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IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, J.
Theme Engineering Services Pvt Ltd. & Anr. – Appellants
Versus
National Highways Authority of India & Ors. – Respondents
W.P.(C) 1173 of 2021 & CONT.CAS(C) 182 of 2021
Decided On : 23-05-2023
The petitioner, a Supervision Consultant, challenged the validity of an order of blacklisting dated 12 January 2021 for a period of six months. The Court held that the impugned order was unsustainable on the following grounds: 1. The order was based on allegations that were not included in the show cause notice (SCN) issued to the petitioner. This violated the principles of natural justice. 2. The petitioner could not be held responsible for the submission of incorrect CVs by key personnel, as it was required to select personnel from the INFRACON portal maintained by the National Highways Authority of India (NHAI). 3. The 2020 Policy for Deterrent Penalty Action against Defaulting Consultants, which was in force at the time of the impugned order, provided for the debarment of key personnel rather than the consulting firm in cases of false CVs. 4. The replacement of more than 50% of key personnel was justified in light of the circumstances, including the discovery of fake CVs and the selection of personnel whose names were not blocked on the INFRACON portal. 5. The order of debarment was disproportionate to the alleged violations. The Court quashed the impugned order and disposed of the contempt petition that had been filed in relation to the blacklisting.
Fact of the Case:
The petitioner, a Supervision Consultant, was appointed by the National Highways Authority of India (NHAI) for a project. Subsequently, the petitioner was issued a show cause notice (SCN) alleging various lapses and deficiencies in the execution of the project. The petitioner submitted a reply to the SCN. However, the NHAI passed an order blacklisting the petitioner for a period of two years. The petitioner challenged the blacklisting order by filing a writ petition. The Court quashed the blacklisting order and directed the NHAI to reconsider the matter. The NHAI then passed a fresh order blacklisting the petitioner for a period of six months. The petitioner challenged the fresh order by filing the present petition.
Finding of the Court:
The Court held that the impugned order of blacklisting was unsustainable on the following grounds: 1. The order was based on allegations that were not included in the SCN issued to the petitioner. This violated the principles of natural justice. 2. The petitioner could not be held responsible for the submission of incorrect CVs by key personnel, as it was required to select personnel from the INFRACON portal maintained by the NHAI. 3. The 2020 Policy for Deterrent Penalty Action against Defaulting Consultants, which was in force at the time of the impugned order, provided for the debarment of key personnel rather than the consulting firm in cases of false CVs. 4. The replacement of more than 50% of key personnel was justified in light of the circumstances, including the discovery of fake CVs and the selection of personnel whose names were not blocked on the INFRACON portal. 5. The order of debarment was disproportionate to the alleged violations.
Issues: 1. Whether the impugned order of blacklisting was based on allegations that were not included in the SCN issued to the petitioner? 2. Whether the petitioner could be held responsible for the submission of incorrect CVs by key personnel? 3. Whether the 2020 Policy for Deterrent Penalty Action against Defaulting Consultants was applicable to the case? 4. Whether the replacement of more than 50% of key personnel was justified? 5. Whether the order of debarment was disproportionate to the alleged violations?
Ratio Decidendi: The Court held that the impugned order of blacklisting was unsustainable on the following grounds: 1. The order was based on allegations that were not included in the SCN issued to the petitioner. This violated the principles of natural justice. 2. The petitioner could not be held responsible for the submission of incorrect CVs by key personnel, as it was required to select personnel from the INFRACON portal maintained by the NHAI. 3. The 2020 Policy for Deterrent Penalty Action against Defaulting Consultants, which was in force at the time of the impugned order, provided for the debarment of key personnel rather than the consulting firm in cases of false CVs. 4. The replacement of more than 50% of key personnel was justified in light of the circumstances, including the discovery of fake CVs and the selection of personnel whose names were not blocked on the INFRACON portal. 5. The order of debarment was disproportionate to the alleged violations.
