Both the actual and potential harm caused by the wrong doing must be considered while blacklisting the offender: High Court of Delhi

IN THE HIGH COURT OF DELHI AT NEW DELHI Judgment delivered on: 16th August 2021 W.P.(C) 3977 2021& CM APPLN. 12033 2021 & 12035 2021 M S BHUSHAN PHARMACEUTICALS PVT. LTD...... Petitioner NEW DELHI MUNICIPAL COUNCIL & ANR. Respondents Advocates who appeared in this case: For the Petitioner : Mr. Aditya Wadhwa Ms. Tejaswi Shetty and Mr.Siddharth Sunil Advocates For the Respondents : Mr. V.P.Sharma Addl. Standing Counsel with Mr. Arjun Malik Assistant Standing Counsel NDMC CORAM: HON’BLE MR. JUSTICE SANJEEV SACHDEVA SANJEEV SACHDEVA J. The hearing was conducted through video conferencing. Petitioner impugns letter order of blacklisting dated 21.02.2020 and further seeks a direction to the respondent to refund the earnest money deposit and alternatively prays that the period of blacklisting be reduced or be limited to the drugs in respect of which petitioner had participated in the subject tender. On 23.11.2017 the respondent had invited bids through a tender for supply of ayurvedic medicines. The last date for submission of bid document including physical sample and test report was 12.08.2018 W.P.3520 2018 this Court directed the respondent to withdraw the blacklisting order. 13. By letter dated 25.04.2018 order dated 28.03.2018 blacklisting the petitioner was withdrawn. Thereafter a fresh show cause notice was issued to the petitioner on 26.04.2018. Hearing was granted to the petitioner however after a gap of merely 21 months by the impugned letter order dated 21.02.2020 petitioner has been blacklisted for a period of two years and the earnest money deposit also forfeited. 14. As per the Petitioner it holds a licence for manufacture of merely 2441 ayurvedic drugs out of which 925 are Unani medicines. The subject tender was for 516 drugs out of which petitioner had merely participated in 45 drugs. As per the Petitioner the revenue that would have been generated from the subject tender was approximately Rs. 7 to 8 lakhs whereas the annual turnover of the petitioner was over Rs. 20 crores. 15. As per the Petitioner there could be no motive behind the petitioner W.P.14 SC 731 wherein the Supreme Court has held that the factors that may influence the debarring officer’s decision inter alia include the actual or potential harm or impact that results or may result from the wrong doing frequency of incidence and duration of wrong doing and whether the contractor has accepted the responsibility for the wrong doing and recognized the seriousness of misconduct. Learned counsel for the respondent per contra contends that the debarment order or the period of punishment does not warrant any interference as admittedly forged and fabricated test reports were submitted. Learned counsel further contends that the petitioner is responsible for all the actions taken by its employees in submission of the bids. W.P.out of the period of 24 months as directed by the impugned order. The guidelines laid down by the Supreme Court in Kulja Industries Ltd. stipulate that the debarring officer while passing an order of debarment has to take into account the actual or potential harm or impact of the wrong doing and further the frequency of the incidence or duration of wrong doing. In the present case there is nothing on record to show that there was any harm occasioned or impact of the wrongdoing on the Respondent or the tender. Further there is nothing on record to show that petitioner had indulged in any wrong doing in the past either with the respondent or with any other organization. W.P. (C)3977 2021 Explanation has explained that the wrong doing was done by a disgruntled employee and the fact that petitioner possessed a valid test report from an accredited lab which was not submitted by the said employee and a false and fabricated test report was furnished. In the facts of the case petitioner cannot be completely absolved of the misdeeds of its employee. However in view of the explanations given I am of the view that in the facts of the present case the period two years is disproportionate to the conduct of the petitioner. This is coupled with the fact that petitioner did not participate in any tender process with the respondents after the first order of debarment i.e. after 28.03.2018. In effect petitioner has not participated in of the tenders of the respondent for nearly a period of three years and five months. 34. Accordingly the impugned order of debarment dated 21.02.2020 in so far as it blacklists the petitioner for a period of two years is modified to the limited extent that period of debarment of the petitioner shall be from the date of the order dated 21.02.2020 till 16.08.2021. The petition is accordingly allowed in the above terms. 36. Copy of the order be uploaded on the High Court website and be also forwarded to learned counsels through email by the Court Master. AUGUST 16 2021 ‘rs’ W.P. (C)3977 2021 SANJEEV SACHDEVA J 

Summary: When blacklisting an offender, it is vital that the authority considers both the actual and potential harm which could have arisen and according give out a reasonable penalty in proportion to the offence. This was held by a single member bench of the High Court of Delhi consisting of Justice Sanjeev Sachdeva in the case of M/s Bhushan Pharmaceuticals Pvt. Ltd v New Delhi Municipal Council [W.P. (C) 3977/2021] on 16th August 2021. On 23rd November 2017, the respondent New Delhi Municipal Council invited bids through a tender for ayurvedic potions and medicines. In order to test its medicines, the petitioner M/s Bhushan Pharmaceuticals engaged ITL Labs Pvt. Ltd a laboratory accredited by the Government. According to the petitioner, the test reports from the ITL Lab was handed over to their employee Rahul Mishra for the purpose of submission along with the bid. The petitioner claims that their employee Rahul Mishra informed them that the original test reports from ITL Labs Pvt. Ltd were not furnished along with the bid document and instead reports from one Devansh Testing Laboratory had been filed. Following this, the petitioner approached the respondent and informed them about the actions of Rahul Mishra, furnished the original test reports issued by ITL Labs Pvt Ltd. and also filed a criminal complaint against Rahul Mishra. However the petitioner was still issued a letter of blacklisting on the 3rd of April 2018 whereby they were debarred from participating in the procurement of ayurvedic medicines of NDMC and their money deposit was forfeited. The present petition was filed by the petitioner impugning the order of blacklisting and seeking a direction to the respondent to refund the money deposit or to reduce the period of blacklisting. The petitioner’s main contention is that they had no motive or reason to submit a false or fabricated test report when they had a genuine report from a government accredited lab and furthermore that a disgruntled employee had filed the fabricated report to sabotage the petitioner. The petitioner’s counsel cited the case of Kulja Industries Ltd v Western Telecom Project BSNL &amp; Ors. [(2014) 14 SC 731], where it was held by the Supreme Court of India that “the factors that may influence the debarring officer’s decision, inter-alia, include the actual or potential harm or impact that results or may result from the wrong doing, frequency of incidence and duration of wrong doing and whether the contractor has accepted the responsibility for the wrong doing and recognized the seriousness of misconduct”.