Debarment Is Not Permanent, Period Dependant Upon Nature Of Offence Committed By Erring Contractor - SC

A two-judge bench of the Supreme Court comprising of Justice M.R. Shah and Justice B.V. Nagarathna while relying upon precedent Kulja Industries Limited Vs. Chief General Manager has held that the period of 'Debarment' is never permanent and the period of debarment would invariably depend upon the nature of offence committed by the erring contractor.

Further, the Bench has observed that 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 pre-determined and violated the principles of natural justice.

In this case, the Respondent – contractor was awarded a contract for the construction of a flyover over the railway level crossing at Bomikhal Junction in Bhubaneswar. In the year 2017, a ten-meter slab of the flyover collapsed during concreting of the railway overbridge at the level crossing, which resulted in the 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. 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.

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 the 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 the Government of Odisha, either directly or indirectly. The Orissa High Court had set aside the order of blacklisting mainly on the ground that the order of blacklisting was in violation of principles of natural justice. This was challenged before the Apex Court.

Advocate General, Shri Ashok Kumar Parija, appeared on behalf of the State of Odisha while Advocate, Shri Sibo Sankar Misra, represented the Respondent – contractor before the Supreme Court.

The primary issue in this case was -

Whether in the facts and circumstances of the case the contractor was required to be debarred/blacklisted permanently.

It was submitted by the State that 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 Appendix XXXIV of OPWD Code was followed and thereafter, after considering the reply submitted by the contractor, the order of blacklisting was passed. Moreover, it was argued that therefore, the High Court had erred in holding that the order of blacklisting was in breach of principles of natural justice. It was urged that in fact the findings recorded by the inquiry committee could be said to be the basis for initiating the action of blacklisting against the contractor. It was thus contended that therefore, the findings recorded by the inquiry committee could be said to be a prima facie opinion while initiating the proceedings for blacklisting.

On the other hand, the Respondent - Contractor submitted that in the facts and circumstances of the case the High Court had rightly observed and held that the order of blacklisting was pre-determined and the same was in breach of principles of natural justice. Moreover, it was argued that the order of blacklisting the Respondent – contractor permanently could be said to be too harsh and/or disproportionate to the charge/misconduct proved against the Respondent – contractor.

The Supreme Court noted that 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 pre¬determined as observed by the High Court.

The Court asserted that – "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 pre¬ determined."

The Apex Court observed that in this case as observed, 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 could not be said the order blacklisting the contractor was in violation of principles of natural justice.

It was opined that 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 did not deserve any leniency. However, according to the Court, to debar him permanently could be said to be too harsh a punishment. The Court however was of the opinion that if the blacklisting was restricted to five years, it may be in the fitness of things.

Thus, the Supreme Court allowed the appeal in part. The impugned judgment and order passed by the Orissa High Court was quashed and set aside. However, the period of blacklisting was ordered to be restricted to five years from the date of passing of the order of blacklisting.

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