W.P.(C)/1014/2021 of M/S ELECON POWER INFRA LTD Vs BSES RAJDHANI POWER LTD

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Digitally Signed By:DINESHSINGH NAYALSigning Date:02.02.202122:57:50

*IN THE HIGH COURT OF DELHI AT NEW DELHIDate of decision: 28[[th]]+W.P.(C) 1014/2021 & CM APPLs. 2818-19/2021

Date of decision: 28[[th]]January, 2021

M/S ELECON POWER INFRA LTD...... Petitioner

Through:Ms. Nandini Sen and Mr. BasabSengupta, Advs. (M: [REDACTED] &[REDACTED])

versus

BSES RAJDHANI POWER LTD...... RespondentThrough:Mr.NarenderHooda,SeniorAdvocate with Mr. Rishab Raj Jain,Advocate. (M: [REDACTED])

CORAM:JUSTICE PRATHIBA M. SINGHPrathiba M. Singh, J.(Oral)

1.This hearing has been done by video conferencing.

2.The Petitioner has filed the present petition challenging the impugnednotice dated 31[st]October, 2020, by which the Petitioner has been blacklistedby the BSES Rajdhani Power Ltd. (hereinafter as ‘BSES’), and debarredfrom performing/participating/associating with the BSES for period ofthree years, w.e.f 1[st]November, 2020, citing gross breach of the VendorCode of Conduct of BSES.

3.The submission of Ms. Nandini Sen, ld. counsel for the Petitioner, isthat the said act of blacklisting has been done without proper notice beinggiven to the Petitioner. Mr. Narender Hooda, ld. Senior counsel for theRespondent, on the other hand, submits that the Rate Contracts between thePetitioner and the Respondent contain clause laying down disputeresolution mechanism, which provides for disputes to be resolved byarbitration and therefore, the Petitioner ought to invoke the same.

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Digitally Signed By:DINESHSINGH NAYALSigning Date:02.02.202122:57:50

4.A perusal of the show cause notice dated 4[th]March, 2020, shows thatafter setting out the allegations against the Petitioner, the BSES has basicallystated that there maybe termination and blacklisting of the Petitioner. Thenotice however gives an opportunity to the Petitioner to submit report onthe action takenonthe saidallegations, whichshallcontaintheprecautionary measures and practices adopted to avoid the occurrence ofsuch issues. The relevant portion of the show cause notice dated 4[th]March2020, after mentioning the various violations by the Petitioner, concludes asextracted below:

“You may refer to the clause no.30 TERMINATION ofthe said Rate Contract & their sub Clause No. 30.7,30.9.

You are aware that as per contract clause no.30 theserepeated cases of vigilances are not acceptable andmayleadtoterminationofthecontractandblacklisting from BRPL.

You are requested to submit action taken report onthese issues which shall contain the precautionarymeasures and practices adapted by your firm to voidsuch occurrence in future and also submit yourdetailed reply why action not to be initiated againstyour firm as per the contract clause no. 30.

The ATR with your reply should reach us, not laterthan 15.03.2020.”

perusal of the above shows that threat was given that the Petitioner maybe blacklisted, but the Petitioner was asked to explain the measures taken byit. It was not clear notice for blacklisting.

5.The Petitioner replied to the Respondent on 14[th]March 2020. In thereply the Petitioner gave detailed explanation as to the action taken by it inrespect of each of the complaints raised against it. In the reply, the Petitioner

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also assured that it will be vigilant in the future to ensure that its employeesfollow proper working procedure. The reply concludes as under:

“d) We've replaced supervisor from time to time, &shall improve screening & monitoring of supervisorsfurther.shall improve screening & monitoring of supervisorsfurther.

Lastly, improvement of working procedure & keepingvigil are two constants. Issues will come in the future,but we can guarantee you this, that our loyalty towardsyour esteemed organization & the work bestowed on uswill never fail, as it has not failed in last 19 years.We have never been blacklisted till now & have nointention to be so.”

6.No further communication was exchanged between the parties. Afteralmost seven months, the Respondent straightaway issued the impugnedorder dated 31[st]October 2020, thus, blacklisting/debarring the Petitioner fora period of three years, and simultaneously terminating the Rate Contract,w.e.f. 30[th]November 2020. The said communications are under challenge inthe present writ petition.

7.The Petitioner submitted letter dated 3[rd]December, 2020, throughits counsel, explaining its position and also highlighting the fact that nohearing was given prior to passing the blacklisting order. In the said letter,the Petitioner also gave the background and history of the relationshipbetween the parties. The Respondent was called upon to withdraw theblacklisting order. The Respondent however refused to withdraw the sameleading to the filing of the present writ petition.

8.The law relating to blacklisting/debarring and the importance ofserving of proper notice prior to blacklisting is quite well settled. In CivilAppeals Nos. 7167-68/2014 titled Gorkha Security Services v. Government(NCT of Delhi) and Ors., dated 4[th]August, 2014, the Supreme Court

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observed as under:

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Digitally Signed By:DINESHSINGH NAYALSigning Date:02.02.202122:57:50

“21. The Central issue, however, pertains to therequirement of stating the action which is proposed tobe taken. The fundamental purpose behind the servingof show-cause notice is to make the noticee understandthe precise case set up against him which he has tomeet. This would require the statement of imputationsdetailing out the alleged breaches and defaults he hascommitted, so that he gets an opportunity to rebut thesame. Another requirement, according to us, is thenature of action which is proposed to be taken for sucha breach. That should also be stated so that the noticeeis able to point out that proposed action is notwarranted in the given case, even if the defaults/breachescomplainedofarenotsatisfactorilyexplained.Whenit comestoblacklisting, thisrequirement becomes all the more imperative, havingregard to the fact that it is harshest possible action.”

9.Recently in Civil Appeal No. 3687 of 2020 titled UMC Technologies

Private Limited v. Food Corporation of India & Anr., dated 16[th]November, 2020, the Supreme Court, while discussing the criteria to befulfilled for show cause notice to constitute valid blacklisting order, hasobserved as under:

“21. Thus, from the above discussion, clear legalposition emerges that for show cause notice toconstitute the valid basis of blacklisting order,suchnotice must spell out clearly, or its contents be suchthat it can be clearly inferred therefrom, that there isintention on the part of the issuer of the notice toblacklist the noticee. Such clear notice is essential forensuring that the person against whom the penalty ofblacklistingisintendedtobeimposed,hasanadequate, informed and meaningful opportunity toshow cause against his possible blacklisting.”

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Digitally Signed By:DINESHSINGH NAYALSigning Date:02.02.202122:57:50

10.In the opinion of this Court, the show cause notice dated 4[th]March,2020, does not satisfy the ingredients to constitute valid order ofblacklisting. From reading of the notice as whole, the clear impressionone gets is that the Petitioner was called upon to take remedial actions withrespect to the allegations raised against the Petitioner in the said show causenotice, and if the Respondent is not satisfied with the action taken, then theRespondent may resort to blacklisting. Considering the fact that thePetitioner has been company which has been dealing with the Respondentsfor more than 19 years, and has more than 150 employees along withenormous investment, it deserved proper opportunity to explain and takeremedial measures before being debarred or blacklisted. The Petitioner wasnot even given hearing prior to blacklisting.

11.Ld. Senior counsel Mr. Hooda, appearing for the Respondent, submitsthat the BSES is willing to withdraw the blacklisting order and serve freshshow cause notice to the Petitioner.

12.Accordingly, the blacklisting order dated 31[st]October, 2020 is setaside. Insofar as the termination of the contract is concerned, the Petitioneris permitted to avail of its remedies, in accordance with law.

13.With these observations the present petition, along with all pendingapplications, is disposed of.

JANUARY 28, 2021Dj/Ap(corrected & released on 2[nd]February, 2021)

PRATHIBA M. SINGHJUDGE

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