The State Of Odisha vs M/S Panda Infraproject Limited on 24 February, 2022


Try out our Premium Member services: Virtual Legal Assistant, Query Alert Service and an ad-free experience. Free for one month and pay only if you like it.

Supreme Court of India

The State Of Odisha vs M/S Panda Infraproject Limited on 24 February, 2022

Author: M.R. Shah

Bench: M.R. Shah, B.V. Nagarathna

                                                                    REPORTABLE

                                IN THE SUPREME COURT OF INDIA
                                 CIVIL APPELLATE JURISDICTION

                                 CIVIL APPEAL NO.1083 OF 2022

         State of Odisha & Ors.                                     ..Appellant (S)
                                              VERSUS

         M/s Panda Infraproject Limited                           ..Respondent (S)

                                                With

                                 CIVIL APPEAL NO.1084 OF 2022


         State of Odisha & Ors.                                     ..Appellant (S)
                                              VERSUS

         M/s Panda Infra Projects (India) Pvt. Ltd.               ..Respondent (S)


                                          JUDGMENT

M. R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned

judgment and order dated 23.03.2021 passed by the High

Court of Orissa at Cuttack in W.P. (C) No.26408 of 2017,

by which the High Court has allowed the said writ petition
Signature Not Verified

and has quashed and set aside the order passed by the
Digitally signed by R
Natarajan
Date: 2022.02.24
16:34:58 IST
Reason:

State, banning the respondent herein from participating or

1
bidding for any work to be undertaken by Government of

Odisha and transacting any business with Government of

Odisha, either directly in the name of propriety bidder or

indirectly under any different name or title, the State of

Odisha has preferred the present C.A. No.1083 of 2022.

2. Feeling aggrieved and dissatisfied with the subsequent

consequential order passed by the High Court vide order

dated 04.06.2021 in W.P. (C) No.16723 of 2021 by which

the High Court, in consequence of the earlier order dated

23.03.2021 passed in W.P. (C) No.26408 of 2017, directed

the State of Odisha to remove the name of the contractor –

respondent herein from the list of blacklisted contractors,

the State of Odisha has preferred the present C.A. No.1084

of 2022.

3. That the respondent – contractor was awarded a contract

for construction of a flyover over the railway level crossing

at Bomikhal Junction in Bhubaneswar. That in pursuance

of the said contract the respondent – contractor

constructed the said flyover. In the year 2017, a ten meter

slab of the flyover collapsed during concreting of the

2
railway over bridge at the level crossing, which resulted in

loss of life and property. One person died and eleven

others were injured. A high­level inquiry was conducted by

the Chief Engineer (Design) and Chief Engineer (DPI and

Roads). The committee submitted a comprehensive report

after a detailed inquiry and found the contractor –

respondent herein guilty. It was found that the contractor

did not submit the formwork design and adopted his own

arrangement leading to collapse of such a huge structure

during construction. It was also found that the contractor

had not ensured adequate safety measures during the

period of construction; otherwise such an unfortunate fatal

accident could have been avoided. It was found that the

quality assurance had not been maintained as stipulated

in the codes and manuals and as per the agreement. It

was found that there were a lot many deficiencies in

workmanship that could affect the quality of work, as

found in other formwork assemblies. Therefore, the

committee found the contractor responsible for such a

serious accident.

3
3.1 On the basis of such report the State Government took the

matter very seriously and directed that immediate

necessary action be taken for blacklisting the contractor

following the procedure as per the Orissa Public Works

Department (OPWD) Code. Thereafter, a show cause notice

was issued to the contractor and the contractor was asked

to show cause as to why it be not blacklisted for

intentionally violating the relevant clauses of the

Agreement No.15­P1/2011­12. The respondent filed a

detailed reply. That on considering the allegations in the

said show cause notice and reply thereto, the Chief

Engineer (DPI & Roads) Odisha issued an order dated

12.12.2017, whereby the respondent – contractor was

blacklisted with immediate effect, for intentional violation

of condition of the contract leading to injuries and loss of

life. The respondent – contractor was banned from

participating or bidding for any work to be undertaken by

the Government of Odisha and the contractor was also

banned from transacting business with Government of

Odisha, either directly or indirectly.

