Vinay Construction Co. And Ors. vs Municipal Corporation Of Delhi And Anr. on 27 November 2003

Delhi High Court
Vinay Construction Co. And Ors. vs Municipal Corporation Of Delhi And Anr. on 27 November, 2003
Equivalent citations: 116(2005)DLT14
Author: Sanjay Kishan Kaul
Bench: Sanjay Kishan Kaul
JUDGMENT

Sanjay Kishan Kaul, J.

1. The action of the respondent MCD in blacklisting six concerns and de-listing them from the list of contractors in terms of the impugned circulars dated 26.6.2003 has given rise to these petitions by the petitioners who have a common grievance. The rules for enlistment of contractors as prevalent in the MCD were circulated vide letter dated 7/13.8.2001 and the contractors have been enlisted in pursuance thereto in different categories and classes. The petitioners herein are registered in different classes and as per Table-I of the said rules, there are different enlisting authorities for different classes of contractors. The details in respect of the petitioners are as under:

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CW Number Name Class Enlisting Authority
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4381/2003 M/sVinay V Executive Engineer
Construction Co.
4382/2003 Shri Om Prakash II Addl. Commissioner/
Mittal Special Commissioner
4444/2003 Shri Rajinder Kumar III Chief Engineer
4786/2003 M/s. Mazdoor II Addl. Commissioner/
Construction Special Commissioner
4747/2003 M/s. Jindal Builders IV Chief Engineer
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2. The genus of the dispute is the notice inviting tender dated 19.8.2002 issued by the respondent in respect of the four separate works. The petitioners participated in the tender but a complaint was received by the Vigilance Department alleging Pooling in respect of the said tender.

3. The original records have been produced and perused in respect of the process of this vigilance inquiry which was started in pursuance to a complaint received on 21.8.2002 during public hearing and it was alleged that due to mala fide intention and corruption in the office of the Executive Engineer, huge financial loss was being caused to the respondent Corporation. The sale of tender (NIT No. 18) took place on 21.8.2002 and it was alleged that a number of contractors who approached the officer were not allowed to purchase the tender and only 6 or 7 selected contractors were permitted to purchase the tenders with a direction to quote their rates in favor of M/s. Aar Gee Constructions, M/s. Vinay Goel, M/s. Vinay Goel and M/s. Aar Gee Construction, item wise (1) (2) (3) and (4) respectively. It is also stated that Aar Gee Construction and M/s. Om Prakash Mittal are sister concerns and both have purchased tender Nos. 1 and 4 so that any of these can get tender in their favor instead of only one firm. On the complaint being made, the matter was investigated and the lowest bid item wise was found in favor of the following contractors:

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Item Number of NIT Name of the Contractors
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1 Om Prakash Mittal
2 Vinay Construction Company
3 Vinay Construction Company
4 Aar Gee Construction Company
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4. It is recorded that since allegation was that it was M/s. Vinay Construction Company who would have got the contract Nos. 2 and 3, and on the opening of the tender, it was found that the successful bidder was M/s. Vinay Construction Company, it was felt necessary to find the composition M/s. Vinay Construction Company. It was recorded that the complaint w also that Shri Om Prakash Mittal and Aar Gee Constructions are sister concen It was found that Shri Vinay Goel was the proprietor of M/s.” Vinay Construction Company though it could not be found that Shri OmPrakash Mittal and M/ Aar Gee Construction Company are sister concerns. The report, however states that some discreet enquiry had revealed that the three contractors a working to support each other being M/s. Aar Gee Construction Company Shri Om prakash Mittal and M/s. Sanjeev Mittal.
5. The statement of the officers was also recorded. It is also noticed the item Nos. 1 and 2 pertain to Councillor Head for which very few contractors a coming forward to purchase the tenders in view of the problem of delay release of payment.
6. The concerned officers also denied the allegations of pooling and stated that there are about 100 registered contractors working in the Division and nothing prevents any contractor from purchasing the NIT.
7. The inquiry, however, found substance in the allegation on the following basis :
————————————————————————————
Sl. Allegation Facts Verified Discussion Conclusion
No.
————————————————————————————
1. Work of Item In respect of The complainant in his Allegation No. 1 will be Item No. 1, the subsequent complaint correct.
awarded to lowest bid was has alleged that M/s.
M/s. Aargee of M/s. O.P. Aar Gee Construction
Construction Mittal Company are sister
Company concerns and discreet
inquiry also revealed
that M/s. O.P. Mittal &
M/s. Aar Gee Construc-
tion are sister concerns.
2. Work of Item Lowest bid was The letter received Allegation
No. 2 will be of M/s. Vinay from A.C. (Engg) correct
awarded to Costruction confirms that the
M/s. Vinay Company proprietor of M/s.
Const. Vinay construction
Company is Mr. Vinay
Goel.
3. Work of Item Lowest bid was The letter received from Allegation
No. 3 will be of M/s. Vinay A.C. (Engg) confirms correct
awarded to Construction that the proprietor of
M/s. Vinay Company M/s. Vinay Construc-
Goel tion Company is Mr.
Vinay Goel
4. Work of Item In respect of The complainant in his Allegation
No. 4 will be Item No. 4 the subsequent complaint correct
awarded to lowest bid was has alleged that M/s.
M/s. Aargee of M/s. Aargee O.P. Mittal and M/s.
Construction Construction Aargee Construction
Company. Company. Company are sister
concerns.
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8. It is also noticed that prior conduct of Shri P.C. Meena, the Officer dealing with the matter had not been found to be good by the Board but no! direct evidence of connivance could be found although allegations of complainant were found to be correct. It was thus recommended that the six contractors found involved in the pooling of NIT-18, may be blacklisted by the competent authority after seeking the explanation as required under the rules, the NIT be cancelled and the action be initiated against the officer.
9. In pursuance to the approval of the aforesaid, show cause notices were issued to the six firms. These show-cause notices dated 1.4.2003 also allege pooling though in different item numbers of the NIT. The show cause notice issued to M/s. Vinay Construction Company is as under (CW No. 4381 /2003):
“Show Cause Notice Vigilance department of MCD had conducted an inquiry with regard to Nit No. EEXxviii/TC/2002/18 dated 19.8.2002 due on 21.8.2002, which was issued in respect of the following four works:-
1. Imp. of park by pdg. B/ wall with marble wash in front of C-4 Block Barat Ghar Sultanpuri.
2. Imp. of park by pdg. B/wall with marble wash in front of C2/242 in R/cly. Sultanpuri.
3. Imp of lane by pdg. CC pavement in Peeragarhi Vill From II No. 487/7 to 487/30, C-39.
4. Imp. of park by pdg. B/wall with MS grill and marble wash near H.No. C3/337 in C-3 Block R/Cly. Sultanpuri.
The Vigilance Department on finalization of the said inquiry, has come to the conclusion that you along with the other tenderers/ Mpl. Contractors had been instrumental in pooling the said NIT.

