TPF Engineering Pvt Ltd v. National Highways Logistics Management Limited

11. In this regard it has been submitted that the aforementioned definition is vague and contrary, and consequently the extension of the Debarment Order to the Petitioner is arbitrary and in contravention to Article 14 of the Constitution of India on account of the lack of any nexus between the Petitioner and the debarred firm i.e., TPFG.

12. Lastly, it has been contended before this Court that Respondent No. 1 could not have issued the Impugned Letter in the absence of affording the Petitioner an opportunity to be heard. Accordingly, it is submitted that the actions of Respondent No. 1, are contrary to the well-established principles of natural justice. In this regard, reliance has been placed on:

(i) Sunrise House Keeping & Support Services Private Limited v.

(ii) Frontier Alloy Steels Ltd. v. Union of India, 2007 SCC OnLine All

940;

(iii) Pritam Singh & Sons v. State of Punjab, 1996 SCC OnLine P&H

405;

(iv) Roshni Enterprises v. Union of India, 2011 SCC OnLine Del 2540;

(v) Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229; and

(vi) JBM Ecolife Mobility (P)Ltd. v. Union of India, 2022 SCC OnLine

13. Mr. Arun Kumar Varma, Senior Counsel appearing on behalf of Respondent No. 1 has submitted before this Court that the Petitioner i.e., National Highways Logistics Management Limited (previously known as Cochin Port Road Company Limited) is a wholly owned special purpose vehicle (“SPV”) of NHAI which was incorporated on 19.01.2004 under the Companies Act, 1956. Further, it is submitted that the MoRTH directed the implementation of multi-modal logistics parks (“MMLPs”), high connectivity to ports and other ancillary works through Respondent No. 1. Accordingly, the Tender came to be issued under the Parvatmala Pariyojana by Respondent No. 1.

14. In this background, it has been contended before this Court that the Petitioner‟s contention qua the alleged violation of principles of natural justice in issuing the Impugned Letter is misguided as no contract has been entered into between the Petitioner (or its joint venture / consortium) and Respondent No. 1. Furthermore, Mr. Varma has placed reliance on Paragraph 5 of Appendix II of the RFP to contend that the Petitioner has waived its right to challenge the rejection of its bid. For ease of reference, on Paragraph 5 of Appendix II of the RFP is reproduced as under:

15. Accordingly, it has been submitted that in light of the unambiguous terms of Clause 5 of Appendix II of the RFP; and in light of the well settled principle of law i.e., that the terms of a tender must be construed strictly, the contention of the Petitioner cannot be sustained in light of Petitioner waiving its right to challenge the rejection of its application / bid by Respondent NO. 1. Furthermore, this Courts‟ attention has been drawn to Paragraph 14, Paragraph 15 and Paragraph 19 of the OM to contend that the question of affording an opportunity of hearing to the Petitioner simply does not arise when the OM categorically prohibits the issuance of contracts to inter alia „allied firms‟ of debarred persons. Furthermore, he has also submitted that similarly, the revocation of a debarment order shall also apply immediately and uniformly without affording the Respondent(s) an opportunity to contest the same. For ease of reference, Paragraph 14, Paragraph 15 and Paragraph 19 of the OM are reproduced hereunder:

16. It was submitted that, in the aforementioned context, Respondent NO. 1 dispensed with granting the Petitioner an opportunity of being heard as the same would be reduced to a mere formality. Reliance in this regard has been placed on a decision of this Court in JBM Ecolife Mobility (P) Ltd. v. Union of India, 2022 SCC OnLine Del 1397.