4
3.2 Aggrieved by the order of blacklisting dated 12.12.2017,

the contractor filed Writ Petition (C) No.26408 of 2017

seeking quashing of the order of blacklisting and by the

impugned judgment and order, the High Court has set

aside the order of blacklisting mainly on the ground that

the order of blacklisting is in violation of principles of

natural justice. The impugned judgment and order passed

by the High Court quashing and setting aside the order of

blacklisting is the subject matter of Civil Appeal No.1083

of 2022.

3.3 That thereafter the contractor filed another Writ Petition

(C) No.16723 of 2021, making a grievance that despite the

order of blacklisting set aside by the High Court in Writ

Petition (C) No.26408 of 2017, the contractor’s name

continues to be shown as the blacklisted in the official

portal of the Government of Odisha. By the order dated

04.06.2021, the High Court has disposed of the said writ

petition by directing the State to pass appropriate orders to

stop showing on the official portal of the Government of

Odisha the name of the contractor – respondent herein as

5
a blacklisted company to enable the contractor to seek

renewal of its licence as well participate in future tenders.

The order dated 04.06.2021 passed by the High Court in

Writ Petition (C) No.16723 of 2021 is the subject matter of

Civil Appeal No.1084 of 2022.

4. Shri Ashok Kumar Parija, learned Advocate General has

appeared on behalf of the State of Odisha and Shri Sibo

Sankar Misra, learned Advocate has appeared on behalf of

the respondent – contractor.

5. Shri Ashok Kumar Parija, learned Advocate General

appearing on behalf of the State of Odisha has vehemently

submitted that in the facts and circumstances of the case,

the High Court has materially erred in quashing and

setting aside the order passed by the State of Odisha

blacklisting the respondent – contractor.

5.1 It is contended that the High Court has erred in holding

that the order of blacklisting was in violation of the

principles of natural justice.

6
5.2 It is submitted that as such before blacklisting the

respondent – contractor a show cause notice was issued

and served upon the respondent. The procedure as

required as far as Appendix­XXXIV of OPWD Code was

followed and thereafter, after considering the reply

submitted by the contractor, the order of blacklisting was

passed. It is submitted that therefore, the High Court has

erred in holding that the order of blacklisting was in

breach of principles of natural justice.

5.3 It is further submitted by Shri Parija, learned Advocate

General appearing on behalf of the State that the High

Court has also erred in concluding that the blacklisting

order was pre­decided as the same was passed on the

basis of the recommendations made in the inquiry report.

It is urged that in fact the findings recorded by the inquiry

committee can be said to be the basis for initiating the

action of blacklisting against the contractor. It is

submitted that therefore, the findings recorded by the

inquiry committee can be said to be a prima facie opinion

while initiating the proceedings for blacklisting. It is

7
submitted that merely because show cause notice was

issued and the blacklisting order was passed on

consideration of the inquiry report, that by itself it cannot

be said that the blacklisting order was pre­decided.

5.4 It is further submitted by Shri Parija, learned Advocate

General, appearing on behalf of the State that even

otherwise, while passing the impugned judgment and

order quashing and setting aside the blacklisting order,

the High Court has not at all considered the seriousness of

the allegations against the contractor. It is submitted that

it was a case of grave lapse and omission and commission

on the part of the contractor; a serious incident occurred

in which one person died and eleven others were injured. It

is submitted that therefore, the High Court ought not to

have interfered with the order passed by the State

Government blacklisting the respondent – contractor

6. The present appeals are vehemently opposed by Shri Sibo

Sankar Misra, learned counsel appearing on behalf of the

respondent – contractor.

8
6.1 It is submitted that in the facts and circumstances of the

case the High Court has rightly observed and held that the

order of blacklisting was pre­determined and the same was

in breach of principles of natural justice.

