Partly allowed

M/S Landmark Royal Engineering (I) Pvt. Ltd. v. State of Chhattisgarh

Chhattisgarh HC20 Jul 2022WPC/663/2021

Case brief

AI extract

What is this about?

Petitioner, a registered contractor, challenged de-registration order after being accused in UAPA and state security cases. High Court held natural justice satisfied but order lacked mandatory specific de-registration period. Petition modified and remitted for fresh order specifying duration under 2014 policy.

What did the court decide?

Petition partly allowed; order remitted to respondent No. 3 to pass fresh order specifying period of de-registration as per Clause 11 & 12 of 2014 Procedure.

M/S Landmark Royal Engineering (I) Pvt. Ltd. Vs… — Property and Title | Chhattisgarh HC (2022)

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NAFR

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HIGH COURT OF CHHATTISGARH AT BILASPUR

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WPC No. 663 of 2021

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M/s Landmark Royal Engineering (I) Pvt. Ltd. Through Mrs. Richa Jain, Aged About 36 Years, Director W/o Nishant Jain R/o Shanti Nagar, Ring Road No. 2, District - Bilaspur, Chhattisgarh

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---- Petitioner Versus

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State Of Chhattisgarh Through Secretary Public Works Department, Mahanadi Bhawan, Mantralaya, Atal Nagar, District - Raipur Chhattisgarh

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Engineer In Chief Public Works Department Nirman Bhawan, North Block, Capitol Complex, Sector - 19, Naya Raipur, Atal Nagar, District - Raipur Chhattisgarh

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Chief Engineer (Planning) Public Works Department Nirman Bhawan, North Block, Capital Complex, Sector - 19, Naya Raipur, Atal Nagar, District - Raipur Chhattisgarh

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---- Respondents

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For Petitioner : Mr. Siddharth Shukla, Advocate For State : Mr. Chandresh Shrivastava, Addl. AG

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Hon'ble Mr. Justice P. Sam Koshy Order on Board

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20/07/2022

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1 . Aggrieved by the order Annexure P-4 dated 14.08.2020 and also Annexure P-6 dated 2.1.2021 the instant writ petition has been filed. Vide the Annexure P-4 dated 14.08.2020 the registration of the Director with the respondents stands de-registered and vide Annexure P-6 the appeal to the said order stands rejected.

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2 . Facts in nutshell relevant for adjudication of the present writ petition is that the petitioner is a proprietor firm engaged in the business of road and building construction. The petitioner was a registered contractor under the respondents having a unified registration under the Government of Chhattisgarh having got a registration as Class A Contractor for a period of 5 years. Initially registration was for a period of 5 years from 2014 which has further been renewed for

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another 5 years in the year 2019. The petitioner participated in a tender by PWD Department in District Kanker in respect of construction of road.

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3 . The petitioner was found qualified and was awarded the work order. The petitioner in turn sublet the contract to one M/s Rudransh Earth Movers Construction Company(in short ‘M/s Rudransh’). The M/s Rudransh Earth Movers Construction Company in turn further sublet the contract to one Tapas Kumar Palit and who was executing the work for and on behalf of M/s Rudransh Earth Movers Construction Company Limited.

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4 . It is said that on 24.3.2020 in the course of search of a vehicle bearing registration no. CG 07 AH 6555 driven by Tapas Kumar Palit himself the vehicle was found to be loaded with 95 pairs of shoes, clothes of uniforms, two bottles of electric wires each of 100 meters, two sets of walki-talki along with charger, LED Lens and other articles. Vehicle was immediately seized, Tapas Kumar Palit was arrested. In the course of investigation it was found that these articles were being taken to be supplied to Naxalites.

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5 . An FIR was registered on 24.3.2020 itself at Police Station Siksod, Tahsil Antagarh, District Kanker vide crime no. 09/2020. On further investigation the personnel of M/s Rudransh as also the Director herein were also made an accused in the said crime and they were all arrested and charged for the offence punishable under Section 10,12, 17 38(1)(a)(2) & 10 of the Unlawful Activities Prevention Act, 1967 along with Section 8(2)(3)(5) of Chhattisgarh Vishesh Suraksha Adhiniyam. The petitioner was arrested on 02.07.2020 and finally got released from jail only on 3.1.2022.

