M/S Krishna Food Product vs. Union Of INDIA

Contents of the affidavit filed by the Proprietor of Writ Petitioner, in brief, are that the respondents floated E-Tender Notice No.COML-CATG-GTL-2024-0003, dated 22.01.2024 for Modular Catering Stall under General Minor Unit (Women) at Guntakal Railway Station on Platform No.7 (towards the Gooty end). (b) The Writ Petitioner participated in the tender process and emerged as a successful bidder and was issued a Letter of Award dated 21.06.2024 for operation, maintenance and provision of catering services through a Catering Stall under GMU (Women) at Guntakal Railway Station, Platform No.7 (towards the Gooty end), for a period of five (05) years from the commencement of operations. In terms of the Award, the Writ Petitioner was required to pay a sum of Rs.9,29,760/- towards Security Deposit and a sum of Rs.21,09,840/- towards License Fee (including GST) within a period of 15 days from the date of the Letter of Acceptance and in the event, the same was not deposited between 16th and 60th day of Letter of Acceptance, 18% per interest would be charged and further, delay in payment beyond 60th day from the Letter of Acceptance, would lead to termination of Letter of Acceptance, forfeiture of Earnest Money Deposit (EMD) and debarment for a period of five years. (c) The Writ Petitioner vide Letter dated 07.08.2024 informed respondent No.3 about deposit of security amount of Rs.9,29,760/- in the form of Fixed Deposit Receipt (FDR) No.2023/SSK/ZE (917097) dated 07.08.2024 issued by the Canara Bank, MG Road, Agra in respect of the tender, and the said deposit was admittedly beyond the initial 15 days’ time limit. In order to commence operations of the catering stall at Platform No.7, Guntakal Railway Station, the Writ Petitioner, vide Letter dated 07.08.2024, requested the respondent No.3 to provide a 3 KW single-phase electrical connection for the duration of license period and further sought details regarding the applicable security deposit and the estimated cost for the said connection. (d) The Writ Petitioner could not deposit the license fee in terms of the Letter of Acceptance by 60th day. According to Writ Petitioner, they made attempt to deposit a demand draft dated 28.08.2024 towards the license fee amounting to Rs.21,09,840/- drawn in favour of Senior Divisional Finance Manager, but the same was not accepted. The said delay occurred because it took some amount of time to arrange the huge sum of money and the said delay is not inordinate and could not be deemed to be so egregious to impose penalty of debarment. (e) Respondent No.4, on behalf of respondent No.3, vide Letter dated 16.10.2024, in an arbitrary and high-handed manner debarred the Writ Petitioner from participating in any future catering tenders for the Indian Railways and IRCTC for a period of five years and forfeited the Earnest Money deposit made by the Writ Petitioner. Neither show-cause notice was issued, nor an opportunity of hearing the Writ Petitioner was provided, rendering violation of principles of natural justice. (f) Respondent No.1 issued a Memorandum No.2021/ RS(G)/779/17(E 3380016), dated 09.11.2022 to various General Managers of Railway Zones identifying the guidelines to be followed for sending debarment proposals to the Railway Board. The competent authority for approving debarment is an Additional Member of the Railway Board and in the event, the Additional Member is not in position, a Board Member may nominate the concerned Principal Executive Director or Executive Director as the Competent Authority. A debarment proposal has to be sent to the Railway Board in a prescribed format for examination and in the event, the proposal is accepted by the Railway Board, a show- cause notice, in the prescribed format, shall be issued to such a bidder, where the charges against the bidder would clearly be identified, and if the bidder sends a reply to the show-cause notice, an opportunity, to be heard through oral hearing, shall be fixed, and on the basis of the above, the decision to debar a bidder shall be taken. (g) As per Article 16 of the General Conditions of Contract, respondent No.4 does not have to mandatorily impose the penalty of debarment, but can simply forfeit the security deposit. Invocation of Article 16.1 (c) to levy a penalty of debarment can only be done in view of Rule 151 of the General Financial Rules, 2017 and the breach of question i.e. non-payment of license fee on time, does not meet the aforementioned conditions. Therefore, the impugned Letter dated 16.10.2024 is in violation of Rule 151 of the General Financial Rules, 2017 and the Debarment Guidelines, 2022 laid down by respondent No.

