Supreme Court of India
ISOLATORS AND ISOLATORS THROUGH ITS PROPRIETOR MRS. SANDHYA MISHRAversusMADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN CO. LTD. AND ANR
- Citation
- 2023 INSC 390
- Decided
- 18 April 2023
- Disposal
- Appeal(s) allowed
- Bench
- DINESH MAHESHWARI
Holding
A specific, unambiguous show‑cause notice is essential before imposing penalty or blacklisting; orders lacking such notice are void.
Summary
The proprietorship firm Isolators & Isolators, represented by Mrs. Sandhya Mishra, was issued cancellation orders, a show‑cause notice for debarment, and later orders imposing a 10% penalty and a three‑year debarment for alleged non‑supply of transformers under two purchase orders of MPMKVVCL. The firm contended that the cancellation orders could not serve as a specific show‑cause notice for penalty, that it had been instructed to defer supply on 18‑09‑2019 and received no further direction, and that it was denied a proper opportunity to be heard before the penalty and debarment were imposed. The Supreme Court held that a specific, unambiguous show‑cause notice is a prerequisite for imposing penalty or blacklisting, and that the cancellation orders could not be read as such; consequently, the penalty and debarment orders were illegal. The Court also observed that the authority had imposed the maximum penalty without justification and had ignored the deferment communication, rendering the debarment untenable. Accordingly, the appeals were allowed, the impugned orders were set aside, and the debarment and penalty were quashed.
Issues considered
- The validity of imposing a penalty without a specific show‑cause notice.
- Whether cancellation orders can be treated as a show‑cause notice for penalty.
- The requirement of quantifying penalty and providing a hearing before imposing it.
- The legality of the three‑year debarment in view of the deferment notice dated 18‑09‑2019.
- Maintainability of a fresh appeal after withdrawal of an earlier SLP and subsequent High Court proceedings.
Subjects
penaltydebarmentblacklistingshow‑cause noticenatural justicecontractual breachprocurementtenderadministrative lawcivil procedure
Judgment
[2023] 4 S.C.R. 445 445
ISOLATORS AND ISOLATORS THROUGH ITS PROPRIETOR A
MRS. SANDHYA MISHRA
v.
MADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN
CO. LTD. AND ANR.
B
(Civil Appeal Nos. 2890-2891 of 2023)
APRIL 18, 2023
[DINESH MAHESHWARI AND SANJAY KUMAR, JJ.]
Contract – Imposition of penalty, debarment/blacklisting of
C
the appellant-firm – Requirement of specific show-cause notice –
Held: Cancellation orders dtd. 19.11.19 and 21.11.19 cannot be
read as show-cause notice specifically for the purpose of imposition
of penalty – Finality attaching to the action of cancellation cannot
be read as a due notice for imposition of penalty even if the
respondents chose to employ the expression ‘cancelled with imposition D
of penalty’ in those orders – Thus, the action of the respondents in
imposing the penalty without even putting the appellant to notice as
regards this proposed action cannot be approved – Further, even
the order debarring the appellant for a period of 3 years for default
in making the requisite supplies has its own shortcomings – Appellant
E
had indeed made substantial supplies against the purchase orders
in question – On 18.09.2019, the respondent No.2 dealing with the
procurement specifically informed the appellant that the supply
under the purchase order in question was to be deferred – After
such an order of deferment, there had not been any other
communication or even indication from the respondents which would F
have informed the appellant to resume supplies – Debarment order
was issued against the appellant without due regard to the
undeniable factual situation where the entire blame could not have
been foisted upon or shifted towards the appellant – Impugned
orders imposing penalty and debarring the appellant are quashed
G
and set aside.
Practice & Procedure – Maintainability of fresh appeal after
withdrawal of the earlier one and after another round of approach
to the High Court – Discussed.
H
445
446 SUPREME COURT REPORTS [2023] 4 S.C.R.
A Allowing the appeals, the Court
HELD: 1.1 Imposition of penalty cannot be approved for
two major factors: The first and foremost being that in the show-
cause notice dated 26.11.2019, the appellant was put to notice
only as regards the proposition of debarment and in the said
B notice, nothing was indicated about the proposed imposition of
penalty. Though in the cancellation orders dated 19.11.2019 and
21.11.2019, the respondents purportedly reserved their right to
take appropriate steps, those orders cannot be read as show-
cause notice specifically for the purpose of imposition of penalty.
The submissions on behalf of the respondents in this regard that
C the said orders dated 19.11.2019 and 21.11.2019 have attained
finality do not take their case any further. Finality attaching to
the action of cancellation cannot be read as a due notice for
imposition of penalty even if the respondents chose to employ
the expression ‘cancelled with imposition of penalty’ in those
D orders. Looking to the terms of contract, quantification of the
amount of penalty (if at all the penalty is considered leviable)
could not have been carried out without affording adequate
opportunity of response to the appellant. That being the position,
the action of the respondents in imposing the penalty without
even putting the appellant to notice as regards this proposed
E action cannot be approved. [Paras 23][470-A-E]
UMC Technologies Private Limited v. Food Corporation
of India and Anr. (2021) 2 SCC 551; A.P. State Financial
Corporation v. C.M. Ashok Raju and Ors. (1994) 5 SCC
359 : [1994] 1 Suppl. SCR 474 – relied on.
F
1.2 Secondly, the authority concerned has proceeded to
impose the maximum of penalty to the tune of 10% of the deficit
supply without specifying as to why the maximum of penalty was
sought to be imposed. In this regard, the relevant factors as
indicated by the appellant could not have been ignored altogether.
G Unfortunately, the High Court has totally omitted to consider this
aspect of the grievance of the appellant. Though, ordinarily, for
such an omission of the High Court, the course would have been
to remit the issue for consideration but, no useful purpose would
H
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 447
v. MPMKVVCL
be served by remitting such an issue in this matter. This is for A
the simple reason that imposition of penalty against the appellant
cannot be approved because of the want of specific show-cause
notice. Moreover, no specific quantum of loss has been specified
by the respondents so as to justify the imposition of maximum of
penalty. [Paras 23.1, 23.2][470-E-G]
B
1.3 Even the order debarring the appellant for a period of 3
years for default in making the requisite supplies carries its own
shortcomings. The appellant had indeed made substantial supplies
against the purchase orders in question. On 18.09.2019, the
respondent No. 2 dealing with the procurement specifically
informed the appellant that the supply under the purchase order C
in question is to be deferred. After such an order of deferment,
there had not been any other communication or even indication
from the respondents which would have informed the appellant
to resume supplies. The written submissions on behalf of the
respondents do not answer the root question in the matter as to D
how the appellant could have been made solely responsible for
delay or default in supply after the communication dated
18.09.2019 when the respondents themselves informed the
appellant that taking of balance delivery was being deferred (until
further instructions). In the length and breadth of the arguments
on behalf of the respondents, it has nowhere been pointed out if E
such “further instructions” were ever issued to the appellant
before issuance of the cancellation orders dated 19.11.2019 and
21.11.2019 as also before issuance of show-cause notice dated
26.11.2019. That being the position, the debarment order had
been issued against the appellant without due regard to the F
undeniable factual situation where the entire blame could not have
been foisted upon or shifted towards the appellant. The impugned
orders dated 23.04.2021 in W.P. No. 12075 of 2020 and dated
13.12.2021 in Review Petition are set aside; and the writ petition
filed by the appellant is allowed. Impugned orders dated
30.07.2020 in debarment of the appellant and dated 17.08.2020 G
in imposition of penalty are quashed and set aside. Such debarment
is annulled for all practical purposes and the order dated
30.07.2020 shall not operate against the rights and interests of
the appellant in any future tender process. [Paras 24, 26, 26.1][470-
H; 471-A-F; 472-A-C] H
448 SUPREME COURT REPORTS [2023] 4 S.C.R.
A Gorkha Security Services v. Government (NCT of Delhi)
and Ors. (2014) 9 SCC 105 : [2014] 13 SCR 617;
Raghunath Thakur v. State of Bihar and Ors. (1989) 1
SCC 229 : [1988] 3 Suppl. SCR 867; M/s Erusian
Equipment and Chemicals Ltd. v. State of West Bengal
and Anr. (1975) 1 SCC 70 : [975] 2 SCR 674 – referred
B
to.
Case Law Reference
[2014] 13 SCR 617 referred to Para 16.2
(2021) 2 SCC 551 relied on Para 16.2
C
[1994] 1 Suppl. SCR 474 relied on Para 17.1
[1988] 3 Suppl. SCR 867 referred to Para 19.3
[1975] 2 SCR 674 referred to Para 19.3
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2890-
D
2891 of 2023.
From the Judgment and Order dated 23.04.2021 in WP No.12075
of 2020 and dated 13.12.2021 in RP No.894 of 2021 of the High Court
of Madhya Pradesh Principal Seat at Jabalpur.
E Vinay Navare, Sr. Adv., R. M. Sharma, Prashant R Dahat, T. R.
B. Sivakumar, Advs. for the Appellant.
Bharat Singh, AAG, Ashish Pandey, Kshitiz Singh, Amit Pawan,
Advs. for the Respondents.
The Judgment of the Court was delivered by
F
DINESH MAHESHWARI, J.
Leave granted.
2. The present appeals are in challenge to the order dated
23.04.2021 as passed by the High Court of Madhya Pradesh, Principal
G Seat at Jabalpur in Writ Petition No. 12075 of 2020 whereby the High
Court partly allowed the writ petition and while maintaining the order of
debarment as passed against the appellant, modified its term of operation
by making the same effective from 13.02.2020 for a period of three
years, instead of being effective from 30.07.2020. The appellant has
also challenged the order dated 13.12.2021 in Review Petition No. 894
H
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 449
v. MPMKVVCL [DINESH MAHESHWARI, J.]
of 2021, whereby the High Court dismissed the review petition against A
the said order dated 23.04.2021.
3. Shorn of unnecessary details, the case of the appellant has
been as follows:
3.1. The appellant, being a proprietorship firm, has been in the
business of manufacturing and repairing of transformers, having its plant B
at 83, Sector I, Industrial Area, Govindpura, Bhopal for past 30 years.
The only customers of the appellant are the distribution companies
(Discoms).
3.2. Two tenders, bearing numbers 494 and 5321, were floated by
the respondent Madhya Pradesh Madhya Kshetra Vidyut Vitran Company C
Limited2. In relation to TS-494, a purchase order was issued by the
respondents on 30.06.2017 for the supply of 586 distribution transformers
(DTR) - Level I. The period for the supply was specified as six months
starting from the third month of the purchase order issue date. However,
the appellant received the purchase order through email on 13.09.2017 D
and physically on 15.09.2017. The appellant made a request to the
respondents to modify the delivery schedule due to delay of 75 days in
the receipt of the purchase order, as also to adjust the rates as per Goods
and Services Tax (GST), which came into effect on 01.07.2017.
3.3. The appellant has averred that despite receiving no response E
from the respondents, they had proceeded to submit drawings for approval
on 04.10.2017, with the intention of commencing production. In addition,
the appellant made two separate requests, dated 13.09.2017 and
18.11.2017, for modifications of the delivery schedule and adjustments
of rates in accordance with GST. According to the appellant, on
28.11.2017, the department responded only to the request for approval F
of drawings and disregarded the request for rescheduling of supplies.
3.4. A revised order, incorporating GST, was issued by the
respondents on 02.01.2018. However, the request for rescheduling of
supplies made by the appellant was ignored and, instead, the order stated
that the appellant was already running late in their supply schedule. G
Thereafter, a notice dated 13.02.2018 was issued alleging that the
appellant was responsible for the delay in supply. The appellant, by letter
1
Hereinafter also referred to as ‘TS-494’ and ‘TS-532’ respectively.
2
‘MPMKVVCL’, for short. H
450 SUPREME COURT REPORTS [2023] 4 S.C.R.
A dated 18.02.2018, responded that there was no delay on their part while
againseeking modification of the delivery schedule.
3.5. It has been the case of the appellant that despite making five
separate requests to reschedule the supply, no response was received
from the respondents. The appellant submitted yet another letter dated
B 07.03.2018, requesting for extension of time. The appellant has stated
the grievance that despite their efforts to supply Level-I transformers,
starting from 02.05.2018 and delivering 300 transformers, the respondents
did not reschedule the supply, and instead imposed late supply penalties
on the appellant’s bills; and deducted penalties to the tune of over Rs. 11
lakh from the bills of the appellant for 300 transformers.
C
3.6. On the other hand, the appellant had received a purchase
order from the respondents for the supply of 593 transformers for Tender
No. TS-532, which was for the supply of 63 KVA and 25 KVA level-II
transformers. The total requirement for the respondents and two other
Discoms was around 75,000 transformers. The purchase order was issued
D on 22.02.2018 by the respondents and was received by the appellant
through email on 03.03.2018. According to the appellant, as for 25 KVA
transformers, they submitted the drawings for approval on 19.04.2018,
which were approved by the respondents on 09.05.2018. Subsequently,
the appellant began manufacturing 100 transformers of Lot-1 under the
E contract and offered the same for inspection to the respondents through
a letter dated 29.05.2018. On 04.06.2018, a stage inspection was
conducted, and clearance was granted on 05.06.2018.On 22.06.2018,
the appellant was directed to supply the aforementioned 63 KVA
Transformers to West Zone Discom (Indore) through a purchase order,
which was executed without any breach.
F
3.7. It has been the case of the appellant that on the intervening
night of 20th and 21st August 2018, an extraordinary storm accompanied
by heavy rains caused the roof of their plant to collapse. As a result,
most of the raw material, which was stored for the manufacture of
transformers, was destroyed. Only 50 transformers from the fourth lot
G of the aforementioned purchase order were saved, as they were complete
in all respects and had already been packed up for delivery. These 50
transformers were supplied on 01.09.2018.
4. On 18.09.2019, the respondent No. 2 Chief General Manager
(Procurement), MPMKVVCLsent a letter to the appellant in relation to
H TS-532 that they had decided to defer the balance deliveries of 593
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 451
v. MPMKVVCL [DINESH MAHESHWARI, J.]
Nos. of transformers under the said contract until further instructions. A
The relevant contents of said letter read as under: -
“No. MD/ MK /04/P-III/TS-494/2824 Bhopal, dated 18/09/2019
To,
M/s. Isolators & Isolators, B
Plot No. 83 Sector. 1,
Industrial Area, Govindpura,
Bhopal – 462023 MP
Sub- Supply of BIS Certified Level- II/0433 KVA.2s KVA C
Conventional Distribution Transformer against Saubhagya Yojana
– Deferment of Supply thereof.
Ref. This Order PO No. MD/MK/04/TS-532/P-III/2166 dated
22.02.2018.
Dear Sir, D
The order under reference above has been placed on you
or supply of BIS Certified Level- II/0433 KVA.2s KVA
Conventional Distribution Transformer against Saubhagya Yojana.
Against the scheduled deliveries of BIS Certified Level- II/0433
KVA.2s KVA Conventional Distribution Transformer as mentioned E
therein, it has been decided to defer the balance deliveries of the
same ie. 593 Nos till further instructions.
The other terms and conditions shall be remain same.”
5. However, an order dated 19.11.2019 was issued by the F
respondent No. 2 cancelling the supply of balance quantity of 286 Level-
1 transformers under TS-494. The relevant contents of said letter are
reproduced as under: -
“No. MD/MK/04/P-III/3491 Bhopal, dated: 19.11.2019
To, G
M/s Isolators & Isolators,
Plot No.- 83 Sector-1,
Industrial Area, Govindpura,
Bhopal-462023 (M.P.). H
452 SUPREME COURT REPORTS [2023] 4 S.C.R.
A Sub:- Cancellation of Purchase Order No. MD/MK/04/TS-
494/P-IIl/1988 dated 30.06.2017 for supply of BIS Certified,
Level-l, 11/0.433 KV, 25 KVA Conventional Distribution
Transformers for unsupplied quantity.
Ref:- 01. This office RCA No. MDIMK/04/TS-494/P-III/1987
B dated 30.06.2017
02. This office letter No. MD/MK/04/P-III/4872 dated
02.11.2018.
Purchase order MD/MK/04/P-IIl/TS-494/1988 dated
30.06.17 for supply of 586 nos. BIS Certified, Level-l, 11/0.433
C KV, 25 KVA Conventional Distribution Transformers was issued
to your firm. The delivery schedule of above Purchase Order
was as below-
D
Your firm has not supplied any quantity even lapse of
schedule period of six months i.e. up to Feb-18. After repeated
telephonic requests, a letter was issued vide letter no. MD/MK/
04/TS-494P-lll/6099 dated 13.02.2018. Subsequently, 300 Nos.
DTRs were supplied against above purchase Order and remaining
E
286 Nos. DTRs have not been supplied till date.
It was informed to your firm vide letter referred above for
non-supply of 25 KVA Level-l DTRs and initiating stern action
against the against your firm. In addition you were also informed
that the number of DTRs equivalent to unsupplied quantity will be
F
purchased from other firm at the risk and cost of your firm.
As per tender clause -12 delivery and supply of material of
Annexure-II of TS -494 read with clause 28 cancellation of rate
contract of Annexure -II the competent authority has accorded
approval for cancellation of PO NO. MD/MK/04/TS-494/P-lll/
G 1988 dated 30.06.2017 for 286 Nos. unsupplied quantity of 25
KVA DTRs with imposition of penalty.
Therefore, PO NO. MD/MK/04/TS-494/P-III/1988 dated
30.06.2017 for 286 Nos. of 25 KVA DTRs is hereby cancelled
with imposition of penalty on unsupplied quantity. Other punitive
H action as per terms of the tender will be initiated separately.”
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 453
v. MPMKVVCL [DINESH MAHESHWARI, J.]
6. Subsequently, the respondent No. 2issued another order dated A
21.11.2019 cancelling the supply of the remaining quantity of transformers
under TS-532 too. The relevant contents of said letter are also reproduced
as under: -
“No. MD/MK/04/P-III/3593 Bhopal, dated: 21.11.2019
B
To,
M/s lsolators&lsolators,
Plot No. - 83 Sector-1,
C
Industrial Area, Govindpura,
Bhopal-462023 (M.P.)
Sub:- Cancellation of Purchase Order No. MD/MK/04/TS-
532/P-III/2166 dated 22.02.2018 for supply of BIS Certified,
EEL-II, 11/0.433 KV, 25 KVA Conventional Distribution D
Transformers for unsupplied quantity.
Ref:- 01. This office RCA No. MD/MK/04/TS-4532/P-III/2092
dated 20.01.2018.
02. This office letter No MD/MK/04/P-III/2824 dated 18.09.
2019. E
**********
Purchase order MD/MK/04/P-III/TS-532/2166 dated
22.02.2018 for supply of 593 nos BIS Certified, EEL-II, 11/0. 433
KV. 25 KVA Conventional Distribution Transformers was issued F
to your firm. The delivery schedule of above Purchase Order
was as below-
G
Firm offered 100 nos. DTRs for stage inspection against
the Purchase order. The inspection was carried out on 04.06.18
and stage clearance letter was issued vide letter no. 1469 dtd
05.06.18. In general procedure, after the stage clearance, firm
has to offer the material for final inspection but M/s Isolators &
H
454 SUPREME COURT REPORTS [2023] 4 S.C.R.
A Isolators, Bhopal has never offered the DTRs for final inspection
till date.
It was informed to your firm vide letter referred above for
non-supply of 25 KVA EEL-II DTRs and initiating stern action
against your firm.
B As per tender clause 04 “Delivery of materiel” of Annexure-
IV of TS - 532 read with clause 17 “Cancellation/Termination of
Purchase order of Annexure -III, the competent authority has
accorded approval for cancellation of PO NO. MD/MK/04/TS-
532/P-III/2166 dated 22.02.2018 for 593 Nos. unsupplied quantity
C of 25 KVA DTRs with imposition of penalty.
Therefore, PO NO.MD/MK/04/TS-532/P-III/2166 dated
22.02.2018 for 593 Nos. of 25 KVA DTRs is hereby cancelled
with imposition of penalty on unsupplied quantity. Other punitive
action as per terms of the tender will be initiated separately.
D
SD/-
Chief General Manager (Proc.)
O/o MD (CZ) MPMKVVCL, Bhopal.”
7. On 26.11.2019, a notice was issued by the respondent No. 2
E asking the appellant to show-cause within 15 days as to why they should
not be debarred from participating in further tenders on account of non-
supply of transformers. In the said notice dated 26.11.2019, the Chief
General Manager (Procurement), after referring to the background
aspects relating to the purchase orders issued to the appellants; the
F appellant’s failure to effect the necessary supplies within time schedule;
and cancellation of the purchase orders, stated as under: -
“*** *** ***
Your firm had offered 100 nos. DTRs for stage inspection
against the Purchase order. The inspection was carried out on
G 04.06.18 and stage clearance letter was issued vide letter no.1469
dtd 05.06.18. In general procedure, after the stage clearance, your
firm were required to offer the material for final inspection but
the above DTRs were not offered by your firm for final inspection.
