K.K. Mahajan Constructions vs State Of H.P & Ors.

2. The Case

“Whereas, 3^rd meeting was conducted on 20^th July, 2023. During meeting, the Executive Engineer, HPPWD, Division Kangra intimated that the firm/contractor was clearly directed to submit his proposal alongwith construction sequences and working programme for approval and get his design rechecked in is presence or his consultant/ Engineer, if required. No Compliance has been received from the contractor till date. At present, there are no any construction activities at site and site is in abandoned condition. The notice has also been served to the contractor under different clauses of the contract agreement but to of no avail.

Whereas, as per statement of Superintending Engineer, 5^th Circle, HPPWD, Palampur and Executive Engineer, HPPWD, Kangra, it is amply clear that the contractor is not taking matter seriously and trying to make lame excuses which leads to considerable delay in execution of work. The contractor has failed to submit proposal for reconstruction of collapsed bridge despite lapse of approximately four month’s period which clearly shows that contractor/ firm is not keenly interested to complete the bridge work.

AND THEREFORE, in exercise of the powers delegated to the undersigned vide Additional Chief Secretary (PW) to the Government of H.P. Notification No. PBW(B)A(3)1/2018 dated 13^th April, 2021, and further recommendations of designated committee in its meeting held on 20^th July, 2023, M/s K.K. Mahajan Construction, Resident of Lambi Galli, Nurpur, Tehsil Nurpur, District Kangra, (H.P)-176202, Class-A contractor, enlisted vide above referred office memorandum is hereby debarred to participate in any tender under jurisdiction of Kangra Zone, HPPWD, Dharamshala till the satisfactory completion of above mentioned work. Above action is without prejudice to the right of Govt. to take any other action under other clauses/ sub-clauses of the contract agreement as-well-as enlistment rules.”

“UNDERTAKING

As per the meeting held in the chamber of Worthy Chief Engineer, Kangra Zone, HPPWD, Dharmashala on dated 17^th August, 2023, I hereby undertake that.

In continuation to my office letter No.2170 dated 27.07.2023, I hereby state that I am willing to execute the work. The alternate design for the same shall be submitted by me after the rainy season i.e. 15^th September, 2023 approximately, after which the strata for the revised design can be checked and the design may be submitted accordingly.

It is stated that after the approval of submitted GAD/Design, the final set of drawing will be submitted for approval within 30 days and the work shall be started only after the final approval of all the submitted drawings. No work will be executed on tentative approved design.”

“After which a Contract Management Meeting was convened by Superintending Engineer, 5^th Circle, H.P.P.W.D, Palampur on 30^th April, 2024, in which contractor requested to release withheld payment for execution of work and assured that the concrete of raft will be completed by 25^th May, 2024.

After Contract Management Meeting on 30^th April, 2024,, the contractor completed the work of pier up to the NSL and thereafter left the work abandoned with effect from 30^th June, 2024 and whereabouts of the contractor was not known to Executive Engineer, H.P.P.W.D, Division, Kangra.

Visualizing the irresponsible behaviour of contractor and his failure to deliver the results, Executive Engineer, Division, Kangra served notice to contractor vide letter No.PWD/KDS/104.00 Mtr./2024-25-2302-04 dated 24^th July, 2024. Finding no response of notice, a final notice to terminate the contract was issued by Executive Engineer, Division Kangra vide letter No. PW/KD/CB/TA/CF-249/2024-25-2515-17 dated 8^th August, 2024. Thereafter the work was rescinded by the Executive Engineer, H.P.P.W.D, Division, Kangra vide his office letter No.4820-26 dated 28^th September, 2024.

In view of above facts, and in exercising the powers delegated to me by the Additional Chief Secretary (PW) to the Government of Himachal Pradesh vide Notification No.PBW(B)A(3)1/2018 dated 13^th April, 2021, and based on recommendations of designated committee meeting held on 20^th July, 2023, and further recommendation received from Superintending Engineer, 5^th Circle, H.P.P.W.D, Palampur office letter No.9961-62 dated 21.12.2024, I hereby blacklist the contractor M/s K.K. Mahahan Construction, Resident of Lambi Galli, Nurpur, Tehsil Nurpur, District Kangra (H.P)-176202, enlisted as a Class-A firm with H.P.P.W.D, as per this office memorandum No. CE(N)-CTR-1/Enlist-A/266-315 dated 1^st December 2006, valid till 31^st March, 2027. Accordingly, the firm is blacklisted/removed from the approved list of Government contractors. The firm is also debarred from participating in any tender process across H.P.P.W.D, C.P.W.D, and all State/Central Government departments, undertakings, boards, and corporations, with immediate effect in public interest.”

