2018 (1) TMI 1748 - HC - Indian Laws

DMRC's five-year blacklisting for non-disclosure of prior debarment ruled disproportionate and arbitrary

Hyundai Rotem Company Versus Delhi Metro Rail Corporation

Hyundai Rotem Company Versus Delhi Metro Rail Corporation - 2018:DHC:217 Issues Involved:1. Validity of the blacklisting order and the finding of fraudulent practice.2. Proportionality of the five-year debarment period imposed on the petitioner.Detailed Analysis:1. Validity of the Blacklisting Order and Finding of Fraudulent Practice:The petitioner challenged the order dated 06.07.2016 by DMRC's Managing Director, which blacklisted the petitioner for five years due to alleged fraudulent practices. The blacklisting was based on the petitioner's failure to disclose a previous debarment by the Airport Authority of India (AAI) in its bid for a DMRC contract. The petitioner argued that the non-disclosure was unintentional, as the division handling the AAI contract was different, and the management was unaware of the debarment. However, the court found that the petitioner was guilty of a fraudulent practice as defined under clause 4.33.1 of the General Conditions of Contract (GCC). The court noted that the knowledge of the employees handling the AAI bid was sufficient to impute knowledge to the petitioner. The court upheld the finding of fraudulent practice, stating that if the petitioner had disclosed the correct information, it would have been disqualified from the DMRC contract.2. Proportionality of the Five-Year Debarment Period:The court considered whether the five-year debarment was disproportionate and thus violated Article 14 of the Constitution of India. The petitioner argued that the punishment was harsh, citing the General Financial Rules, 2017, which suggest a maximum debarment of two years for breaches of the Code of Integrity. The petitioner also highlighted that JICA, the funding agency for the project, had only suspended the petitioner for four months. The court acknowledged the need for proportionality in punitive measures, referencing the Supreme Court's guidelines in Kulja Industries Ltd. v. Chief General Manager, BSNL, which emphasize that debarment should not be permanent and should be commensurate with the offense's gravity. The court noted that DMRC had not provided guidelines for determining the debarment period and relied on other organizations' practices, which ranged from a few months to ten years. The court found the five-year period disproportionate, considering mitigating factors such as the petitioner's remedial actions and lack of evidence of deliberate wrongdoing. The court suggested reducing the debarment to three years and directed DMRC to reconsider the period in light of these observations.In conclusion, while the court upheld the finding of fraudulent practice, it found the five-year debarment period disproportionate and directed DMRC to reassess the duration, considering the mitigating factors and relevant guidelines.