IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF MARCH 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE WRIT PETITION NOS.54211-213 OF 2018 (GM-RES) BETWEEN:
M/s CCS Computers Private Limited, (A Company incorporated under The provisions of the Companies Act, 1956) No.13/1, 1st Floor, Sri Rangappa Reddy Complex, Minerva Circle, R.V. Road, Bengaluru – 560 004, Represented by its Authorised Signatory Sri. Haribabu M.
(By Sri. B. Vachan, Advocate For Sri. Ganesh Bhat Y. H., Advocate) AND:
1. Union of India, Ministry of Finance, Department of Financial Services, Jeevan Deep Building, Parliament Street, New Delhi – 110 001 Represented by its Director.
… Petitioner 2. M/s Canara Bank, Having its Head office at No.112, J.C. Road, Nagarathpete, Bengaluru – 560 002 Represented by its Chairman.
3. M/s. Canara Bank, Asset Procurement and Management Group DIT Wing, H.O. (Annexure) Naveen Complex, No.14, M.G. Road, Bengaluru – 560 001. Represented by its General Manager.
… Respondents (By Smt. M.C. Nagashree, CGC for R1;
Sri. T.P. Muthanna, Advocate for R2 and R3) These Writ Petitions are filed under Articles 226 and 227 of the Constitution of India, praying to quash the orders vide letter dated 04.05.2018 vide Annexure-N letter dated 15.05.2018 vide Annexure- Q and letter dated 20.11.2018 vide Annexure-T insofar as it relates to debarring the petitioner for a period of three years from participating in any future request for proposal issued by R-3, and etc.
These Petitions coming on for Preliminary Hearing this day, the Court made the following:-
ORDER Sri. B. Vachan, learned counsel for Sri. Ganesh Bhat Y.H., learned counsel for the petitioner.
Smt. M.C. Nagashree, learned Central Government Counsel for respondent No.1.
Sri. T.P. Muthanna, learned counsel for respondent Nos.2 and 3.
Petitions are admitted for hearing. With the consent of learned counsel for the parties, the same are heard finally.
2. In these petitions, petitioner inter alia has assailed the validity of the communication dated 04.05.2018, 15.05.2018 and 20.11.2018. In order to appreciate the petitioner’s challenge to the impugned order, few facts need mention which are stated infra.
The petitioner is a company incorporated under the Companies Act, 1956. Respondent No.2 on 17.11.2017, floated a ‘Request For Proposal’ for supply, installation and maintenance of servers and other items. The petitioner responded to the aforesaid proposal and submitted his commercial proposal on 31.01.2018, in the capacity of authorized partner of M/s. Fujitsu India Private Limited. The commercial proposal of the petitioner was accepted on 03.02.2018 and a purchase order was issued to the petitioner on 03.02.2018. As per the specification mentioned in the aforesaid purchase order, the petitioner was required to obtain servers through technical specifications stipulated by respondent No.2 from M/s. Fujitsu India Private Limited. The petitioner accordingly placed the purchase order with M/s. Fujitsu India Private Limited on 09.02.2018. However, on 16.04.2018, M/s. Fujitsu India Private Limited sent a mail to the petitioner as well as respondent No.2 in which it was stated that there was a crises arising out of component shortage from component manufacturers. Therefore, the servers could not be delivered on time and new delivery was expected by 24.05.2018. Respondent No.2 thereupon by a communication dated 04.05.2018, cancelled the purchase order of the petitioner and also debarred it from participating in any future ‘Request For Proposal’ for a period of three years. The petitioner by a communication dated 09.05.2018 made a request to respondent Nos.2 and 3 that due to circumstances beyond the control of the petitioner, the petitioner could not supply the servers and the other items and requested the respondents to withdraw the cancellation as well as the order blacklisting the petitioner for a period of three years. However, the respondents refused to consider the request of the petitioner. In the aforesaid factual background, the petitioner has approached this Court.
3. Learned counsel for the petitioner submitted that respondent No.2 ought to have appreciated that delay in supply of the servers and other items was not on account of any negligence on the part of the petitioner but due to the fact that manufacturer of the equipment, namely, M/s. Fujitsu India Private Limited had delayed the supply of the servers, which was evident from the mail sent by the manufacturers. It is further submitted that in the ‘Request For Proposal’, no specifications were given. However, at the time of issue of the supply order, the Make and Model was mentioned as ‘FUJITSU CX400 M4’. It is also submitted that in the facts and circumstance of the case and in view of Section 56 of the Indian Contract Act, 1872 (hereinafter referred to as ‘the Act’ for short), the agreement was rendered void as the petitioner was asked to do an impossible act. In support of aforesaid submissions, reference has been made to the decision of Hon’ble Supreme Court in ‘DELHI DEVELOPMENT AUTHORITY VS. KENNETH BUILDERS AND DEVELOPERS PRIVATE LIMITED AND OTHERS’, (2016) 13 SCC 561.