“(b). Quash and set-aside the impugned communications/orders dated 04.08.2023 (Annexure P-11) and 24.12.2024 (Annexure P-15), thereby revoking the blacklisting of the petitioner and termination of its enlistment consequently directing the respondent authorities to allow the petitioner to participate in tender process within the State and Central Government Departments, Boards, Undertakings and Corporations.”

“HIMACHAL PRADESH

PUBLIC WORKS DEPARTMENT

Notice.

Whereas the work Construction of 104.00 Meters Span Bridge over Nanner Khad on Daulatpur Jalari Har Kharat Road at RD5/740 under NABARD RIDF-XXII was awarded to you vide Executive Engineer, H.P.P.W.D Division, Kangra office letter No.12463-74 dated 20.09.2018 for an amount of ₹3,42,07,077/- only with a time limit of 18 Months reckoned from the 15^th day of the issue of award letter to start the work. Accordingly, the work was required to be completed on or before 04.04.2020 but the work is still in progress. During the execution of work, the bridge Arch fell down on dated 10.04.2023. The enquiry was conducted by the Superintending Engineer-cum-SQC, HPPWD, Nigam Vihar Shimla-2 as per the direction of worthy E-in-C, HPPWD, Shimla office letter No.810-11 dated 18.04.2023, on the day of inspection dated 12.04.2023 wherein you/representative of the firm was also present.

The following points have been reported against you by the enquiry team:

1.

The cement store was checked, where OPC cement was found stacked in an un-engineering manner.

2.

The test results were found doubtful with respect to the quality of concrete work laid on the fallen structure of arch.

3.

The steel of various brands like Satluj, Shiv Shakti, Jindal, Birla Steel etc. was found which indicate bad management of such a important structure. No tests of such steel by the third party of purchase bill with test result of principle manufacturer were made available to the enquiry team.

4.

No construction sequences were available at site.

5.

The results of various tests actually conducted at site by NDT or by DT and the results which were entered in the record of the field functionaries had a lot of variations.

6.

The compressive strength of core tested in lab after applying correction factor does not confirm to the standard required strength.

You are hereby called upon to submit your written statement within 07 days of receipt of the notice to the undersigned after that an opportunity shall given in person to you which will be intimated you later on, failing which it will be presumed that you have nothing to say in your defence & further action under various rules of the enlistment rule deemed fit shall be initiated against the firm.

Sd/-

Chief Engineer,

Kangra Zone, HPPWD,

“To

The Chief Engineer,

Kangra Zone,

Dharamshala, H.P.

Sub C/O 104 Mtr Span Bridge over Baner Khad on Daulatpur Jalari Khari road at RD5/740 under NABARD RIDF-XXII (SH: C/O 104 mtr span RCC Arch Type Single lane bridge at RD5/740 i/c approaches)

Ref: Yours office notice issued by letter No.:679-80 dated 02.06.2023.

Sir,

With reference to your notice issued by letter No.679-80 dated 02.06.2023 for the subject cited work, the Para-wise reply is as under:-

1.

The Material/Cement was stacked as per in-engineering manner. However, due to sudden collapsed of arch, the cement taken out for casting was returned to store and stacked in haphazardly manner, the same is regretted.

2.

The test conducted at site and in lab were recorded in the register and the same was checked and duly signed by the department officers.

3.

The steel of various brands as issued by the department were used at site as such there is no bad management at our part. The bill/test results of steel were never provided to us, the same were to be provided by the department to the enquiry team.

4.

Working Program duly stands submitted as and when asked for.

5.

As per the information collected by me, NDT cannot be conducted on the disturbed structure as the structure stands deformed and it is requested the DT reports may please be provided for further conclusion.

6.

The compressive strength of core were never tested in our presence.

This is for your information. In addition to above the reason for collapse is still not known to us, for which the design calculation on which the structure was erected time again requested by my letter no. 2120-24 Dated 05.05.2023, 2125-29 dated 10.05.2023, 2132-36 dated 15.05.2023, 2137-40 dated 26.05.2023 is still awaited, the same may please be supplied, so that 3^rd party consultancy maybe referred to complete the work at the earliest.

Thanking you

Yours faithfully,

Sd/-

K.K. Mahajan Constructions..”

21.

The Central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of Show Cause Notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/ breaches complained of are not satisfactorily explained. When it comes to black listing, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action.

22.

The High Court has simply stated that the purpose of show cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show cause notice should meet the following two requirements viz:

i)

The material/ grounds to be stated on which according to the Department necessitates an action;

ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit.

We may hasten to add that even if it is not specifically mentioned in the show cause notice but it can be clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement.”

“3.

That the respondent – contractor was awarded a contract for construction of a flyover over the railway level crossing at Bomikhal Junction in Bhubaneswar. That in pursuance of the said contract the respondent – contractor constructed the said flyover. In the year 2017, a ten meter slab of the flyover collapsed during concreting of the railway over bridge at the level crossing, which resulted in loss of life and property. One person died and eleven others were injured.

4.

A high Level inquiry was conducted by the Chief Engineer (Design) and Chief Engineer (DPI and Roads). The committee submitted a comprehensive report after a detailed inquiry and found the contractor – respondent herein guilty. It was found that the contractor did not submit the formwork design and adopted his own arrangement leading to collapse of such a huge structure during construction. It was also found that the contractor had not ensured adequate safety measures during the period of construction; otherwise such an unfortunate fatal accident could have been avoided. It was found that the quality assurance had not been maintained as stipulated in the codes and manuals and as per the agreement. It was found that there were a lot many deficiencies in workmanship that could affect the quality of work, as found in other formwork assemblies. Therefore, the committee found the contractor responsible for such a serious accident.

5.

On the basis of such report the State Government took the matter very seriously and directed that immediate necessary action be taken for blacklisting the contractor following the procedure as per the Orissa Public Works Department (OPWD) Code. Thereafter, a show cause notice was issued to the contractor and the contractor was asked to show cause as to why it be not blacklisted for intentionally violating the relevant clauses of the Agreement No.15-P1/2011-

12.

The respondent filed a detailed reply.

6-12. xxx

13.

By the impugned judgment and order, the High Court has set aside the order passed by the Government of Odisha blacklisting the respondent contractor mainly on the ground that the same was pre-determined and in breach of principles of natural justice.

14-19 XXX

20.

So far as the findings recorded by the High Court that the blacklisting order was in breach of principles of natural justice is concerned, it is to be noted that the blacklisting order was passed after issuing a show cause notice to which the contractor – respondent was called upon to reply and show cause as to why he be not blacklisted. A detailed show cause notice was issued with specific allegations to which the respondent – contractor submitted a detailed reply. After considering the allegations in the show cause notice, considering the reply and also by considering the material available on record the order of blacklisting was passed. We fail to appreciate, how in such a case the blacklisting order can be said to be in breach of principles of natural justice.

21.

In the case of Grosons Pharmaceuticals (P) Ltd. & Anr.v. State of U.P.^{44.(2001)8 SCC 604}, the order of blacklisting was challenged by the contractor on the ground that the contractor was not supplied with all the materials on the basis of which charges against him were based. It was the case on behalf of the contractor that non supply of such material resulted in violation of principles of natural justice. To that, this Court observed that it was sufficient requirement of law that an opportunity of show cause was given to the appellant before it was blacklisted. This Court observed that the contractor was given an opportunity to show cause and it did reply to the show cause to the State Government and therefore the procedure adopted by the Government while blacklisting the contractor was in conformity with the principles of natural justice.

22.

In the present case as observed hereinabove, show cause notice was issued upon the contractor by which the contractor was called upon to show cause why he be not blacklisted; the show cause notice was replied to by the contractor and thereafter, after considering the material on record and the reply submitted by the contractor and having found the serious lapses which led to a serious incident in which one person died and eleven others were injured, the State Government took a conscious decision to blacklist the contractor. Therefore, it cannot be said the order blacklisting the contractor was in violation of principles of natural justice.

23.

As observed by this Court in the case of Gorkha Security Services v. Govt. (NCT of Delhi) & Ors.² the fundamental purpose behind the serving of a show-cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement is the nature of action which is proposed to be taken for such a breach.

24.

As per the law laid down by this Court in a catena of decisions “debarment” is recognised and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission. It is for the State or appropriate authority to pass an order of blacklisting/debarment in the facts and circumstances of the case. Therefore, the High Court has erred and has exceeded its jurisdiction in exercise of powers under Article 226 of the Constitution of India by quashing and setting aside the blacklisting order, that too, without adverting to the serious allegations and the act of omission and commission on the part of the contractor which led to a serious incident of collapse of ten meter slab while concrete work of the deck was going on and due to which one person died and eleven others were injured. It was specifically found that the safety arrangements were lacking severely in the construction work zone. It was also found that quality assurance was not emphasised as stipulated in the codes and manuals and as per the Agreement. Therefore, the High Court ought to have considered the seriousness of the incident in which due to omission and commission on the part of the contractor in constructing the flyover one person died and eleven others were injured.”

“4.0 Applicability:

(a)

Himachal Pradesh Public Works Department will Enlist Contractor/Firm/Company who intends to work with the Department. It is done to have a ready list of suitable and competent contractors/firms/companies of H.P.P.W.D works so as to minimize requirement of verification of credentials of contractors at the time of individual tenders.

Any Indian individual, Sole Proprietorship Firm, Partnership Firm, Public Limited Company, Private Limited Company may apply for enlistment as a contractor in HPPWD under these Rules provided that eligibility criteria and other conditions are satisfied as per table-1. The enlisted contractors have to abide by all the rules made herein and as amended from time to time during the currency of their enlistment.”