Respondent Nos.1 to 4 filed counter-affidavit, denying the contents of the affidavit accompanying Writ Petition, contending inter alia that the Writ Petitioner is guilty of suppresio very and suggestion falsi, as the Writ Petitioner deliberately played mischief by suppressing many fundamental and imperative material facts which are relevant and necessary for deciding the Writ Petition. The Letter of Debarment dated 16.10.2024 was issued strictly in conformity with the terms and conditions of the tender document and the Letter of Acceptance. The Writ Petitioner failed to comply with the mandatory contractual obligations within the stipulated timelines, despite being afforded sufficient opportunities. Under the express terms of the tender, debarment and forfeiture of EMD are automatic consequences of such default and does not require issuance of separate show-cause notice. (b) The Writ Petitioner failed to remit the Security Deposit and the License Fee for the first year within the stipulated period of 60 days and it was admitted through Letter dated 09.09.2024, wherein it was stated that due to personal financial difficulties, the Writ Petitioner could not make required payments within the prescribed time. The timely payment constitutes an essential and fundamental condition of the contract. The alleged request for an electrical connection has absolutely no nexus with the Writ Petitioner’s failure to comply with the mandatory payment timelines stipulated under the Agreement. The attempt of Writ Petitioner to link operational requirements with admitted contractual breaches is misconceived and misleading. The Writ Petitioner attempted to submit a demand draft dated 28.08.2024 only after expiry of mandatory 60-days’ period reckoned from 21.06.2024, which lapsed on 20.08.2024 and any payment tendered after the contractual deadline, is legally impermissible and could not have been accepted under the tender conditions. (c) The Writ Petitioner’s plea that arranging funds ‘took time’ is wholly untenable and cannot override or dilute the express contractual terms binding upon him and the financial incapacity or internal difficulties of the Writ Petitioner not attributable to the respondent, cannot constitute a valid ground for non-compliance. The provisions of the General Financial Rules, 2017 have no application to debarment arising under the Standard Bid Document (for brevity ‘SBD’) for General Minor Unit (GMU), which constitutes a self-contained contractural framework. The SBD clearly empowers the competent divisional authorities to impose debarment in cases of non-payment within prescribed timelines. The Writ Petitioner’s reliance on the said Memorandum is therefore, misplaced, misconceived and legally unsustainable. (d) That no show-cause notice is required in cases where the SBD provides for automatic contractual consequences upon failure to deposit the License Fee and Security Deposit within 60 days from the date of issuance of Letter of Acceptance. No approval from the Railway Board is required to implement contractual debarment and the expression ‘competent authority’ mentioned in the impugned letter refers to the authority designated under the SBD itself, hence, the allegation that the debarment was issued without authority, is incorrect and unsustainable. Hence, prayed to dismiss the Writ Petition.

Learned counsel for the Writ Petitioner would contend that the Writ Petitioner was diligent enough in depositing security amount well within prescribed time, but could not deposit the License Fee by 60th day from the date of Letter of Acceptance i.e. 20.08.2024 and such act is not egregious to impose penalty of debarment of the Writ Petitioner. Learned counsel would further contend that the impugned Letter dated 16.10.2024 is contrary to the guidelines issued by the respondent No.1 in Memorandum No.2021/RS(G)/779/17(E 3380016), dated 09.11.2022. According to learned counsel, the impugned Letter dated 16.10.2024 is in violation of Rule 151 of the General Financial Rules, 2017 and the Debarment Guidelines, 2022 laid down by respondent No.1, as the invocation of Article 16.1 (c) of the Section D-Master License Agreement, to levy a penalty of debarment, can only be done in view of Rule 151 of the General Financial Rules, 2017 and the breach of question i.e. non-payment of license fee on time, does not meet the aforementioned conditions. According to learned counsel, the impugned Letter dated 16.10.2024 is not sustainable under law.

