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Judgment
The instant petition has been preferred by the petitioner challenging the order dated 06.12.2024 passed by Managing Director Madhya Pradesh Public Health Services Corporation Limited and order dated 17.12.2024 passed by Managing Director (Finance and Admin) of the Corporation, whereby the products of the petitioner has been blacklisted for a period of one year and the security deposit furnished by the petitioner has been forfeited by the respondents by invoking bank guarantee of Rs.1,23,050/-.
With the consent of parties, arguments heard for the purpose of final disposal.
Respondent Madhya Pradesh Public Health Services Corporation Limited floated a tender invited the offers for supply of disposable syringe (50ml). The petitioner submitted bid which was accepted and an agreement was executed in favour of the petitioner and the contract was awarded to the petitioner. Notification of award was issued on 16.03.2023, whereby the tender for supply of disposable syringe (50ml) to various hospitals of Government of Madhya Pradesh was awarded to the petitioner.
As per the agreement the petitioner was under obligation to supply the demanded quantity of the syringe to the concerned hospital within 45 days of the receipt of purchase order. On 21.08.2024, an incident of fire took place at the factory of petitioner situated at Unit-II, beside River Kharun, Village Akola, District Durg (Chhatisgarh) which disturbed the operations of the manufacture of disposable syringe and infusion set. FIR was lodged by the petitioner in respect of the said incident on 25.08.2026 which was registered against the employees of the petitioner under Section 326(f) and 3(5) of the BNS, 2023.
Thereafter, on 30.08.2024, the petitioner intimated the respondent-corporation in respect of the incident of fire with a request for extension of supply period by treating the said incident as Force Majeure Event as per the terms of the agreement however, by letter dated 26.09.2024 respondent authorities declined to extend the period of supply and to consider the incident of fire as Force Majeure Event.
A show cause notice was issued to the petitioner on 24.10.2024 stating that the petitioner has failed to supply the syringe to the department, which has affected the supply chain of syringe in Government hospitals in Madhya Pradesh and it was intimated to the petitioner to satisfy the authorities within seven days with further caution that otherwise ex-parte, decision will be taken against the petitioner. It was also noticed to the petitioner that in case of the submission of reply is not found satisfactory, the contract will be cancelled and petitioner/ its products will be blacklisted for a period of one year.
The petitioner submitted a reply, wherein the petitioner submitted that out of the ordered quantity 6,90,858 the petitioner has already supplied 5,05,958 and balance quantity under the tender is only 1,85,100. The petitioner further submits that its factory has been completely ruined due to the incident of fire and the intimation of the said incident of fire was immediately given to the respondent on telephone and thereafter by letter dated 30.08.2024 whereas the prayer of the petitioner was declined by the concerning officer.
The petitioner submits that the petitioner is not liable to be blacklisted and contract may not be terminated. By impugned order dated 06.12.2024 passed by the Managing Director Madhya Pradesh Public Health Services Corporation Limited upon the allegation that the petitioner failed to supply the material within 45 days from the date of purchase order invoking the Clause 16(a) and Clause 12(d) and (k) the contract of the petitioner was terminated and the product of the petitioner i.e. disposable syringe (50ml) has been blacklisted/debarred for a period of one year. The security deposit submitted by the petitioner was also forfeited and the pending purchase orders were cancelled.
Thereafter on 17.12.2024, General Manager of the Corporation invoked the bank guarantee of security deposit of Rs.1,23,050/- and issued a letter to the Branch Manager Kotak Mahindra Bank Ltd to make the payment of the amount of Bank guarantee and the bank in compliance paid the amount to the department.
The petitioner has challenged order of termination/blacklisting/debarring and forfeiture of security deposit dated 16.06.2024 and the order of invoking bank guarantee dated 17.12.2024 in the instant petition on various grounds inter alia no such instance of failure on the part of the petitioner to supply the material within a period of 45 days on the issuance of purchase order has been spelled out in the show cause notice or in the impugned order. The incident of fire duly covered under Force Majeure Event but the same illegally and arbitrarily not considered as Force Majeure Event. The security deposit of the petitioner has been wrongly forfeited and contract has been terminated without any cogent reason. The petitioner prays for quashment of the order dated 06.12.2024 and 17.12.2024.
The corporation in the reply submits that the incident of fire in the factory of the petitioner was not reported to the Corporation within a period of seven days. It is submitted that the incident took place on 21.08.2024 but the same was intimated to the Corporation on 30.08.2024. It is further submitted by the respondent that the petitioner has misleaded the court by suppressing the material fact and by not submitting the copy of tender document.
The Corporation has taken the action against the petitioner in consonance with the terms of the tender document. The terms of the tender was clear enough to the bidders and petitioner has participated in the tender process after the understanding the terms of the tender. The petitioner was awarded the contract for the purpose of the supplying the disposable syringe to the Government Hospital and Medical Colleges of Government across the State of MP and nature of the contract was urgent. As the intimation was not given within seven days and it was given with a delay of two days, the petitioner is not entitled to invoke the Force Majeure Clause and therefore the Corporation has not committed any error in declining to treat the incident of fire as a Force Majeure Event. The petitioner was already intimated by reply dated 26.09.2024 that the prayer of the petitioner made through communication dated 30.08.2024 has already been rejected by the Corporation earlier. The petitioner was intimated by email dated 24.04.2024, 31.07.2024 and 14.08.2024 for non supply of the product in time.