Therefore, the PO No. MD/MK/04/P-III/TS-532/2166
H dated 22.02.18 has been cancelled vide letter no. MD/MK-04/P-
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 455
v. MPMKVVCL [DINESH MAHESHWARI, J.]
III/3593 dated 21.11.2019 with imposition of penalty on unsupplied A
quantity. With note that other punitive action as per terms of the
tender will be initiated separately.
As per Tender Clause 17 of Annexure-III. General Terms
and Condition:-
The Purchaser may upon written notice of default, B
terminate/cancel the purchase order/contract in whole or for a
part quantity with recovery of liquidate damages at the rate of
10% of ex-works price(s) of stores not delivered by them or liability
on account of risk and cost, whichever is higher in the
circumstances detailed hereunder:- C
17.1. If in the opinion of the Purchaser, the supplier fails to deliver
the material within the time specified or during the period for which
extension has been granted by the Purchaser.
17.4. In pursuance to clause no. 17.1, 17.2 &17.3 above, Purchaser
maydebar the supplier/contractor for further business with D
Purchaser for a declared period on breach of the Purchase Order.
Since MPMKVVCL was in urgent need of 25 KVA DTRs
for completion of urgent works under Government Schemes but
your firm hadnot complied with the provisions of tender therefore
both the purchase orders MD/MK-04/P-III/TS-494/1988 dated E
30.06.17 and TS-532/2166 dated 22.02.18 have been cancelled.
In view of above default on your part, this office is sending
this notice asking you to clarify as to why strict action as per
tender terms should not be taken against you for blatant violation
of Purchase Order andfor the large insensitivity shown by you to F
a number of government development schemes which were
severely hit due to non-executing of Purchase Order issued upon
your firm. Also intimate that why your firm should not be debarred
as per Tender Provisions stated above. You have also been given
sufficient time to supply the material but you have ignoredthe set
G
timeliness persistently and knowingly.
Please submit your reply within 15 days and in case you
want personal hearing then intimate to this office within 07 days
from issue Of this letter, failing which, it will be presumed that
you have no plausible explanation to offer in your defense and
H
456 SUPREME COURT REPORTS [2023] 4 S.C.R.
A then this office would be constrained to take action towards
debarment of your firm for non-performance in material supply.
Hence kindly take due cognizance andsend your reply within time
given.”
8. The appellant responded to the aforementioned notice on
B 30.11.2019, setting out the circumstances for which, theyhad been unable
to undertake the supply against the purchase orders. However, the
respondent issued an order dated 13.02.2020 debarring the appellant
from participating in future tenders for a period of three years. A
representation was made by the appellant on 27.02.2020 requesting the
respondents to reconsider and recall the order dated 13.02.2020 but in
C vain. In the said order dated 13.02.2020, the Chief General Manager
(Procurement), after recounting the background aspects including the
said show-cause notice dated 26.11.2019, stated and ordered as under:-
“*** *** ***
D In view of above default on your part, this office had sent a
notice ofdebarring for violation of PO Terms & Conditions, asking
you to clarify as towhy strict action as per tender terms should
not be taken against you forblatant violation of Purchase Order
and for the large insensitivity shown byyou to a number of
Government Development Schemes. You were alsointimated that
E why your firm should not be debarred as per Tender
Provisionsstated above. You were also given 15 day’s time to
furnish a reply of notice ofdebarring to this office personal hearing.
Your firm vide letter no.I&I/BPL/19-20/Reply/1025 dated
30.11.2019 has submitted reply to debarring notice and your firm
F could not produce anydocument/statement which restrains the firm
from debarring. Your firm hasviolated Tender conditions as
stipulated in TS-494 and TS-532.
Therefore, after given full opportunity and due consideration,
thecompetent authority has accorded approval to recover penalty
G on rejectedand unsupplied DTRs from the firm. Further.
M/s Isolators, Bhopal and itsCompany/Firms should be debarred
for future business for the period of 3(Three) years.
Accordingly, your firm M/s Isolators & Isolators. Bhopal
havingregistered office at Plot No.-83 Sector-I, Industrial Area.
H Govindpura. Bhopal-462023 (M.P.) is hereby debarred for
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 457
v. MPMKVVCL [DINESH MAHESHWARI, J.]
participating in tenders of MPMKVVCLfor a period of 3(Three) A
years from the date of issuance of this letter. All ofyour associated
concerns and their Business dealings with this companyhave also
been banned for the same period.”
9. In the given circumstances, the appellant approached the
Madhya Pradesh High Court, Principal Seat at Jabalpur by way of WP B
No. 7579 of 2020 challenging the aforesaid order dated 13.02.2020. The
High Court, by its order dated 08.07.2020, set aside the order dated
13.02.2020 and permitted the respondents to pass a fresh order within
15 days after affording an opportunity of hearing to the appellant.
10. Thereafter,by a notice dated 16.07.2020, the appellant was C
called for hearing through video-conferencing on 20.07.2020. Duringthis
video-conferencing, three representatives of the appellant including its
proprietor were afforded the opportunity of hearing and thereafter, the
Chief General Manager (Procurement)-respondent No. 2 proceeded to
passa detailed order on 30.07.2020, while point-by-point dealing with all
the relevant submissions, as made by the appellant through the letters D
dated 27.02.2020 and 18.07.2020 as also by the three representatives.
Ultimately, the orders were maintained to the effect that penalty on
rejected and unsupplied transformers shall be recovered from the
appellant firm; and the appellant firm and its subsidiary/affiliated company/
firms shall stand debarred from participating in tenders of MPMKVVCL E
for a period of three years from date of issuance of that order.The
respondent No. 2 finally ordered as under: -
“*** *** ***
Therefore, after given full opportunity and due consideration, the
competent authority has accorded approval to recover penalty F
on rejected and unsupplied DTRs from the firm. Further,
M/s. Isolators & Isolators, Bhopal and its subsidiary/
affiliated Company/[Firms should be debarred for future
business for the period of 3 (Three) years.
Accordingly, your firm M/s Isolators & Isolators, Bhopal G
having registered office at Plot No.- 83 Sector-I, Industrial
Area, Govindpura, Bhopal-462023 (M.P.) is hereby
debarred for participating in tenders of MPMKVVCL for a
period of years from the date of issuance of this letter. All
of your associated concerns and their Business dealings
H
with this Company have also been the same period (sic).”
458 SUPREME COURT REPORTS [2023] 4 S.C.R.
A 11. Later, the respondent No. 2 also issued another order dated
17.08.2020, imposing penalty on the appellantto the tune of Rs.27,98,960/
- in relation to TS-532, being 10% of the ex-works price of the quantity
not deliveredtogether with GST @ 18%. Therelevantcontents of the
said order dated 17.08.2020 read as under:-
B “*** *** ***
Purchase order MD/MK/04/P-III/TS-532/2166 dated
22.02.2018 for supply of 593 nos BIS Certified, Level-II, 11/0.