Whereas it has been found that the said M/s. Vinay Const. Co. and M/s. Jindal Builders had carried out the sale of item Nos .2 & 3 and M/s Mazdoor Construction also carried out the sale of item No. 3 of the said NIT.

Whereas Sh. Vinay Goel is the proprietor of the said firm M/s. Vinay Const. Co. On the request of the said firm dated 21.8.2002 you were allowed to carry out the sale of NIT No. 18 Item Nos. 2 & 3.

Whereas it has also been found that the said firm M/s. Vinay Const. Co. has also connived with M/s. Mazdoor Constructions in pooling of Item No. 3.

Whereas the rate tendered by you for the item No. 2 is @ 43.00% above and that of M/s. Jindal Builders is @ 45.70 above against the justification rates of 41.24% above and in item No. 3 you have quoted our rates as @ 18.00% above and that of M/s. Mazdoor Constructions is @ 20.10% above against the justification of 24.10% above. The said quoted rates by you and Jindal Builders along with M/s. Mazdoor Constructions clearly show that the pooling had been done in the said cases which is against the sanctity of the NIT and the laid down procedure. Thus the pooling of the said NIT by you and other contractors has inadvertently thwarted the healthy competition and correspondingly MCD has been put to financial loss for which you are responsible.

You are hereby given an opportunity to show cause why the action for blacklisting should not be taken against the said firm besides the other action for having entered into pooling in the case of NIT No. 18, Item Nos. 2 & 3 and your connivance with M/s. Jindal Builders & M/s. Majdoor Constructions.

Your explanation should reach the undersigned within a week’s time positively, otherwise it will be presumed that you have nothing to say in the matter and the ex parte decision in the matter will be taken.”

Though the initial description in the show cause notice and the paragraphs dealing with the explanation is same in different show-cause notice, the basic contents of the show-cause notice differ and it is necessary to reproduce the same in view of the differences in the allegations made:

CW No. 4382/2003- Whereas it has been found that the said M/s. Om Prakash Mittal and M/ s. Aar Gee Const. Co. had carried out the sale of item No. 1 and 4 of the said NIT.
Whereas Sh. Om Prakash Mittal is the proprietor of the said firm M/s. Om Prakash Mittal. On the request of the said firm dated 21.8.2002 you were allowed to carry out the sale of NIT No. 18/1 and 4.
Whereas the rate tendered by you for the item No. 1 is @ 36.30% above and that of M/s Aar Gee Const. Co. is @ 38.00 above against the justification rates of 38.97% above. The said quoted rates by you and M/s. Aar Gee Cont. Co. clearly show that the pooling had been done in the said case which is against the sanctity of the NIT and the laid down procedure. Thus the pooling of the said NIT by you and M/s. Aar Gee Const. Co. has inadvertently thwarted the healthy competition and correspondingly MCD has been put to financial loss for which you are responsible.
Whereas it has been found that the said firm M/s. Om Prakash Mittal deliberately did not put his tender in the tender box in respect of item o.4 for the reason that the said firm had connived with the other firm M/s. Aar Gee Const. Co., Majdoor Constructions & M/s. Raj Brothers which clearly show the pooling has been done in the said case.
Whereas it has also been found during the course of inquiry that M/s. Aar Gee Const. Co. is the sister concern of M/s. Om Prakash Mittal and thus the sale of the tender in respect of item Nos. 1 and 4 by you and M/s. Aar Gee Const. Co. do not show any healthy competition and thereby the possibility of pooling in the said case cannot be ruled out which fact is also evident and established from the rates quoted by you and M/s. Aar Gee Const. Co.
CW No. 4786/2003:
Whereas Sh. Surender and Sh. Ashutosh are the partners of the said firm M/s. Mazdoor Constructions. On the request of the said firm dated 20.8.2002 you were allowed to carry out the sale of NIT No. 18 Item Nos. 3 & 4.
Whereas it has also been found that the said firm M/s. Mazdoor Constructions has connived with M/s. Vinay Const. Co. & M/s. Aar Gee Const. Co. M/s. Raj Brothers, M/s. Jindal & M/s. Om Prakash Mittal in pooling of Item Nos. 3 and 4 of the said NIT No. 18.
Whereas M/s. Jindal Builders did not put his tenderers in the tender box in respect of Item No. 3 and likewise M/s. Om Prakash Mittal also did not put his tenders in the tender box in respect of item No. 4 despite having gone for the sale of the said item.
Whereas the rate tendered by you for the item No. 3 is @ 20.10% above and that of M/s. Vinay Const. Co. is @ 18.00 above against the justification rates of 24.10% above and in the case of item No. 4 you have quoted your rates as @ 24.24 above and that of M/s. Aar Gee Const. Co. is @ 19.99% above and tht of M/s. Raj Bros @ 34.98% above. The said quoted rates by you and M/s. Vinay Const. Co.; M/s. Raj Brothers; M/s. Aar Gee Const. Co.; M/s. Jindal Builders & M/s. Om Prakash Mittal clearly show tat the pooling had been done in the said case which is against the sanctity of the NIT and the laid down procedure. Thus the pooling of the said NIT by you and other contractors has inadvertently thwarted the healthy competition and correspondingly MCD has been put to financial loss for which you are responsible.
CW 4747/2003:
“Whereas it has been found that the said M/s. Jindal Builders & M/s. Vinay Const. Co. had carried out the sale of item Nos. 2 and 3 and M/s. Mazdoor Constructions carried out the sale of item No. 3 of the said NIT.
Whereas Sh. Anil Kumar Jindal & Sh. Sunil Kumar Jindal are the partners of the said firm M/s. Jindal Buildaers. On the request of the said firm dated 21.8.2002 you were allowed to carry out the sale of NIT No. 18 Item Nos. 2 & 3.
Whereas it has also been found that the said M/s. Jindal Builders has also connived with M/s. Mazdoor Constructions in pooling of item No. 3.
Whereas the rate tendered by you for the item No. 2 is @ 45.70% above and that of M/s. Vinay Const. Co. is @ 43.00% above against the justification rates of 41.24% above and in the case of item No. 3 you have not your tender in the tender box deliberately having connivance with M/s. Vinay const. Co. & M/s. Mazdoor Constructions. The said quoted rates by you and Vinay Const. Co. along with M/s. Mazdoor Constructions clearly show that the pooling had been done in the said cases which is against the sanctity of the NIT and the laid down procedure. Thus the pooling of the said NIT by you and other contractors has inadvertently thwarted the healthy competition and correspondingly MCD has been put to financial loss for which you are responsible.”
CW No. 4444/2003:
“Whereas Sh. Rajender Kumar is the proprietor of the said firm M/s. Raj Bros. On the request of the said firm dated 21.8.2002 you were allowed to carry out the sale of NIT No. 18, Item No. 4.
Whereas it has also been found that the said firm M/s. Raj Bros. has connived with M/s. Aar Gee Const. Co., Mazdoor Constructions & M/s. Om Prakash Mittal in pooling of Item No. 4.
Whereas the rate tendered by you for the said item No. 4 is @ 34.98 above and that of M/s. Mazdoor Constructions, is @ 24.24% above and that of M/s. Aar Gee Const. Co. @ 19.99% above and whereas M/s. Om Prakash Mittal did not put his tenders in connivance with you and Other contractors. The said quoted rates by you and M/s. Mazdoor Constructions Along with M/s. Aar Gee Const. Co. clearly show that the pooling had been done in the said case which is against the sanctity of the NIT and the laid down procedure. Thus the pooling of the said NIT by you and other contractors had inadvertently thwarted the healthy competition and correspondingly MCD has been put to financial loss for which you are responsible.”
10. The petitioners called upon the respondent Corporation to supply them the relevant documents in order to give an effective reply to the show cause notice and in pursuance thereto they were asked to come and inspect the documents. Thereafter replies to the show-cause notices were filed denying the allegation. However, in terms of the impugned circular, the petitioners were blacklisted.
11. In order to appreciate the controversy between the parties, it is also necessary to set out the relevant portions of the instructions for enlistment of contractors. The enlistment was a pre-requisite to participate in any tender of the respondent subject to the terms and conditions of the tender and the contractor was required to submit an application in a prescribed form to be processed for enlistment under different categories.
The relevant terms and conditions are as under:

“6. Period of enlistment-
The enlistment shall be valid for a period of five years. The enlistment can, however, be revalidated in accordance with rules in this regard. Each revalidation shall be for a period of five years from the date of expiry of the previous enlistment/revalidation. The enlistment shall be open to review by the enlistment authority and liable to termination, suspension or any other such action at any time if considered necessary by the enlistment authority, after issue of show cause notice.
7. Categories and Classes-
The enlistment shall be done in the categories and classes mentioned in Table-1.
8. Tendering limits-
The tendering limit up to which they shall be eligible to tender shall be as given in Table-1.
The contractor shall be governed by the provisions existing at a particular point of time irrespective of when he was enlisted.
22. Disciplinary actions-
The contractor shall have to abide by all the rules of enlistment and also by the terms and conditions of the contract and the notice inviting tenders. He shall have to execute the works satisfactorily, on time and with good quality. The enlisting authority shall have the right to demote a contractor to a lower class, suspend business with him for any period, debar him or remove his name from the approved list of contractors after issue of show cause notice. Decision of the department shall be final and binding on the contractor. The following actions of the contractor shall, in general, make him liable to disciplinary actions :
22.2. Suspension of business-
The enlistment authority may suspend business with a contractor for indefinite period where, pending full inquiry into the allegations the enlistment authority is prima facie of the view that the contractor is guilty of an offence in relation to business dealings which, when established would result in his removal/banning business and it is not considered desirable to entrust new works or continue business with the contractor.

22.3 Removal from the approved list-

The name of the contractor may be removed from the approved list of contractors, by the enlisting authority, if he,

(a) has, on more than one occasion, failed to execute a contract or has executed it unsatisfactorily, or

(b) is proved to be responsible for constructional defects in two or more works, or

(c) persistently violates any important conditions of the contract, or

(d) fails to abide by the conditions of enlistment, or

(e) is found to have given false particulars at the time of enlistment, or

(f) has indulged in any type of forgery or falsification of records, or

(g) changes constitution of the firm or individual without prior approval of the enlistment authority, or

(h) changes permanent address/business address without intimation to the enlistment authority, or

(i) is declared or is in the process of being declared bankrupt, insolvent, would up, dissolved or partitioned, or

(j) persistently violates the labour regulations and rules, or

(k) is involved in complaints of serious nature received from other departments which prima facie appear to be true, or

(l) defaults in settlement of tax dues like income tax, contract tax, sales tax, octroi duties, etc., or

(m) has been declared insolvent by a Court of competent jurisdiction.

(n) has been involved in criminal case against body and property and convicted by the Court.”

12. The normal process requires the tender to be scrutinized once it is opened. For each item of tender, the respondent Corporation has calculated its “Justification Rates”. These justification rates are calculated on the basis of the actual cost of carrying out a particular activity along with the reasonable level of profit. Thus if the rates are above the justification rates, the Corporation calls the contractors for negotiations to bring them down to at least the justification rates. Even in cases where the rates quoted are below the justification rates, the contractor may be called to justify as to how he proposes to execute the contract at such a low margin. This is in order to ensure that the respondent Corporation is not stuck in the middle with an unexecuted contract on account of the low rates quoted by the contractor or with the substandard material.

