[needs editing] Supreme Court says duration of blacklisting cannot be solely per offence; seriousness of lapse, gravity of commission/omission should be the relevant considerations

While allowing an appeal filed by the State of Odisha whereby it questioned the High Court's decision to set aside an order passed by the State banning one M/s Panda Infraproject Limited from participating or bidding for any work to be undertaken by Government of Odisha and transacting any business with Government of Odisha, either directly in the name of propriety bidder or indirectly under any different name or title, the Supreme Court noted that duration of blacklisting cannot be solely per an offence.

The top court further held that it did not approve of the guidelines issued by the State Government regarding blacklisting and debarring of organisations/companies.

“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.”, held the Court.

A bench of Justices MR Shah and BV Nagarathna went on to note that 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.

Thus, it added that although it may be the contractor’s first offence, 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….”, said the bench.

M/s Panda Infra-project Limited was awarded a contract for construction of a flyover over the railway level crossing at Bomikhal Junction in Bhubaneswar. In 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.

A high-­level inquiry was conducted wherein it was found that

1. the contractor did not submit the formwork design and adopted his own arrangement leading to collapse of such a huge structure during construction,
2. the contractor had not ensured adequate safety measures during the period of construction; otherwise such an unfortunate fatal accident could have been avoided,
3. the quality assurance had not been maintained as stipulated in the codes and manuals and as per the agreement.
4. there were a lot many deficiencies in workmanship that could affect the quality of work, as found in other formwork assemblies.

A show cause notice was issued to the contractor and a detailed reply was filed on his behalf. After considering the allegations in the show cause notice and reply thereto, the Chief Engineer (DPI & Roads) Odisha ordered that the contractor be blacklisted with immediate effect, for intentional violation of condition of the contract leading to injuries and loss of life.

The Top Court noted that merely because the show cause notice was issued after the inquiry committee report was considered and thereafter the State Government took the decision to initiate proceedings for blacklisting, that by itself it cannot be said that the order of blacklisting was pre­determined as observed by the High Court.

Findings recorded by the High Court that the blacklisting order was in breach of principles of natural justice were also not accepted.

Noting that “debarment” is often used as an effective method for disciplining deviant suppliers/contractor by the State or appropriate authority to pass an order of blacklisting/debarment, the division bench said,

“…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…..”

Thus, while considering the seriousness of the offence, it was held that as such the contractor did not deserve any leniency.

“However, to debar him permanently can be said to be too harsh a punishment…., we are of the opinion that if the blacklisting is restricted to five years, it may be in the fitness of things…”, ordered the top court.

Case Title: State of Odisha & Ors. v. M/s Panda Infraproject Limited