P. K. Techno Projects Pvt Ltd v. Union of India and Ors.

1. The present writ petition has been filed seeking directions for quashing the impugned communication dated 06th March, 2025, issued by respondent no. 3, whereby, the petitioner company has been temporarily delisted from the list of approved vendors on account of non-conformity of Elastic Rail Clips (“ERC”) samples manufactured by petitioner with the specified quality.

2. There is further prayer for directions to respondents to forthwith reinstate the petitioner in the list of approved vendors for ERC MK-III and ERC MK-V.

3. Learned Senior Counsel for the petitioner submits that the petitioner has duly completed the supplies relating to certain units of ERC, in accordance with the contractual specifications, which were subjected to multi-stage inspections.

4. It is submitted that the final inspection certificate dated 03rd October, 2022 and Consignment Receipt Note dated 07th November, 2022 confirmed full and defect-free receipt of the aforesaid supplies. Accordingly, vendor approval of the petitioner for ERC MK-III and MK-V was extended by respondent no. 3, until the next periodic quality audit scheduled for 31st July, 2026, vide letters dated 07th September, 2021 and 21st October, 2021, respectively.

5. It is further submitted that the contractual warranty expired on 07th May, 2024, in terms of Clause 12.[4] of the Special Conditions of Tender for combined procurement, read with (ERC MK-III) Clause 5.9.[1] of the General Conditions of Contract for Services, 2018.

6. It is submitted that no complaints or audit discrepancies arose during the contractual warranty period.

7. Learned Senior Counsel for the petitioner submits that without prior notice or intimation, the respondents collected samples from the field, i.e., BSB Yard, on or before 23rd December, 2024, without affording the petitioner the opportunity to remain present or to provide testing facilities, in breach of Clause 1300 of the Indian Railway Standard (“IRS”) Conditions of Contract, 2018. Thus, it is submitted that not only was the petitioner not present at the time when the samples were taken, but also, insufficient samples were taken by the respondents.

8. Attention of this Court has been drawn to the Show Cause Notice dated 04th February, 2025, wherein, it is submitted that random samples were collected jointly from BSB Yard in presence of Research Designs & Standards Organization (“RDSO”) official and the concerned field unit official. However, it is submitted that there was no notice to the petitioner and there was no joint collection of the samples, as wrongly stated in the Show Cause Notice.

9. Learned Senior Counsel for the petitioner further draws the attention of this Court to the reply dated 24th February, 2025, submitted on behalf of the petitioner to the Show Cause Notice dated 04th February, 2025, and in particular, relies upon paragraphs 2 and 3 of the said reply, which are reproduced as under: “xxx xxx xxx

2. At the outset, we wish to point out that Railways have failed to follow the due procedure prescribed in the testing of the samples. The said Samples were duly manufactured and passed in the testing process and they were supplied to the Consignee once they were passed the tests and thereafter, the payment was released to us. The warranty period of the said samples have also expired. The said material were inspected on 03.10.2022 and delivered by 31.10.2022 ( copy of inspection certificate and Receiving R note enclosed ) to the consignee. The guarantee for the said lot was for the 18 months from the date of delivery or 12 months from the placing in service whichever is earlier. The lot which is the subject matter of the present dispute was said to be tested by you on 24.12.2024 and the same was supplied on 31.10.2022. Therefore, the guarantee period is already over and the undersigned cannot be penalized for the same. The goods were in perfect condition when the same were supplied by us. It is humbly submitted that there are flaws in the testing and handling of samples on the part of Railways. The supplier can not be asked to compensate the purchaser for the goods for which the guarantee period is already over. It was further recorded in the agreement that the firm shall not be liable for the material which has been repaired / altered by the purchaser, or on his behalf in any way to affect the strength, performance or reliability or any defect to nay part due to misuse, negligence or accident. Copy of relevant portion of purchase order is enclosed for ready reference. The relevant clause is reproduced for ready reference: - “12.3. The guarantee herein contained shall not apply to any material which shall have been repaired or altered by the purchaser, or on his behalf in any way so as to affect its strength, performance or reliability or any defect to any part due to misuse, negligence or accident. “12.4. The guarantee herein contained shall expire in respect of each item of stores on the expiry of l 8 months from the date of its delivery- or 12 months from the date of its placing in service whichever is earlier, except in respect of defects notified to the Contractor prior to the expiry of such date.”

3. We wish to further point out that the samples were collected in a very arbitrary manner. We wish to further point out that your officials have failed to follow the due procedure of testing rules as prescribed for the picking and testing of the already passed sleeper. It is specifically mentioned in the said guidelines that the firm’s representative will be present at the time of picking of the samples at the consignee end. In the present matter, no intimation is provided to us in respect of the picking or testing of the samples. This major lapse clearly shows the violation of the rules on the part of Railways. We wish to humbly point out that your employees use the technique of hammering OF ERC CLIPS while picking up the samples AND also during installation of ER clips which affects the strength and quality of the samples/goods. This is general practice in all the Railway yards and is in violation of the rules. As per the rules, the field staff should use the mechanical or hydraulic applicator without causing harm to the supplied material while setting the ER clips in track and also points and crossings. However, that is not the practice in general. Therefore, as you have failed to adopt proper mechanism/applicators which resulted in harming the material, making the entire process of testing as void. xxx xxx xxx” (Emphasis Supplied)

10. Attention of this Court has been drawn to the impugned order dated 06th March, 2025, wherein, again, as per learned Senior Counsel for the petitioner, it has wrongly been stated that the samples were collected jointly. She further submits that reply filed on behalf of the petitioner was not even considered properly by the respondents and that the impugned order dated 06th March, 2025, is a cryptic and non-speaking order.

11. Learned Senior Counsel for the petitioner further draws the attention of this Court to the various Clauses of the Document No. Q0-D-8.1-11 issued by RDSO, and in particular to Clause 4.2.2, relating to temporary delisting, which reads as under: “ xxx xxx xxx”

12. By referring to the aforesaid, learned Senior Counsel for the petitioner submits that it is only in the case of repeated failures, that temporary delisting can be resorted to. However, in the present case, earlier two samples tested for the petitioner’s products, were found to be in order.

13. She submits that the impugned order of temporary de-listing has been issued on the basis of the third testing, for which samples have been collected behind the back of the petitioner.