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6 . Respondent, State of Chhattisgarh has with regards to placing a contractor under suspension, demotion, non-renewal and deregistration has published a policy called The Centralized Procedures of the Government of Chhattisgarh for Suspension, Demotion, Non-Renewal and De-registration of Contractors/firms, 2014. It lays down the complete procedure and mechanism for taking an appropriate decision either for suspension, demotion, non-renewal or deregistration of the Contractor. The two impugned orders under challenge in the

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present writ petition are one which have been issued under the Fair Road Procedures/Guidelines of the State Government. The original order Annexure P-4 dated 14.08.2020 is one which was issued invoking Clause 7.1 of the aforementioned Procedure of 2014. For ready reference grounds for demotion, non-renewal or de-registration as is envisaged under Clause 7 is reproduced

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herein :-

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Grounds for demolition, Non-Renewal and De-Registration

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7.1 The Designated Authority may de-register a contractor/firm (referred hereinbelow as “entity”) for any sufficient reason, including any one or more of, but not limited to, the grounds listed below;

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(i) Conviction for, or the commencement of an investigation under the Criminal Procedure Code, 1973 or the filing of a chargesheet by an investigative agency in a criminal court of competent jurisdiction, or a civil judgment in respect of commission or alleged commission of fraud or an offence under any law in force in India or elsewhere, either directly or indirectly, by an entity, its proprietor, employee, partner, agent or representative in connection with (a) obtaining, or (b) attempting to obtain, or (c) performing a government contract or agreement: Provided that in case of commencement of criminal investigation this clause shall constitute a valid ground for de-registration only if the said fraud or offence is in relation to a contract or agreement entered into with the Government of Chhattisgarh or an entity directly or indirectly under its administrative control;

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(ii) If national security considerations, including question of loyalty to the State, so warrant;”

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7 . It would be relevant also at this juncture to take note of the procedure to be adopted while demotion or de-registration or suspension or non-renewal of the registration is concerned. Clause 10 of the aforementioned Procedures of 2014 deals with the same. 10.1 Deals with the demotion and de-registration. For ready reference, Clause 10.1 is reproduced hereinunder :-

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“10.1 Demotion or de-registration shall be initiated by the Designated Authority upon receipt of information or proposals by putting a contractor/firm on notice:

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(i) That demotion or de-registration is being contemplated;

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(ii) Of the reasons for proposed demotion or de-registration relied upon under paragraph 7 of these Procedures for the proposed demotion or de-registration;

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(iii) Stating the period of demotion or de-registration and the proposed start and end dates for the period of demotion and de-registration;

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(iv) That, within fifteen days of receipt of the notice, the contractor/firm may submit in writing, either in person or through a representative, information and arguments in connection contesting the proposed demotion/de-registration.”

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8 . The final order is to be passed invoking clause 11. For ready reference Clause

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11.1 relevant for adjudication of the present case is also reproduced

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hereinunder :-

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“11. Final Orders for Demotion/De-Registration

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11.1 If the Designated Authority decides to issue a final order of demotion or de-registration, whether after the issue of an initial order of suspension or non-renewal or otherwise after issue of notice of proposed demotion or de-registration, the contractor/firm concerned shall expeditiously be given notice of such final order :

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(i) Referring to the notice(s) of the order of suspension or non-renewal

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, if any,m and notice of proposed demotion or de-registration;

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(ii) Specifying the reasons for demotion or de-registration; and

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(iii) Starting the period of demotion or de-registration, including effective start and end dates.”

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9 . Clause 12 provides for the period of which the contractor can be demotioned, de-registered or suspended or non-renewed, which again for ready reference is reproduced hereinunder :-

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12.1 Demotion and de-registration shall be for a period commensurate with the seriousness of the reason(s), but not less than two years and not more than then years in any case, including subsequent extensions of demotion or de-registration orders, if any : Provided that in case the period of demotion for any entity is less than the remaining period of registration, the order of demotion shall have the effect of restricting the renewal of registration or re-registration

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upon completion of registration to the demoted class for the balance period of demotion;

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10. Contention of the learned counsel for the petitioner is that the impugned order dated 14.08.2020 is one which has been issued in utter violation of the principles of natural justice inasmuch as the petitioner was not provided a fair and reasonable opportunity of defence. That the show cause proceedings were drawn at a stage when the respondents very well knew that petitioner was confined in jail and would be unable to defend himself. It is also contention of the counsel for the director that because of the fact he/she was confined in jail for the relevant period, he/she was not in a position to effectively reply to the show cause notice. This again has led to a stage where there is no proper appreciation of defence of the director. It is further contention of the director that the action on the part of the respondents firstly initiating the show cause proceedings and secondly passing the final order on 14.08.2020 are both in contravention to Clause 9.5 of the Procedures of 2014. According to the counsel for the petitioner the respondents in all fairness should have waited till the outcome of the criminal case and only in the event the criminal case resulted in a conviction should the respondents have invoked the procedures of 2014 and thereafter should have passed the order. Referring to Clause 9.5 of the aforesaid procedure of 2014 contention of the counsel for the director is that the procedure states that mere initiation of a criminal proceeding or other investigation or an enquiry by an agency by itself shall not render the petitioner ineligible. Therefore as long as the petitioner/director is not convicted in a criminal case it could not be presumed otherwise by the respondents nor could have passed the final order dated 14.8.2020. Lastly, it was contended by the counsel for the director that the impugned order is also bad in law for the reason that as is required under Clause 10, 11 & 12 all of which have been already reproduced in the preceding paragraphs, neither show cause notice, nor final order and also the Appellate Order prescribes the period for which the order of de-registration would be enforced. That on this ground alone the entire

