Full Text
W.P.(C) 16110/2022 & CM APPL. 6210/2023
Date of Decision: 20.02.2023 IN THE MATTER OF:
NATIONAL HIGHWAYS BUILDERS FEDERATION
THROUGH ITS AUTHORIZED REPRESENTATIVE.
C-713/G, PALAM EXTENSION, OPP. SHIKSHA BHARTI COLLEGE & OLD SCHOOL, SECTOR 7, DWARKA, NEW DELHI - 110075 ….PETITIONER NO.1
M/S GHV (INDIA) PVT. LTD.
THROUGH ITS AUTHORIZED REPRESENTATIVE.
AML CENTRE 1, 8 MAHAL INDUSTRIES AREA, MAHAKALI CAVES ROAD, ANDHERI (EAST)
MUMBAI 400093. ….PETITIONER NO.2
Through: Mr.Vishrov Mukherjee, Mr.Girik Bhalla and Mr.Raghav Malhotra, Advocates.
THROUGH ITS SECRETARY, MINISTRY OF ROAD, TRANSPORT AND HIGHWAYS, TRANSPORT BHAWAN, 1, PARLIAMENT STREET, NEW DELHI - 110001. ….RESPONDENT NO.1
UNION OF INDIA
THROUGH ITS SECRETARY, MINISTRY OF FINANCE, DEPARTMENT OF EXPENDITURE
ROOM NO.76
NEW DELHI - 110001 ….RESPONDENT NO.2
NATIONAL HIGHWAYS AUTHORITY INDIA
THROUGH ITS AUTHORIZED REPRESENTATIVE, G 5 & 6, SECTOR-10, DWARKA, NEW DELHI - 110075 ….RESPONDENT NO.3
Through: Mr.Apoorv Kurup, CGSC, Mr.Ojaswa Pathak, Ms.Nidhi
Mittal, Advocates and Ms.Damini Garg, GP for R-1 & 2/UOI.
Mr.Manish K.Bishnoi and Mr.Nirmal Prasad, Advocates for
R-3.
JUDGMENT
1. This petition seeks to challenge the Impugned Office Memorandum dated 18.08.2022 (Impugned OM) passed by respondent No.1, i.e. Union of India.
2. The petitioner No.1 is a registered society of builders and contractors of national highways, state highways and bridges in the organised sector all over the country. The petitioner No.1 body comprises of 87 members, list thereof, has been placed on record. It is the petitioners‟ case that respondent No. 1/UOI and 3 i.e. National Highways Authority of India (“NHAI”) have started initiating proceedings for debarment against them pursuant to the impugned OM. Respondent No.3 had issued a Show Cause Notice ("SCN") dated 30.08.2022 to petitioner No.2 i.e. GHV (India) Pvt. Ltd. seeking to initiate debarment proceedings on account of registration of case by Central Bureau of Investigation (“CBI”) against employees of Petitioner No.2 under the Prevention of Corruption Act, 1988 and Indian Penal Code, 1860. The petitioners therefore, not only challenged the SCN but also challenged the legality of the impugned OM. For the sake of clarity, the reliefs prayed for by the petitioners are being reproduced as under:- "(i) Issue a writ in the nature of prohibition and any other writ or order or direction in the nature thereof directing and prohibiting the Respondents from enforcing / implementing, in any manner whatsoever, the Impugned Office Memorandum dated 18.08.2022 issued by Respondent NO. 1;"
(ii) Issue a writ in the nature of mandamus directing the
Respondents to ensure that the provisions of the General Finance Rules, 2017 are followed in their entirety and the Respondents shall not take any action whatsoever on the basis of the Impugned Office Memorandum dated 18.08.2022;
(iii) Issue a writ of Mandamus or any other writ or order in the direction thereof directing / holding that any/all proceedings initiated basis / pursuant to the Impugned Office Memorandum dated 18.08.2022 are annulled and declared to be non-existent having no existence in the eyes of law and not to be proceeded with any further in any manner whatsoever; and
(iv) Pass any such order/s as this Hon’ble Court deems fit and proper in the interest of justice."
