Rani Infrasture Development Private Limited v. Union of India & Anr

ORDER

14.08.2010

¶1'fhc Petitioncr, a company having its rcgistercd officc in Secunderabad, Andhra Pradcsh and a regional off-rcc in Ncw Delhi secks a writ of certiorari to quash thc decision of the Rcspondcnt No.2 National I Iighways Authority of India ('NIIAI') declaring thc Petii.ioner as a non-pcrforming contractor and conscqucntial reliefs of dirccting NI"IAI as well as the Union of Irrdia ('IJOI') through the Ministry of ltoad 1'ransporl and Flighways ('MoR1'II') (ltcspondcnt No.1 hercin) to permit the Petitioner to participatc in thc tendering proccss for various road projccts including thc oncs rclating to NI'l-202, Nl l-105 and NI'l-I 04.

¶2'l'his rvrit pctition r,vas t-rlcd on 19'l'July 2010 and came up lbr w.P. (c) No.4796 ol 2o7o Poge 7 of 13 Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. 11' hearing before this Court f-rrst on 20tl'July 2010 and then again on 23'o July 2010. The Petitioner's case was that its price bid lbr the tender for thc Hyderabad, Bhoopalapatnam Road stretch of NFI-202 in Andhra Pradcsh were not being opened on account of the NI-IAI having declared it as a non-performing contractor. Learncd counsel for the NHAI informed this Court on 23'd July 2010 that the Petitioner has been declared a non-performing contractor in 2004 itself. This Court did not grant any interim relief on 23'd July 2010 but listed the case for hearing on 3Oth August 2010 and directed parties to complete the pleadings in the meanwhile.

3.'I'he order dated 23'd July 2010 of this Court was challenged by the Petitioner by filing an appeal LPA No. 551 of 2010. While not interfering with the order of this Court, the Division Bench by its order dated 5t" August 2010 disposed of the said appeal and directed the partics to complete thc pleadings by 10'h August 201O.This Coutt was requested to disposc of the writ petition itself by 20th August 2010. l'he Respondents 1 and 2 have since filed their rcplics on 12tl' and l3th August 20 I 0 respectively.

4.'fhc lretitioncr states that it is a Class-I Contractor carrying oll business in the field of construction and in particular road construction lbr the last 25 ycars. Para 3 of the writ petition lists out four major works cxccutcd by the Petitioner successfully in India and Nepal. 'the Petitioner entcred into a ioint venture ('JV') with Lanco Infta 'I'ech Lirnited ('LI'I'L'). lhe JV was called Lanco-Rani JV. 'Ihe JV was W.P. (C) No.4796 of 2070 Pase 2 of 73 \) awarded a contract by NI-IAI lbr the work of four laning on Km 419 to Km 447 of Purnea-Gavakota Section of NFI-31 in Bihar. f'he contract agreement was signed by the parties on 30th August 2001. 'I'hc value of the work was approxirnately Rs. 176.10 crores. 'fhe work was to be completed within 36 rnonths i.e. by l8'h Septetnber 2004.

¶5According to the Petitioner the NFIAI failed to perform its obligations under the contract which led to the inevitable delay in the completion of the contract. The writ petition lists out thc various claims made by the Petitioner arising out of the contract. On 29'n May 2008, NIIAI issued a letter to the JV in relation to the project concetning the four laning of Km .419 1.o 447 of Purnea-Gayakota Scction of NII-31 stating that in terms of NHAI's criteria the progress achieved was only 75o/o. 'Ihe letter stated that the "pcrformance of your firm in respect of the projecl detailed below is very poor and in accordance with the above criteria and accordingly, it is proposed to declarc you as a non-performing contractor and debar you from participation in any future bidding process". 'l'he JV was asked to show cause within 21 days.'fhe JV replied to the above show cause notice on 16'n June 2008 giving its explanation for the delay in completion of thc project, which according to it was either on account of NHAI's omissions or circumstances bcyond the JV's control. The JV requested NFIAI to rcview thc JV's perf,ormance on merits and not to punish thc JV "by debarring to parlicipate in your lirture tenders".