13. The grievances of the petitioners / contractors can be broadly categorised in respect of this blacklisting is as under :

(i) The only ground given for blacklisting is pooling by the contractors. This expression “Pooling” is not defined anywhere and certainly not under the instructions for enlistment. Clause 22.3 which provides for removal of approved list does not list “pooling”, “whatever it may mean” as a ground for removal from the approved list.
(ii) On the show-cause notice being issued, the petitioners asked for supply of documents vide letter dated 8.4.2003 and were called upon to appear on 28.4.2003 to see the documents. The reply to show-cause notice was filed only later on 9.5.2003. No opportunity of personal hearing was given and there has been tampering with the record inasmuch as the proceedings of 28.4.2003 were recorded and addition was made later on seeking to give an impression as if hearing was given on the said date. This would not have been possible since the reply itself was given at a later date. The relevant noting is as under and the portion alleged to have been tampered with has been underlined:
“With reference to Letter No. EEXxviii/2003/D/71 dated 28.4.2003, regarding showing the relevant record in respect of NIT No. 18 DT. 19.8.2002, the following are present today i.e. 5.5.2003. They also put forth their proposals which were given a hearing.
1. M/s. Aar Gee Const. Co.
2. M/s. Jindal Builders.
3. Mazdoor constructions.
4. M/s. Om Prakash Mittal.
5. Vinay Const. Co.
The aforesaid proceedings have been signed on 5.5.2003 though replies to show cause notices have been filed later.
(iii) In case the reference to pooling is to create a cartel, the facts of the present case are completely contrary to the very concept of cartel. The object of cartel is to get a higher rate and make additional profit by colluding together. In the present case except in one case the rates quoted are even below the justification rates and are thus even more competitive than what was thought by the MCD to be the ideal bid.
(iv) The impugned order has been issued on the basis that there was pooling among the six contractors/tenderers but in the show-cause notice issued in CW No. 4444/2003 the allegation was that four contractors participated in item No. 4.
(v) The concept of cartel only envisages collusion which would imply that the bids should be close to each other or close to justification rates. This was not so in the present case where there was considerable disparity in the bids submitted and they were below the justification rates.
(vi) The justification rates are determined after the opening of tender, thus no petitioner could have come to know of the justification rates.
(vii) The impugned order does not even specify the time period for black-listing and consequently the black-listing is for an indefinite period of time.
(viii) Contracts have been awarded in cases where there is less than 2% differential between the rates and thus there was nothing unusual in the present case.
(ix) The enlisting authority is naturally to be the de-listing authority and the opportunity of hearing has to be before the said authority. At best the hearing took place before the Executive Engineer (though factually denied) and the said authority is not the enlisting authority for contractors of Classes I to IV.
(x) In CW No. 4747/2003 the tender forms were purchased for Item Nos. 2 and 3 but filled in only for Item No. 2 and rates were 2% above the justification rates. There could thus be no pooling apart from the fact that in the other three cases it was below the justification rates.
14. Learned Counsel for the petitioners relied upon a number of authorities in support of their case. It was thus submitted that there could not be any occasion for hearing to take place before the Executive Engineer and it is only the concerned authority which had to grant the hearing. Learned Counsel referred to the judgment of the Supreme Court in Southern Painters v. Fertilizers & Chemicals Travancore Ltd. and Anr., 1994 Supp (2) Supreme Court Cases 699, which dealt with the issue of a deletion of name of Government contractor from the list of approved contractors on account of a vigilance report without affording an opportunity. It was held that deletion of name amounted to blacklisting affecting reputation of the contractor and so the affected contractor was entitled to an opportunity of being heard. The Supreme Court observed in para 9 and 10 as under :

“9. In Erusian Equipment & Chemicals Ltd. v. State of W.B., this Court observed :
‘The state need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person’s character and personality. Blacklisting tarnishes one’s reputation.
Exclusion of a member of the public from dealing with a State in sales transactions has the effect of preventing him from purchasing and doing a lawful trade in the goods in discriminating against him in favor of the other people.
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.’
10. Again, in Raghunath Thakur v. State of Bihar, , this Court observed:
‘Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of .giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realized that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order’.”
15. In Mahabir Auto Stores and Ors. v. Indian Oil Corporation and Ors., , the Supreme Court held that the State or its instrumentality engaged in commercial transactions must be reasonable, fair and act in a just manner and it should inform and take into confidence the affected party when adverse action is contemplated.

16. Learned Counsel also referred to the Division Bench judgment of this Court in B.R. Gupta v. Union of India and Ors., to contend that the personal hearing has to be by the person who is the competent authority and deals with the matter and that the Executive Engineer was not such an authority. In this behalf the judgment of the Supreme Court in State of U.P. and Ors. v. Maharaja Dharmander Prasad Singh and Ors., , was relied upon where in para 55 it was observed as under:

“55. It is true that in exercise of powers of revoking or cancelling the permission is akin to and paratakes of a quasi-judicial complexion and that in exercising of the former power the authority must bring to bear an unbiased mind, consider impartially the objections raised by the aggrieved party and decide the matter consistent with the principles of natural justice. The authority cannot permit its decision to be influenced by the dictation of others as this would amount to abdication and surrender of its discretion. It would then not be the authority’s discretion that is exercised, but someone else’s. If an authority ‘hands over its discretion to another body it acts ultra vires’. Such an interference by a person or body extraneous to the power would plainly be contrary to the nature of the power conferred upon the authority. De Smith sums up the position thus-
The relevant principles formulated by the Courts may be broadly summarised as follows. The authority in which a discretion is vested can be compelled to exercise that discretion, but not to exercise it in any particular manner. In general, a discretion must be exercised only by the authority to which it is committed. That authority must genuinely address itself to the matter before it: it must not act under the dictation of another body or disable itself from exercising a discretion in each individual case. In the purported exercise of its discretion it must not do what it has been forbidden to do, nor must it do what it has not been authorised to do. It must act in good faith, must have regard to all relevant considerations and must not be swayed by irrelevant considerations, must not seek to promote purposes alien to the letter or to the spirit of the legislation that gives it power to act, and must not act arbitrarily or capriciously. Nor where a judgment must be made that certain facts exist can a discretion be validly exercised on the basis of an erroneous assumption about those facts. These several principles can conveniently be grouped in two main categories, failure to exercise a discretion and excess or abuse of discretionary power. The two classes are not, however, mutually exclusive.”
17. Learned Counsel for the petitioner also submitted that if there was particular procedure prescribed by law, the same should scrupulously followed and in this behalf referred to the judgments of the Supreme Court in Ramana Dayaram Shetty v. International Airport Authority of India and Ors., ; A.K. Roy and Anr. v. State of Punjab and Ors., ; D.N. Taneja v. Bhajan Lal, .

