Case: State of Odisha &amp; Ors Vs. M/s Panda Infraproject Limited

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 railway over bridge at the level crossing, which resulted in loss of life and property. One person died and eleven others were injured. A high-level 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.3.1 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.15-P1/2011-12. 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.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 contractors 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 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.

Reasoning:
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 committees report and after following the due procedure as required. Therefore, the High Court has erred in holding that the blacklisting order was pre- determined.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 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 non- supply 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 show- 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 show-cause 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 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.9.1 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.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 offencesHowever, 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 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 contractors 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 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.