TaxTMI 
TaxTMI 
2013 (10) TMI 733
X X X X Extracts X X X X
X X X X Extracts X X X X
....oth the tender notices. It is also not in dispute that several orders for supply of the material were placed with the appellant-company during the years 2004-2006 and that goods were supplied to various consignee units of BSNL pursuant to the same. The appellant's case is that a "receipt certificate" was issued in its favour after delivery of the goods and that bills for payment of the price of the goods were raised in triplicate to the Chief Controller of Accounts, WTP BSNL, Mumbai from time to time. The appellant's further case is that a single account to receive 95% of the payment due from BSNL was maintained by it and since the amounts received from the respondent- BSNL by cheques did not carry any particulars of the consignment for which such payment was being made it could, in no way, discover excess payment, if any, released by BSNL against the bills sent by the appellant. 4. The appellant's further case is that on gaining knowledge about the excess payments received by it, an offer for reconciliation of the accounts was made to the BSNL and since any such reconciliation was likely to take 30 to 45 days, the appellant offered to adjust the excess amount credited to its acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ook no corrective action in terms of the reconciliation, W.P. No.4536 of 2010 was filed before the High Court of Judicature at Bombay in which it assailed the blacklisting order. The High Court allowed the petition on the short ground that the appellant had not been afforded any opportunity of being heard before the blacklisting order was issued by the respondent. The High Court did not go into the merits of the dispute but reserved liberty to the appellant to raise all such contentions as were open to it if and when BSNL issued a show cause notice for blacklisting it again. The BSNL was left free to pass a fresh order and take a final decision in the matter within six weeks from the date of the issue of the show cause notice. 8. A show cause notice was accordingly issued by BSNL on 4th November, 2010 to which the appellant filed a reply. The appellant was also called for a personal hearing in support of its reply to the show cause notice as directed by the High Court. By an order dated 15th January, 2011 BSNL once again directed the blacklisting of the appellant, inter alia, holding that the appellant had defrauded BSNL by using duplicate and triplicate copies of the bills that s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....BSNL with the supplier. Hereby M/s. Kulja Industries Ltd., Solan (Himachal Pradesh) is permanently banned and is consequently prevented from having any business dealing with entire BSNL through the country. This is issued with the approval of the competent authority. Sd/- AGM (MM) 15.1.2011 O/o CGM, WTP, Mumbai-54" 9. Aggrieved by the above order the appellant once again approached the High Court in W.P. No. 2289 of 2011 which was heard and dismissed by a Division Bench of the High Court in terms of the order impugned in this appeal. The High Court was of the opinion that reconciliation of the account had proved that the appellant had received payment twice over for the supplies made by it and that merely because the excess payment received had been subsequently refunded by the appellant did not obliterate the act of misconduct and fraud. The High Court observed: "In the order impugned, the Authority has stated that on the reconciliation of the account, it was found as a fact that the Petitioner has received payment twice for the supply of the same material, because the supply was ongoing and the amount was found to be payable to the Petitioner, that was paid to him. Mere pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g the appellant was also justified having regard to the nature of the fraud committed by it in collusion with the officers of the respondent-corporation and involving a huge amount of nearly eight crores. 14. We may at the outset deal with the contention whether paras 31 and 32 of the bid document to which Mr. Rohtagi has made reference is the only source of the power to blacklist a defaulting contractor. These paras are as under: "31. Purchaser reserves the right to disqualify the supplier for a suitable period who habitually failed to supply the equipment in time. Further, the suppliers whose equipment do not perform satisfactory in the field in accordance with the specifications may also be disqualified for a suitable period as decided by the purchaser. 32. Purchaser reserves the right to blacklist a bidder for a suitable period in case he fails to honour his bid without sufficient grounds." 15. A plain reading of the above would show that BSNL, the purchaser has reserved the right to disqualify any supplier who (a) habitually fails to supply the equipment in time or (b) the equipment supplied by the supplier does not perform satisfactory in the field in accordance with the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ Court. The legal position on the subject is settled by a long line of decisions rendered by this Court starting with Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975) 1 SCC 70 where this Court declared that blacklisting has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and that the Authority passing any such order was required to give a fair hearing before passing an order blacklisting a certain entity. This Court observed: "20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his Court in M/s Mahabir Auto Stores & Ors. v. Indian Oil Corporation Ltd., (1990) 3 SCC 752 should, in our view, suffice: "11. It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in Miss Radha Krishna Agarwal and Ors. v. State of Bihar and Ors., [1977] 3 SCR 249 ...... In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ponsibility; (b) Violation of the terms of a public agreement or transaction so serious as to affect the integrity of an agency program, such as- (1) A willful failure to perform in accordance with the terms of one or more public agreements or transactions; (2) A history of failure to perform or of unsatisfactory performance of one or more public agreements or transactions; or (3) A willful violation of a statutory or regulatory provision or requirement applicable to a public agreement or transaction; (c) xxxx (d) Any other cause of so serious or compelling a nature that it affects your present responsibility. 21. The guidelines also stipulate the factors that may influence the debarring official's decision which include the following: (a) The actual or potential harm or impact that results or may result from the wrongdoing. (b) The frequency of incidents and/or duration of the wrongdoing. (c) Whether there is a pattern or prior history of wrongdoing. (d) Whether contractor has been excluded or disqualified by an agency of the Federal Government or have not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct similar to o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for all times to come may sound too harsh and heavy a punishment to be considered reasonable especially when (a) the appellant is supplying bulk of its manufactured products to the respondent-BSNL and (b) The excess amount received by it has already been paid back. 26. The next question then is whether this Court ought to itself determine the time period for which the appellant should be blacklisted or remit the matter back to the authority to do so having regard to the attendant facts and circumstances. A remand back to the competent authority has appealed to us to be a more appropriate option than an order by which we may ourselves determine the period for which the appellant would remain blacklisted. We say so for two precise reasons. Firstly, because blacklisting is in the nature of penalty the quantum whereof is a matter that rests primarily with the authority competent to impose the same. In the realm of service jurisprudence this Court has no doubt cut short the agony of a delinquent employee in exceptional circumstances to prevent delay and further litigation by modifying the quantum of punishment but such considerations do not apply to a company engaged in a lucrative bu....