Case Note & Summary
The writ petition under Article 226 of the Constitution of India was filed by a private limited company engaged in corrosion resistant coating application, challenging a banning order issued by the Oil and Natural Gas Corporation (ONGC), a state within the meaning of Article 12. The banning order, dated 25 April 2014, prohibited the petitioner from participating in any tender floated by ONGC for a period of three years. The order was passed pursuant to a show cause notice dated 4 December 2013, which alleged irregularities in a prior contract for maintenance painting of offshore platforms that was completed on 31 May 2011. The contract, executed on 8 May 2009, was a three-year contract that was successfully terminated, with a completion certificate issued by ONGC on 19 September 2011 and final payments received by the petitioner on 18 October 2011. Despite this, ONGC later raised issues regarding the quantity of paint supplied, manpower deployment, and maintenance of records, leading to the invocation of two bank guarantees totaling approximately Rs. 55.42 lakhs and the show cause notice. The petitioner replied to the show cause notice on 16 December 2013, explaining that the contract was for a lump-sum based on actual application of paint, that quantity of paint was indicative, and that manpower movement was as per ONGC’s instructions. The petitioner contended in the writ petition that the banning order was violative of Articles 14 and 19(1)(g) of the Constitution, because the show cause notice did not indicate that it was issued with a view to ban the petitioner for a future period, no inquiry report was furnished, and the action was excessively harsh and malafide, aimed at favouring another bidder. The court issued Rule and heard the parties finally, but the judgment text provided is incomplete and does not contain the court’s analysis or final decision.
Issue of Consideration
Whether the banning order dated 25 April 2014 passed by ONGC against the petitioner is valid and whether it violates Articles 14 and 19(1)(g) of the Constitution and principles of natural justice.
Law Points
- Article 14
- Article 19(1)(g)
- arbitrariness in blacklisting
- natural justice requires show cause notice to mention proposed action
- proportional penalty
- fair opportunity
Case Details
2016 LawText (BOM) (10) 37
Writ Petition No. 2752 of 2014 along with Notice of Motion 210 of 2016 and Notice of Motion (L) 117 of 2015
S.C. Dharmadhikari, B.P. Colabawalla
Raju Z Moray, S.R. Nargolkar, Aumkar Vijaykumar Joshi, Kevic Setalvad, Daisy Dubhash, J.P. Kapadia, O. Mohandas, Amrit Khare, Rajiv Singh, Astha Tamhankar
M/s J.K. Surface Coatings Pvt. Ltd.
Oil and Natural Gas Corporation, The General Manager (Civil) ONGC Ltd, Executive Director MH Asset, Shri Kalraj Mishra, M/s Global Corrosion Control
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Nature of Litigation
Writ Petition under Article 226 of the Constitution of India challenging a banning order passed by ONGC, a public sector undertaking, against the petitioner company, preventing it from participating in future tenders for three years.
Remedy Sought
Petitioner sought a writ of certiorari to quash the office order dated 25 April 2014 and a writ of mandamus to allow it to obtain documents and participate in future tenders.
Filing Reason
The banning order was passed on grounds of alleged irregularities in a previous contract; petitioner contended it was violative of fundamental rights and principles of natural justice, and that the show cause notice did not indicate the intention to ban.
Issues
Whether the banning order violated Articles 14 and 19(1)(g) of the Constitution of India.
Whether the show cause notice dated 4 December 2013 was adequate as it did not indicate that it was issued with a view to ban the petitioner.
Whether the scope of the show cause notice was limited to contractual disputes and not to banning.
Whether the punishment of banning for three years was excessively harsh.
Whether the principles of natural justice were violated by not furnishing any inquiry report to the petitioner.
Whether the action of ONGC was malafide, aimed at favouring a particular bidder.
Submissions/Arguments
The banning order is violative of Articles 14 and 19(1)(g) of the Constitution of India.
The show cause notice dated 4 December 2013 did not even indicate that it was issued with a view to ban the petitioner from future tenders.
The show cause notice limited the scope of inquiry to alleged irregularities in the completed contract, which were contractual disputes resolvable through contractual and statutory provisions.
The banning order was excessively harsh and unjustified.
No inquiry report was furnished to the petitioner, denying an opportunity to respond or challenge it.
The entire action smacks of malafides to ensure that a particular bidder is favoured and the petitioner is ousted from the bidding process.
In reply to the show cause notice, the petitioner explained that the contract was for a lump-sum based on actual painting area, and quantity of paint was indicative; payment was for actual work done.
Manpower deployment was as per ONGC's directives, and the third-party inspection agency was aware of utilization at different locations.
Judgment Excerpts
By this Writ Petition under Article 226 of the Constitution of India, the Petitioner seeks a Writ of Certiorari or any other appropriate writ, order or direction, quashing and setting aside the office order dated 25th April, 2014.
the said order is impugned by the Petitioner on the ground (i) that it is violative of Articles 14 & 19(1)(g) of the Constitution of India; (ii) that the SCN dated 4th December, 2013 issued to the Petitioner did not even indicate that the same was issued with a view to consider banning the Petitioner from future tenders for a particular period.
Procedural History
In 2008, ONGC invited bids for maintenance painting; the petitioner's bid was accepted and a contract dated 8 May 2009 was executed for three years. The contract was completed on 31 May 2011, and a completion certificate was issued on 19 September 2011. Disputes arose regarding quantities of paint and manpower, leading to ONGC invoking bank guarantees on 30 September 2013. A show cause notice was issued on 4 December 2013, to which the petitioner replied on 16 December 2013. ONGC passed a banning order on 25 April 2014, blacklisting the petitioner for three years from future tenders. The petitioner filed the present writ petition challenging the banning order. The High Court issued Rule on the petition, and the matter was heard finally.
Acts & Sections
- Constitution of India, 1950: Article 14, Article 19(1)(g), Article 226
- Companies Act, 1956:
