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TMI Blog2018 (1) TMI 1748X X X X Extracts X X X X X X X X Extracts X X X X ..... ilty of a "fraudulent practice". The petitioner had submitted its offer for supply of Metro Cars pursuant to an invitation to offer issued by DMRC. The petitioner's offer was the lowest and was accepted by DMRC on 24.05.2013. 3. Thereafter, on 16.06.2015, DMRC issued a show cause notice alleging that the petitioner had indulged in a fraudulent practice as defined under clause 4.33.1 of the General Conditions of Contract (GCC) as it had not disclosed the information at the time of making offer that the Airport Authority of India (hereafter 'AAI') had debarred the petitioner from bidding for its contracts for a period of three years. 4. The petitioner responded to the said show cause notice. However, the same was not found satisfactory and the Board of Directors of DMRC passed a resolution on 15.07.2015 blacklisting the petitioner for a period of five years. Consequently, a communication dated 29.07.2015 was issued by DMRC in view of the resolution passed by the Board of Directors of DMRC. The said communication was impugned by the petitioner in a writ petition filed before this Court (being W.P.(C) 7265/2015). In the said petition, an order dated 31.07.2015 was passed by this Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al by an order dated 21.07.2016. 12. In view of the above, the limited controversy that remains for consideration of this Court is whether the punishment of debarring the petitioner for a period of five years is highly disproportionate and thus, offends Article 14 of the Constitution of India. 13. Mr Kapil Sibal, learned Senior Counsel appearing for the petitioner contended that non-disclosure of a communication dated 14.12.2011 issued by the AAI debarring the petitioner from participating in AAI's contract for a period of three years was not intentional. He reiterated that the division involved in executing the contract with the AAI was completely different and, therefore, the management did not, in fact, have any knowledge of the said order. He fairly conceded that this contention had not been accepted by this Court as in the order dated 08.07.2016, this Court had held that the said contention did not inspire any confidence. 14. He submitted that immediately on becoming aware that the AAI had debarred the petitioner, the petitioner company had instituted an enquiry at its head office in Seoul and had issued notices to the two employees (Mr Chug and Mr Lee) who were responsible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and disproportionate to the alleged offending act. 19. Next, Mr Sibal referred to the General Financial Rules, 2017 issued by the Ministry of Finance, Department of Expenditure and drew the attention of this Court to Rule 151 of the said Rules, which expressly provides that a bidder may be debarred if he has been convicted for an offence under Prevention of Corruption Act, 1988 or the Indian Penal Code, 1860 for a period not exceeding three years. He submitted that a bidder could also be debarred from commercial transactions for a period of two years if it is determined that the bidder had breached the Code of Integrity. 20. He emphasised that in terms of Rule 175(1) of the said Rules, the Code of Integrity included serious acts of misconduct and yet maximum punishment provided was of debarment of two years. He earnestly contended that the punishment must commensurate with the petitioner's alleged offence viewed in the context of the General Financial Rules, 2017 and the same warranted that only a token penalty be imposed. 21. Mr Sibal also referred to a letter dated 11.03.2015 issued by the Japan International Co-operation Agency (hereafter 'JICA'), whereby the JICA had suspen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or State Government undertaking as on the due date of submissions of bid? (Bidder to furnish a specific undertaking to this effect) √ 7 xxxx xxxx xxxx 8 Has any misleading information been given in the application? √ Note- 2. A "YES" answer to any question 1,3,4,5,6 or 8 will disqualify the applicant." 24. This Court had, in the order dated 08.07.2016 held that the knowledge of the two employees who had handled the submission of prequalification bids to the AAI would be sufficient to impute knowledge of the same to the petitioner. The Court further held that it was not believable that the management would not be aware of the reasons for being unsuccessful in the bid submitted to the AAI and the circumstances clearly establish that the petitioner was aware of the debarment order passed by the AAI. 25. In view of the above, there could be little doubt that the decision of DMRC to debar the petitioner cannot be faulted. Thus, as observed above, the only question that falls for consideration is whether the punishment imposed is disproportionate to the conduct of the petitioner, which has been found to be fraudulent. 26. It is now well s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's decision which include the following: (a) The actual or potential harm or impact that results or may result from the wrongdoing. (b) The frequency of incidents and/or duration of the wrongdoing. (c) Whether there is a pattern or prior history of wrongdoing. (d) Whether the contractor has been excluded or disqualified by an agency of the Federal Government or has not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct similar to one or more of the causes for debarment specified in this part. (e) Whether and to what extent did the contractor plan, initiate or carry out the wrongdoing. (f) Whether the contractor has accepted responsibility for the wrongdoing and recognized the seriousness of the misconduct. (g) Whether the contractor has paid or agreed to pay all criminal, civil and administrative liabilities for the improper activity, including any investigative or administrative costs incurred by the Government, and has made or agreed to make full restitution. (h) Whether the contractor has cooperated fully with the government agencies during the investigation and any court or administrative action. (i) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny other JV firm/JV SPV in any name and style for a period of give (5) years w.e.f. 15th July to 14th July 2020". 