17. Thereafter, Mr. Varma has vehemently contended that the issuance of the Impugned Letter cannot be faulted, especially on account of a common holding company between the Petitioner and TPFG i.e., a fact that has not been disputed by the Petitioner, which would result in the Petitioner being treated as an „allied firms‟ under Paragraph 3 of the OM. Furthermore, it has been submitted that the said definition is merely indicative, not determinative and accordingly, the reliance placed by the Petitioner on the provisions of the Companies Act and IT Act to restrict the latitude of the debarment order is misguided on account of a clear policy decision to restrict business dealings with non-performers and its allied firms. Additionally, it has been submitted that the aforementioned policy decision is reflected under Clause 1.[4] of the Tender whereunder the Petitioner would have been rendered ineligible. The same reads as under: “1.[4] The Consultants may apply either as a sole firm or forming Joint Venture with other consultants. In case of Joint Venture, the maximum number of Joint Venture partners is limited to three including Associate partner, if any (i.e. Case 1: one lead + JV 1 +JV 2 or Case 2: one Lead + one JV partner + one Associate partner). The Applicant whether a sole applicant or joint venture may include an Associate company also. Any entity which has been barred by the Ministry of Road Transport and Highways (MORTH) or its implementing agencies for the works of Expressways, National Highways, ISC, EI Works and any other work being carried by MoRTH/ NHAT NHIDCL/ NHLML and the bar subsists as on the date of application, would not be eligible to submit the bid, either individually or as a member of a Joint Venture.”

18. Lastly, it has been submitted that not only is the holding company a commonality between the Petitioner and TPFG but the Board of Directors of both companies also feature a common director. Accordingly, the contention raised by the Petitioner qua the erroneous treatment of the Petitioner as an allied firm of TPFG ought to be rejected.

19. In rejoinder, Mr. Wadhwa has submitted that the prohibition under Clause 1.[4] of the Tender could not have been agitated against the Petitioner, as on the date of submission of bids, no Debarment Order subsisted against even TPFG; and that on account of a single common director, the management could not be said to be common.

20. This court has heard the Learned Counsel(s) appearing on behalf of the parties and perused the record.

21. Pertinently, as a precursor, it would be relevant to reiterate that this Court passed an interim order dated 28.06.2023, in the present writ petition whereunder Respondent No. 1 had been directed to consider the Petitioner‟s technical and financial bid on merits subject to the outcome of the present petition. Thereafter, vide an order dated 20.07.2023, the Respondents were directed to open the financial bids received in the Tender and present the results to this Court in a sealed cover. On 25.07.2023, the Petitioner was identified as H-1 in relation to Package No. 2 (as defined under the Tender) and accordingly, this writ petition now stands confined to the abovementioned section of the Tender.

22. Undisputedly, the Petitioner participated in the tendering process pursuant to the Tender and successfully submitted its bid. Thereafter, on 12.06.2023, Respondent No. 1 vide the Query sought certain clarifications in relation to the nature of the relationship between the Petitioner and TPFG i.e. a company that had since been debarred by the NHAI. In furtherance of the Query, the Petitioner vide a letter dated 13.06.2023, delineated the nature of the relationship between the Petitioner; and TPFG. Pertinently, it was disclosed that the two companies shared a common majority shareholder / holding company. The shareholding of (i) the Petitioner; and (ii) TPFG are reproduced below:

23. Subsequently, the Impugned Letter came to be issued whereunder inter alia the Petitioner was (i) declared technically unresponsive; and (ii) disqualified from the tendering process of the Tender by extending the application of Debarment Order upon the Petitioner on account of the guidelines framed under the SOP; and the Circular whereunder a debarment order automatically stands extended to all „allied firms‟ of such debarred firm. Aggrieved by the issuance of the Impugned Letter, the Petitioner has filed this present writ petition.

24. The fulcrum of the dispute before this Court is whether the Petitioner could be classified as an „allied firm‟ of the TPFG and accordingly could be disqualified from the tendering process of the Tender.