¶6'l'he Pelilioner states that it did not hear frorn the NHAI in response w.P. (C) No.4796 of 2o10 \Y to the above reply dated 16"'Junc 2008. Meanwhile the Petitioner invoked the arbitration clause on ?7'l' December 2008 and the disputes arising out of the performance of the contract were referred to arbitration. The hearing in the arbitration proceedings is stated to have concluded and an Award is awaited. One of the points urged is that the action of the NHAI in declaring the Petitioner a non-performer without awaiting the outcome of the arbitration procecdings is itself unrcasonable and arbitrary.

¶7'fhe Petitioner states that they could substantially completc thc four-laning contract of the Section NH-31 by December 2008. It is stated that the project included construction of two flyovers i.e. the Kishan Ganj Flyover-1 (KGFO-1) and the Kishan Ganj Iilyover-2 (KGFO-2). Accordine to the Petitioner the KGFO-2 could not be cornpleted on account of the objection raised by the Railways to the alignment. Iteferencc is madc to a letter dated 22nd April2010 frorr the Railways in this regard. Although the KGFO-I was cornpletcd, the approach roads to the flyover collapsed on account of unprecedented torrential rains in 2005. Notwithstanding that a certificate was issued by NHAI on l8'h April 2009 stating that the "road work of four laning is substantially completed from Km 419 to I<fn 447", the rebuilding of the approach roads by the Petitioner is stated to be in progress. A final cerlificatc o1-completion was issued on 7th April 2010 by NIIAI's Supcrvising Contractor for the project i.e. Scott Wilson India Pvt. t.td.

¶8[t is stated that sometime in February 2010 there was a tender w.P. (c) No.4796 of 2010 Poge 4 of 73 l> notification issued by the Respondent for the work of four laning of the Nagpur-Flyderabad Section of NH-7 in the State of Maharashtra. When the Petitioner requested for the issuance of the bid documents, it received a letter frorn NFIAI on 25th March 2010 that "it has been found that your namc has bcen enlisted as Non-Performing Contractors in NHAI. Flence, issuance of Bid Docurnent cannot be considered at this stage". The Petitioner wrote a letter of protest on l2'r' April 2010 stating that "we are shocked to receive your said comrnunication and fail to understand as to why we are not being allowed to participate in the tenders of NIIAI". fhe Petitioner pointed out that the work in relation to the four-laning of Km 419 to Km 447 of the Purnea-Gayakota Section of NtI-31 had been completed within the extended time of 3 1" I)ecember 2009 and a cornpletion cerlificate has been issued on 7th April 2010. "Hence, denying us to participate in the tenders of NHAI is totally unjustified and against the principles of natural justice". It was pointed out that thc action of NITIAI "may affect us to participate in the tenders of other departments likc MOR'|H, State PWD's etc. where though we are not at fault wc may bccome thc victirns in their hands. l'Ience we request you to remove our name from the list of Non Performers within 30 days and allow us to participate in the bids by NI IAI, failing which we shall take recourse as available to us to readdress our grievance..." It may be pointed out hcre that it is thc Petitioner's case that it is entitled to be removed from thc list of non-perfonning contractors in terms of the guidelincs issucd by thc NIIAI in that regard on2l" July 2008. w.P. (C) No.4796 of 2010 tflb

¶9The petitioner states that when it submitted an application for pre-qualification in rclation to the work of widening and strengthening of certain stretches of NH-205, NH-1 04 and NII-8 I under Special Proj ects in Bihar, it was infbrmed by u letter dated 1" July 2010 from the MORTI-I that "disqualified/debarred/slow performance/non performcr dcclared by any State/Central Govt. or PSU or Authority would lead to disqualification to your firm". It was thus plain to the Petitioner that it would be denicd the opportunity for tendering in various contracts of the Central and State Governments on account of NFIAI declaring it to be a non-performer.