Final Decision: The Court quashed the impugned order of blacklisting and disposed of the contempt petition that had been filed in relation to the blacklisting.
JUDGMENT
1. The petitioner who was appointed as a Supervision Consultant by the National Highways Authority of India [NHAI] in connection with the construction, supervision of balance work of 4 laning of Ranchi-Rargaon-Mahulia section from 114.00 to km 277.568 at National Highway-33 falling in the State of Jharkhand impugns the validity of an order of blacklisting dated 12 January 2021. In terms of the said order, the Review Committee of NHAI has drawn an order of debarment which was to operate for a period of six months. The impugned order passed by the Review Committee has on a reconsideration of all relevant facts reduced the period of debarment of two years as was made originally in terms of an order dated 17 December 2020.
2. Undisputedly, by the time the present petition was taken up for consideration, the period of debarment had already come to an end. The petitioner however has sought an appropriate declaration since the order of debarment was asserted to have a continued detrimental effect and impact on the right of the petitioner to participate in future contracts either with NHAI or other bodies. For the purposes of sketching out the necessary backdrop and in order to appreciate the challenge which stands raised, the following facts may be noticed.
3. NHAI on 30 April 2019, invited tenders for appointment of a Supervision Consultant for its Engineer in respect of the project work noticed above. Responding to the said Letter of Invitation, the petitioner submitted its technical proposal on 20 June 2019. The petitioner upon being identified as the lowest bidder was declared successful in the bidding process and on 23 August 2019, a Letter of Award came to be granted in its favour. The Letter of Award was followed by the execution of a Contract Agreement between the parties on 24 September 2019. It has also come on the record that the total duration of the project was for 42 months comprising of 18 months for the completion of construction work and an additional 24 months being designated as the Defect Liability Period.
4. It would also be pertinent to note that along with the technical proposal, the petitioner had also submitted a list of key personnel who would be engaged for the purposes of rendering consultancy services. In terms of the provisions made in the Contract Agreement, the key personnel were to be handpicked by the petitioner from out of the names appearing on a web portal maintained by INFRACON. The aforesaid arrangement flows from the provisions made in Clause 3.3 of the Contract Agreement and which is extracted hereinbelow:
"3.3. The RFP shall be received through "INFRACON" (www.infracon.nic.in) and will be evaluated based on details furnished on "INFRACON". As such before submitting the proposal, the Consultant (the firm and all key personnel) shall mandatorily register and enlist themselves, on the MoRTH portal "INFRACON" and upload all relevant information to enable correct evaluation of RFP. All the bidders registered on "INFRACON" shall form a Team on "INFRACON which would be assigned unique INFRACON Team ID. Bidders while submitting the RFP proposal shall furnish registration details including INFRACON Team ID. A copy of INFRACON Operation Procedure is enclosed for bidder's reference.
It is requested to submit your Technical proposal only strictly using the formats enclosed herewith (refer section 3 and 4). The Financial proposal should be uploaded online as per the procedure under e-tendering. The proposal shall be written in the English language as specified in the Data Sheet. All pages of the Proposal shall be signed by an authorized representative. The representative's authorization shall be confirmed by written Power of Attorney duly notarized to be submitted with the proposal. In case of JV an MOU indicating the specific Projects, input and role of each Partner etc. shall be submitted with the proposal."
5. A Commencement Letter came to be issued by NHAI in favour of the petitioner on 30
The Court held that the impugned order of blacklisting was unsustainable on the following grounds:
1. The order was based on allegations that were not included in the SCN issued to the petitio....
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Blacklisting or debarment cannot be permanent and must be preceded by a specific show cause notice, complying with the principles of natural justice.
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.
Blacklisting of a contractor must adhere to the principles of natural justice, requiring a specific show cause notice containing proposed penalties. Furthermore, permanent or indefinite blacklisting ....
(1) Debarment as a remedy is to be invoked in cases where there is harm or potential harm for public interest particularly in cases where person’s conduct has demonstrated that debarment as a penalty....
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