18. It was thus submitted that the procedure prescribed requires that it is only the enlisting authority who could have de-listed and that too after giving a personal hearing which was never given. Learned Counsel made a grievance about the fact that a personal hearing was a must and evidence against the persons must be apprised to the person. It is only thereafter that there can be any effective personal hearing. It was observed in para 22 which is as under:

“22. It is interesting to find that this rule was recognised and applied by a Constitution of this Court in a case of sale of Kendu leaves by the Government of Orissa in Rashbihari Panda v. State of Orissa (supra). The trade of Kendu leaves in the State of Orissa was regulated by the Orissa Kendu Leaves (Control of Trade) Act, 1961 and this Act created a monopoly in favor of the State so far as purchase of Kendu leaves from growers and pluckers was concerned. Section 10 of the Act authorised the Government to sell or otherwise dispose of Kendu leaves purchased in such manner as the Government might direct. The Government first evolved a scheme under which it offered to renew the licenses of those traders who in its view had worked satisfactorily in the previous year and had regularly paid the amounts due from them. The scheme was challenged and Realizing that it might be struck down, the Government withdrew the scheme and instead, decided to invite tenders for advance purchases of Kendu leaves but restricted the invitation to those individuals who had carried out contracts in the previous year without default and to the satisfaction of the Government. This method of sale of Kendu leaves was also challenged by filing a writ petition on the ground inter alia that it was violative of Articles 14 and 19(l)(g) and this challenge, though negatived by the High Court, was upheld by this Court in appeal. The Court pointed out that the original scheme of offering to enter into contracts with the old licensees and to renew their terms was open to grave objection, since it sought arbitrarily to exclude many persons interested in the trade and the new scheme under which the Government restricted the invitation to make offers to those traders who had carried out their contracts in the previous year without default and to the satisfaction of the Government was also objectionable, since the right to make tenders for the purchase of Kendu leaves being restricted to a limited class of persons, it effectively shut out all other persons carrying on trade in Kendu leaves and also the new entrants into that business and hence it was ex facie discriminatory and imposed unreasonable restrictions upon the right of persons other than the existing contractors to carry on business. Both the schemes evolved by the Government were thus held to be violative of Articles 14 and 19(l)(g) because they “gave rise to a monopoly in the trade in Kendu leaves to certain traders and singled out other traders for discriminatory treatment”. The argument that existing contractors who had carried out their obligations in the previous year regularly and to the satisfaction of the Government formed a valid basis of classification bearing a just and reasonable relation to the object sought to be achieved by the sale, namely, effective execution of the monopoly in the public interest was also negatived and it was pointed out that: “exclusion of all persons interested in the trade, who were not in the previous year licensees, is ex facie arbitrary: it had no direct relation to the object of preventing exploitation of pluckers and growers of Kendu leaves, nor had it any just or reasonable relation to the securing of the full benefit from the trade, to the State”. The Court referred to the offer made by a well known manufacturer of Bidis for purchase of the entire crop of Kendu leaves for a sum of Rs. 3 crores which was turned down by the Government and expressed its surprise that no explanation was attempted to be given on behalf of the State as to why such an offer, from which the State stood to gain more than Rs. 1 crore, was invitation to submit tenders to a limited class of persons was held to be violative of the equality clause, because the classification did not bear any just and reasonable relation to the object sought to be achieved, namely, selling of Kendu leaves in the interest of the general public. The standard or norm laid down by the government for entering into contracts of sale of Kendu leaves with third parties was discriminatory and could not stand the scrutiny of the contention of the Government that by reason of Section 10 it was entitled to dispose of Kendu leaves in such manner as it thought fit and there was no limitation upon its power to enter into contracts for. sale of Kendu leaves with such persons it liked. The Court held that the Government was, in the exercise of its power to enter into contracts for sale of Kendu leaves, subject to the constitutional limitation of Article 14 and it could not act arbitrarily in selecting persons with whom to enter into contracts and discriminate others similarly situated. The Court criticised the government for not giving any explanation as to why an offer for a large amount was not accepted, the clearest implication being that the Government must act in the public interest; it cannot act arbitrarily and without reason and if it does so, its action would be liable to be invalidated. This decision wholly supports the view we are taking in regard to the applicability of the rule against arbitrations in State action.”
19. Learned Counsel for the petitioners also referred to the observations of the Supreme Court in Swedeshi Cotton Mills v. Union of India, explaining the concept of a natural justice which are as under :

