply to the show cause notice. They said that the 174 hoardings allotted were “non-lucrative”. Amongst other things they said that there was an arbitration agreement clause (Clause No. 18) in the agreement between the parties.
8. In the written notes they inter alia said that a “no objection certificate” was not given by the Corporation, as a result of which CESC Limited could not provide the lighting arrangements for the hoardings allotted i.e. 174 in number. By his letter dated 3rd December, 2015 the Chief Manager (Advertisement) of the respondent Corporation directed the petitioner to appear before him on 10th December, 2015 at 3 p.m. for hearing them on the show cause notice.
9. On 2nd March 2016 the Chief Manager (Advertisement) made the impugned decision to black list the petitioner. The effect was that they could not participate in any tender of the respondent Corporation for a period of 5 years or till the payment of their claim.
10. The petitioners challenge this black listing.
11. Mr. Dutta, learned Counsel appearing from them says that the claim of the Corporation is out of a contract and is purely contractual. The petitioners have paid them substantial sums of money in respect of the contract. The contract period was over on 30th June, 2015. Arbitration has been commenced. Therefore, it was most unfair on the part of the Corpo