25. At the outset it would be relevant to refer to the OM issued by Department of Expenditure, Ministry of Finance, Procurement Policy Division whereunder the capitalised term(s) „Allied Firms‟ and „Firm‟ have been defined. Upon a perusal of the definition of the capitalised term „Allied Firms‟ and „Firm‟ defined under Paragraph 3 of the OM, this Court is of the considered opinion that, the said term is inclusive so as to extend to firms which may „be controlled by‟; or under the „common control of‟ a particular person. Pertinently, a parallel may be drawn against Section 2(76) of the Companies Act whereunder, the capitalised term „Related Party‟ has been defined to include “a subsidiary of the same holding company”. For ease of reference Section 2(76) of the Companies Act is reproduced as under:

26. Accordingly, in light of the language of the OM whereunder the term „allied firms‟ has been defined; this Court is of the considered opinion that a firm which is controlled by a common parent or a holding company or is controlled by a subsidiary or under the common control with another related party would satisfy the definition of allied firms. Accordingly, as TPFS exercises “common ownership interest” (defined under the Tender) in both the Petitioner; and TPFG both TPFG and the Petitioner have rightly been treated as allied firms / related parties by Respondent No. 1.

27. Therefore, this Court must now consider whether Respondent No. 1 could have disqualified the Petitioner on account of it being an „allied firm‟ of TPFG. Pertinently, TPFG was debarred vide the Debarment Order, thereafter, vide the issuance of the Impugned Letter, the application of the Debarment Order was extended to the Petitioner. As we have already held hereinabove, that the Petitioner was rightly treated as an allied firm, accordingly, the question before this Court is whether the extension of the Debarment Order under Paragraph 9.[3] of the Circular to the Tender was proper. For ease of reference Paragraph 9.[3] of the Circular is reproduced as under: “9.[3] Debarment/declaration as non-performer of a particular firm shall automatically extend to all its allied firms. In case a joint venture/ consortium is debarred, all partners/members shall stand debarred for the entire period.”

28. Upon, a perusal of the aforementioned circular, the application of the Debarment Order is deemed to automatically extend to all its allied firms. Under Paragraph 9.[3] of the Circular, the Debarment Order is self-activating qua the Petitioner herein and therefore it would naturally restrain the Petitioner from participating in future NH projects of NHAI / MoRTH or its executing agencies either directly or indirectly.

29. In the context, it would be relevant to note that Tender was issued by Respondent No. 1 under the Parvatmala Pariyojana formulated by the MoRTH. Undoubtedly, Respondent No. 1 is an executing agency of the NHAI / MoRTH which has as per the counter affidavit filed by Respondent No. 1, has been incorporated as a SPV of NHAI for the implementation of inter alia MMLPs, high connectivity to ports and other ancillary works.

30. Accordingly, the application of the Debarment Order to the Tender must be tested against the anvil of Paragraph 9.[3] of the Circular and the terms and conditions of the Tender. In this background, it would be pertinent to note that Paragraph 9.[3] of the Circular contemplates an automatic or selfactivating extension of an order of debarment to allied firms of the debarred entity. Furthermore, Paragraph 12 of the Debarment Order contemplates a prospective prohibition from participation in NH projects of NHAI / MoRTH or its executing agencies either directly or indirectly. Furthermore, Clause 1.[4] of the Tender clarifies that a prospective bidder would have been deemed ineligible to submit its bid in the event that an order of debarment operated against such prospective bidder as on date of the application. The relevant extracts of the Debarment Order; and the Tender are reproduced as under:

(i) Relevant Paragraph of the Debarment Order:

(ii) Relevant Clause of the Tender: “1.[4] The Consultants may apply either as a sole firm or forming Joint Venture with other consultants. In case of Joint Venture, the maximum number of Joint Venture partners is limited to three including Associate partner, if any (i.e. Case 1: one lead + JV 1 +JV 2 or Case 2: one Lead + one JV partner + one Associate partner). The Applicant whether a sole applicant or joint venture may include an Associate company also. Any entity which has been barred by the Ministry of Road Transport and Highways (MORTH) or its implementing agencies for the works of Expressways, National Highways, ISC, EI Works and any other work being carried by MoRTH/ NHAT NHIDCL/ NHLML and the bar subsists as on the date of application, would not be eligible to submit the bid, either individually or as a member of a Joint Venture.”

31. Admittedly, the Tender was issued on 31.12.2023, thereafter the Petitioner submitted its bid on 22.03.2023; and subsequently on 11.05.2023, the Petitioner was found to be technically qualified in respect of the Tender. However, vide the Impugned Letter, the Petitioner was inter alia disqualified from the tendering process of the Tender on account Clause 1.[4] of Tender; Paragraph 9.[3] of the Circular; read with the Debarment Order.

