LexM/S KULJA INDUSTRIES LIMITED versus CHIEF GEN. MANAGER W.T. PROJ. BSNL AND ORS.
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A B [2013) 14 S.C.R. 430 M/S KULJA INDUSTRIES LIMITED v. CHIEF GEN. MANAGER W.T. PROJ. BSNL AND ORS. (Civil Appeal No. 8944 of 2013) OCTOBER 4, 2013 [T.S. THAKUR AND VIKRAMAJIT SEN, JJ.] Contract - Contract with Government Company - For supply of goods - Purchaser black-listed the supplier C permanently on the ground that it committed gross misconduct and irregularities by receiving excessive payments from the purchaser - Held: Power to black-list a contractor is inherent in the party allotting the contract - But if such decision is taken by State or its instrumentalities, it is subject to judicial D review and open to scrutiny on the touchstone of fairness, relevance, natural justice, non-discrimination, equality and proportionality - 'Debarment' though recognised as an effective method for disciplining deviant suppliers, it is never permanent - Period of debarment would invariably depend E upon the nature of the offence committed by the erring contractor - In the facts of present case, permanent debarment is too harsh - Matter remanded back to competent authority to determine the period of debarment - Constitution of India, 1950 - Arts.226 and 32 - Judicial Review. F Respondent-company (BSNL) entered into contract with the appellant-Company. BSNL black-listed the appellant permanently on the ground that the appellant had committed gross misconduct and irregularities by receiving excessive payments from BSNL and thereby G wrongfully causing loss to the said company. The appellant denied these allegations contending that BSNL Policy/Manual did not provide for punitive action in the nature of blacklisting and that excess payment at best H 430 KULJA INDUSTRIES LIMITED v. CHIEF GEN. 431 MANAGER W.T. PROJ. BSNL could be said to be irregularity which had been cured by A refund of the amount. The question for consideration in the present appeal is whether BSNL could have blacklisted the appellant for allotment of future contracts for all times to come. Allowing the appeal, the Court HELD: 1. A literal construction of the provisions of paras 31 and 32 of the bid document would mean that the power to disqualify or blacklist a supplier is available to B the purchaser only in the three situations enumerated in C paras 31 and 32 and no other. Any such interpretation would, however, give rise to anomalous results. It is because, in cases where a supplier is found guilty of much graver offences, failures or violations, resulting in much heavier losses and greater detriment to the D purchasers in terms of money, reputation or prejudice to public interest may go unpunished simply because all such acts of fraud, misrepresentation or the like have not been specifically enumerated as grounds for blacklisting of the supplier in paras 31 and 32 of the tender document. E That could never be the true intention of the purchaser wh~n it stipulated paras 31 and 32 as conditions of the tender document by which the purchaser has reserved to itself the right to disqualify or blacklist bidders for breach or violation committed by them. If bidders who F commit a breach of a lesser degree could be punished by an order of blacklisting there is no reason why a breach of a more serious nature should go unpunished, be ignored or rendered inconsequential by reason only of an omission of such breach or violation in the text of G paras 31 and 32 of the tender document. Paras 31 and 32 cannot, in that view, be said to be exhaustive; nor is the power to blacklist limited to situations mentioned therein. [Para 16) [442-H; 443-A-D) 2. The power to blacklist a contractor whether the H 432 SUPREME COURT REPORTS [2013] 14 S.C.R. A contract be for supply of material or equipment or for the execution of any other work whatsoever is inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because 'blacklisting' simply s signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any c constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken b
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