“26. Well then, what is “natural justice”? The phrase is not capable of a static and precise definition. It cannot be imprisoned in the strait-jacket way “which implies the existence of moral principles of self-evident and unarguable truth”. In course of time, Judges nurtured in the traditions of “equity and good conscience”. Legal experts of earlier generations did not draw any distinction between “natural justice” and “natural law”. “Natural justice” was considered as “that part of natural law which relates to the administration of justice”. Rules of natural justice are not embodied rules. Being means to an end and not an end in themselves, it is not possible to make an exhaustive catalogue of such rules.
27. But two fundamental maxims of natural justice have now become deeply and indelibly ingrained in the common consciousness of mankind, as pre-eminently necessary to ensure that the law is applied impartially, objectively and fairly. Described in the form of Latin tags these twin principles are : (i) audi alterant partem and (ii) nemo judex in re sua. For the purpose of the question posed above, we are primarily concerned with the first. This principle was well-recoganised even in the ancient world. Seneca, the philosopher, is said to have referred in Medea that it is unjust to reach a decision without a full hearing. In Maneka Gandhi case, , Bhagwati, J. Courts to ensure that a statutory authority arrives at a just decision and it is calculated to act as a healthy check on the abuse or misuse of power. Hence its reach should not be narrowed and its applicability circumscribed.”
28. During the last two decades, the concept of natural justice has made great strides in the realm of administrative law. Before the epochmaking decision of the House of Lords in Ridge v. Baldwin, (1964) AC 40, 196 and (1963) 2 All ER 66 (HL), it was generally thought that the rules of natural justice apply only to judicial or quasi-judicial proceedings; and for that purpose, whenever a breach of the rule of natural justice was alleged, Courts in England used to ascertain whether the impugned action was taken by the statutory authority or Tribunal in the exercise of its administrative or quasi-judicial power. In India also, this was the position before the decision, dated February 7,1967, of this Court in Dr. Bina Pani Dei’s case, , was further rubbed out to a vanishing point in A.K. Kraipak v. Union of India, If the purpose of the rules of natural justice is to prevent miscarriage of justice one fails to see why those rules should be made inapplicable to administrative inquiries. Often times it is not easy to draw the line that demarcates administrative enquiries from quasi-judicial inquiries…… Arriving at a just decision is the aim of both quasi-judicial inquiries as well as administrative enquiries. An unjust decision in an administrative inquiry may have more far-reaching effect than a decision in a quasi-judicial inquiry.”

20. Learned Counsel for the petitioners also submitted that the enlisting authority consists of more than one members and since at the time of de-listing no meeting was held there could not be any meeting of mind amongst the members of the Committee and thus the decision was bad in law and in this behalf referred to the judgment of the Supreme Court in State of Bihar v. Jainanadan Prasad Singh and Ors., 1989 Supp (2) SCC 544 where it was held that the administrative action taken by a Committee by circulating a file among its members in the absence of any rule prescribing such procedures could not be sustained since there would be no meeting of minds of the members.

21. Learned Counsel for the petitioners are also aggrieved by the lack of any reasoning in the order communicating the black-listing and in this behalf referred to the judgment of the Supreme Court in States of West Bengal v. Atul Krishna Shaw and Anr., 1991 Supp (1) SCC 414 and Vasant D. Bhavsar v. Bar Council of India and Ors., V (1999) SLT 303:(1999) SCC 45.

22. Lastly the learned Counsel for the petitioners referred to the judgment of the Supreme Court in K.I. Shephard and Ors. v. Union of India and Ors., where it was observed in para 15 as under :

“15. Fair play is a part of the public policy and is a guarantee for justice to citizens. In our system of Rule of Law every social agency conferred “with power is required to act fairly so that social action would be just and there would be furtherance of the well-being of citizens. The rules of natural justice have developed with the growth of civilisation and the Rule of Law prevailing in the community. Man within the social frame has struggled for centuries scores of years for the rules of natural justice to conceptually enter into the field of social activities. We do not think in the facts of the case there is any justification to hold that rules of natural justice have been ousted by necessary implication on account of the time frame. On the other hand we are of the view that the time limited by statute provides scope for an opportunity to be extended to the intended excluded employees before the scheme is finalised so that a hearing commensurate to the situation is afforded before a section of the employees is thrown out of employment.”
23. Learned Counsel for the respondent on the other hand contended that the decision to blacklist the petitioners has been taken after due scrutiny and on the basis of the complaint received by the Vigilance Department. The petitioners were only bidders and the complaint was received in advance. However, though the allegation in the complaint was that the other persons were not permitted to participate in the bid, learned Counsels for the respondent do not dispute the proposition that there is nothing on record to substantiate this plea. It was, however, stated that the same is not material for determination of the controversy in the present case.

24. Learned Counsel for the respondent stated that the scope of the scrutiny by the Court was limited specially in view of the fact that there was no allegation of mala fide.

25. The complete case of the respondent really rests on the allegation against the petitioners of pooling. A query was put to learned Counsel for the respondent as to where this pooling is defined or prohibited under the provisions of the arrangement for enlisting/de-listing.

26. Mr. Sabharwal, learned Counsel for the respondent stated that the dictionary meaning of “Pooling” as per the file noting is “an arrangement between competitive parties to fix price and share business to eliminate competition”. A specific query was raised as to which dictionary or book of legal definitions was sought to be referred for this purpose. The only answer to the same was that the “Pooling” is a well understood term and is defined in some Oxford Dictionary as instructed by an officer of the respondent and it is open to the Court to see any dictionary.

27. I have considered it appropriate specially to refer to this aspect, as in my considered view, Counsels owe a duty to the Court to at least refer to the book or dictionary from where the terminology has been lifted and defined. This is least which can be expected by the Court. To say that it is open to the Court to look into any dictionary is like saying that the facts are in the file, the law is in the books and the judgment has to be pronounced by the Judge!

28. Left with no other option, I considered it appropriate to look to the definition. In Black’s Law Dictionary, seventh edition, the expression “Pooling”- “Pooling agreement” shows that the same is a reference to an association of individual or entitites who share resources and funds to promote their joint undertaking. If such an association is formed to eliminate competition throughout a single industry, it is a restraint of trade and this will hit by antitrust law.

29. In Law Lexicon by P. Ramanatha Aiyar, the expression “Pooling” is said to apply to business arrangement or combinations, a combination of persons contributing money to be used for purpose of increasing or depressing market price of stocks/grains or other commodities; a combination having the intention and power, or tendency, to monopolise business or control production or to interfere with trade.

30. Thus reading of the aforesaid definitions show that the concept of “Pooling” implies an arrangement which has two fold object of eliminating competition and fixing price for the benefit of the persons who are so pooling.

31. Learned Counsel for the respondent admitted that the bids made were below the justification rates in three cases and within a range of 2% above the justification rates in the 4th bid. It was, however, submitted that even when rates are below justification rates it can still impinge competition since it is open to the respondent authorities to call all the persons who are below the justification rates for further negotiations.