¶10l'hc tenders for (R&B) NH Circle, Flyderabad for widening the two lanes and improvetnents from Km 264 to Km 301 on the Ilyderabad Bhoopalapatnatn Road of NH-202 in Andhra Pradcsh under LWE scheme opened on l4'r'June 2010. The price bids were scheduled to be opcncd on tgtr'July 2010. The Petitioner states that it subrnittcd its bid but was informcd by the NHAI that since it had been declarcd as a non-pcrforming contractor, its bid would not be opened. It is in those circumstances that the present writ petition was filed' I l. In the counter affidavit filed by NHAI, a preliminary objection rs takcn to the prcsenl writ petition being entertained on the ground that thc Pctitioner has willfully suppressed material facts. It is pointed out that the Petitioncr and Lanco Construction, its JV partncr, wcre declared non-performing contractors way back on 9thlt0tr' August2004. Annexure It-4 to the counter affidavit of NHAI is a copy of the Circular w.P. (c) No.4796 of 2010 Poge 6 ol 13 \i dated 9thl10tr' August 2004 cnclosing a list of 17 contractors including the Petitioner and Lanco Construction. It is stated that prior to the above list being published show cause notices were issued and the rcplies filed thereto considered. The above decision was communicated to the Petitioner but a copy of the said communication was not traceable. However, reference is made to a lettcr dated 20'l' August 2004 of the Petitioner addressed to the NHAI requesting for the review of its performance in relation to the project concerning thc four laning of Km 419 to Km 447 of the Purnea-Gayakota Section of NH-31 in Bihar. In the said letter the Petitioner has stated "under the facts and circumstances brought out about, we sincerely feel that we do not dcscrve to be classified as a non-performing parLy, resulting in denial of opportunity to bid for luture works of NHAI". 'l'he counter affidavit of the NFIAI points out that thereafter the Petitioner wrote to the NIIAI on 7tr'February 2006, 30tn April 2006, 16'h June 2008 and 6tl' June 2009 requesting NHAI to remove the Petitioner's name frotn the list of non-performing contractors. In the circumstances it is denied that the Petitioner was not aware of the order passed by NHAI declaring it to be a non-perfonning contractor.

¶12Il is subrnitted by the NIIAI that apart from the supprcssion of the above material facts, the writ petition is barred by laches inasmuch as for nearly six ycars after 2004, the Petitioncr has not chosen to seek lcgal redress against it being declared as a non-performer' It is thirdly submitted thar thc ground that NIIAI ought to wait till the arbitral Award is pronounced to declare the Petitioncr a non-performer is w.P. (c) No.4796 ol 2010 lr untenable since these two were independent proceedings. It is stated that NHAI cannot be compelled to deal with a party which has been declared a non-performer after following the due process.

¶13Appearing for the Petitioner, Mr. submitted that till today the Petitioner has Rajan learned counsel been provided with any formal order declaring it to be a non-performer. If, indeed, there was an earlier order of 9tr'l10'h August 2004 declaring it as a non-performer then there was no need for NHAI to have again issued a notice on ?9th May 2008 asking the JV to show cause why it should not bc dcclarcd a non-performer. 'l'he inference to be drawn was that the earlier declaration, if any, of the Petitioner as non-performer was given up or condoned by the NHAI. He points out that, admittedlY, ro order has yet been passed by the NFIAI on the plea of the Petitioner in its reply dated l6th June 2008 asking the NHAI to remove it from the list of non-performers. It is submitted that in tenns of Para 4 (ii) of thc guidelines issued by thc NI'IAI on 21" July 2008 there was no justification for retaining thc Pctitioner in the list of non-performers when it has successfully completed the four laning project of Purnea-Gayakota Section of NI-l-3 I within the extended time of 3 l " December 2009 and lbr which a cornplction certificate has been issued on 7"'April 2010. lle reiterated that thc circumstances in which the approach roads to the KGIrO-1 collapscd were beyond the control of the Petitioner and cannot come in the way of the Petitioner being removed by the NHAI frorn the list of non-pcrformers. In any event, the Petitioner is reconstrucling the approach roads upon a proper assessment made by experts o1-the causes S. not w.P. (c) No.4796 of 2010 Poge 8 of 13 rq ll behind the collapse of the approach roads earlier constructed.

