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-Report by Kanishka

The recent judgment of ISOLATORS AND ISOLATORS THROUGH ITS PROPRIETOR MRS. SANDHYA MISHRA V/S MADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN CO. LTD. & ANR. is concerned with the debarring of the contractor in course of tender.


The appellant, a sole proprietorship company, has been in the transformer manufacturing and maintenance industry for the past 30 years. Its facility is located at Govind Pura, Bhopal. The appellant’s only clients are distribution businesses (Discoms). Two renders were issued by the respondent Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited. No response on rescheduling the delivery and due to extraordinary storm accompanied by heavy rains caused the roof of their plant to collapse. Half of the project is ready to be delivered and the same was asked to defer by the respondent. Chief General Manager has cancelled all the purchase orders and debarred the company for 3 years and also imposed a fine of 27,98,960. The aggrieved party approached the high court Also high court didn’t even consider the other part(penalty) of the review petition. Nevertheless, the High Court issued an order that was identical to the chief general manager’s order.


The learned counsel for the appellant contended that there has been a violation of natural justice and there was no reason specified by the respondent for debarring the appellant. TS-494, the appellant had supplied 300 out of 586 transformers and as regards TS-532, the appellant had supplied all 63 KVA transformers. It was unlawful to terminate the order for the delivery of the remaining transformers after a significant quantity of transformers had been provided against purchase. The respondent intentionally had not considered the heavy rains resulting in damage to the plant and loss of raw material.


It was contended by the learned counsel for the respondent that the appellant has not performed on the terms and conditions of the contract and debarring was done after the hearing opportunity given to the appellant. The order has been given in the exercise of the relevant clauses of the purchase order. The termination order had never been challenged by the appellant and the same has attained finality. The learned counsel, imposition of penalty has been consequential to the aforesaid order the same had been as per the terms and conditions of the rate/contract/purchase order.


The court has quashed and set aside in debarment of the appellant and imposition of penalty, no recovery shall be made from the appellant thereunder and if any amount has been recovered, the same shall be refunded to the appellant within a month from today or else, it shall carry simple interest at the rate of 9% per annum from the date of recovery and until the date of repayment.

The further court explained that:-

1) Imposing of penalty 

A) the appellant was only made aware of the potential debarment in the show-cause notice, and nothing concerning the proposed imposition of penalty was included in the notice.

B) Without explaining why the maximum penalty was sought to be applied, the relevant body has gone ahead and levied the maximum fine of 10% of the deficit supply. The appellant’s list of pertinent considerations could not have been completely disregarded. The respondents have not provided a particular amount of loss in order to support the imposition of the maximum penalty.

Thereforethe lack of particular show-cause notice, the application of a penalty against the appellant cannot be allowed and it is to be set aside.

2) Debarring the appellant for 3 years 

The respondent themselves postponed taking the balance of delivering further there has been no instructions, or communication provided by the respondent to resume the supply. The debarment judgment had been made against the appellant without taking into account the evident factual situation, in which the appellant could not have been solely blamed or held responsible.

Court has also referred to a case Gorkha Security Services v. State (NCT of Delhi) where it was ruled that a prior show-cause notice granting a reasonable opportunity to be heard is a crucial component of all administrative decision-making, especially when those decisions involve blacklisting and carry serious repercussions for the entity being blacklisted. In these situations, providing a legitimate show-cause notice is essential, and failing to do so would render any order of blacklisting based on said order null and void.

Therefore, debarring the appellant for 3 years is also set aside.❖ Both of the orders could only be disapproved because the High Court failed to approach the situation correctly, whether in deciding the writ case or the review petition.

READ FULL JUDGEMENT: https://bit.ly/3mOFeYw

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