State of Odisha vs M/s Panda Infraproject Limited

State of Odisha vs M/s Panda Infraproject Limited

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)
J U D G M E N T 
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
and has quashed and set aside the order passed by the
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   predetermined. 
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 nonsupply 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 show16
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

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

Comments

  1. You've provided quite good information here. This is fantastic since it expands our knowledge and is also beneficial to us. Thank you for sharing this piece of writing. Cowlitz County Siding Contractors

    ReplyDelete

Post a Comment

Popular posts from this blog

100 Questions on Indian Constitution for UPSC 2020 Pre Exam

संविधान की प्रमुख विशेषताओं का उल्लेख | Characteristics of the Constitution of India

भारतीय संविधान से संबंधित 100 महत्वपूर्ण प्रश्न उतर