¶14Mr. Rajan pointed out that the decision of NFIAI dcclaring the Petitioner a non-performer was given wide publicity and circulatcd to all government departments and PSUs. This severely prejudiced the Petitioner and unfairly prevented it from participating in several major tenders valued at over Rs. 8,500 crores. He submitted that the non-mentioning in the petition of the correspondence between the parlies in 2004 and 2006 was not deliberate. It should, in any event, not preclude NIIAI considering removing the Petitioner frorn thc list of non-performers.

¶15Appearing for NHAI, Mr. Gourab Banerjee, learned Additional Solicitor General ('ASG'), submitted that the pelition ought to be rejected on the ground of suppression of material facts and laches as already pointed out in the counter affidavit filed by the NHAI. IIe pointcd out that the decision of the NHAI declaring the Pctitioner a non-performer was taken way back in August 2004 much before the arbitration proceedings commenced. -fherefore, it was legally untenable to contend that till such time the Award was not pronounced in the arbitration proceedings, no decision to declare the Petitioner as a non-performer could have been taken. Mr. Banerjee, ncveflheless, stated that the rcview of the list of non-performers in tcrms of the NIIAI guidelines dated ?1" July 2008 was an on-going process and no exception would bc made as far as the Petitioner was concerncd. In other words, the NI{AI would, in accordance with its guidelines, be w.P. (C) No.4796 of 2010 Poge 9 of 13 w willing to review its decision declaring the Petitioner a non-performer.

¶6Mr. Bhardwaj, learned counsel appearing for lJnion of lndia pointed ut that as lons as the Petitioner continued in the list of non-perfonrlers as declared by NHAI, the MoRTH would not be in a position to accept the bids of the Petitioner as such declaration would be a disqualification.

¶17l'he first point to be considered is whether the Petitioner was aware of the earlier decision dated 9'hllOth August 2004 of the NIIAI declaring the Petitioner a non-performer? It appears to this Court that the Pctitioner was indeed aware of such decision. 'fhis is evident from the letter dated 20tr' August 2004 written by the Petitioner to NIIAI asking that it should be retnoved from the list of non-performcrs' A copy of the said letter has been enclosed with the counter affidavit of the NIIAI and not dcnicd by the Petitioner. The submission that the NI IAI irnplicdly gavc up this dcclaration of the Petitioner to be a non-performer on account of the subsequent show cause noticc dated 29'h May 2008 is also not correct. l'he said show cause notice was issued in thc contcxt of the review undertaken by NHAI of the list of non-performers. 'fhis is evident from the subject matter of the show cause notice dated 29't'May 2008 which rcads as under: "Sub: 4-laning of Krn 419.00 to 447.00 of'Purnca-Gayakota Section of NH-31 in the State of llihar (Contract Pkg. EW-I 2/BR). -Review of performance of contractors on on-going contracts of NHAI reg." (emphasis supplied) w.P. (C) No.4796 of 2010 2-+

¶18Consequently, the Pctitioner despite being aware of being declared as a non-performcr since 9thl10t" of August 2004 did not choose to challcnge such decision for nearly six years. Mr. Rajan, learned counsel appearing for the Petitioner was candid in submitting that the effect of the decision of NI-IAI began to be felt only in 2010 when the Petitioner on 25th March 2010 was informed by NHAI that it would not be issued the bid documents 1br the project in Maharashtra and later in June 2010 when the MOR'|FI informed it that the declaration of the Petitioner as a non-performer would disqualify it from being considered for the Spccial Projccts in llihar. 'fhis explains why the Petitioner did not challense the decision of the NHAI till now.