“23.0 Disciplinary Actions against defaulting

Contractor: Enlistment authority is competent to take disciplinary action as decided after issue of show cause notice and being heard in person. Enlistment authority can take the following disciplinary action after issue of show cause notice within 60 days. The decision of the Enlistment authority shall be final and binding on the contractor. The disciplinary action can be taken against the contractor for any of following reasons:-

(a)

Contractor is responsible for fundamental breach of contract conditions of work being executed by him with any department of the State Government, he shall be debarred to participate in any tender in that particular Division/circle for a period of six months.

(b)

Found responsible for constructional defects in one or more works having gradation of US(unsatisfactory) poor performance (duly certified by an officer not below the rank of Executive Engineer) for any work. The Contractor will be debarred to participate in any tender in that particular Division/circle/Zone/State for a period of three months or satisfactory rectification of such defects (which ever is more).

(c)

Willfully fails to start the awarded work within one month of start date in any Division. The Earnest Money of the contractor shall be forfeited without any notice and he will be debarred to participate in any tender in that particular Division/ circle for a period of six months.

(d)

Fails to submit the hard/original documents of tenders as up loaded in e-procurement within prescribed time limit in the bid document. The contractor will be debarred to participate in any tender in that particular Division/circle for a period of three months. However, for more than two repeated instances, he will be debarred to participate in any tender in that particular Division/circle for a period of six months.

(e)

In case any work of a contractor is rescinded or earnest money is forfeited for any reasons, he will not be eligible to participate for the tender of said work in future and further he will be debarred to participate in any tender in that particular Division/ circle for a period of three months. However for more than two repeated instances, he will be debarred to participate in any tender in that particular Division/circle for a period of six months.

23.1 Blacklisting/demoting to lower class/Removal of a contractor from the approved list of

contractors:

The contractor shall be liable to be Blacklisted/demoting to lower class/removal from the approved list of contractors by the Enlistment Authority on approval from the designated committee or debarring him from renewal by the Enlistment authority, if he:-

(a)

Has failed to execute a contract on more than one occasions or has executed it unsatisfactorily; Or

(b)

Fails to abide by the condition of enlistment. Or

(c)

If found to have given false particulars at that time of enlistment/tendering. Or

(d)

Does not have the adequate equipment/technical personal/financial resources to execute work in the class enlisted. Or

(e)

Indulged in any type of forgery or falsification of records; or

(f)

Changes constitution of the firm/company without prior approval of the enlistment authority; or

(g)

Changes permanent address/business address without intimation to the enlistment authority; or

(h)

Declared or is in the process of being declared bankrupt/ insolvent/ would up/ dissolved or

(i)

Persistently violates the labour regulations and rules. Or

(j)

Involved in complaints of serious nature received from any department which prima-facie appear to be true; or

(k)

Defaults in settlement of tax dues like GST, income tax, Contract tax, sales tax, octroi, duties, EPF etc. or any tax. Obligation imposed by the Govt., from time to time. Or

(l)

Compensation for delay imposed for three times or more duly confirmed by the competent authority specified in the contract agreement.”

“25.

The next question which is posed for consideration of this Court is, whether, in the facts and circumstances of the case the contractor was required to be debarred/blacklisted permanently?

26.

In the case of Kulja Industries⁵ , this Court has observed that “debarment” is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor.In the said decision this Court emphasised on prescribing guidelines by determining the period for which the blacklisting should be effective. It is observed and held by this Court that while determining the period for which the blacklisting should be effective, for the sake of objectivity and transparency it is required to formulate broad guidelines to be followed. It is further observed that different periods of debarment depending upon the gravity of the offences, violations and breaches may be prescribed by such guidelines.

27.

In the present case, after the order of blacklisting was passed, the State Government has formulated guidelines by O.M. dated 26.11.2021 which provides as under:-

“The blacklisting period per offence shall be limited to 03 (Three) years subject to an overall maximum cumulative period of 10 (Ten) years for multiple offences” However, we may observe that we do not approve of the guidelines issued by the State Government by O.M. dated 26.11.2021.

28.

Duration of blacklisting cannot be solely per offence. Seriousness of the lapse and the incident and/or gravity of commission and omission on the part of the contractor which led to the incident should be the relevant considerations. In a given case, it may happen that the commission and omission is very grave and because of the serious lapse and/or negligence, a major incident would have taken place. In such a case, it may be the contractor’s first offence, in such a case, the period/duration of the blacklisting/banning can be more than three years. However, as the said guidelines are not under challenge, we rest the matter there and leave it to the State Government to suitably amend and/or modify the said office memorandum. However, whatwe have observed above can be a guide while determining the period of debarment/blacklisting.”