29. It appears from the above that the period of debarment had been determined by taking a rough average of the period of debarment as fixed by other Government organizations. According to DMRC, the period of debarment in other organizations ranges from a few months to ten years. However, there is no indication in the impugned order as to which are the orders issued by the other Government organizations that were considered by the MD of DMRC. Concededly, none of such orders had been provided to the petitioner. However, in the counter affidavit, DMRC has filed a tabulated statement of various orders passed by various organizations debarring certain contractors. Although, the said tabulated statement does indicate that in several cases, contractors have been banned for a period of five years; however, there is no indication as to the gravity of the offence in those cases. It is also seen that in most of the cases contractors have been banned for a period much less than five years. 30. According to the petitioner, the decision to debar the petitioner for five years is di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue to be decided could have arrived at it. Proportionality as a legal test is capable of being more precise and fastidious than a reasonableness test as well as requiring a more intrusive review of a decision made by a public authority which requires the courts to "assess the balance or equation" struck by the decision-maker. Proportionality test in some jurisdictions is also described as the "least injurious means" or "minimal impairment" test so as to safeguard the fundamental rights of citizens and to ensure a fair balance between individual rights and public interest. Suffice it to say that there has been an overlapping of all these tests in its content and structure, it is difficult to compartmentalise or lay down a straitjacket formula and to say that Wednesbury has met with its death knell is too tall a statement. Let us, however, recognise the fact that the current trend seems to favour proportionality test but Wednesbury has not met with its judicial burial and a State burial, with full honours is surely not to happen in the near future. 37. Proportionality requires the court to judge whether action taken was really needed as well as whether it was within the range ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his would suffer from the vice of arbitrariness. Blacklisting or debarring an entity from participating in contracts is a serious measure and insofar as possible must be pivoted on certain objective criteria. Since DMRC has not set out any guidelines which would serve as a benchmark as to the period of debarment in a particular situation, the MD had rightly sought to rely on orders passed by the other government organizations. This Court finds nothing wrong with the approach of drawing or adopting guidelines as set out by any other government organization. However, the period of blacklisting must be correlated to the gravity of the offence and mitigating circumstances, if any; surrounding the case, merely referring to period of debarment in various orders de hors the facts in those cases or the guidelines applied therein may be of a little assistance in obviating the vice of arbitrariness and would hardly further the purpose of ensuring objectivity in the decision making process. 37. It is also relevant to mention that the instructions to tenderers expressly indicated that JICA was funding the procurement and in case funding by JICA was only in part or nil, the balance would be fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Expenditure, Ministry of Finance, Government of India also provides for debarment of bidders in case the bidders breach the Code of Integrity. Rule 151 of the General Rules is set out below:- "Rule 151 Debarment from bidding. (i) A bidder shall be debarred if he has been convicted of an offence- (a) under the Prevention of Corruption Act, 1988; or (b) the Indian Penal Code or any other law for the time being in force, for causing any loss of life or property or causing a threat to public health as part of execution of a public procurement contract. (ii) A bidder debarred under sub-section(i) or any successor of the bidder shall not be eligible to participate in a procurement process of any procuring entity for a period not exceeding three years commencing from the date of debarment. Department of Commerce (DGS&D) will maintain such list which will also be displayed on the website of DGS&D as well as Central Public Procurement Portal. (iii) A procuring entity may debar a bidder or any of its successors, from participating in any procurement process undertaken by it, for a period not exceeding two years, if it determines that the bidder has breached the code of integ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two years. 42. Plainly, although it is not mandatory for DMRC to follow the above Rules, DMRC could use the same as a benchmark to determine the quantum of punishment to be imposed on the petitioner in absence of any internal guidelines. 43. The Tabular chart provided by the petitioner indicates that there are as many as 23 contracts for which the petitioner has been unable to bid on account of the blacklisting order. It is also relevant to note that DMRC has not cancelled the petitioner's bid although it was entitled to do so. 44. As noted above, the Supreme Court in Kulja Industries Ltd. (supra) had laid down the factors that ought to be considered by the competent authority while taking a decision to blacklist an entity. Although, it does appear that the impact of the wrongdoing in this case is material as the petitioner was able to secure the contract for which it was disqualified to bid for; however, there is little material to conclude that the petitioner had planned to initiate and carry out the wrongdoing. The petitioner had explained that the Division, which was concerned with the business aerobridges, was the Plant and Machinery Division of the petitioner and not the ..... 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