IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE ELEVENTH DAY OF SEPTEMBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE V.V.S.RAO WRIT PETITION NO.19678 of 2001 Between: Sri Srinivasa Travels, Rep. by its Sole Proprietor, K.Ramalingeshwar Rao, S/o late Venkataramaiah, Palavoncha, Khammam District. a Sole Proprietory Concern, Contaractors Colony, Palavoncha, Khammam District. ..... Petitioner AND 1 A.P.Power Generation Corporation Ltd., Rep. by its Chairman and Managing Director, Vidyut Soudha, Khairathabad, Hyderabad. 2 The Chief Engineer, (O&M), KTPS, Palavoncha, Khammam Distict. 3 The Superintendent Engineer,(O&M), KTPS, Palavoncha, Khammam Distict. .....Respondents Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Aﬃdavit ﬁled herein the High Court will be pleased to issue such appropriate writ or direction or order to the respondents more particularly one in the nature of Mandamus, declaring the action of respondents in invoking the bank guarantee given by the petitioner for Rs.40,000/- vide BG No. 95/2000- 2001 of State Bank of Hyderabad, Kinnerasani Bank towards E.M.D. and black listing the petitioner from participating in the works of ﬁrst respondent for three years i.e., up to 31.3.2004 through Lr/CE/KTPS/T1A1/BUS/D.No.366, dated 23.5.2001 is highly arbitrary, illegal, without authority and as such violative of Art 14 of Constitution of India ad consequently directed the respondents to re-fund the amount of bank guarantee invoked by them to the petitioner. Counsel for the Petitioner: MR.HARI SREEDHAR Counsel for the Respondents: MR.K.CHIDAMBARAM The Court made the following: THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.19678 of 2001 ORDER: First respondent invited tenders for awarding contract for operation of contract bus service from KTPS complex. Contract includes operation of two buses in Paloncha and Kothagudem towns for the purpose of conveyance of Shift Engineers, Maintenance Engineers, staﬀ and such other persons as designated by employer from various starting points to Power House and Kothagudem and back. Inter alia, the terms and conditions provide speciﬁcations that two buses provided by contractor should not be more than three to four years of age, that is to say, they should have been bought after 1998. Petitioner was successful bidder. However as buses of 1998 model were under repairs, he requested respondents to permit him to run earlier model buses. He was so permitted to run buses from 01.4.2001 with earlier model only till 10.4.2001. It is case of petitioner that on 10.4.2001, third respondent addressed a communication directing him to commence work using 1998 model buses from 11.4.2001. He was also informed that necessary action would be taken against him. Be it also noted that when he was running old buses penalty was also collected and petitioner objected to this. A copy of communication dated 10.4.2001 cancelling Letter of Intent (LoI) dated 12.1.2001 was sent to him. Petitioner then addressed a letter dated 10.4.2001 informing that he is being charged heavy penalty for running old model buses, that he is facing diﬃculty in running buses and that he can run buses in good condition as per time schedule only if penalty clause is modiﬁed. After receiving the same, second respondent passed impugned order dated 23.5.2001 forfeiting Earnest Money Deposit (EMD) of Rs.40,000/- as per tender conditions and also blacklisting petitioner from participating in tenders ﬂoated by Andhra Pradesh Power Generation Corporation Limited (APGENCO) for three years upto 31.3.2004. Assailing the order of second respondent dated 23.5.2001, present writ petition is ﬁled contending that blacklisting petitioner without notice is illegal, arbitrary and that bank guarantee for Rs.40,000/- given by him ought not to have been forfeited as respondents were at fault. Respondents ﬁled elaborate counter. Though it is alleged that contract was cancelled on 10.4.2001, after issuing notice, there is no speciﬁc denial that order of blacklisting was passed without notice to petitioner. Counter aﬃdavit further shows that as per LoI, contract would commence from 01.4.2001 but till 10.4.2001 petitioner did not provide model buses as per specifications. He promised to engage two new buses, but he did not produce necessary documents like C-book and M.V. Tax receipt. Therefore third respondent reported the matter to second respondent, who passed orders on 10.4.2001 cancelling contract and subsequently passed orders blacklisting petitioner. Learned Counsel for petitioner and learned Standing Counsel for APGENCO made submissions in tune with contentions in their aﬃdavits. Question of forfeiting EMD and blacklisting petitioner, depends on various terms and conditions in special terms and conditions of contract bus service as well as work order given to petitioner. Condition 5 deals with EMD, security deposit and forfeiture thereof. Various sub-conditions thereof read as under. 5.1 The EMD should be paid in the form of crossed demand draft drawn in favour of Senior Accounts Oﬃcer/KTPS, Paloncha, payable at State Bank of Hyderabad, Paloncha. The tenders, submitted without EMD are liable to be rejected. 5.2 Successful bidder shall enter into L.S. Agreement with APGENCO for the contract period. 5.3 Contractors shall furnish a Security Deposit or Bank Guarantee for 5% of the total amount of the work before commencement of work for satisfactory completion of work. 5.4 The EMD shall be refunded to unsuccessful bidders and in case of the successful bidder, the amount shall be adjusted towards the Security Deposit. 5.5 The Earnest Money Deposited by the successful tenderer shall be retained towards Security Deposit for the fulﬁllment of the contract if the successful tenderer fails to deposit the requisite Security Deposit and fails to commence the work from the date speciﬁed, the EMD deposited by them shall be forfeited. 5.6 The successful tenderer shall be required to produce the buses, at KTPS, whose Nos. are mentioned in the tender documents for inspection by Assistant Divisional Engineer/Work Shop/KTPS, two days before the commencement of the contract. In a sense, every tenderer is required to furnish EMD for 5% of total amount of work, which shall be converted into security deposit or bank guarantee. As per condition 5.5 if successful tenderer fails to commence work from the date speciﬁed EMD/security deposit shall be forfeited. It is very interesting to notice that condition 5.5 operates not only when successful bidder fails to execute agreement, it also operates the moment he fails to commence work. In this case, admittedly, petitioner did not commence work as per specifications. For the period from 01.4.2001 to 10.4.2001, petitioner did not operate 1998 model buses. With permission of authorities he operated non-speciﬁed model buses and paid penalty as per Clause 14. In the background of this admitted case, this Court is not able to countenance submission that forfeiture of an amount of Rs.40,000/- by way of bank guarantee is arbitrary. This Court holds that forfeiture of Rs.40,000/- is strictly in accordance with Condition 5.5 and no exception can be taken. Whether blacklisting petitioner is sustainable? Petitioner was given LoI on 29.3.2001. From that date till 23.5.2001 when impugned order was passed there was exchange of correspondence between petitioner and respondents. In none of communications from third/second respondent petitioner, there was indication of blacklisting. That there was no speciﬁc notice to petitioner calling upon him as to why he should not be blacklisted is admitted even in para 12 of counter aﬃdavit. Therefore, it has to be concluded that petitioner has been blacklisted without giving notice to him. It is no doubt true that eﬀect of blacklisting a contractor is disqualifying such person for oﬀering his services to public works. Though such a person has no enforceable right against public to demand allotment of contract, he has a right that his tenders will be considered. Even then blacklisting of person without notice is bad in law. A reference may be made to Erusian Equipment and Chemicals Ltd. v State of West Bengal[1] wherein the Supreme Court laid down as follows. … … The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of black-listing has the eﬀect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of black-listing. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. But for the order of blacklisting the petitioner would have been entitled to participate in the purchase of cinchona. Similarly the respondent in the appeal would also have been entitled but for the order of blacklisting to tender competitive rates. The State can enter into contract with any person it chooses. No person has a fundamental right to insist that the Government must enter into a contract with him. A citizen has a right to earn livelihood and to pursue any trade. A citizen has a right to claim equal treatment to enter into a contract which may be proper, necessary and essential to his lawful calling. 15. The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It created a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion". Yet against their Lordships laid down law as under. Blacklisting has the eﬀect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist. In this case admittedly second respondent did not issue any notice to petitioner before passing impugned order blacklisting him. The same is therefore unsustainable. Insofar as forfeiture of EMD/security deposit is concerned, the same does not call for interference. In the result, writ petition is partly allowed setting aside impugned order insofar as the same has eﬀect blacklisting petitioner participating APGENCO for three years. There shall be no order as costs. ______________ (V.V.S.RAO, J) September 11, 2008 YS To 1. A.P. Power Generation Corporation Ltd., Rep. by its Chairman and Managing Director, Vidyut Soudha, Khairathabad, Hyderabad. 2. The Chief Engineer, (O&M), KTPS, Palavoncha, Khammam Distict. 3. The Superintendent Engineer,(O&M), KTPS, Palavoncha, Khammam Distict. 4. Two C.D. Copies. [1] AIR 1975 SC 266