433 KV. 25 KVA Conventional Distribution Transformers was
issued to your firm. For not making complete supply as per the
C conditions of tender no. 532 and for violating the terms and
conditions of the tender, this office vide letter no. MD/MK/P –
III/3593 dated 21/11/2019 had imposed penalty for non-supply of
593 items and cancelled your order. As per letter no. 3593 dated
21/11/2019 your firm is liable to pay the penalty amount as under
D
E
F
G (Total penalty amount Rs. Twenty Seven lakh Ninety Eight
Thousand Nine Hundred Sixty only )
Therefore, you are requested to kindly deposit the penalty
amount of Rs. 27,98,960/- (Rs. Twenty Seven lakh Ninety Eight
Thousand Nine Hundred Sixty only) vide demand draft in the
account of the company within 15 days failing which appropriate
H
action against your form shall be taken.”
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 459
v. MPMKVVCL [DINESH MAHESHWARI, J.]
12. Being aggrieved of the aforesaid orders dated 30.07.2020 and A
17.08.2020, the appellant preferred another writ petition in the High Court,
being W.P. No. 12075 of 2020 that has been considered and disposed of
by the impugned order dated 23.04.2021.
13. In its order dated 23.04.2021, the High Court took note of the
rival submissions where on one hand, the appellant contended that the B
impugned orders were suffering from violation of principles of natural
justice; that there was no reason recorded in the orders impugned by the
respondents for taking the extreme and extraordinary measure of
debarringthe appellant; that after substantial supply of transformers against
purchase order No. 586, cancelling the order for supply of remaining
transformers was suffering from malice in law; and that the respondents C
had deliberately not considered the factors regarding extraordinary rainfall
and storm between 20.08.2018 and 21.08.2018, resulting in damage to
the plant and loss of raw material. On the other hand, it was contended
on behalf of the respondents that blacklisting or debarring was
orderedafter giving full opportunity to the contractor, who was at fault in D
not supplying the material as per the terms of the contract;that there
was nothing illegal or arbitrary in exercise of powers when the
respondents took recourse to the relevant clauses of the purchase order;
and that reliance of the appellant on force majeure clause was also
misplaced, for no suchinformation was furnished within 15 days, as
required by the terms of the contract. E
14. Having taken note of the rival submissions, respectively in
paragraphs 5 and 6 of the order impugned, in the next paragraph, the
High Court proceeded to state its opinion that the order of blacklisting
contained justified and plausible reasons and no case for exercising
extraordinary powers under Article 226 of the Constitution of India was F
made out. The High Court observed that the appellant failed to substantiate
the lapsesin not supplying the required transformers as per contract.
Thereafter, the High Court merely observed that the second order of
debarment was passed on 30.07.2020 but factually, the appellant-firm
was debarred by the order dated 13.02.2020 and therefore, provided a G
slight modification in the manner that the period of 3 years’ debarment
would be reckoned w.e.f.13.02.2020. With these observations and
modifications, the High Court proceeded to dispose of the writ petition
filed by the appellant.The relevant passages in the order so passed by
the High Court read as under: -
H
460 SUPREME COURT REPORTS [2023] 4 S.C.R.
A “7. Considering the rival contention of the parties and perusal of
record, we are also of the opinion that so far as the orderof
blacklisting is concerned, it contains the reason and in no way we
find those reasons unjustified. Considering the existing fact situation
of the case, we find that the assigned reason appear to be prima-
facie, plausible and are sufficient to maintain the order of
B
blacklisting. In the circumstances, as have been set forth before
us, exercising extraordinary power under Article 226 of the
Constitution of India, interference in a decision making process is
not permissible when the orders have been passed after following
the principle of natural justice and are supported by plausible
C reasons. Indubitably the petitioner’s firm failed to substantiate the
lapses on their part for not supplying the required transformers as
per the contract. We do not find any such reason available in the
case holding the orders passed by the respondents illgal and
arbitrary. Therefore, interference in the matter under Article 226
of the Constitution of India is not warranted. However, we have
D
noticed that the order of debarment has been passed on 30.07.2020
restraining the petitioner from participating in further tender
proceedings of respondents, but, factually the petitioner firm was
debarred vide order dated 13.02.2020, the first order, which was
set aside by this Court. Accordingly, the period of three years
E debarring the petitioner be considered to be reckoned w.e.f.
13.02.2020 and would be ended accordingly after completion of
three years from the said date.
8. Accordingly, the petition is partly allowed modifying the order
of debarment making the same effective w.e.f. 13.02.2020 till the
F period of three years.”
15. At this juncture, we may also take note of the fact that as
against the aforesaid order dated 23.04.2021 passed in W.P. No. 12075
of 2020, the appellant had earlier approached this Court by way of SLP(C)
No. 13571 of 2021 but then, sought permission to withdraw with liberty
G to take recourse to other appropriate remedy in accordance with law.
By the order dated 24.09.2021, the said SLP(C) No. 13571 of 2021 was,
accordingly, dismissed as withdrawn with liberty as prayed. Thereafter,
the appellant filed a review petition in the High Court that came to be
summarily rejected by the High Court with a short order dated 13.12.2021
that reads as under:-
H
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 461
v. MPMKVVCL [DINESH MAHESHWARI, J.]
“On hearing learned counsels, we do not find any error A
apparent on the face of the record that calls for any interference.
In the absence of any error on the face of the record, this
review petition is dismissed.”
16. Assailing the orders so passed by the High Court, learned
senior counsel for the appellant has essentially put forward two principal B
contentions. In the first place, it has been argued that the show-cause
notice dated 26.11.2019was only about debarment but then, the
respondents proceeded to pass the orders debarring the appellant for 3
years as also imposing penalty. Even in regard to the question of penalty,
according to the learned counsel, as per Clause 4 of the contract, the C
quantum of penalty could have been from ½% to 10% for delay in delivery
but the respondents have chosen to impose the maximum thereof without
assigning any reason as to why the highest of such quantum was chosen.
In the second place, learned counsel has contended that the order
debarring the appellant and the order imposing penalty both were
challenged in the writ petition but the High Court chose to consider only D
the challenge with respect to the order of the debarment and nothing
was considered about the order imposing penalty.
16.1. With reference to the facts of the case, learned senior counsel
has submitted that the appellant is manufacturer of transformers and by
the very nature of its product, the distribution company like the respondents E
are the only purchasers and that way, the present one is a case of single
purchase market. The appellant had been supplying transformers to the
respondents since the year 1989 without any default or difficulties and in
the totality of circumstances, delay in execution of the present purchase
orders,that had occurred because of the reasons and circumstances F
explained by the appellant, debarment for a maximum period of 3 years
and imposition of maximum penalty had been highly disproportionate
and too harsh. Learned counsel has particularly referred to the fact that
as regards TS-494, the appellant had supplied 300 out of 586 transformers
and as regards TS-532, the appellant had supplied all the 63 KVA
transformers. The want of supply of other transformers had been for G
the reasons explained by the appellant and entire fault could not have
been attributed to the appellant alone. In this regard, learned counsel has
particularly underscored the submissions that by the letter dated
18.09.2019,the respondents deferred the delivery and thereafter,there
was no communicationfor withdrawing deferment. In this background, H
462 SUPREME COURT REPORTS [2023] 4 S.C.R.
A the order cancelling contract on 21.11.2019 for want of supply could
have only been considered as arbitrary and unreasonable.
16.2. The learned counsel has also relied upon the decisions of
this Court in Gorkha Security Services v. Government (NCT of Delhi)
and Ors.: (2014) 9 SCC 105 and UMC Technologies Private Limited
B v. Food Corporation of India and Anr.: (2021) 2 SCC 551 to submit
that show-cause notice must indicate the proposed action and in the
show-cause notice in question, there being no indication of the proposed
action of imposing penalty, the order imposing penalty remains patently
illegal and deserves to be set aside.
C 17. In the present case, while preliminarily entertaining thepetitions
seeking leave to appeal, this Court had taken note of the facts regarding
earlier filing of the petition, being SLP(C) No. 13571 of 2021 against the
order dated 23.04.2021 passed in W.P. No. 12075 of 2020; and the
appellant having withdrawn on 24.09.2021 with liberty to take recourse
to other appropriate remedy in accordance with law. As noticed,thereafter,
D the appellant filed a review petition in the High Court that came to be
summarily rejected by the High Court after finding no error apparent on
the face of the record. In this backdrop, this Court had left the question
of maintainability of the petitions, particularly in challenge to the original
order dated 23.04.2021 open.
E 17.1. In regard to the above question, learned senior counsel has
referred to a decision of this Court in the case ofA.P. State Financial
Corporation v. C.M. Ashok Raju and Ors.: (1994) 5 SCC 359 to
submit that the first order of the High Court dated 23.04.2021 cannot be
said to have attained finality. He would also submit that the order dated
F 23.04.2021 suffered from several errors apparent on the face of record,
including that the challenge to the order imposing penalty was not even
gone into but, the High Court rejected the review petition without even
examining the record.
18. Per contra, learned counsel for the respondents has duly
G supported the orders impugned with particular reference to Clauses 13,
14 and 15 of the conditions of purchase order No. TS-494 and Clauses
8,10 and 17 of TS-532. The learned counsel would submit that since the
appellant did not comply with the terms and conditions of the contract, a
notice was issued on 13.02.2018 which was followed by the
communications dated 02.05.2018, 12.06.2018, 16.08.2018 and
H
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 463
v. MPMKVVCL [DINESH MAHESHWARI, J.]
01.09.2018 about dispatch instructions for supply of transformers Level- A
I. According to the learned counsel, the appellant having failed to fulfil
the terms and conditions of TS-494, by the order dated 19.11.2019, the
respondents rightly cancelled the said purchase order with imposition of
penalty for non-supply of 286 transformers. It has been argued that the
said termination order had never been challenged by the appellant and
B
the same has attained finality. As regards the supply of 593 DTRs Level-
II, the appellant was informed by the communication dated 22.02.2018
that the respondents had reserved the right to defer, reduce or reschedule
the supply as per the requirement. According to the learned counsel, the
appellant having failed to make the requisite supplies despite various
requests, by the communication dated 18.09.2019, the appellant was C
informed about deferment of supply until further instructions.
19. As noticed, the aforesaid communication of deferment dated
18.09.2019 has been strongly relied upon by the learned counsel for the
appellant to submit that after such communication, the respondents never
issued instructions for supply or for withdrawal of such deferment and, D
therefore, the blame could have been shifted on the appellant.During the
course of submissions, in regard to the aforesaid line of arguments, we
posed pointed query to the learned counsel for the respondents and
afforded him an opportunity on 28.02.2023 to take all instructions while
posting the matter for further hearing. Learned counsel for the
respondents has endeavoured to submit that the said communication E
dated 18.09.2019 is of no adverse impact on the validity of the orders
passed against the appellant. As regards the said communication dated
18.09.2019 and the contentions of the appellant on that basis, the learned
counsel for the respondents has further submitted the additional written
submissions and having regard to the questions involved, we deem it F
appropriate to reproduce the relevant passages of such written
submissions as follows: -
“4. That a submission on behalf of petitioner has been made before
this Hon’ble Court that vide letter dated 18.09.2019 (Page 148
Of SLP), the respondent/Electricity Company himself has deferred G
the supply of 593 transformers of Level-II and as such, there is
no fault on the part of the petitioner-firm in supplying 593
transformers. In this respect, it is most humbly submitted that the
said submission on behalf of Petitioner is only to cover-up its
defaults in not supplying the 593 transformers as per time schedule
H
464 SUPREME COURT REPORTS [2023] 4 S.C.R.
A prescribed. The petitioner herein has not produced any document
which can be treated as against the answering respondents and
as such, an adverse inference cannot be drawn against the
answering respondents. The submissions made by the petitioner
are contrary to the material evidence available on records, thus,
same are liable to be rejected. The petitioner herein was awarded
B
the contract on 22.02.2018 for supply of 593 transformers of level-
II and in that regard a purchase order was issued along with terms
and conditions of said Contract to the petitioner. It is submitted
that as per terms and conditions and also admitted position is that
the said supply of 593 transformers had to be made within 6 months
C from the date of award of said Contract/Purchase order. The
Petitioner herein has not produced a single document before the
forums below nor before this Hon’ble Court that he was always
ready to supply the 593 transformers but the respondents refused
to either accept or defer the said supply. Even after 18.09.2019,
the petitioner has not produced a single evidence on record to
D
show that he was ready to supply the said transformer which had
to be supplied within 6 months from the date of purchase order
i.e. on or before 22 August, 2019. After considering the gross
violations of terms and conditions of supply of said transformers,
virtually after an expiry of more than one year, when it was found
E that petitioner is not at all interested in supply the said 593
transformers, the answering respondent had no option but to
terminate the said purchase order vide order dated 21.11.2019
which has never been challenged before any competent forum.
5. That it is further most respectfully submitted that even if it
F assumed for the sake of argument, though it is not admitted, that
the answering respondents himself have deferred the supply of
said 593 transformers, still the adverse inference cannot be drawn
against the answering respondents on the ground that it is for the
petitioner-firm who has to prove on record that the 593
transformers have always been ready for supply to the answering
G respondents. It is further most respectfully submitted that onus is
upon the petitioner to prove that petitioner was always ready to
supply the said 593 transformers but the answering respondents
have refused the same or deferred the same.
H
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 465
v. MPMKVVCL [DINESH MAHESHWARI, J.]
6. It is further most respectfully submitted that the letter dated A
18.09.2019 of answering respondents cannot be taken into
consideration against the answering respondents in view of the
fact that despite various opportunities and communications made
to the petitioner by the answering respondents for supply of said
593 Transformers, the petitioner has not even pay any heed on
B
that and finally has chosen not to supply the said transformers on
one pretext or other. The answering respondents most humbly
submit that this Hon’ble Court may kindly see the reasons given
in detail while cancelling the said Purchase order vide order dated
21.11.2019 and also while declaring the petitioner blacklisted vide
order dated 30.07.2020.” C
19.1. The learned counsel has submitted that keeping in view the
past conduct of the appellant and violation of the terms and conditions of
contract and purchase order, they had rightly cancelled the same and
imposed penalty on unsupplied quantity by another detailed order dated
21.11.2019. It is submitted that even the said order dated 21.11.2019 has D
never been challenged in any forum and has attained finality. According
to the learned counsel, imposition of penalty has been consequential to
the aforesaid order dated 21.11.2019 and the same had been as per the
terms and conditions of the rate/contract/purchase order.