6.2 It is submitted that before a show cause notice was issued

to the respondent – contractor, a communication/letter

dated 10.10.2017 was written by the Under Secretary in

the Works Department to the Chief Engineer which shows

that the Government had already ordered blacklisting of

the contractor and the Engineer­in­Chief was directed to

take immediate action for blacklisting the contractor. It is

submitted that as rightly observed that the action of

blacklisting the contractor was pre­determined. It is

submitted that it is rightly observed by the High Court that

giving a show cause notice was an empty formality which

was not going to change the decision already taken to

blacklist the contractor.

9
6.3 It is further submitted that even in the show cause notice

there was no reference to the letter dated 10.10.2017

and/or to the report of the committee.

6.4 It is further submitted that even after the show cause

notice containing serious allegations of violations by the

contractor, the contractor was asked to execute the

balance work, on a revised design, which the contractor –

respondent admittedly completed to the satisfaction of the

Department by 31.03.2018. It is submitted that therefore,

the High Court has rightly quashed the order of

blacklisting the respondent – contractor.

6.5 In the alternative, it is contended by learned counsel

appearing on behalf of the respondent – contractor that in

the facts and circumstances of the case, the order of

blacklisting the respondent – contractor permanently can

be said to be too harsh and/or disproportionate to the

charge/misconduct proved against the respondent –

contractor.

10
6.6 It is urged that it was the first offence by the respondent –

contractor. That after the impugned order passed by the

Government, the Government of Odisha, Works

Department passed an office memorandum dated

26.11.2021, which provides that the blacklisting period

per offence shall be limited to three years subject to an

overall maximum cumulative period of ten years for

multiple offences. It is submitted that the respondent has

completed a period of 4 ½ years of its blacklisting. It is

submitted that therefore the order of blacklisting

respondent – contractor permanently also deserves to be

quashed and set aside.

6.7 Making the above submissions and relying on the

decisions of this Court in the cases of Erusian Equipment

& Chemicals Ltd. Vs. State of West Bengal and Anr.

(1975) 1 SCC 70, Kulja Industries Limited Vs. Chief

General Manager, Western Telecom Project Bharat

Sanchar Nigam Limited and Ors. (2014) 14 SCC 731

and M/s. Daffodills Pharmaceuticals Ltd. & Anr. Vs.

State of U.P. & Anr. 2019 (17) Scale 758, it is prayed to
11
dismiss the present appeals and/or in the alternative to

reduce the period of blacklisting.

7. We have heard learned counsel appearing on behalf of the

respective parties at length.

8. By the impugned judgment and order, the High Court has

set aside the order passed by the Government of Odisha

blacklisting the respondent contractor mainly on the

ground that the same was pre­determined and in breach of

principles of natural justice.

8.1 However, it is required to be noted that the action of

blacklisting followed a high­level inquiry conducted by two

members committee, Chief Engineer (Designs) and Chief

Engineer (DPI & Roads). After studying the contract

provisions and drawings, as also inquiry on the spot and

after a detailed consideration of the general behaviour and

collapse of the formwork, a comprehensive report was

submitted and the following observations were made in

respect of the respondent – contractor: ­

“(b) In respect of the Contractor

12

(i) The Contractor has not submitted the
formwork design and has adopted his own
arrangement leading to such occurrence of
collapse of such huge structure during
construction. Design of the formwork is
the responsibility of the Contractor and
the Contractor shall also be entirely
responsible for adequacy and safety of
formwork, notwithstanding any approval
or review of drawing and design by the
Engineer.

(ii) The Contractor has not ensured adequate
safety measures during construction
activities with which such unfortunate
fatal accident could have been avoided,
even in case of failure.

(iii) Quality assurance has not been
emphasized as stipulated in the codes and
manuals and as per the Agreement.

(iv) There are lot many deficiencies in
workmanship that may affect the quality
of work, as found in other formwork
assemblies.”