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proceedings should be vitiated and the impugned order should be quashed. In the absence of specific period provided in the impugned order according to the counsel for the director the implication would be that de-registration would be for an indefinite period and which otherwise is not impermissible.

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11. Counsel for the director in support of his contentions relied upon the judgment of Hon’ble Supreme Court in the case of B. C. Biyani Projects Private Limited Vs. State of M.P. and others in Civil Appeal No.6632/2016 decided on 22.7.2016, Daffodils Pharmaceuticals Limited Vs. State of Uttar Pradesh and Another, (2020) 18 SCC 550 , VetIndia Pharmaceuticals Limited Vs. State of Uttar Pradesh & Another, (2021) 1 SCC 804 and judgment of the M.P. High Court reported in 2022 SCC OnLine MP 405 in the case of Naman Seva Samiti Vs. Central Wool Development Board and Others decided on 4.3.2022.

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12. All the aforesaid judgments deal with the issue of blacklisting of a firm without any specific period prescribed treating them to be for an indefinite period, the impugned orders in all those cases were quashed.

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13. Per contra, learned Additional AG opposing the petition submits that in the instant case the factual aspect of the case is undisputed so far as proprietor being an accused in a criminal case who was arrested as early as on 02.07.2020 and against whom various offences under the Unlawful Activities Prevention Act, 1967. So also the provisions of Chhattisgarh Vishesh Jan Suraksha Adhiniyam have been levelled and charged. It is the further contention of the respondent counsel that even a charge sheet has since been filed and trial is undergoing. Learned State counsel submits that from the aforegiven admitted factual matrix the proceedings drawn by the respondent State in de-registering the petitioner cannot be found fault with as the petitioner’s case squarely falls within the ambit of 7.1(i)(ii).

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14. According to the State counsel the director was aware of the development that has transpired from the show cause notice period of itself. The petitioner/director has been contesting the case all along including at the stage of appeal in spite of the fact that he/she stands released from jail only now vide

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order dated 3.1.2022. State counsel submits that if the petitioner has voluntarily not submitted his reply to the show cause proceedings, it is he/she himself/herself who is to be blamed. It cannot be said that he/she was denied a fair and reasonable opportunity. It is further contention of the State counsel that even otherwise under the admitted factual matrix where a criminal case is pending and where the charge against the petitioner is for the offence under Unlawful Activities and prevention Act, 1967 and also the Chhattisgarh Vishesh Jan Suraksha Adhiniyam, there is not much scope left for the director to improve upon by filing a reply to the show cause notice. The petitioner/director cannot deny the fact that he/she is not implicated in a criminal case for the aforesaid proceedings.

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15. It is the further contention of learned counsel for the State that as regards Clause 9.5 which is harped upon by the petitioner/director, the same would not be applicable in the instant case, where the final order has been passed under the procedures of 2014. Clause 9.5 is a clause would be applicable in a case where the contractor is restrained from participating in a tender proceedings without there being an order under Procedures of 2014 dealing with suspension, demotion, non-renewal and de-registration. It is in that context that 9.5 stipulates that mere initiation of a criminal case or a pendency of a proceeding elsewhere would not be sufficient enough to debar a person from participating in the tender proceedings, until and unless an order is passed under the Procedure of 2014.

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16. As regards the non-disclosure of the specific period in the show cause notice or in the impugned order, learned counsel for the State submits that since it is a question of de-registration of the contractor the period is implied to be applicable till the contractor has a valid registration or till the conclusion of criminal case, which ever is earlier, as the case may be. It is further contention of the State counsel that petitioner/director even can apply for renewal of his registration or for a fresh registration thereafter. Thus, the impugned orders do not warrant interference. It is further also the contention of State counsel that

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once when procedures of 2014 under which impugned orders has been passed prescribes the minimum and the maximum period for the applicability of the order of de-registration. It cannot be presumed it is for an indefinite period, the period is definite where the maximum period is of uptill 10 years.