3. Learned counsel appearing on behalf of the petitioners states that the Impugned OM is in violation of Article 14 of the Constitution of India, in as much as the same does not prescribe any fair procedure and leaves sufficient room for the authority to act arbitrarily. According to him, in the guise of clarification, the respondent-authorities cannot completely alter the General Financial Rules 2017 („GFR‟ 2017), and introduce an altogether different scheme for debarment of the concerned contractor. He further submits that the impugned OM is contrary to Rule 151 of GFR, 2017, and is also against the Guidelines on Debarment dated 02.11.2021, issued by the concerned Ministry. According to him, unless the guilt or culpability of the concerned company or its officers is proved, no inference can be drawn so as to conclude that the concerned company or its officers are in breach of the Code of Integrity (COI). He further states that the original Rule 175 of GFR, 2017 or the basic Guidelines on Debarment nowhere stipulate that merely on the basis of lodging of an FIR, an order of debarment can be passed. According to him, there has to be a proper application of mind, depending upon the material available, so as to positively infer that the concerned company or its officers are in the breach of COI. He has taken this court through various clauses of Rule 151 of GFR, 2017 and various Guidelines issued by the concerned Ministry. He has also cited the decision of the Hon'ble Supreme Court in the case of Board of Control for Cricket v. Cricket Association Of Bihar & Ors[1] and the Division Bench decision of this court in the case of Orion Security Solutions Pvt. Ltd. v. University of Delhi[2].
4. Learned counsel appearing on behalf of respondents opposed the submissions and stated that if the impugned OM is perused carefully, the same would indicate that it is clarificatory in nature. According to them, the Guidelines dated 02.11.2021, relied upon by the petitioners does not deal with sub-Rule (iii) of Rule 151. They therefore, state that if the impugned clarification is issued by the respondents-authorities, no fault can be found merely on the ground that in some of the cases, the same has not been strictly followed.
5. It is the case of the respondent-authorities that respondent No.1 has consciously issued the circular to clarify that there is no necessity to wait
W.P.(C) No.252 of 2018 till the criminal case instituted by the investigating agency is concluded provided there is 'enough material' to proceed. According to respondent No.1, the clarification is based on sound legal principles and the same does not violate any of the rights of the members of the petitionerassociation. He also places reliance on a decision of this court in the case of Israel Military Industries Ltd. v. Union of India & Anr.[3]
6. Learned counsel appearing on behalf of respondent No.3 further supports the submissions made by learned counsel appearing on behalf of respondent No.1 and in addition, he states that there is no automatic debarment under sub-Rule (iii) of Rule 151 of the concerned Rule. According to him what sub-rule (iii) stipulates is that if it is determined that the bidder has breached the COI which is prescribed under Rule 175 of GFR, 2017 appropriate action can be taken in pursuance to concerned clause. He therefore, states that the same should be read as if the same is clarificatory in nature. The same does not expand the overall scope of GFR, 2017. Learned counsel places reliance on a Single Bench decision of this court in the case of M/s M.K.C. Infrastructure Limited v. Union of India[4], to contend that the Coordinate Bench of this court did not find any fault with the application of Rule 151 of GFR, 2017 in the said case, while rejecting the interim prayer of staying the order of debarment.
7. I have heard the learned counsel appearing on behalf of the parties and perused the record.
8. Before proceeding further, it would be appropriate to understand the scope of OM dated 18.08.2022; which reads as under:- " No. NH-35014/20/2020-H-Part(2) Government of India 2013 SCC OnLine Del 2199 2023/DHC/000463I Ministry of Road Transport 6 Highways (Highways Section) Transport Bhawan,1, Parliament Street, New Delhi’110001 Dated: 18.08.2022 OFFICE MEMORANDUM Subject: Integrity in Public Procurement In order to ensure transparency, equity and competitiveness, Integrity Pact provisions have been made in the RFP and contract documents. Further, Integrity Pacts are being monitored by a panel of Independent External Monitors.
2. Ministry of Finance has issued Guidelines on Debarment of Firms from Bidding vide O.M No. F.[1] /20/2018- PPD, dated 02.11.2021 (copy enclosed). Subsequently, Compliance Report of the said Guidelines has also been sought by Ministry of Finance vide O.M No. F.[1] /20/2018- PPD, dated 02.08.2022 (copy enclosed).
3. All the implementing agencies of MoRTH shall follow these Guidelines in letter and spirit.
4. In the above context, it is further clarified that: i. As per Clause (iii) of Rule 151 of GFR, 2017, an entity may be blacklisted/debarred if the bidder has breached the code of integrity. ii. There is no need to wait till the criminal case instituted by the investigating agency is concluded. In case, there is enough material to proceed, implementing agency shall go ahead with the imposition of penalty. iii. The kind of evidence required to be certain of a violation by a bidder so as to trigger such sanctions is adequate evidence of a violation if "on the basis of the facts available there are no material doubts" or "it is more likely than not" that the violation has occurred. The Supreme Court of India in M/s Erusian Equipment and Chemicals Ltd. [(1975) 1 SCC 70] inter alia held that “strong justification for believing that the proprietor or employee of the firm has been guilty of malpractices such as bribery, corruption, fraud” can be one of the grounds for blacklisting. The Report of the Investigating Agency (e.g. CBI Report)/ Investigating Officer’s Report under section 173 of Code of Criminal Procedure (Charge Sheet) or any other reliable source shall be the basis for determining violations. iv. There shall not be any delay in taking action on all such violations as such a delay will result in giving benefit of allowing defaulters to bid and get new projects with the Government. v. AS(H) shall be the competent authority to debar the firms, as per Ministry of Finance O.M No. F.[1] /20/2018-PPD, dated 02.11.2021.
