M/S Pearl INDIA Marketing Services Private Limited vs. State Of Chhattisgarh

Facts

The petitioner, M/s Pearl India Marketing Services Private Limited, filed a writ petition challenging a blacklisting order dated May 5, 2025, and a consequential order dated May 13, 2025, forfeiting its Earnest Money Deposit (EMD). The Chhattisgarh State Renewable Energy Development Agency (CREDA) had issued a tender for Solar Home Lighting Systems. The petitioner was the L-1 bidder and received several work orders. They submitted sample systems with test reports, which were approved. The petitioner commenced supply and installation, completing over half the work, and received joint commissioning certificates. CREDA later raised objections regarding alleged deviations in module cell count and mounting structure, despite the tender and scheme guidelines specifying only a minimum wattage and efficiency. The petitioner responded, but CREDA issued the blacklisting order and EMD forfeiture without a proper hearing. The petitioner claimed outstanding dues of Rs. 4,48,11,214/-, including GST, and sought release of payments, refund of EMD, and an extension for balance work.

Held

The Court held that the blacklisting order dated May 5, 2025, could not be sustained in its present form. The Court found the order to be disproportionate and violative of procedural fairness because the show-cause notice did not specify the proposed duration of blacklisting, nor did it provide a clear basis for permanent or indefinite debarment. The blacklisting order itself lacked reasons for adopting such a harsh measure, especially when the matter involved disputed compliance with technical specifications. The Court quashed the blacklisting order, leaving it open for CREDA to initiate fresh proceedings if advised, strictly in accordance with law and due process, including a proper, reasoned show-cause notice specifying the duration and grounds for proposed debarment. Regarding the remaining disputes, including the petitioner's claims for the outstanding sum, forfeiture of EMD, and all questions relating to compliance with technical specifications, installation standards, and inspection findings, the Court directed the petitioner to invoke the arbitration clause under Clause 25 of the General Conditions of Contract. The Court expressly refrained from interfering with contractual aspects like payment, rectification, and forfeiture of EMD.

Key Issues

1. Whether the blacklisting order dated May 5, 2025, issued by CREDA against the petitioner is arbitrary, illegal, and violative of principles of natural justice and proportionality, particularly in light of the alleged deviations being matters of disputed compliance with technical specifications and beyond the petitioner's control? (Article 14, 19(1)(g), 301, 304 of the Constitution of India). - Petitioner's argument: The blacklisting is arbitrary and unsustainable as supplies strictly conformed to the approved sample and work order specifications. The tender documents were silent on cell count and mounting structure type, and the petitioner's vendor supplied modules exceeding the prescribed wattage, which were approved. The alleged deviations are ex post facto insertions. The blacklisting violates fundamental rights and lacks a rational basis. - Revenue/State's argument: Not recorded in the judgment. 2. Whether the forfeiture of the Earnest Money Deposit (EMD) is justified and lawful? - Petitioner's argument: The forfeiture is wrongful, as the blacklisting itself is unjustified. - Revenue/State's argument: Not recorded in the judgment. 3. Whether the petitioner is entitled to the outstanding contractual sum of Rs. 4,48,11,214/- and interest thereon? - Petitioner's argument: The amount is due for completed work, including GST, and should be released with interest. - Revenue/State's argument: Not recorded in the judgment. 4. Whether the petitioner is entitled to a commensurate extension of time for completion of the balance supply and installation?