19.2. With reference to the show-cause notice dated 26.11.2019 E
and the reply dated 30.11.2019, it has been argued that the order dated
13.02.2020 was passed after extending full opportunity of hearing to the
appellant and when the said order was challenged in the High Court in
Writ Petition No. 7579 of 2020 and the High Court directed the
respondents to pass a fresh order after affording opportunity of hearing
to the appellant, the authority concerned passed detailed speaking order F
dated 30.07.2020 after giving full opportunity of hearing to the appellant
and after duly considering the financial loss suffered by the respondents
due to non-supply of transformers.
19.3. It has been argued that the writ petition was duly defended
with reference to Clause 14 of purchase order and the High Court has G
rightly rejected the principal contention of the appellant even while giving
a partial relief of making the order of debarment effective from
13.02.2020. Thus, according to the learned counsel, no case for
interference is made out. The decisions of this Court in the case of
Raghunath Thakur v. State of Bihar and Ors.: (1989) 1 SCC 229;M/ H
466 SUPREME COURT REPORTS [2023] 4 S.C.R.
A s Erusian Equipment and Chemicals Ltd. v. State of West Bengal
and Anr.: (1975) 1 SCC 70;and an order dated 13.12.2019 passed in
Civil Appeal No. 9417 of 2019- M/s Daffodills Pharmaceuticals
Ltd. and Anr. v. State of U.P. and Anr.have been relied upon.
20. Having given thoughtful consideration to the rival submissions
B and having examined the record, we are clearly of the view that the
impugned order as passed by the High Court in practically denying the
principal relief claimed by the appellant cannot be approved and the writ
petition filed by the appellant deserves to be allowed to the extent of
annulling the effect of debarment and quashing the imposition of penalty.
C 21. As regards the principles of law applicable to the case, we
need not elaborate on various decisions cited at the Bar. Suffice it would
be to take note of the decision in UMC Technologies Private Limited
(supra) wherein, the substance of the other relevant decisions has also
been duly noticed by this Court while explaining the principles governing
such actions of debarment/blacklisting. Therein, this Court, inter alia,
D underscored the requirement of specific show-cause notice and referred
to the settled principles in the following terms: -
“13. At the outset, it must be noted that it is the first principle
of civilised jurisprudence that a person against whom any action
is sought to be taken or whose right or interests are being affected
E should be given a reasonable opportunity to defend himself. The
basic principle of natural justice is that before adjudication starts,
the authority concerned should give to the affected party a notice
of the case against him so that he can defend himself. Such notice
should be adequate and the grounds necessitating action and the
F penalty/action proposed should be mentioned specifically and
unambiguously. An order travelling beyond the bounds of notice is
impermissible and without jurisdiction to that extent. This Court
in Nasir Ahmad v. Custodian General, Evacuee Property,
(1980) 3 SCC 1 has held that it is essential for the notice to specify
the particular grounds on the basis of which an action is proposed
G to be taken so as to enable the noticee to answer the case against
him. If these conditions are not satisfied, the person cannot be
said to have been granted any reasonable opportunity of being
heard.
14. Specifically, in the context of blacklisting of a person or
H an entity by the State or a State Corporation, the requirement of a
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 467
v. MPMKVVCL [DINESH MAHESHWARI, J.]
valid, particularised and unambiguous show-cause notice is A
particularly crucial due to the severe consequences of blacklisting
and the stigmatisation that accrues to the person/entity being
blacklisted. Here, it may be gainful to describe the concept of
blacklisting and the graveness of the consequences occasioned
by it. Blacklisting has the effect of denying a person or an entity
B
the privileged opportunity of entering into government contracts.
This privilege arises because it is the State who is the counterparty
in government contracts and as such, every eligible person is to
be afforded an equal opportunity to participate in such contracts,
without arbitrariness and discrimination. Not only does blacklisting
take away this privilege, it also tarnishes the blacklisted person’s C
reputation and brings the person’s character into question.
Blacklisting also has long-lasting civil consequences for the future
business prospects of the blacklisted person.
*** *** ***
16. The severity of the effects of blacklisting and the D
resultant need for strict observance of the principles of natural
justice before passing an order of blacklisting were highlighted by
this Court in Erusian Equipment & Chemicals Ltd. v. State of
W.B., (1975) 1 SCC 70 in the following terms: (SCC pp. 74-75,
paras 12, 15 & 20) E
“12. … The order of blacklisting has the effect of depriving a
person of equality of opportunity in the matter of public contract.
A person who is on the approved list is unable to enter into
advantageous relations with the Government because of the
order of blacklisting. A person who has been dealing with the F
Government in the matter of sale and purchase of materials
has a legitimate interest or expectation. When the State acts
to the prejudice of a person it has to be supported by legality.
***
15.…The blacklisting order involves civil consequences. It casts G
a slur. It creates a barrier between the persons blacklisted and
the Government in the matter of transactions. The blacklists
are “instruments of coercion”.
***
H
468 SUPREME COURT REPORTS [2023] 4 S.C.R.
A 20. Blacklisting has the effect of preventing a person from the
privilege and advantage of entering into lawful relationship with
the Government for purposes of gains. The fact that a disability
is created by the order of blacklisting indicates that the relevant
authority is to have an objective satisfaction. Fundamentals of
fair play require that the person concerned should be given an
B
opportunity to represent his case before he is put on the
blacklist.”
17. Similarly, this Court in Raghunath Thakur v. State of
Bihar, (1989) 1 SCC 229 struck down an order of blacklisting for
future contracts on the ground of non-observance of the principles
C of natural justice. The relevant extract of the judgment in that
case is as follows: (SCC p. 230, para 4)
“4. … [I]t is an implied principle of the rule of law that any
order having civil consequences should be passed only after
following the principles of natural justice. It has to be realised
D that blacklisting any person in respect of business ventures
has civil consequence for the future business of the person
concerned in any event. Even if the rules do not express so, it
is an elementary principle of natural justice that parties affected
by any order should have right of being heard and making
E representations against the order.”
18. This Court in Gorkha Security Services v. State (NCT
of Delhi), (2014) 9 SCC 105 has described blacklisting as being
equivalent to the civil death of a person because blacklisting is
stigmatic in nature and debars a person from participating in
F government tenders thereby precluding him from the award of
government contracts. It has been held thus: (SCC p. 115, para
16)
“16. It is a common case of the parties that the blacklisting
has to be preceded by a show-cause notice. Law in this regard
G is firmly grounded and does not even demand much
amplification. The necessity of compliance with the principles
of natural justice by giving the opportunity to the person against
whom action of blacklisting is sought to be taken has a valid
and solid rationale behind it. With blacklisting, many civil and/
or evil consequences follow. It is described as “civil death” of
H
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 469
v. MPMKVVCL [DINESH MAHESHWARI, J.]
a person who is foisted with the order of blacklisting. Such an A
order is stigmatic in nature and debars such a person from
participating in government tenders which means precluding
him from the award of government contracts.”
