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IN THE HIGH COURT OF DELHI AT NEW DELHI
Sanjeev Sachdeva, J.
Bhushan Pharmaceuticals Pvt. Ltd. - Appellant
Versus
New Delhi Municipal Council & Anr. - Respondents
W.P.(C) 3977/2021& CM Appln. 12033/2021 & 12035/2021
Decided On : 16-08-2021
Blacklisting - Procurement of Ayurvedic Medicines - Kulja Industries Ltd. Vs. Western Telecom Project BSNL &Ors. - [Summary of the acts and sections referenced and discussed by the court]
Fact of the Case:
The petitioner challenges the blacklisting order and seeks a refund of earnest money deposit, or a reduction in the blacklisting period. The petitioner had participated in a tender for the supply of ayurvedic medicines but was blacklisted due to the submission of forged test reports by an employee.
Finding of the Court:
The court found that the petitioner had genuine test reports from an accredited lab but the employee submitted fabricated reports. The court held that while the petitioner cannot be completely absolved of the employee's misdeeds, a two-year blacklisting period was disproportionate to the petitioner's conduct.
Issues: The issues revolved around the submission of forged test reports, the responsibility of the petitioner for its employee's actions, and the proportionality of the blacklisting period.
Ratio Decidendi: The court considered the actual or potential harm from the wrongdoing, the frequency and duration of the wrongdoing, and the petitioner's acceptance of responsibility. It also noted that the petitioner had not participated in any tenders after the initial blacklisting.
Final Decision: The court modified the blacklisting period to be from the date of the order till a specific date, allowing the petition in those terms.
JUDGMENT
Sanjeev Sachdeva, J. - The hearing was conducted through video conferencing.
2. Petitioner impugns letter/order of blacklisting dated 21.02.2020 and further seeks a direction to the respondent to refund the earnest money deposit and alternatively prays that the period of blacklisting be reduced or be limited to the drugs in respect of which petitioner had participated in the subject tender.
3. On 23.11.2017, the respondent had invited bids through a tender for supply of ayurvedic medicines. The last date for submission of bid document including physical sample and test report was 12.08.2018; whereafter technical evaluation of the bid had to take place.
4. It is contended that for testing its medicines, Petitioner had engaged the services of ITL Labs Pvt. Ltd., a laboratory which was accredited by Govt. approved laboratory and which agency petitioner had been using for several years for having its medicines tested.
5. As per the petitioner, the online submission process was commenced on 11.12.2017 and was completed on 18.12.2017. During the process of online submission, earnest money deposit was also furnished.
6. As per the petitioner, the test reports from the ITL Labs Pvt. Ltd., was handed over to its employee – Rahul Mishra for the purposes of submission along with bid.
7. Petitioner alleges that since it was in the process of making structural changes to its factory it withdrew its bid vide letter dated 01.01.2018 at the stage when the technical evaluation was still underway.
8. Petitioner alleges that petitioner was subsequently, on 29.03.2018, informed by its employee – Rahul Mishra that the original test reports from ITL Labs Pvt. Ltd., were not furnished along with the bid document and reports from one Devansh Testing Laboratory had been filed. It is alleged that he informed that the said reports were fake.
9. It is alleged that petitioner thereafter immediately approached the respondent and informed them about the action of Rahul Mishra and furnished original test reports issued by ITL Labs Pvt. Ltd. A criminal complaint was also filed against Mr. Rahul Mishra.
10. It is alleged that petitioner was issued letter of blacklisting dated 03.04.2018 whereby petitioner was debarred from participating in the procurement of ayurvedic medicines of NDMC and his earnest money deposit were forfeited.
11. Petitioner filed a writ petition impugning order dated 03.04.2018, inter-alia, on the ground of breach of principles of natural justice.
12. By order dated 13.04.2018 in W.P. (C) 3520/2018 this Court directed the respondent to withdraw the blacklisting order.
13. By letter dated 25.04.2018, order dated 28.03.2018 blacklisting the petitioner was withdrawn. Thereafter a fresh show cause notice was issued to the petitioner on 26.04.2018. Hearing was granted to the petitioner, however, after a gap of merely 21 months by the impugned letter/order dated 21.02.2020, petitioner has been blacklisted for a period of two years and the earnest money deposit also forfeited.
14. As per the Petitioner, it holds a licence for manufacture of merely 2441 ayurvedic drugs, out of which 925 are Unani medicines. The subject tender was for 516 drugs, out of which petitioner had merely participated in 45 drugs. As per the Petitioner the revenue that would have been generated from the subject tender was approximately Rs. 7 to 8 lakhs, whereas the annual turnover of the petitioner was over Rs. 20 crores.
15. As per the Petitioner there could be no motive behind the petitioner submitting false or fabricated test reports. It is contended that even though petitioner had genuine test reports from accredited labs, the disgruntled employee filed fabricated test report to prejudice the petitioner.
16. It is alleged that action in accordance with law has also been taken against the said employee.
17. Learned counsel for the petitioner submits that though petitioner is not at fault, however, keeping in view of the fact that one of the employees of the petitioner committed
The court emphasized the need for proportionality in the period of blacklisting and considered the petitioner's acceptance of responsibility for the employee's misdeeds.
Debarment or blacklisting must be proportionate to the default committed by the bidder. Proper reasons must be provided for blacklisting, and the principles of natural justice must be followed. Black....
The period of blacklisting should not be indefinite and should be determined based on the nature of the offense committed by the erring contractor.
Blacklisting an entity for submission of forged bid documents is justified when the act impacts bid integrity; vicarious liability applies to employers for employee misconduct in the course of their ....
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 ....
Blacklisting in procurement processes must be justified, time-bound, and proportionate to the offense; indefinite blacklisting lacks legal support.
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....
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