32. Therefore, this Court must consider whether the rigors under Clause 1.[4] of the Tender would only apply in the event a Debarment Order subsist on the date of the application i.e., which as per the Petitioner must be interpreted to mean that an order of debarment must subsist as on the date of submission of the bid; or whether the rigors of Clause 1.[4] of the Tender could be invoked through the various stages of tendering process prior to the issuance of the Letter of Allotment (“LoA”), as contended by Respondent No. 1. In this regard, it would be necessary to refer to certain decisions of the Hon‟ble Supreme Court of India (the “Supreme Court”) in relation to scope of judicial review in the interpretation of a tender document.

33. The Supreme Court in Agmatel India (P) Ltd. Vs. Resoursys Telecom, (2022) 5 SCC 362, has analysed the scope of judicial review in contractual matters, particularly in relation to the process of interpretation of a tender document. Accordingly, the Supreme Court in Agmatel India (P) Ltd. (Supra) relying on Galaxy Transport Agencies Vs. New J.K. Roadways, Fleet Owners & Transport Contractors, (2021) 16 SCC 808; Montecarlo Ltd. v. NTPC Ltd., (2016) 15 SCC 272; and Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corpn. Ltd., (2016) 16 SCC 818, held as under:

34. 34. Moreover in, Silppi Constructions Contractors v. Union of India, (2020) 16 SCC 489 the Supreme Court observed as under:

35. Lastly, the Supreme Court in Michigan Rubber (India) Ltd. v. State of Karnataka, (2012) 8 SCC 216 enunciated principles warranting judicial interference in contractual matters involving the State, the same are reproduced as under:

24. The principles have a sound jurisprudential basis. Since the function of the judicial and quasi-judicial authorities is to secure justice with fairness, these principles provide a great humanising factor intended to invest law with fairness to secure justice and to prevent miscarriage of justice. The principles are extended even to those who have to take an administrative decision and who are not necessarily discharging judicial or quasi-judicial functions. They are a kind of code of fair administrative procedure. In this context, procedure is not a matter of secondary importance as it is only by procedural fairness shown in the decision-making that a decision becomes acceptable. In its proper sense, thus, natural justice would mean the natural sense of what is right and wrong.

25. This aspect of procedural fairness, namely, right to a fair hearing, would mandate what is literally known as “hearing the other side”. Prof. D.J. Galligan [ On “Procedural Fairness” in Birks (Ed.), The Frontiers of Liability, Vol. 1 (Oxford 1994)] attempts to provide what he calls “a general theory of fair treatment” by exploring what it is that legal rules requiring procedural fairness might seek to achieve. He underlines the importance of arriving at correct decisions, which is not possible without adopting the aforesaid procedural fairness, by emphasising that taking of correct decisions would demonstrate that the system is working well. On the other hand, if mistakes are committed leading to incorrect decisions, it would mean that the system is not working well and the social good is to that extent diminished. The rule of procedure is to see that the law is applied accurately and, as a consequence, that the social good is realised. For taking this view, Galligan took support from Bentham [A Treatise of Judicial Evidence (London 1825)], who wrote at length about the need to follow such principles of natural justice in civil and criminal trials and insisted that the said theory developed by Bentham can be transposed to other forms of decision-making as well. This jurisprudence of advancing social good by adhering to the principles of natural justice and arriving at correct decisions is explained by Galligan in the following words: “On this approach, the value of legal procedures is judged according to their contribution to general social goals. The object is to advance certain social goals, whether through administrative processes, or through the civil or criminal trial. The law and its processes are simply instruments for achieving some social good as determined from time to time by the law-makers of the society. Each case is an instance in achieving the general goal, and a mistaken decision, whether to the benefit or the detriment of a particular person, is simply a failure to achieve the general good in that case. At this level of understanding, judgments of fairness have no place, for all that matters is whether the social good, as expressed through laws, is effectively achieved.” Galligan also takes the idea of fair treatment to a second level of understanding, namely, pursuit of common good involves the distribution of benefits and burdens, advantages and disadvantages to individuals (or groups). According to him, principles of justice are the subject-matter of fair treatment. However, that aspect need not be dilated upon.