19. In light of the above decisions, it is clear that a prior show-
cause notice granting a reasonable opportunity of being heard is B
an essential element of all administrative decision-making and
particularly so in decisions pertaining to blacklisting which entail
grave consequences for the entity being blacklisted. In these cases,
furnishing of a valid show-cause notice is critical and a failure to
do so would be fatal to any order of blacklisting pursuant thereto.”
C
22. As regards maintainability of these appeals, learned counsel
for the appellant has rightly referred to the decision in A.P. State
Financial Corporation (supra) wherein, while dealing with an akin
question about maintainability of fresh appeal, after withdrawal of the
earlier one and after another round of approach to the High Court,this
Court, inter alia, observed as under: - D
“6. Learned counsel for the contesting respondents have
strenuously contended that the special leave petitions against the
judgment of the Division Bench of the High Court in writ appeals,
having been rejected by this Court, the High Court judgment has
achieved finality and, as such, these appeals are liable to be E
dismissed on that short ground. We do not agree with the learned
counsel. This Court while rejecting the petitions as withdrawn,
granted liberty to the petitioner to approach the High Court and
point out the case which was sought to be pleaded before this
Court. In other words, this Court prima facie found the contentions F
of the petitioner to be plausible and, as such, granted liberty to
raise the same before the High Court. The High Court heard the
parties at length and passed a reasoned order running into 16
pages. In the facts and circumstances of this case, we are not
inclined to agree with the learned counsel that the judgment of the
High Court in writ appeals has achieved finality.” G
22.1. Having regard to the above, and overall circumstances of
the case we find no reason to treat the impugned order dated 23.04.2021
as final and deem it appropriate to examine the challenge on merits.
H
470 SUPREME COURT REPORTS [2023] 4 S.C.R.
A 23. As regards the question of penalty, we find force and substance
in the contentions urged on behalf of the appellant that such an imposition
cannot be approved for two major factors: The first and foremost being
that in the show-cause notice dated 26.11.2019, the appellant was put to
notice only as regards the proposition of debarment and in the said notice,
nothing was indicated about the proposed imposition of penalty. Though
B
in the cancellation orders dated 19.11.2019 and 21.11.2019,the
respondents purportedly reserved their right to take appropriate steps,
those orders cannot be read as show-cause notice specifically for the
purpose of imposition of penalty. The submissions on behalf of the
respondents in this regard that the said orders dated 19.11.2019 and
C 21.11.2019 have attained finality do not take their case any further. Finality
attaching to the action of cancellation cannot be read as a due notice for
imposition of penalty even if the respondents chose to employ the
expression ‘cancelled with imposition of penalty’ in those orders.
Looking to the terms of contract, quantification of the amount of penalty
(if at all the penalty is considered leviable) could not have been carried
D
out without affording adequate opportunity of response to the appellant.
That being the position, the action of the respondents in imposing the
penalty without even putting the appellant to notice as regards this
proposed action cannot be approved.
23.1. Secondly, the authority concerned has proceeded to impose
E the maximum of penalty to the tune of 10% of the deficit supply without
specifying as to why the maximum of penalty was sought to be imposed.
In this regard, the relevant factors as indicated by the appellant could
not have been ignored altogether. Unfortunately, the High Court has
totally omitted to consider this aspect of the grievance of the appellant.
F 23.2. Though, ordinarily, for such an omission of the High Court,
the course would have been to remit the issue for consideration but, we
are of the view that no useful purpose would be served by remitting
such an issue in this matter. This is for the simple reason that imposition
of penalty against the appellant cannot be approved because of the want
G of specific show-cause notice. Moreover, no specific quantum of loss
has been specified by the respondents so as to justify the imposition of
maximum of penalty. Viewed from any angle, the impugned order dated
17.08.2020 is required to be set aside.
24. Even the order debarring the appellant for a period of 3 years
H for default in making the requisite supplies carries its own shortcomings.
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA 471
v. MPMKVVCL [DINESH MAHESHWARI, J.]
As noticed, the appellant had indeed made substantial supplies against A
the purchase orders in question. Fact of the matter further remains that
on 18.09.2019, the respondent No. 2 dealing with the procurement
specifically informed the appellant that the supply under the purchase
order in question is to be deferred. It has rightly been argued on behalf
of the appellant that after such an order of deferment, there had not
B
been any other communication or even indication from the respondents
which would have informed the appellant to resume supplies. We have
reproduced hereinabove all the relevant passages in the additional written
submissions on behalf of the respondents, made in an effort to meet with
the arguments concerning the effect and impact of the said communication
dated 18.09.2019. It is at once apparent that the respondents have not C
been able to rebut the contention urged in this regard on behalf of the
appellant. The written submissions on behalf of the respondents do not
answer the root question in the matter as to how the appellant could
have been made solely responsible for delay or default in supply after
the communication dated 18.09.2019 when the respondents themselves
D
informed the appellant that taking of balance delivery was being deferred
(until further instructions). In the length and breadth of the arguments on
behalf of the respondents, it has nowhere been pointed out if such “further
instructions” were ever issued to the appellant before issuance of the
cancellation orders dated 19.11.2019and 21.11.2019 as also before
issuance of show-cause notice dated 26.11.2019. That being the position, E
we are clearly of the view that the debarment order had been issued
against the appellant without due regard to the undeniable factual situation
where the entire blame could not have been foisted upon or shifted
towards the appellant. Hence, the impugned order dated 30.07.2020
debarring the appellant is also required to be set aside.
F
25. Before concluding, we are impelled to observe that, in fact,
the High Court had had the opportunity to correct the obvious errors in
its order dated 23.04.2021, particularly when the review petition was
placed before it for consideration because one part of the matter
(concerning penalty) was not even considered and as regards other part
too, the pertinent contentions of the appellant did not acquire the requisite G
attention of the High Court. Unfortunately, the High Court chose to
dismiss the review petition without even looking into the relevant factors,
including the oneconcerning the impact of the communication dated
18.09.2019. The High Court having not dealt with the matter in the correct
H
472 SUPREME COURT REPORTS [2023] 4 S.C.R.
A perspective whether in disposal of the writ petition or in disposal of the
review petition, both the impugned orders could only be disapproved.
26. Accordingly, and in view of the above, these appeals succeed
and are allowed. The impugned orders dated 23.04.2021 in W.P. No.
12075 of 2020 and dated 13.12.2021 in Review Petition No. 894 of 2021
B are set aside; and the writ petition filed by the appellant is allowed. The
impugned orders dated 30.07.2020 in debarment of the appellant and
dated 17.08.2020 in imposition of penalty are quashed and set aside.
26.1. Having regard to the period of debarment in terms of the
impugned order dated 30.07.2020, we deem it appropriate to provide
C that such debarment is annulled for all practical purposes and the said
order dated 30.07.2020 shall not operate against the rights and interests
of the appellant in any future tender process. The order dated 17.08.2020
imposing penalty having also been set aside, no recovery shall be made
from the appellant thereunder and if any amount has been recovered,
the same shall be refunded to the appellant within a month from today or
D else, it shall carry simple interest at the rate of 9% per annum from the
date of recovery and until the date of repayment.The parties shall bear
their own costs.
Divya Pandey Appeals allowed.
E (Assisted by : Shevali Monga, LCRA)
F
G
H
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