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17. Having heard the contentions put forth on either side and on perusal of record as has been stated in the preceding paragraphs the procedure stands prescribes for passing an order under the aforementioned procedure of 2014 clause 10.3 specifically envisages that de-registration of a contractor shall be initiated with a notice stating the period of de-registration with proposed the start and end dates for the period of de-registration. Likewise, again Clause 11 of the said Centralized Procedure of 2014 again in Clause 11.1(iii) holds that designated authority shall pass a final order of de-registration stating the period of de-registration including the effective start and end dates. So also clause 12 prescribes the minimum and maximum period of de-registration. 12.1 clearly lays down that de-registration shall be for a period of not less than two years and not more than 10 years. The aforesaid three clauses of the Centralized Procedure of 2014 makes it emphatically clear that at all stages of the procedure right from the stage of issuance of show cause notice the period has to be mentioned and made known to the contractor. In the absence of a specific period in the show cause notice as also in the final order it has to be presumed or an adverse inference is that the de-registration is for an indefinite period, if not at least it is for the maximum period provided under Clause 12.1 of the aforesaid Procedure of 2014. In the opinion of this Court this is not the mandate of the Government when it had laid down the said Procedures. Plain reading of Clause 12.1 shows that it was for the authorities to have decided taking into consideration the gravity of the allegations against the contractor to decide whether the period of de-registration has to be for a minimum period of two years or for a period of more than two years but in any case less than 10 years. 18. If we take into consideration the judgments cited by the learned counsel for the petitioner/director, the Hon’ble Supreme Court has time and again reiterated the

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fact that, blacklisting of a firm/contractor cannot be for an indefinite period as that would amount to passing of a capital punishment. It has to be for a specific period. In the instant case, need for specifying the period all the more becomes necessary for the reason that the provision under which the impugned orders have been passed or the powers which have been invoked by the respondents for de-registering the petitioner/director requires that the period has to be specifically mentioned at all stages.

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19. The impugned order to the aforesaid extent apparently is bad in law. However, as regards the contention of the petitioner/director is that the impugned order is also in violative of Clause 9.5, this Court is not inclined to accept the submissions by the learned counsel for the petitioner/director for the reason that the Court finds sufficient force in the submissions made by the learned counsel for the State counsel when he says that Clause 9.5 is a clause which would be applicable in the case where petitioner/director has been restrained from participating in a tender proceeding without a final order being passed under the Centralized Procedure of 2014. This Court also is of the view that the plain reading of the Clause 9.5 itself would clearly reflect that the said provision was to be made applicable in a case where the contractor was declared ineligible or was restrained from participating in a tender proceeding, merely because of an initiation of a criminal case or where the contractor was facing an investigation or an enquiry by the authority of the Government both Central and the State. The said provision thus cannot be made applicable in the facts of the present case. Nor would that clause come to rescue that the petitioner for the simple reason that the in instant case final order has already been passed on 14.8.2020 and has been affirmed in an appeal also.

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20. Given the admitted factual matrix that petitioner is being prosecuted for the offence under Section punishable under Unlawful Activities and Prevention Act, 1967 and Chhattisgarh Vishesh Jan Suraksha Adhiniyam. Clause 7.1 of the procedures of 2014 empowers the authority to de-register a contractor even on the commencement of an investigation under Cr.P.C., 1973 at even if a case

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where charge-sheet has been filed in a criminal Court of competent jurisdiction. Both these provisions stand attracted in the case of the director. Therefore, the action on the part of the respondents in de-registering the petitioner/director in the given factual backdrop does not warrant interference. However, order since it is not satisfying the specific period as is otherwise required under Clause 11 deserves to be remitted back to the respondent no.3 for an appropriate order to be passed specifying the period as is required under Clause 11 and 12 of the Procedures of 2014 taking into consideration the nature of allegations, charges and gravity of the offence and role played by the petitioner, if at all. The writ petition therefore stands partly allowed. Matter is remitted back to the respondent no.3 for appropriate order which the respondent no.3 shall pass within an outer limit of 45 days from the date of receipt of copy of this order.

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21. It is expected that while deciding the period so far as de-registration is concerned the authority shall provide an opportunity of hearing to the petitioner/ director also before passing a final order.

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Sd/(P. Sam Koshy) Judge

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Rohit

M/S Landmark Royal Engineering (I) Pvt. Ltd. v. State of Chhattisgarh

Case brief

What is this about?

What did the court decide?

M/S Landmark Royal Engineering (I) Pvt. Ltd. v. State of Chhattisgarh

Case brief

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