8.2 Thereafter, the State Government studied the report

submitted by a high­level committee and having

considered the case of lapse on the part of the contractor,

a serious incident had taken place of collapse of a ten

meter slab and in the said incident, one person died and

eleven others were injured. Hence, a decision was taken to

blacklist the contractor after following the proceedings as

per the OPWD Code. Thereafter, a show cause notice was

13
issued upon the respondent – contractor and the

respondent – contractor was called upon to show cause as

to why he be not blacklisted. The said show cause notice

was issued in terms of the provisions and the procedures

in the OPWD Code. The respondent – contractor replied to

the same. After considering the allegations in the show

cause notice and the reply submitted by the contractor,

thereafter the Government passed an order of blacklisting.

Merely because the show cause notice was issued after the

inquiry committee report was considered and thereafter

the State Government took the decision to initiate

proceedings for blacklisting, that by itself it cannot be said

that the order of blacklisting was pre­determined as

observed by the High Court. The communication dated

10.10.2017 by the State Government to the Chief Engineer

can be said to be a proposed decision to initiate the

proceedings for blacklisting. In the communication dated

10.10.2017, it has been specifically mentioned that the

action be taken for blacklisting after following the

procedure as per the OPWD Code. Before any show cause

notice is issued for any action when a tentative decision is

14
taken, it cannot be said that subsequent decision followed

by a show cause notice and the proceedings as per the

OPWD Code can be said to be pre­determined. Before

initiation of any proceedings for blacklisting, there can be

a tentative decision on the basis of the material available

forming a tentative/prima facie opinion that action is

required. In the instant case a committee submitted a

detailed report which was the basis for issuance of the

show cause notice to the respondent. The action initiated

against the respondent was not in a vacuum but after

considering the committee’s report and after following the

due procedure as required. Therefore, the High Court has

erred in holding that the blacklisting order was pre­

determined.

8.3 So far as the findings recorded by the High Court that the

blacklisting order was in breach of principles of natural

justice is concerned, it is to be noted that the blacklisting

order was passed after issuing a show cause notice to

which the contractor – respondent was called upon to reply

and show cause as to why he be not blacklisted. A detailed

15
show cause notice was issued with specific allegations to

which the respondent – contractor submitted a detailed

reply. After considering the allegations in the show cause

notice, considering the reply and also by considering the

material available on record the order of blacklisting was

passed. We fail to appreciate, how in such a case the

blacklisting order can be said to be in breach of principles

of natural justice.

8.4 In the case of Grosons Pharmaceuticals (P) Ltd. & Anr.

v. State of U.P., (2001) 8 SCC 604, the order of

blacklisting was challenged by the contractor on the

ground that the contractor was not supplied with all the

materials on the basis of which charges against him were

based. It was the case on behalf of the contractor that non­

supply of such material resulted in violation of principles

of natural justice. To that, this Court observed that it was

sufficient requirement of law that an opportunity of show

cause was given to the appellant before it was blacklisted.

This Court observed that the contractor was given an

opportunity to show cause and it did reply to the show­

16
cause to the State Government and therefore the

procedure adopted by the Government while blacklisting

the contractor was in conformity with the principles of

natural justice.

8.5 In the present case as observed hereinabove, show cause

notice was issued upon the contractor by which the

contractor was called upon to show cause why he be not

blacklisted; the show cause notice was replied to by the

contractor and thereafter, after considering the material

on record and the reply submitted by the contractor and

having found the serious lapses which led to a serious

incident in which one person died and eleven others were

injured, the State Government took a conscious decision to

blacklist the contractor. Therefore, it cannot be said the

order blacklisting the contractor was in violation of

principles of natural justice.

8.6 As observed by this Court in the case of Gorkha Security

Services v. Govt. (NCT of Delhi) & Ors., (2014) 9 SCC

105, the fundamental purpose behind the serving of a

17
show­cause notice is to make the noticee understand the

precise case set up against him which he has to meet. This

would require the statement of imputations detailing out

the alleged breaches and defaults he has committed, so

that he gets an opportunity to rebut the same. Another

requirement is the nature of action which is proposed to be

taken for such a breach.