Sri Y.V.Anil Kumar, learned Central Government Counsel for respondent Nos.1 to 4 would contend that the impugned Letter dated 16.10.2024 was in conformity with the terms and conditions of the tender document and the Letter of Acceptance, and since the Writ Petitioner deliberately failed to comply with the mandatory contractual obligations within the stipulated time, it was issued. Learned counsel further contends that the terms of the tender themselves constitute an essential and fundamental condition that the licensee shall pay the License Fee and the security amount within the prescribed time and failure in compliance of the said condition within the time bound, leads to debarment and the same was expressly mentioned in the tender, and for such default, no show-cause notice needs to be issued. It is further contended that the provisions of the General Financial Rules, 2017 have no application to debarment arising under the SBD for GMUs, which constitutes a self-contained contractural framework. According to learned counsel, no approval from the Railway Board is required to implement contractual debarment. Hence, prayed to dismiss the Writ Petition.

Perused the entire material available on record.

It is an admitted fact that the Writ Petitioner was declared as the highest bidder in the E-Tender Notice No.COML- CATG-GTL-2024-0003, dated 22.01.2024 issued by the respondents, and it was issued Letter of Award dated 21.06.2024 for operation, maintenance and provision of catering services through a Modular Catering Stall under General Minor Unit (Women) on Platform No.7 (towards Gooty end) at Guntakal, Railway Station, for a period of five (05) years.

It is also an admitted fact that as per Section-B, Chapter-3 : Evaluation Criteria, Clause 3.5.4 (i) of the Comprehensive Standard Bid Document, the Writ Petitioner, being the licensee (selected bidder) shall be required to pay 10% of the total contract value as Security Deposit as per Article 5 of Section – D of the Master License Agreement within 15 days from the date of acknowledgment of Letter of Acceptance and any delay in payment of Security Deposit beyond the stipulated period of 15 days will attract 18% penal interest on the due amount from the 16th day to 60th day from the date of acknowledgment of Letter of Acceptance. It is also made clear in the said clause that in case delay is beyond 60th day, the Earnest Money Deposit will be forfeited and the Letter of Acceptance will be treated as cancelled and licensee will be debarred from participating in future catering tenders over Indian Railways and IRCTC Limited for a period of five (05) years.

A perusal of the material on record goes to show that the Writ Petitioner vide Letter dated 07.08.2024 to 3rd respondent submitted the Security Deposit amount of Rs.9,29,760/- in the form of Fixed Deposit Receipt vide S.No.2023/SSK/ZE (917097), dated 07.08.2024 issued by Canara Bank, M.G.Road, Agra. Apparently, the said Security Deposit was made between 16th day and 60th day from the date of acknowledgment of Letter of Acceptance. However, when the Writ Petitioner attempted to deposit a demand draft dated 28.08.2024 for a sum of Rs.21,09,840/- towards License Fee, it was not accepted by the respondents, as the said fee was attempted to be deposited by the Writ Petitioner beyond 60th day from the date of Letter of Acceptance i.e. 20.08.2024, and consequently, the impugned Debarment Letter dated 16.10.2024 was issued, debarring the Writ Petitioner from participating in any future catering tenders of Indian Railways and IRCTC for a period of Five (05) years.

Learned counsel for the Writ Petitioner would contend that the impugned Letter dated 16.10.2024 is contrary to the Guidelines issued by the respondent No.1 in Memorandum No.2021/RS(G)/779/17(E 3380016), dated 09.11.2022. It is further contended that Rule 151 of the General Financial Rules, 2017 and the Debarment Guidelines, 2022 laid down by respondent No.1, as the invocation of Article 16.1 (c) of Section D-Master License Agreement, to levy a penalty of debarment, can only be done in view of Rule 151 of the General Financial Rules, 2017 and the breach of question i.e. non-payment of license fee on time, does not meet the aforementioned conditions. According to learned counsel, a debarment proposal has to be sent to the Railway Board in a prescribed format for examination and in the event, the proposal is accepted by the Railway Board, a show-cause notice, in the prescribed format, shall be issued to such a bidder, where the charges against the bidder would clearly be identified, and if the bidder sends a reply to the show-cause notice, an opportunity, to be heard through oral hearing, shall be fixed, and on the basis of the above, the decision to debar a bidder shall be taken.

