Administrative Law: Government contracts – Blacklisting of contractor – Principle of natural justice – Judicial review – Respondent was awarded contract to construct a flyover over the railway level crossing – Post construction, a ten meter slab of flyover collapsed which resulted in loss of life and property – A high level inquiry was conducted which submitted a comprehensive report and found respondent guilty – On the basis of such report, state government issued a show cause notice to respondent and on considering its reply thereto, permanently banned it from participating or bidding for any work to be undertaken by the government – Respondent filed writ petition before High Court – High Court set aside the order of blacklisting on the ground of violation of principles of natural justice – On appeal, held: Blacklisting order was passed after considering the allegations in the show cause notice, considering the reply and also by considering the material available on record and after following the procedure as per the Orissa Public Works Department Code – Thus, decision of state government of blacklisting the respondent was not in breach of principles of natural justice – “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 – It was specifically found that the safety arrangements were lacking severely in the construction work zone and quality assurance was not emphasised as stipulated in the codes – High Court erred and exceeded its jurisdiction in exercise of powers under Art.226 of the Constitution of India in 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 meter slab while concrete work of the deck was going on and due to which one person died and eleven others were injured – However, to debar him permanently can be said to be too harsh a punishment – Blacklisting restricted to five years.
Disposing of the appeals, the Court
HELD: 1. A detailed 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. [Para 8.3][192-D]
2. 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 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. [Para 8.7][193-C-F]
3. 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 such the contractor does not deserve any leniency. However, to debar him permanently can be said to be too harsh a punishment. Blacklisting is restricted to five years in the fitness of things. [Para 9.1][194-F-H]
Kulja Industries Limited v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited and Ors. (2014) 14 SCC 731 : [2013] 14 SCR 430; Grosons Pharmaceuticals (P) Ltd. & Anr. v. State of U.P. (2001) 8 SCC 604 : [2001] 2 Suppl. SCR 567; Gorkha Security Services v. Govt. (NCT of Delhi) & Ors. (2014)
9 SCC 105 : [2014] 13 SCR 617 – relied on.
Erusian Equipment & Chemicals Ltd. v. State of West Bengal and Anr. (1975) 1 SCC 70 : [1975] 2 SCR 674; M/s. Daffodills Pharmaceuticals Ltd. & Anr. v. State of U.P. & Anr. 2019 (17) Scale 758 – 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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