Back
2015 Supreme(Del) 177
High Court of Delhi
VIBHU BAKHRU, J.
M/s. Avinash Em Projects Private Limited - Appellant
Versus
M/s. Gail (India) Limited - Respondent
W.P.(C). No. 2041 of 2014 & CM Nos. 4256, 14287 of 2014
Decided on: 06-02-2015
For the Petitioner:Sanjiv Kakra, Vaishali Kakra, Bheem Sain Jain, Varun Gowda, Rohit Oberoi, Advocates.
For the Respondent:Parag Tripathi, Sr. Advocate with Pragyan Sharma, Ms Kanika Tandon, Nitihesh Kumar, Advocates.
The main legal point established in the judgment is the application of the principle of proportionality in assessing the disproportionate nature of punitive measures, highlighting the consequences and limitations of such measures under the legal framework of the IFB, GCC, and Integrity Pact.
Headnote:
Blacklisting - Bidding for Contracts - IFB, GCC, Integrity Pact - [Section 29, 35 of IFB, Clause 29 of GCC, Integrity Pact] - The court examined the disproportionate nature of the blacklisting order imposed on the petitioner for submitting forged financial statements to secure contracts. It highlighted the legal provisions of the IFB, GCC, and Integrity Pact, emphasizing the consequences and limitations of punitive measures. The court found the blacklisting order to be shockingly disproportionate and set it aside, remanding the matter to consider a period of blacklisting afresh.
Fact of the Case:
The petitioner was blacklisted by the respondent, GAIL, for submitting forged financial statements to secure contracts. The petitioner challenged the order, arguing that the punitive measure was too harsh and disproportionate to the alleged misconduct. The respondent contended that the measure was within its discretion and not amenable to judicial review.
Finding of the Court:
The court found the blacklisting order to be disproportionately harsh, effectively leading to the petitioner's exclusion from participating in any contracts with GAIL and other PSUs, ultimately destroying the petitioner's business. It highlighted the legal provisions of the IFB, GCC, and Integrity Pact, emphasizing the consequences and limitations of punitive measures. The court set aside the blacklisting order and remanded the matter to consider a period of blacklisting afresh.
Issues: The main issue was whether the blacklisting order imposed on the petitioner for submitting forged financial statements was disproportionately harsh and not commensurate with the alleged misconduct.
Ratio Decidendi: The court applied the principles of proportionality and examined the legal provisions of the IFB, GCC, and Integrity Pact to assess the disproportionate nature of the blacklisting order. It found the measure to be shockingly disproportionate and set it aside, remanding the matter for reconsideration.
Final Decision: The court set aside the blacklisting order imposed on the petitioner and remanded the matter to consider a period of blacklisting afresh in view of the observations and the context of the period specified in the integrity pact.
Vibhu Bakhru, J.
1. The petitioner has filed the present petition impugning an order of the respondent dated 18.03.2014 (variously referred to as ‘the blacklisting order’ or ‘the impugned order’) whereby the respondent has banned the petitioner for an indefinite period from doing any future projects with the respondent or participating in bidding process for any of its tenders in future. The said decision is subject to review after a period of ten years.
2. The brief facts that are relevant for examining the controversy in the present petition are as under:-
2.1 The respondent - GAIL (India) Limited (hereafter also referred to as ‘GAIL’) is a state-owned natural gas processing and distribution company in India. The respondent invited E-Tender no.8000002161 for laying of pipelines of spurlines to Bhilwara and Chittorgarh and augmentation of existing Vijaipur Kota pipeline (hereafter ‘E-Tender 2161’). The complete scope of work of the E-Tender 2161 was divided into 5 parts (Part A, B, C, D and E).
2.2 Paragraph 4.2 of the Invitation for Bids (hereafter ‘IFB’) stipulated that the Indian Bidders shall have minimum working capital of Rs.30 million for Part D and Rs.18.5 million for Part E, i.e. an aggregate of Rs.4.85 crores, as per their immediate preceding year's audited financial results. In the event of inadequate working capital, the bidder was required to supplement the shortfall with a letter issued by the bidder's banker (having net worth not less than Rs.1000 million) confirming availability of a line of credit to meet the specified working capital requirement. In the event, the audited financial results for the immediate preceding financial year were not available, bidders had the option to submit the audited financial result for the year immediately prior to that year for consideration of the working capital calculation. Paragraph 9 of IFB provides that a bidder would furnish documentary evidence by way of copies of work order, completion certificate, balance sheet or audited financial statements including the profit and loss account etc. along with the bid, to establish that the qualification criteria was met.
2.3 Apart from E-Tender 2161, the respondent also invited E-Tender No.8000002119 - for annual rate contract for construction of pipelines and associated facilities in Northern Region for supplying gas to new/existing consumers (hereinafter ‘E-Tender 2119’) and E-tender No.8000003564 - for annual rate contract for construction of pipelines and associated facilities in Northern Region for supplying gas to new/existing consumers (hereinafter ‘E-Tender 3564’).
2.4 On 06.09.2010, the petitioner submitted its bid for Parts D and E of E-Tender 2161 and E-Tender 2119. Along with its bids, the petitioner submitted an audited financial statement dated 21.08.2010, which reflected the petitioner’s company’s working capital as on 31.03.2010 to be Rs.6.96 crores approximately. The respondent awarded the contract for E-Tender 2161 and E-Tender 2119 to the petitioner based on the information and documents supplied by the petitioner in its bids.
2.5 The respondent issued a Show Cause Notice dated 29.07.2013 alleging that a forged and manipulated audited financial statement dated 21.08.2010 was submitted to secure the tenders. It was pointed out that the balance sheet submitted to the Registrar of Companies, Delhi for the year 2010-11 reflected the working capital of the petitioner company, as on 31.03.2010, as Rs.3.01 crores approximately. The petitioner was called upon to show cause as to why penal action of banning the petitioner from doing any business with GAIL not be initiated.
2.6 The petitioner, by its letter dated 07.08.2013, replied that at the time of submission of the bid, the balance sheet for the year 2009-10 was under scrutiny and was yet to be finalized and approved. Therefore, the financial statement dated 21.08.2010, duly audited by a Chartered Accountant, was submitted to the respondent. And, subsequently the bal