Learned counsel for the Writ Petitioner placed strong reliance on the proposition of law laid down by the Hon’ble Supreme Court in M/s. Techno Prints v. Chhattisgarh Textbook Corporation & Anr.,1, wherein it was held as under: “Ordinarily, a writ court should not entertain any petition, seeking to challenge a show cause notice unless the Court is convinced that the same has been issued by an authority having no juri iction, or the same is tainted with mala fides. The guiding principles as to when and in what circumstances a blacklisting order can be passed,

Learned Central Government Counsel for respondent Nos.1 to 4 would contend that the terms of the tender themselves constitute an essential and fundamental condition and failure in compliance of the condition within the time bound, leads to debarment and for such default, no show-cause notice needs to be issued. It is further contended that the provisions of the General Financial Rules, 2017 have no application to debarment arising under the SBD for GMUs, which constitutes a self-contained contractural framework.

It is pertinent to refer Rule 151 of the General Financial Rules, 2017 issued by the Government of India, Ministry of Finance, Department of Expenditure, which is extracted hereunder: “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.

Vide No.2021/RS (G)/779/17 (E3380016), dated 09.11.2022, the Government of India, Ministry of Railways issued Debarment Instructions for Ministry of Railways, wherein, it was specifically stated that the debarment in Ministry of Railways shall be dealt with, as per guidelines issued by Department of Expenditure. The Competent Authority for approval for debarment for Ministry of Railways shall be concerned Additional Member and in case, Additional Member is not in position, concerned Board Member may nominate concerned Principal Executive Director or Executive Director as Competent Authority. The second guideline goes to show that the proposals for debarment shall be sent by procuring units to concerned Directorate in Railway Board and proposals for debarment out of Vigilance/ SPE/CBI cases shall be sent by concerned Vigilance of Railway Board to concerned Directorate in Railway Board. As per 7th guideline, it was specifically stated that the debarment proposal will be examined in Board by the concerned Directorate to examine the adequacy of the facts necessary for issue of Show Cause notice to the firm concerned. Further, the ninth guideline issued by the authority goes to show that the Show Cause Notice (Format as per Annexure-II)

A perusal of the aforesaid guidelines further goes to show that the debarment order shall also indicate the reason(s) in brief that led to debarment of the firm and the fact that the representation has been considered and oral hearings have also been conducted (as applicable) should invariably be mentioned in the debarment order and if no representation was received in response to the show cause notice or the firm has not availed the opportunity of oral hearing given to it, the same should invariably be indicated in the debarment order.

Apparently, a perusal of the impugned Debarment Letter dated 16.10.2024 is quite contra to the Debarment Guidelines vide No.2021/RS (G)/779/17 (E3380016), dated 09.11.2022, issued by the Government of India for Ministry of Railways and also not in accordance with Rule 151 of the General Financial Rules, 2017. There is no reason in the impugned Debarment Letter dated 16.10.2024 as to what led them to debar the Writ Petitioner. More so, the impugned letter does not contain as to when the oral hearings have been conducted. Even, the details as to whether show cause notice was issued to the Writ Petitioner or not, and as to whether the Writ Petitioner availed the opportunity of oral hearing or not, are lacking in the said letter. The action of respondents in debarring the Writ Petitioner through the impugned Debarment Letter dated 16.10.2024, which is not preceded by any show cause notice or oral hearing as contemplated under the subject Guidelines. The same is not only contrary to the Guidelines, but also is in violation of the principles of natural justice, specifically audi alteram partem, as the Writ Petitioner being the affected party, lost a reasonable opportunity to put-forth its defence before suffering the consequences. In view of the aforesaid facts and circumstances, the impugned Debarment Letter, dated 16.10.2024 does not stand in the eye of law and deserves to be set-aside.

Accordingly, the Writ Petition is allowed, setting-aside the impugned Debarment Letter, dated 16.10.2024. There shall be no order as to costs of the Writ Petition.