32. In so far as the issue of unlimited black-listing is concerned, a reference was made to the procedure for enlistment to contend that para 5 prescribed the period of enlistment of five years. It was thus submitted that the effect of the Same would be that the removal would operate only for the balance period of five years as a fresh list has to be drawn thereafter. It was thus submitted that de-listing was not for an unlimited period but only for the balance period. This was, however, raised as an alternative plea to the first plea that there could be an unlimited black-listing and nothing prevented the respondent from permanently barring the petitioners from participating in any tender.

33. In so far as the issue of personal hearing is concerned, it was submitted that there was no such requirement as long as there was sufficient compliance with the principle of natural justice. It was thus submitted that once a show cause notice was given and the petitioners were given the opportunity to reply to the show cause notices, nothing obligated the respondent to give a personal hearing.

34. In so far as the allegation of the petitioners that they were never given a personal hearing and that it was subsequently recorded that they had been given a hearing, learned Counsel for the respondent submitted that the same was not correct. In the alternative it was submitted that in any case it was an extra gesture on the part of the respondent and admittedly a mistake since the respondent was not bound to give such a hearing.

35. Learned Counsel for the respondent has referred to the judgment of the Supreme Court in Assistant Excise Commissioner and Ors. v. Issac Peter and Ors., , where it was held by the Supreme Court that doctrine of fairness or duty to act fairly and reasonably is evolved to ensure fair action where function is administrative and this doctrine cannot be invoked to amend, alter or vary the express terms of the contract between the parties.

36. Learned Counsel referred to the judgment of the Supreme Court in Karnataka Public Service Commission and Ors. v. B.M. Vijaya Shankar and Ors., , where it was held that natural justice is a concept which is weighed in balance of fairness, the Courts have been circumspect in extending it to situations where it would cause more injustice than justice. It was observed in para 4 as under :

“Was natural justice violated? Natural justice is a concept which has succeeded in keeping the arbitrary action within limits and preserving the rule of law. But with all the religious rigidity with which it should be observed, since it is ultimately weighed in balance of fairness, the Courts have been circumspect in extending it to situations where it would cause more injustice than justice. Even though the procedure of affording hearing is as important as decision on merits yet urgency of the matter, or public interest at times require flexibility in application of the rule as the circumstances of the case and the nature of the matter required to be dealt may serve interest of justice better by denying opportunity of hearing and permitting the person concerned to challenge the order itself on merits not for lack of hearing to establish bona fide or innocence but for being otherwise arbitrary or against rules. Present is a case which, in our opinion, can safely be placed in a category where natural justice before taking any action stood excluded as it did not involve any misconduct or punishment.”
Learned Counsel for the respondent lastly referred to the judgment of the Supreme Court in State Bank of Patiala and Ors. v. S.K. Sharma, , to contend that such right of hearing has to be judged on the touchstone of prejudice caused.

37. It was observed that the principle of natural justice cannot be reduced to any hard and fast rule or put in strait jacket. The applicability would depend on the facts and circumstances of each case and the object is to ensure a fair hearing/fair deal to the person whose rights are going to be affected. Thus, any complaint of violation of rule of audi alteram pattern has to be examined from the standpoint of fair hearing, applying the test of prejudice and there may be situations where observance of the requirements of prior notice/hearing may defeat the very proceeding resulting in grave prejudice to pubic interest. In such cases, the rule of post-decisional hearing is sufficient compliance with the principles of natural justice.

38. I have considered the submissions advanced by learned Counsel for the parties at length and considered the judgments cited at the Bar.

39. The first aspect which has to be considered is as to what was the complaint which gave rise to the proceedings against the petitioners. The initial complaint was that the NIT was not being made available to other persons who wanted to participate in the tender and only these contractors were allowed to submit their bids for the same. There has been nothing brought on record to substantiate the plea that any Contractor was not given tender causing interference with his rights to bid find limiting the competition. This was in fact the background of the complaint.

40. Even the allegations which were made of particular item numbers being awarded to a particular contractor did not turn out to be correct. For example in item No. 1 the allegation was that the same was to be awarded to M/s. Aar Gee Construction but the said bid was of M/s. Om Prakash Mittal. The complainant in subsequent complaint stated that M/s. Om Prakash Mittal and Aar Gee Construction Company are sister concerns. Even the enquiry thereafter made could not substantiate the same as recorded but all that is stated is that some discreet inquiry has revealed that they were sister concerns. Without establishing the facts, a conclusion has been arrived at that the complaint was correct. This is the same position with item No. 4. The mere fact that the bids were ultimately found to be lowest f certain contractors cannot give rise to a conclusion against them.

41. These aforesaid facts have to be examined taking into consideration the fact that in three of the cases the rates were found to be below the justification rates. A tabular form has been prepared in this behalf and the noting of the investigation and it would be useful to reproduce the same as under :

——————————————————————————-
Item Head Agency Agency Rates Justifica – Difference
No. of A/c mentioned in after open- received tion of in rates
complaint ing of tender rates quoted &
justifi-
cation
——————————————————————————-
1. Councillor Aar Zee Om Prakash 36.30% 38.97% -2.67% Head Const. Co Mittal above
2. Councillor Vinay Goel Vinay 43.00 41.24% +1.76% Head Constn. above Co.
3. Urban Vinay Vinay 18.00 24.10% -6.10% Village Goel Constn. above
4. MLA Aar Zee Aar Zee 19.99% 35.08% -15.09% Head Const. Co. Const. Co. above
——————————————————————————–
42. The aforesaid would show that the rates are as far below as 15% than the justification rates. If the justification rate is above in one case which is 1.76% more than the justification rates, in that case a number of illustrations have been annexed to the petition to show the award of contract within the margin of 2% or even more. It thus cannot be said that the contractors bid for a high amount to increase the profit element and eliminate the competition.

43. It has to be appreciated that justification rates are subsequently calculated and would not be known to the bidding parties. The justification rates are really speaking ideal rates which the respondent looks to. This includes an element of profit since no contractor is working for any altruistic motives. Really speaking, where the rates are below the justification rates, the contractor is called upon to justify how the person would perform the obligations at such low rates. Thus the very object of making high profits was absent as is available from the rates quoted.

44. The concept of cartel being formed is where persons get together to eliminate the competition and make profit. In view of the rates quoted being below the justification rates or around, this object is totally absent. It has not been established as to how the competition was eliminated or how the petitioners denied participation of any other contractor in the tender.

