Contract – Imposition of penalty, debarment/blacklisting of 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 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 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 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 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.
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 showcause 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 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 showcause 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 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 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. [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.
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. 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 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 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]
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 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 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 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 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 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][470H; 471-A-F; 472-A-C] 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 to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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