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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rekha Palli, J.
M/s Johnson And Johnson Private Limited - Appellant
Versus
All India Institute Of Medical Sciences New Delhi - Respondent
W.P.(C) 5989 of 2021
Decided On : 25-08-2021
The petitioner, a global healthcare and medical technology company, was debarred from participating in any future tenders of the respondent, a medical institution, for a period of two years. The debarment was imposed on the ground that the petitioner had concealed material information regarding its previous business arrangement with other hospitals in respect of the same equipment. The petitioner challenged the debarment order, contending that it was arbitrary, discriminatory, and disproportionate to the violations alleged to have been committed by it. The Court held that the debarment order was not justified in the facts of the case. The Court found that the petitioner had not violated any contractual obligations that invited the application of a penalty clause, and that the respondent's apprehensions as to whether the petitioner had honoured its responsibility to act in their mutual interest and for the general public good at the time of executing the contract between them, were not material considerations. The Court also found that the impugned order failed to set out any valid ground for the respondent to proceed against the petitioner, and that the decision to blacklist the petitioner was entirely unwarranted. Accordingly, the Court set aside the debarment order.
Fact of the Case:
The petitioner, a global healthcare and medical technology company, was debarred from participating in any future tenders of the respondent, a medical institution, for a period of two years. The debarment was imposed on the ground that the petitioner had concealed material information regarding its previous business arrangement with other hospitals in respect of the same equipment.
Finding of the Court:
The Court held that the debarment order was not justified in the facts of the case. The Court found that the petitioner had not violated any contractual obligations that invited the application of a penalty clause, and that the respondent's apprehensions as to whether the petitioner had honoured its responsibility to act in their mutual interest and for the general public good at the time of executing the contract between them, were not material considerations. The Court also found that the impugned order failed to set out any valid ground for the respondent to proceed against the petitioner, and that the decision to blacklist the petitioner was entirely unwarranted.
Issues: Whether the petitioner had violated any contractual obligations that invited the application of a penalty clause; Whether the respondent's apprehensions as to whether the petitioner had honoured its responsibility to act in their mutual interest and for the general public good at the time of executing the contract between them, were material considerations; Whether the impugned order had set out any valid ground for the respondent to proceed against the petitioner; Whether the decision to blacklist the petitioner was entirely unwarranted.
Ratio Decidendi: The Court found that the petitioner had not violated any contractual obligations that invited the application of a penalty clause, and that the respondent's apprehensions as to whether the petitioner had honoured its responsibility to act in their mutual interest and for the general public good at the time of executing the contract between them, were not material considerations. The Court also found that the impugned order failed to set out any valid ground for the respondent to proceed against the petitioner, and that the decision to blacklist the petitioner was entirely unwarranted.
Final Decision: Accordingly, the Court set aside the debarment order.
JUDGMENT
1. The present petition preferred under Article 226 of the Constitution of India seeks quashing and setting aside of an order dated 29.04.2021 passed by the respondent cancelling its contract with the petitioner and debarring it from participating in any of its tenders for a period of two years.
2. The petitioner - Johnson & Johnson Private Limited claims to be the Indian arm of the Johnson & Johnson USA, a multinational corporation that develops medical devices, pharmaceutical products, and consumer packaged goods. The respondent is the All India Institute of Medical Sciences, New Delhi, an autonomous medical university and healthcare centre located in New Delhi, established under the All India Institute of Medical Sciences Act, 1956. It is the case of the petitioner that even though it has been collaborating with the respondent for the last several decades for supply of various medical devices without any complaint, the respondent passed the impugned order against the petitioner by holding it guilty of 'corrupt and fraudulent practices' on account of an erroneous presumption that the petitioner had deliberately misrepresented facts to influence the tender procurement process.
3. On 27.09.2019, the respondent, for the benefit of its Surgical Block (hereinafter referred to as 'AIIMS, SB'), issued a Tender Enquiry Document bearing Reference No. 03/SB/M&E/2019-20/S1 (hereinafter referred to as 'TED') inviting bids for providing endo surgery equipment, namely, 12 Combined Single Generators for Ultrasonic Cutting and Coagulation device with advanced Radio-Frequency (RF) Energy technology, along with an equivalent number of accessories and consumables (collectively referred to as 'equipment'). These bids were invited online in a two-bid system, comprising of techno-commercial and financial bid components. Pursuant thereto, the petitioner submitted its bid on 15.11.2019 and, while the same was pending consideration with the respondent, a bid it had submitted on 14.09.2018 for supply of the same type of generator with different quantities of capital, accessories and consumables - sought under an earlier tender floated by the National Cancer Institute, Jhajjar (hereinafter referred to as 'the NCI') on 10.08.2018 - came to be accepted. The petitioner was consequently awarded the tender by the NCI on 15.02.2020, which it accepted on 19.03.2020.
4. About a year later, the respondent invited the petitioner for price negotiations in respect of its bid submitted on 15.11.2019. On 12.03.2021, the petitioner's representatives met with the Price Negotiation Committee of the respondent wherein they disclosed information regarding two contracts the petitioner had executed previously for supply of similar equipment to the Comprehensive Rural Health Services Project of AIIMS in Ballabgarh, in the year 2016 (hereinafter referred to as 'CRHP, Ballabgarh'), as well as the AIIMS Department of Emergency Medicine in 2015 (hereinafter referred to as the 'AIIMS Emergency'). On 27.03.2021, the respondent, after finding the petitioner's bid technically and commercially sound, issued a supply order in its favour, being S.O. No. 08/Surgical Block/M&E/2020-21/St. The parameters of the contractual relationship between the parties was set out under this supply order, which contained an arbitration clause, and required the equipment to be delivered and installed on or before 31.03.2021. It is pertinent to note that the petitioner duly executed the supply order and effected delivery and installation of the equipment within time.
5. On 08.04.2021, the petitioner claims that, to its surprise, the Senior Stores Officer (Surgical Block) of the respondent issued a show cause notice to it, which reads as under:
"ALL INDIA INSTITUTE OF MEDICAL SCIENCES DEPARTMENT OF SURGICAL DISCIPLINES
ANSARINAGAR, NEW DELHI-110029
Email :storesection. newsurgicalblock@gmail. Com
(Surgical Block)
MOST URGENT/TIME BOUND
Dated: 08.04.2021
S.O. NO. 08/Surgical Block/M&E/2020-21/St.
To,
M/S JO
A debarment order is not justified if the party being debarred has not violated any contractual obligations, the apprehensions of the other party are not material considerations, the debarment order ....
The requirement of giving reasons, adherence to principles of natural justice, and fairness in administrative actions, especially in cases of blacklisting or imposing penalties, is essential for a va....
The impugned order violated principles of natural justice and tender conditions, leading to its setting aside by the court.
The decision to blacklist a contractor must follow due process and communicate the intended action clearly in the show cause notice. Non-supply of essential goods during a pandemic can justify blackl....
The requirement for a fair hearing and a specific show cause notice before imposing the severe civil consequence of blacklisting, and the need for the authority to determine the period of punishment ....
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.
Administrative authorities must strictly adhere to principles of natural justice when taking punitive actions such as blacklisting. This requires issuing a prior show cause notice with specific alleg....
Point of law : Before proposing to pass a black listing order or debarring orders the parties had to be given hearing followed by an appropriate reasoned order.
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