M/S Naveen Kumar vs. Bhilai Steel Plant

Held

The Court held that the impugned order dated 29.08.2020, which restrained the petitioner from business dealings with the respondents for 12 months, was passed in violation of the principles of natural justice. The Court found that the letter dated 11.08.2020 from the respondents merely mentioned that legal action would be taken if the petitioner failed to reply, but it did not specify the nature of the proposed action or the relevant clause under which it would be taken. Citing Supreme Court judgments in Gorkha Security Services and UMC Technologies Private Limited, the Court emphasized that a show cause notice must clearly spell out the proposed action, such as blacklisting or banning, to enable the noticee to provide an adequate and meaningful opportunity to respond. The Court noted that while the respondents had the discretion to withhold business dealings for up to one year, this action could only be taken after issuing a specific notice detailing the proposed action. Therefore, the order dated 29.08.2020 was set aside. However, the respondents were granted liberty to initiate appropriate proceedings in accordance with the law, provided they issue a clear notice specifying the proposed action under the relevant clause and then pass an appropriate order.

Facts

The petitioner, M/s Naveen Kumar, a registered 'A' class contractor, participated in a tender floated by Bhilai Steel Plant (BSP) for cleaning, housekeeping, and sanitation services. The tender initially specified 340 working days and an estimated value of Rs. 51,29,488.20 excluding GST. BSP amended the tender to 313 working days and an estimated value of Rs. 47,22,149. The petitioner, after becoming L-1 bidder, wrote to BSP requesting reconsideration of his quoted price, stating confusion due to the tender document's clauses and lack of experience led him to quote a lower price. BSP responded by asking the petitioner to withdraw his request and accept the quoted rate. The petitioner then requested to withdraw his bid and participate in a fresh tender. Consequently, BSP issued an order on 29.08.2020, placing the petitioner on hold from participating in tenders for 12 months.

Key Issues

1. Whether the impugned order dated 29.08.2020, which restrains the petitioner from participating in tender proceedings for 12 months, is liable to be set aside for being passed in violation of the principles of natural justice, specifically for lack of a specific show cause notice detailing the proposed action? (Question of law) The petitioner argued that the order of banning business dealings has civil consequences and requires adherence to the principles of natural justice, including a specific show cause notice. He relied on Supreme Court judgments in UMC Technologies Private Limited, Daffodills Pharmaceuticals Ltd., Gorkha Security Services, and Kulja Industries Limited. He contended that the tender document's Clause 21 and the Circular dated 24.11.2014, which permit suspension for a maximum of 9 months during investigation, were not followed, and the 12-month ban exceeded the permissible period even for suspension. He also argued that the grounds for banning were not present in the circular. The respondents argued that the petitioner accepted the revised working days and estimated value of the work after being informed by Mjunction Services Limited, the agency engaged for the online reverse auction. They contended that the petitioner's subsequent letters clearly indicated his intention to withdraw his bid, making him liable for action.