Corporation submits the reply that before passing the order of termination ,blacklisting and forfeiture of security deposit proper show cause notice was issued to the petitioner on 24.10.2024 and after affording opportunity of hearing to the petitioner as per the terms of the contract the order was passed on 06.12.2024 which is just and proper.
Respondent has relied on Clause No.12 (d)(k) as well as Annexure-V and Clause No.10 of the tender document of the agreement which provides that the supply should be completed within a period of 45 days from the date of purchase order and the order may be cancelled at the end of 90th day from date of the issuance of purchase order after levying penalty on the value of the unexecuted order and further the bidder shall also be liable to pay penalty as specified. Security deposit of supplier shall also be forfeited besides taking other penal action like, blacklisting /debarring from participating in present and future tenders of the tender inviting authority etc. The counsel for the respondent prays for dismissal of the present petition.
Arguments advanced by the parties are considered and documents available on record are perused.
It appears that the petitioner participated in the tender process and was awarded the contract for supply of the disposable syringe (50ml) and on account of the incident of fire in the factory of the petitioner on 2108.2024, the petitioner submitted a letter for treating the same as Force Majeure Event. The explanation to the Annexure - V provides that increase in the cost raw material, power failure, labour strike, layout, closure of factory will not be considered as act of vis- majeure. As the petitioner was not responsible for the incident of the fire and an FIR was lodged by the petitioner ,the same incident appears to be a Force Majeure Event.
The impugned order records that as per Clause 12(n) the fact should be intimated to the Department within a period of seven days from the date of incident. In case in hand, the incident of fire is of 21.08.2024 though the petitioner claims that the petitioner informed to the respondents on telephone immediately however, the petitioner intimated to the respondents in writing on 30.08.2024 with a delay of two days. The respondent cannot decline to consider the incident as Force Majeure Event only on the ground that the intimation was not furnished within seven days has been given by delay of 2 days.
As per the terms of the tender as mentioned by the respondent in the show cause notice and impugned order in case of supply of the material within 90 days from the date of issuance of purchase order the bidder is liable for penalty besides the other penal action inter alia forfeiture of security deposit and penal action of blacklisting or debarring, participating in present and future tender from tender inviting authority. Meaning thereby, the terms of NIT provides that blacklisting order can be passed only when, if the supplier fails to supply the material within 90 days from the date of issuance of purchase order. The action of blacklisting is a penal action and therefore for taking the penal action the specific notice should be given by mentioning specific instances.
In the show cause notice, no such instance was mentioned that when the purchase order was issued and when the period of 90 days was completed. Similarly, no such incident was considered by the respondent no.2- at the time of passing the impugned order of blacklisting and in a casual manner, the blacklisting order was passed by stating that the petitioner has not supplied the material as per the terms of the NIT. It is settled position of law that blacklisting amounts to civil death and therefore, the action should be taken after intimating to the concerned bidder in the events of default. In the present matter in show cause notice, the events were not mentioned and details of not a single purchase order was mentioned which was not complied with by the petitioner.
Reference may be had to the judgement of the Hon'ble Supreme Court in UMC Technologies Private Ltd. vs. Food Corporation of India and Another, (2021) 2 SCC 551 , wherein the Supreme Court has categorically held that a notice merely stating that appropriate steps shall be taken as per terms and conditions of contract would not suffice as a show cause notice for black listing. The Supreme Court has held as under :-
"25.The mere existence of a clause in the bid document, which mentions blacklisting as a bar against eligibility, cannot satisfy the mandatory requirement of a clear mention of the proposed action in the show cause notice. The Corporation’s notice is completely silent about blacklisting and as such, it could not have led the appellant to infer that such an action could be taken by the Corporation in pursuance of this notice. Had the Corporation expressed its mind in the show cause notice to blacklist, the appellant could have filed a suitable reply for the same. Therefore, we are of the opinion that the show cause notice dated 10.04.2018 does not fulfil the requirements of a valid show cause notice for blacklisting. In our view, the order of blacklisting the appellant clearly traversed beyond the bounds of the show cause notice which is impermissible in law. As a result, the consequent blacklisting order dated 09.01.2019 cannot be sustained. 26. In view of our conclusion that the blacklisting order dated 09.01.2019 passed by the Corporation is contrary to the principles of natural justice, it is unnecessary for us to consider the other contentions of the learned counsel for the appellant. Having regard to the peculiar facts and circumstances of the present case, we deem it appropriate not to remit the matter to the Corporation for fresh consideration.
The Supreme Court further held in UMC Technologies (supra) that mere existence of a clause in the bid document which mentions black listing does not satisfy mandatory requirement of a clear mention of the proposed action in the show cause notice. An action taken in such circumstances would be contrary to the principles of natural justice.
In the above conspectus, the order of blacklisting of the product of the petitioner i.e. disposable syringe (50ml) for a period of one year cannot be given a seal of approval and the same is liable to the quashed. Similarly, the forfeiture of the security deposit order is also liable to be quashed. Consequently, the order dated 06.12.2024 and 17.12.2024 are hereby quashed. Petitioner will be entitled to claim/adjust the amount of security deposit.
The petition is allowed in the above terms. No order as to costs