2023 (2) TMI 1244 - HC - Indian Laws

De-listing letter of 10th November 2022 - Petitioner is de-listed for nine months from the list of approved vendors for the manufacture and supply of jointless hard Drawn Grooved Copper contact wires or HDGC wires - HELD THAT - There is here a procedural irregularity in the absence of cogent reasons the failure to take into account relevant material and the reliance on extraneous or immaterial factors that meets the Wednesbury unreasonableness standard. As to proportionality nowhere in the impugned order we find a justification for a de-listing for nine months. It can only be presumed that it was less than 12 months because someone might have described that as a blacklisting and hence completely illegal. But that still does not answer why it should be this particular period. It is impossible to sustain the impugned order at Exhibit A - petition allowed.

Summary

Issues Involved:
1. Legality of the delisting of the petitioner.
2. Compliance with quality standards by the petitioner.
3. Procedural irregularities in the delisting process.
4. Retrospective application of new specifications.
5. Proportionality and reasonableness of the administrative action.

Issue-wise Detailed Analysis:

1. Legality of the Delisting of the Petitioner:
The petitioner challenged the delisting letter dated 10th November 2022, which de-listed the petitioner for nine months from the list of approved vendors for the manufacture and supply of HDGC wires. The delisting was based on a show-cause notice dated 2nd August 2022. The court observed that the delisting order lacked reasons and was based on speculation about potential quality issues without any factual basis. The court held that such an order with serious consequences must be based on concrete evidence rather than conjecture.

2. Compliance with Quality Standards by the Petitioner:
The petitioner, a major supplier of Over Head Equipment to Indian Railways, had been supplying HDGC wires since May 2018 without any recorded complaints about quality. The court noted that the copper cathodes supplied by the petitioner met the London Metal Exchange Grade-A specifications and were duly inspected and certified by the relevant authorities. The CCC rods manufactured using these cathodes were also inspected and approved. The court found no evidence of any deviation from quality specifications or standards.

3. Procedural Irregularities in the Delisting Process:
The court identified procedural irregularities in the delisting process, including the absence of cogent reasons for the delisting and the failure to consider relevant material. The court emphasized that administrative actions with significant consequences must be based on factual determinants and not on speculation. The impugned order failed to provide a justification for the delisting, making it unsustainable.

4. Retrospective Application of New Specifications:
The court noted that the prohibition against job-work was introduced on 1st January 2021, but the impugned order applied these specifications to supplies made between 2019 and 2020. The court held that applying new specifications retrospectively to past supplies was improper and could not be justified.

5. Proportionality and Reasonableness of the Administrative Action:
The court applied the doctrines of Wednesbury unreasonableness and proportionality to assess the reasonableness of the administrative action. The court found that the delisting order was disproportionate and unreasonable, as it was based on speculation rather than factual evidence. The court emphasized that administrative actions must achieve a correct balance and not be excessive in relation to the cause for the order. The delisting for nine months was deemed disproportionate, especially given the absence of any quality issues with the petitioner's supplies.

Conclusion:
The court concluded that the delisting order was procedurally irregular, lacked factual basis, and was disproportionate. The petition succeeded, and the delisting order was quashed. The petitioner was allowed to participate in ongoing and future tenders, and the court directed that the petitioner's technical bids be accepted and examined. The court clarified that the Section 34 petition filed by the Railways would be decided on its merits, uninfluenced by the observations in this order.