4. On the other hand, learned counsel for respondent-Bank submitted that the respondent- Bank had requested the bidders to offer servers and other items meeting the specifications, which were general in nature and the petitioner himself submitted a manufacturer authorization form from M/s. Fujitsu India Private Limited authorizing the petitioner to offer their products and to conclude the contract with respondent-Bank. Therefore, the petitioner was asked to supply ‘FUJITSU CX400 M4’. Admittedly, the petitioner has not supplied the servers and other equipments and therefore, the commercial proposal of the petitioner was rejected and an order was passed blacklisting the petitioner for a period of three years in view of the terms and conditions contained in business rules. The action against the petitioner has been taken in accordance with law. In support of aforesaid submissions, reliance has been placed in ‘M/S. KULJA INDUSTRIES LIMITED VS. CHIEF GEN. MANAGER, W.T. PROJ., BSNL AND ORS’, AIR 2014 SC 9.
5. I have considered the submissions made on both sides and perused the records.
6. The Hon’ble Supreme Court in the case of ‘ERUSIAN EQUIPMENT AND CHEMICALS LIMITED VS. STATE OF WEST BENGAL AND ANOTHER’, AIR 1975 SC 266, has held that an order of blacklisting a contractor has the effect of preventing a person from entering into lawful relationship with the Government for purposes of gains and the Authority passing any such order was required to give a fair hearing before an order of blacklisting is passed. Similar view was taken by the Hon’ble Supreme Court in ‘JOSEPH VILANGANDAN VS. THE EXECUTIVE ENGINEER, (PWD) ERNAKULAM AND ORS.’, AIR 1978 SC 930, ‘M/S SOUTHERN PAINTERS VS. FERTILIZERS AND CHEMICALS TRAVANCORE LIMITED AND ANOTHER’, AIR 1994 SC 1277, ‘B.S.N. JOSHI AND SONS LIMITED VS. NAIR COAL SERVICES LIMITED AND OTHERS’, AIR 2007 SC 437, ‘PATEL ENGINEERING LIMITED VS. UNION OF INDIA’, AIR 2012 SC 2342’. Thereafter, the Hon’ble Supreme Court in the case of ‘M/S. KULJA INDUSTRIES LIMITED’ (SUPRA), has culled out the factors which may be taken into account while passing the order of blacklisting that may influence the debarring official’s decision which include the following:
“(a) The actual or potential harm or impact that results or may result from the wrongdoing.
(b) The frequency of incidents and/or duration of the wrongdoing.
(c) Whether there is a pattern or prior history of wrongdoing.
(d) Whether contractor has been excluded or disqualified by an agency of the Federal Government or have not been allowed to participate in State or local contracts or assistance agreements on a basis of conduct similar to one or more of the causes for debarment specified in this part.
(e) Whether and to what extent did the contractor plan, initiate or carry out the wrongdoing.
(f) Whether the contractor has accepted responsibility for the wrongdoing and recognized the seriousness of the misconduct.
(g) Whether the contractor has paid or agreed to pay all criminal, civil and administrative liabilities for the improper activity, including the investigative or administrative costs incurred by the government, and have made or agreed to make full restitution.
(h) Whether contractor has cooperated fully with the government agencies during the investigation and any court or administrative action.
(i) Whether the wrongdoing was pervasive within the contractor’s organization.
(j) The kind of positions held by the individuals involved in the wrongdoing.
(k) Whether the contractor has taken appropriate corrective action or remedial measures, such an establishing ethics training and implementing programs to prevent recurrence.
(l) Whether the contractor fully investigated the circumstances surrounding the cause for debarment and, if so, made the result of the investigation available to the debarring official.”
7. The Hon’ble Supreme Court in the case of ‘SATYABRATA GHOSE VS. MUGNEERAM BANGUR AND CO.’ AIR 1954 SC 301, has held that the expression ‘impossible’ used in Section 56 of the Act has to be interpreted as impracticable and useless from the point of view of the object and purpose that the parties had in view when they entered into the contract. It has further held that the aforesaid impracticability or uselessness may arise due to some intervening or supervening circumstance, which the parties had not contemplated. A similar view was taken in ‘DELHI DEVELOPMENT AUTHORITY’ (SUPRA).
8. In the light of the aforesaid legal principle, the facts of the case in hand may be examined. From perusal of the record, it is evident that petitioner has participated in the ‘Request For Proposal’ and had furnished a manufacturer authorization form from M/s. Fujitsu India Private Limited. Admittedly, aforesaid company by communication dated 16.04.2018, informed the petitioner as well as respondent No.2 that it is facing crisis due to component shortage from component manufacturers and therefore, the supply of servers would be delayed. The petitioner is only an agent of the manufacturer. Thus, due to circumstances beyond the control of the petitioner, the petitioner could not supply the server and other items as sought by respondent No.2, as the manufacturer itself had expressed its inability to supply the same. Thus, there was delay in supply of the servers and other items due to circumstances beyond the control of the petitioner and there was neither any negligence or inaction on the part of the petitioner. The petitioner cannot be expected to perform an impossible act and therefore, the contract in question had been rendered void in view of Section 56 of the Act.
9. In view of preceding analysis, the impugned order dated 15.05.2018 insofar as it pertains to debarring the petitioner for a period of three years is hereby quashed.
Accordingly, writ petitions are disposed of .
Sd/- JUDGE Mds/-