38. But that is not the end of the matter. While the law on the principle of audi alteram partem has progressed in the manner mentioned above, at the same time, the courts have also repeatedly remarked that the principles of natural justice are very flexible principles. They cannot be applied in any straitjacket formula. It all depends upon the kind of functions performed and to the extent to which a person is likely to be affected. For this reason, certain exceptions to the aforesaid principles have been invoked under certain circumstances. For example, the courts have held that it would be sufficient to allow a person to make a representation and oral hearing may not be necessary in all cases, though in some matters, depending upon the nature of the case, not only full-fledged oral hearing but even cross-examination of witnesses is treated as a necessary concomitant of the principles of natural justice. Likewise, in service matters relating to major punishment by way of disciplinary action, the requirement is very strict and full-fledged opportunity is envisaged under the statutory rules as well. On the other hand, in those cases where there is an admission of charge, even when no such formal inquiry is held, the punishment based on such admission is upheld. It is for this reason, in certain circumstances, even post-decisional hearing is held to be permissible. Further, the courts have held that under certain circumstances principles of natural justice may even be excluded by reason of diverse factors like time, place, the apprehended danger and so on.

39. We are not concerned with these aspects in the present case as the issue relates to giving of notice before taking action. While emphasising that the principles of natural justice cannot be applied in straitjacket formula, the aforesaid instances are given. We have highlighted the jurisprudential basis of adhering to the principles of natural justice which are grounded on the doctrine of procedural fairness, accuracy of outcome leading to general social goals, etc. Nevertheless, there may be situations wherein for some reason—perhaps because the evidence against the individual is thought to be utterly compelling—it is felt that a fair hearing “would make no difference”—meaning that a hearing would not change the ultimate conclusion reached by the decision-maker—then no legal duty to supply a hearing arises. Such an approach was endorsed by Lord Wilberforce in Malloch v. Aberdeen Corpn. [(1971) 1 WLR 1578: (1971) 2 All ER 1278 (HL)], who said that: (WLR p. 1595: All ER p. 1294) “… A breach of procedure … cannot give [rise to] a remedy in the courts, unless behind it there is something of substance which has been lost by the failure. The court does not act in vain.” Relying on these comments, Brandon L.J. opined in Cinnamond v. British Airports Authority [(1980) 1 WLR 582: (1980) 2 All ER 368 (CA)] that: (WLR p. 593: All ER p. 377) “… no one can complain of not being given an opportunity to make representations if such an opportunity would have availed him nothing.” In such situations, fair procedures appear to serve no purpose since the “right” result can be secured without according such treatment to the individual.

40. In this behalf, we need to notice one other exception which has been carved out to the aforesaid principle by the courts. Even if it is found by the court that there is a violation of principles of natural justice, the courts have held that it may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void. The validity of the order has to be decided on the touchstone of “prejudice”. The ultimate test is always the same viz. the test of prejudice or the test of fair hearing.

47. In Escorts Farms Ltd. v. Commr. [(2004) 4 SCC 281], this Court, while reiterating the position that rules of natural justice are to be followed for doing substantial justice, held that, at the same time, it would be of no use if it amounts to completing a mere ritual of hearing without possibility of any change in the decision of the case on merits. It was so explained in the following terms: (SCC pp. 309-10, para 64)

48. Therefore, on the facts of this case, we are of the opinion that non-issuance of notice before sending communication dated 23-6-2003 has not resulted in any prejudice to the appellant and it may not be feasible to direct the respondents to take fresh action after issuing notice as that would be a mere formality.”

42. Furthermore, the Supreme Court in State of U.P. v. Sudhir Kumar Singh, 2020 SCC OnLine SC 847 enunciated certain principles in relation to interference by Courts in matters claiming the contravention of principles of natural justice. Pertinently, the Supreme Court in Sudhir Kumar Singh (Supra) observed as under:

43. Accordingly, as the Petitioner was afforded an opportunity to explain its relationship with TPFG; and in light of the admission by Petitioner qua the relationship between itself and TPFG i.e., subsidiaries of a common holding company, this Court is of the considered opinion that, an additional opportunity of hearing prior to the issuance of the Impugned Letter would necessarily be reduced to a mere ritual / useless formality. Furthermore, in light of Clause 9.[3] of the Circular read with Paragraph 3 of the OM whereunder once the relationship between Petitioner and TPFG has been admitted to include a common holding company the classification of the Petitioner as an allied firms / related party, the extension of the Debarment Order is a natural, self-activating, automatic and invariable consequence, accordingly, no fruitful purpose would have been served by extending the Petitioner an additional opportunity of hearing.

44. Therefore, following the aforenoted decisions of the Supreme Court and in light of the admitted position vis-à-vis TPFG; and the Petitioner, this Court does not consider it necessary to exercise its jurisdiction under Article 226 of the Constitution of India in relation to the non-observance of natural justice particularly in light of the unambiguous terms of the OM and the Circular as more particularly identified above.

45. Before we conclude we must also deal with the judgements cited by Mr. Wadhwa in relation to the application of principles of natural justice to the case herein.

46. Firstly, reliance was placed on Sunrise House Keeping & Support Services Private Limited (Supra) to contend that the Petitioner could not have been disqualified by Respondent No. 1 merely on account of TPFG being disqualified in the absence of a prior opportunity of hearing. Pertinently in the said case, the Chandigarh Industrial & Tourism Development Corporation Limited issued a tender in relation to mechanized cleaning services however, it went on to the blacklist the petitioner therein by piercing the corporate veil i.e., by identifying common directors between the blacklisted firm and the petitioner therein to justify the extension of the blacklisting in the absence of any policy or guidelines mandating such a procedure. In the considered opinion of this Court, the said case is distinguishable on facts, as the facts of the present case reveal that a duly formulated policy had been enacted whereby a debarment order is extended to „allied firms‟ of a debarred firm.

47. Secondly, reliance was placed on Frontier Alloy Steels Ltd. (Supra) and Roshni Enterprises (Supra) to contend that principles of natural justice demanded that prior to the determination of the Petitioner as an „allied firm‟ of the debarred entity, an opportunity of hearing ought to have been provided. In the present case, the Petitioner pursuant to the Query, disclosed that it shared a common holding company with the debarred entity i.e., TPFG. Accordingly, once the relationship is admitted and the said relationship satisfied the definition of „allied firms‟ the question of a further opportunity of hearing became immaterial. Therefore, the reliance placed by the Petitioner on the aforementioned cases is misguided and does not assist the Petitioner herein.

48. Thirdly, reliance on Pritam Singh (Supra) is misdirected as the said case pertains to the blacklisting of firms by way of a non-speaking; and unreasoned order. In the present case, neither has the Petitioner been blacklisted nor is the Impugned Letter and / or Debarment Order nonspeaking or unreasoned. Accordingly, the reliance placed Pritam Singh (Supra) would not assist the Petitioner herein.

49. Fourthly, the reliance was placed on Raghunath Thakur (Supra) is erroneous as the observations of the Supreme Court were made in relation to providing the primary entity an opportunity of hearing and accordingly, has no weight in the present case wherein TPFG i.e., the debarred entity has been afforded multiple opportunities of hearing prior to the issuance of the Debarment Order.

50. Finally, reliance was placed on JBM Ecolife II, however the said case is distinguishable on facts as therein the primary debarment order was set aside and accordingly, the subsequent order i.e., extending the primary debarment order to the sister concern / allied firm was also set aside. In the present case, the factual matrix does not envisage the primary Debarment Order being set aside. Conclusion

51. For the foregoing reasons, we find that the Petitioner has been unable to make out a case warranting interference of this Court under Article 226 of the Constitution of India.

52. The writ petition is, accordingly, dismissed. (SATISH CHANDRA SHARMA)

CHIEF JUSTICE

JUDGE NOVEMBER 03, 2023