45. The expression “pooling” has been culled out from the various legal dictionaries which would show that the object of the same is to combine and eliminate the competition and make profit. Nothing has been shown in the records in the present case whereby the same has been established. In fact it could have really not been established where the rates are below the justification rates.

46. Another important aspect is that this concept of “pooling” is nowhere defined in the instructions for enlistment of contractors. This aspect is important since a detailed list of reasons for removal from approved list have been set out in Clause 22.3. In such a case was it really open for the respondent to go beyond the terms and conditions specified when a person has to be removed from the approved list? In my considered view the answer to the same would be in the negative.

47. The aforesaid aspect has to be examined taking into consideration the fact that assuming the respondent had some suspicion, in relation to a particular contract or in the activities of its officers, it was always open to the respondent to cancel the bid as in the present case. Nothing bound them to mandatorily award the contract. This would have cured the mischief, if any, which seems to have weighed with the respondent. The respondent, however, did not stop at this and has black-listed the petitioners which is a severe punishment resulting in civil consequences. Apart from the fact that it puts the reputation of the petitioners at stake, it also deprives the petitioners to do business with the respondent Corporation. In my considered view this could not have been done.

48. In so far as the issue about the right of hearing was concerned, there is no doubt about the proposition that there cannot be any hard and fast rule in this behalf, nor can the principles of compliance of natural justice be put in strait jacket. The Supreme Court has said so in State Bank of Patiala and Ors. v. S.K. Sharma’s case (supra). However, in the present case, the respondent itself deemed it appropriate to give a personal hearing to the petitioners and rightly so. Taking into consideration the nature of civil consequences and the severe effect on the petitioners, a right of hearing was mandated. It was not a case where a right of hearing would have negated any larger public interest since contract was in any case not being awarded. Having decided to give the personal hearing, the same ought to have been given. The respondent stated that this was given which was disputed by the petitioners. The perusal of the record in this behalf clearly shows when the show cause notices were issued to the petitioners, the petitioners asked for supplying of the documents. Admittedly the documents were not supplied but inspection was permitted for which the date of 28.4.2003 was fixed. Thereafter a further date of 5.5.2003 was fixed. The original record bears the testimony to this which has been reproduced herein above. The allegation of the petitioners is that a line has been added saying that they have been given a hearing. The perusal of the record does show that though the complete noting is in black ink, the thickness” of the pen is different for the line “They also put forth their proposals which were given a hearing”. The reading of the original record does gives an impression as if an addition has been made subsequently. This aspect is further fortified by reason of the fact that the reply to the show cause notice was given after this date and thus the occasion for personal hearing would not have arisen before that date. This Court has been informed that the officers who gave this hearing has been placed under suspension in respect of another departmental proceeding. I am not satisfied with the noting made which purports to show as if personal hearing was given.

49. In my considered view, there has been a clear case of violation of the principles of natural justice in the present case and no effective hearing was given. In fact no hearing has been given in view of the finding aforesaid.

50. I am also unable to accept the contention of learned Counsel for the respondent that there can be indefinite period of black-listing. Black-listing is a very severe consequence and it should have prescribed some time period. In fact this issue was even examined by the Commissioner, MCD but the nothings only show that what was stated was that if a representation is made, this can be considered for future. This is no answer to the legal proposition that there could not have been such indefinite period of black-listing.

51. The contention of the respondent that de-enlistment is only for the balance period of five years cannot be accepted in view of the plea that the black-listing is for an indefinite period.

52. The manner in which the inquiry proceeded also shows that the Vigilance Department had recommended that they should be black-listed, but before black-listing a hearing should be given. It appears as if a conclusion was already arrived at and the mere formality was fulfillled. There have been no detailed finding and the letter issued is a cryptic one. It makes general allegation about “pooling” of all six persons while this was not so. Even the show cause notices in all cases were different. Thus even the endeavor to examine each case separately has not taken place.

53. In so far as the issue of the authority which had to decide the question of de-listing is concerned, the instructions for enlistment itself provided the procedure and named the authority. Clause 22.3 clearly states that the contractor has to be removed from the approved list by the enlisting authority. The enlisting authority is different for different categories of contractors and it is not disputed that the Executive Engineer is the enlisting authority only for Class V contractors. It is only in CW No. 4381/2003 that one is concerned with class V contractor. The hearing has been given by the Executive Engineer. Thus the enlisting authority itself has not given the hearing.

54. The answer to the aforesaid by learned Counsel for the respondent was that the provisions of the Delhi Municipal Corporation Act, 1957 makes the Commissioner the competent authority holding all executive powers and thus the tact that the decision has been admittedly approved by the Commissioner negates any infirmity in the process.

55. In my considered view, this can be no answer to the plea raised by the petitioners. Once the enlistment procedure prescribes the authority which has to enlist and de-list it is that authority which has to take the decision. If there is a particular manner prescribed to do a thing, it must be done in that manner alone. It was observed in Nazir Ahmad v. King Emperor and the said principles has been consistently followed.

56. The aforesaid is not a mere formality to be completed but is the procedure to be followed while doing the needful. It may also be noted that even in the counter affidavit filed, it is stated that the “Main” Enlistment Authority for class V contractor is the Executive Engineer.

57. In this behalf it may be noticed that the enlisting authority mentioned aforesaid are as stated by the respondent and learned Counsel for the petitioners have been disputing this and stating that there is a panel of enlisting authority. The plea raised in the counter affidavit does seem to suggest as if there were more than one member of the enlisting authority since expression used “Main Enlisting Authority” imply that there are enlisting authorities.

58. In view of the aforesaid facts and the clear proposition of law enunciated by various Courts set out above, I have no manner of doubt that the black-listing of the petitioners in terms of the impugned order is completely illegal and cannot be sustained in law.

59. The respondent has in fact caused prejudice to the petitioners by the aforesaid and the petitioners have not been able to bid for the contracts during the interim period of time.

60. A writ of mandamus is thus issued quashing the impugned orders of black-listing against the petitioners making the rule absolute.

61. The petitioners shall also be entitled to costs quantified at Rs. 5,000/- per petitioner.