8.7 As per the law laid down by this Court in a catena of

decisions “debarment” is recognised and often used as an

effective method for disciplining deviant

suppliers/contractors who may have committed acts of

omission and commission. It is for the State or appropriate

authority to pass an order of blacklisting/debarment in the

facts and circumstances of the case. Therefore, the High

Court has erred and has exceeded its jurisdiction in

exercise of powers under Article 226 of the Constitution of

India by quashing and setting aside the blacklisting order,

that too, without adverting to the serious allegations and

the act of omission and commission on the part of the

contractor which led to a serious incident of collapse of ten

18
meter slab while concrete work of the deck was going on

and due to which one person died and eleven others were

injured. It was specifically found that the safety

arrangements were lacking severely in the construction

work zone. It was also found that quality assurance was

not emphasised as stipulated in the codes and manuals

and as per the Agreement. Therefore, the High Court ought

to have considered the seriousness of the incident in which

due to omission and commission on the part of the

contractor in constructing the flyover one person died and

eleven others were injured.

9. The next question which is posed for consideration of this

Court is, whether, in the facts and circumstances of the

case the contractor was required to be

debarred/blacklisted permanently?

9.1 In the case of Kulja Industries Limited (supra), this

Court has observed that “debarment” is never permanent

and the period of debarment would invariably depend

upon the nature of the offence committed by the erring

contractor.

19
In the said decision this Court emphasised on

prescribing guidelines by determining the period for which

the blacklisting should be effective. It is observed and held

by this Court that while determining the period for which

the blacklisting should be effective, for the sake of

objectivity and transparency it is required to formulate

broad guidelines to be followed. It is further observed that

different periods of debarment depending upon the gravity

of the offences, violations and breaches may be prescribed

by such guidelines. In the present case, after the order of

blacklisting was passed, the State Government has

formulated guidelines by O.M. dated 26.11.2021 which

provides as under:­

“The blacklisting period per offence shall be limited to 03
(Three) years subject to an overall maximum cumulative
period of 10 (Ten) years for multiple offences”

However, we may observe that we do not approve of

the guidelines issued by the State Government by O.M.

dated 26.11.2021. Duration of blacklisting cannot be

solely per offence. Seriousness of the lapse and the

incident and/or gravity of commission and omission on

20
the part of the contractor which led to the incident

should be the relevant considerations. In a given case, it

may happen that the commission and omission is very

grave and because of the serious lapse and/or negligence,

a major incident would have taken place. In such a case,

it may be the contractor’s first offence, in such a case,

the period/duration of the blacklisting/banning can be

more than three years. However, as the said guidelines

are not under challenge, we rest the matter there and

leave it to the State Government to suitably amend

and/or modify the said office memorandum. However,

what we have observed above can be a guide while

determining the period of debarment/blacklisting.

In the instant case, it might be true that the offence

was the first offence committed by the contractor.

However, considering the seriousness of the matter that

due to the omission and commission on the part of the

contractor a serious incident had occurred as there was a

collapse of a ten meter slab while constructing a flyover

in which one person died and eleven others injured, as

21
such the contractor does not deserve any leniency.

However, to debar him permanently can be said to be too

harsh a punishment. But considering the subsequent

O.M. dated 26.11.2021 reproduced hereinabove (to which

as such we do not agree as observed hereinabove), we are

of the opinion that if the blacklisting is restricted to five

years, it may be in the fitness of things.

10. In view of the above discussion and for the reasons stated

above, present appeal, i.e., C. A. No. 1083 of 2022 is

allowed in part. The impugned judgment and order

passed by the High Court quashing and setting aside the

order dated 12.12.2017 blacklisting the respondent

herein – contractor is hereby quashed and set aside.

However, the period of blacklisting is ordered to be

restricted to five years from the date of passing of the

order of blacklisting. Civil Appeal No.1083 of 2022 is

allowed to the aforesaid extent.

22
In view of the order passed in Civil Appeal No.1083 of

2022, Civil Appeal No.1084 of 2022 stands dismissed. In

the facts and circumstances of the case, there shall be no

order as to costs.

…………………………………J.

(M. R. SHAH)

…………………………………J.

(B.V. NAGARATHNA)
New Delhi,
February 24, 2022.

23



Source link