5. This issues with the approval of Secretary (RT&H). (Sushant Sudan) Deputy Secretary to the Government of India i. Chairperson, NHAI ii. DG (RD)& SS iii. MD, NHIDCL"
9. Rule 151 of GFR, 2017 deals with the debarment from bidding. The same is also reproduced as under:- "Rule 151 Debarment from bidding.
(i) A bidder shall be debarred if he has been convicted of an offence—
(a) under the Prevention of Corruption Act, 1988; or (b) the Indian Penal Code or any other law for the time being in force, for causing any loss of life or property or causing a threat to public health as part of execution of a public procurement contract.
(ii) A bidder debarred under sub-section (i) or any successor of the bidder shall not be eligible to participate in a procurement process of any procuring entity for a period not exceeding three years commencing from the date of debarment. Department of Commerce (DGS&D) will maintain such list which will also be displayed on the website of DGS&D as well as Central Public Procurement Portal.
(iii) A procuring entity may debar a bidder or any of its successors, from participating in any procurement process undertaken by it, for a period not exceeding two years, if it determines that the bidder has breached the code of integrity. The Ministry/Department will maintain such list which will also be displayed on their website.
(iv) The bidder shall not be debarred unless such bidder has been given a reasonable opportunity to represent against such debarment."
10. Sub-Rule (iii) of Rule 151 of GFR, 2017 states that a procuring entity may debar a bidder or any of its successors from participating in any procurement process undertaken by it for a period not exceeding two years, if it determines that the bidder has breached the COI. The COI is explained in Rule 175 of GFR, 2017. The same is reproduced as under:-. " Rule 175 (1) Code of Integrity No official of a procuring entity or a bidder shall act in contravention of the codes which includes
(i) prohibition of
(a) making offer, solicitation or acceptance of bribe, reward or gift or any material benefit, either directly or indirectly, in exchange for an unfair advantage in the procurement process or to otherwise influence the procurement process. (b) any omission, or misrepresentation that may mislead or attempt to mislead so that financial or other benefit may be obtained or an obligation avoided.
(c) any collusion, bid rigging or anticompetitive behavior that may impair the transparency, fairness and the progress of the procurement process.
(d) improper use of information provided by the procuring entity to the bidder with an intent to gain unfair advantage in the procurement process or for personal gain. (e) any financial or business transactions between the bidder and any official of the procuring entity related to tender or execution process of contract; which can affect the decision of the procuring entity directly or indirectly. (f) any coercion or any threat to impair or harm, directly or indirectly, any party or its property to influence the procurement process. (g) obstruction of any investigation or auditing of a (h) making false declaration or providing false information for participation in a tender process or to secure a contract;
(ii) disclosure of conflict of interest.
(iii) Disclosure by the bidder of any previous transgressions made in respect of the provisions of sub-clause (i) with any entity in any country during the last three years or of being debarred by any other procuring entity."
11. The OM dated 02.11.2021, i.e. 'Guidelines on Debarment of Firms from Bidding‟ clarifies various aspects and in paragraph No.3 of the said OM, it is stated that all issues regarding debarment have been reviewed in consultation with major procuring ministries, departments, and it has been decided to issue debarment guidelines in suppression of all earlier instructions on the subject.
12. Paragraph No.2 of the OM dated 02.11.2021, on debarment of firms from bidding, reads as under:-
13. The submission that the OM dated 02.11.2021 already clarified all aspects and therefore, without touching OM dated 02.11.2021, no further clarification could have been made, has no substance, as can be seen that OM dated 02.11.2021, only deals with Rule 151(ii) of GFR, 2017 and does not deal with the other clauses of GFR, 2017.
14. A careful perusal of the OM dated 18.08.2022, indicates that the same has been issued in order to ensure transparency, equity and competitiveness. The department had clarified sub-Rule (iii) of Rule 151 of GFR, 2017 to achieve the aforesaid objects. It is thus seen that clarification dated 18.08.2022, in impugned OM only deals with subclause (iii) of Rule 151 of GFR, 2017.
15. As has already been noted in the preceding paragraph, sub-rule
(iii) of Rule 151 deals with the breach of the COI. The COI has already been noted from Rule 175 of GFR, 2017. The impugned OM further clarifies that there is no need to wait till the criminal case instituted by the investigating agency is concluded. It further states that there has to be 'enough material' to proceed. Clause (iii) of the Impugned OM as reproduced in preceding paragraphs, takes care of all apprehensions expressed by the petitioners.
16. If the OM is seen in the context of sub-rule (iii) of Rule 151 and Rule 175, the same does not indicate any breach of the COI. What is stipulated in the impugned OM is to allow the authority to proceed to take appropriate action without awaiting the outcome of the criminal case. It nowhere states that the pendency of the criminal case alone can be the reason for debarment of any particular contractor. What it further stipulates is that there has to be 'enough material' to proceed. The 'enough material' to proceed will safeguard the interest of contractors as to whether, the fact and situation in a particular case requires the passing of an order for debarment. It cannot be said that on the basis of clause
(ii) of OM dated 18.08.2022, the concerned authority can straight away debar any particular contractor merely on the basis of the lodging of an FIR. It is thus seen that for maintaining the transparency, equity and competitiveness in the tender process and discharge of the Government contract, it would be necessary in the larger public interest that parties must maintain high integrity.
17. If the COI is also carefully perused, the same would certainly require that no official of a procuring identity or a bidder shall act in contravention of the Codes which includes various aspects including the making of an offer, solicitation or acceptance of bribe, reward or gift or any material benefit, either directly or indirectly in discharge of an unfair advantage in the procurement process or to otherwise influence the
18. The lodging of an FIR alone, as has been said, would not be the basis for taking action for debarment but of course the same can be one of the reasons to trigger proceedings against a particular contractor to further evaluate as to whether it requires action to be taken on the basis of other available material and its evaluation. There must be 'enough material' to proceed.
19. The decision relied upon by learned counsel appearing on behalf of the petitioners, in the case of Orion Security Solutions (supra) is with respect to the eligibility condition of a particular contractor. In that case, the FIR was registered and the outcome thereto was not known. A contractor was held to be ineligible merely on the basis of registration of FIR. In the instant case, the same is not the situation as the impugned OM specifically says that there has to be 'enough material' to proceed for debarment. Another decision relied upon by the learned counsel appearing on behalf of the petitioners in the case of Board Of Control For Cricket (supra) relates to disqualification in an election. Whether the disqualification can be attached on a conviction or on the registration of an FIR was the issue involved therein. It is for the legislature in the appropriate case to determine as to what would be the disqualification in the matters of election. In the instant case, GFR, 2017 clearly states that there can be debarment from bidding, if it is found that the bidder has breached the COI. The COI has been explained in the impugned OM which only clarifies that the concerned authority need not to wait for the final outcome of a particular criminal case, if 'enough material' is available to proceed. This court is unable to find fault with the impugned OM.
20. Learned counsel appearing on behalf of the respondent No.1, has rightly relied upon the decision of this court in the case of Israel Military Industries Ltd. (supra) which clearly states that the courts under Article 226 of the Constitution of India can only interfere if it is a case where there is no material at all or is a case of breach of principles of natural justice or lack of jurisdiction. In the instant case, if the said principle is applied, this court finds that the impugned OM does not envisage that merely on the basis of FIR an action is to be taken against a particular contractor. As has been stated in the preceding paragraph, what the impugned OM states is that the authority concerned need not to wait for the final outcome of the criminal case and there has to be 'enough material'. The requirement of possessing 'enough material' would clearly safeguard the interest of the bidder and it also ensures that the authority concerned will have to apply its mind in each case. The apprehension so raised by the petitioners that merely on the basis of FIR, the authority will proceed to debar the contractor is misplaced and contrary to the plain reading of the impugned OM. The State can certainly take action of debarment besides, on other grounds including on the ground that there is a 'strong justification' that a person is guilty of malpractices, such as, bribery, corruption, fraud etc. the Impugned OM cannot be set aside merely on the ground that the same is capable of being misinterpreted.
21. In view of the aforesaid, this court does not find any reason to interfere into the impugned OM, therefore, the instant petition along with pending application, stands dismissed.
22. So far as the challenge to the individual debarment order dated 05.01.2023, with respect to petitioner No.2 is concerned, the petitioner is at liberty to take appropriate recourse in accordance with law.
23. The date already fixed stands cancelled.
PURUSHAINDRA KUMAR KAURAV, J FEBRUARY 20, 2023