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

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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

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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. 

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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. 

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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

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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. 

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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

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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. 

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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. 

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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. 

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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

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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

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(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

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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

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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

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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

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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

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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. 

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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

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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

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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. 

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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.

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Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले