Back
IN THE HIGH COURT OF DELHI AT NEW DELHI
Navin Chawla, J.
Ccs Computers Pvt. Ltd. – Appellant
Versus
Telecommunications Consultants India Ltd. & Anr. – Respondents
W.P.(C) 666 of 2023
Decided On : 09-08-2023
MSMED Act - Contractual Dispute - LOI dated 01.05.2018, MSA dated 04.01.2019 & PO dated 29.11.2018 - Section 18 of the MSMED Act
Fact of the Case:
The petitioner was awarded a contract for Supply, Installation, Commissioning and Maintenance of Event Management System for Bihar Local Area Development Agency. The petitioner claimed to have completed the work and requested payment, but the respondent did not release the payment. The petitioner filed a reference under Section 18 of the MSMED Act. In response, the respondent issued a show-cause notice and subsequently terminated the contract, invoked the Performance Bank Guarantee, and banned the petitioner for two years.
Finding of the Court:
The court found that the respondent's actions were unjustified and disproportionate. The court set aside the ban on the petitioner, stating that the respondent's actions were without giving reasons, disproportionate, and arbitrary. The court allowed the respondent to initiate action depending on the result of the arbitration proceedings or otherwise and in accordance with the law.
Issues: The main issue was whether the respondent's actions, including the ban on the petitioner, were justified in response to the petitioner's invocation of Section 18 of the MSMED Act.
Ratio Decidendi: The court held that the respondent's ban on the petitioner was unjustified, disproportionate, and arbitrary. The court also emphasized that the remedy of the petitioner under Article 226 of the Constitution of India should not be denied.
Final Decision: The court allowed the petition, set aside the ban on the petitioner, and directed the respondent to upload on its website the information that the ban had been set aside. There was no order as to costs.
Navin Chawla, J. (Oral)
1. This petition has been filed by the petitioner challenging the Letter dated 05.01.2023 issued by the respondent no.1 to the petitioner, inter-alia taking the following actions against the petitioner:
"Whereas, TCIL constrained to take the following action as mentioned below due to violation of the agreed contractual terms and conditions between parties:
2. The petitioner was awarded the work of Supply, Installation, Commissioning and Maintenance of Event Management System (EMS) for Bihar Local Area Development Agency, Planning and Development Department, Govt. of Bihar (hereinafter referred to as the `BLADA') by the respondent no. 1 vide Letter of Intent (in short `LOI') dated 01.05.2018.
3. It is the case of the petitioner that the petitioner duly delivered the hardware and software components to BLADA on 16.05.2018 vide challan No. CCS/S108, and requested for release of 40% of the contract value in accordance with the terms of the LOI. The petitioner further claims that after petitioner had carried out the implementation and commissioning of the work within the stipulated timeline, the respondent No. 1 had received the requisite signoff from its end customer, that is, Bihar State Electronics Development Corporation Ltd. (hereinafter referred to as the `BSEDC') on 11.09.2018. The petitioner, therefore, called upon the respondent no.1 to release its outstanding dues, vide letters dated 28.11.2018 and 03.12.2018. The respondent no.1, in turn, addressed communications dated 14.01.2019 and 06.12.2021 to BSEDC, acknowledging that the installation and commissioning work has been completed and signoff documents have been submitted.
4. The petitioner claims that as in spite of various reminders, the payment was not released to the petitioner by the respondent no.1, the petitioner was constrained to file a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (in short, `MSMED Act') before MSE Facilitation Council, South-East, Delhi (hereinafter referred to as the `Council') on 26.03.2022. The Council was pleased to issue notice of the reference to the respondent no.1 on 26.03.2022.
5. The petitioner claims that only as a counter blast, the respondent no.1 vide letter/show-cause notice dated 14.06.2022 alleged that the petitioner had failed to complete the work as the Go- Live of System is not accepted by the client with the remarks that the service support needs to be improved. It was further alleged that the client has not accepted the system and has not issued the Final Acceptance Test Certificate. The respondent no.1 alleged that the petitioner was in breach of Clause 4 of the Agreement, which provides for back-to-back payment from the respondent no.1 to the petitioner on receipt thereof from the client, by invoking its remedies under Section 18 of the MSMED Act and therefore, due to such a violation, action of termination of LOI, debarment, forfeiture of the performance bank guarantee, and other actions in terms of the contract were proposed to be taken against the petitioner.
6. By a subsequent letter dated 15.07.2022, the respondent no.1 advised the petitioner to submit a reply to the Show-Cause Notice dated 14.06.2022.
7. The petitioner duly submitted its reply to the Show Cause Notice, on 28.07.2022, inter-alia contending therein that the work under the LOI had been successfully completed and all tasks to be performed had been duly performed by the petitioner. The petitioner further claimed that the due si
The court emphasized that imposing a ban on a company should not be done in a casual or regular manner and that such actions should be justified, proportionate, and not arbitrary.
Blacklisting a consultancy firm without providing an opportunity for a hearing violates natural justice principles and renders the action impermissible.
Mere existence of a Clause in the Bid Document, which mentions blacklisting as a bar against eligibility, cannot satisfy the mandatory requirement of a clear mention of the proposed action in the sho....
The necessity of a valid, particularised and unambiguous show-cause notice before passing an order of blacklisting or debarment.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