¶19In thc considcrcd view of this Court, even though the Petitioner failed to mention the above facts in the writ petition and did not challenge the NIIAI's decision till now, that does not and should not preclude the Nl IAI lrorn reviewing its decision to continuc the Pctitioner in the list of non-performers since there arc guideline s issued b1' NHAI itself on 21" July 2008 for that purpose. The guidelines insist on "periodic revicw". Moreover, the learned ASG has fairly submitted that in any evcnt the periodic review of the list of non-performers is anyway undertaken by the NHAI and would also be done in the Petitioner's casc. He further added that the dccision would bc taken kecping in view the law explained by thc Supreme Court in S.,n/. Mukherjee v. (Jnion of India AIR 1990 SC 1984 and by this Courl in Meksster Truding Corp. v. (Jnion of India 106 (2003) DLT 573, G.D. W.P. (C) No.4796 of 2010 Poge 77 of 73 7-2/ Tewuri & Co. v. DDA 2005 (1) CTLJ 267 (Delhi) and Prakush Atlanta JV v. National Highways Authority of India 169 (2010) DLT 664.

¶20ln view of thc above submission, the only relief that can be granted to the Petitioner in the present petition is to direct that if the Petitioner makes a representation requesting NHAI to review the decision dated 9thllOth August 2004, the NHAI should take a fresh decision, in atirne-bound lnanner, in terms of its guidelines dated 21" July 2008, after giving the Petitioner a hearing and considering the materials placed by the Petitioner on record. It is clarified that this Court has not expressed any view on thc merits of the Petitioner's claim for its rcmoval from the list of non-performers as declared by the NHAI. Whether in fact the Petitioner satisfies the criteria set out in the said guidelines dated 21" July 2008 for being removed by the NHAI frorn the list of non-pcrformers is for the NHAI to decide. It is further clarified that any claim that thc Petitioner may have on account of the losses, if any, suffcred by it on account of the decision of the NI{AI will have to be adjudicated in other appropriate proceedings. l'hat right of the Petitioner is not lbreclosed bv this order.

21.It is accordingly directed that the Petitioner will, within a period of l0 days from today, make a detailed representation to NI IAI enclosing with it whatcvcr documents it wishes to rely upon and requcst the NI IAI to revicw its decision to declare the Petitioncr as a non-performer in terms of the guidelines dated 21" July 2008. Within a week of rcceipt w.P. (C) No.4796 of 2010 v3 of such representation, the NHAI will inform the Petitioner of the date on which i1 proposes to give the Petitioner a personal hearing. A personal hearing should be given to the Petitioner, subject to the above time targets being met, within a period of four weeks from today. 'l'hc decision on the Petitioner's representation, after giving a hcaring to thc Petitioner, should be taken by the NHAI by passing a reasoned order within a period of eight weeks from today, consistent with the legal requirements explained in the decisions noted in para 19 of this judgment. 'l'he decision will be communicated to the Petitioner within a further period of two weeks thereafter. It will be open to the Pctitioner, if aggrieved by such decision, to seek appropriate remedies as may be availablc to it in accordance with law.

¶22Wilh the above directions, the writ petition is disposed of with no order as to costs. The applications are disposed of.

¶23A copy of this order be given dasti under signature of the Court Master. to learned counsel for partics S.MURALIDHAR, J AUGUST 14,,2010 dn W.P. (C) No.4796 of 2010 Poge 13 of 13

t\ l. IN THE, HIGH COURT OF DELHI AT NE,W DELHT W.P.(C) No. 4796 of 2010 & CM Nos. 10628. 10629 & 9494 of20l0 RANI INIIRASI'RUC'| IJRE DEVL,I,OPM }IN'I' PRIVATF] I-l'D. ..... Petitioner l'hrough: Mr. S. Itajan with Ms. Manisha Narain, Advocatc. VCTSUS LINION OII INDIA & ANR. ..... Rcspondents 'fhrough: Mr. A.K. Bhardwaj with Ms. Jagrati Singh, Anuj Aggarrval and Mr. Gaurav Khanna, Advocates for UOI. Mr. Gourab Banerjee, Additional Solicitor General of India u'ith Ms. Padma Priya, Mr. Syced Abdul Ilaseeb and Ms. Meenakshi Sood, Advocates for NIIAI. CORAM: JUSTICE S. MURALIDHAR