# ISOLATORS AND ISOLATORS THROUGH ITS PROPRIETOR MRS. SANDHYA MISHRA v. MADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN CO. LTD. AND ANR

- **Citation:** [2023] 4 S.C.R. 445
- **Court:** Supreme Court of India
- **Decided:** 2023-04-18
- **Case number:** Civil Appeal Nos. 2890-2891 of 2023
- **Bench:** Dinesh Maheshwari, Sanjay Kumar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/isolators-and-isolators-through-its-proprietor-mrs-sandhya-mishra-v-madhya-37049
- **Pages:** 28

## Headnote

Contract - Imposition of penalty, debarment/blacklisting of
the appellant-firm - Requirement of specific show-cause notice -
Held: Cancellation orders dtd. 19.11.19 and 21.11.19 cannot be
read as show-cause notice specifically for the purpose of imposition
of penalty - Finality attaching to the action of cancellation cannot
be read as a due notice for imposition of penalty even if the
respondents chose to employ the expression 'cancelled with imposition
of penalty' in those orders - Thus, the action of the respondents in
imposing the penalty without even putting the appellant to notice as
regards this proposed action cannot be approved - Further, even
the order debarring the appellant for a period of 3 years for default
in making the requisite supplies has its own shortcomings - Appellant
had indeed made substantial supplies against the purchase orders
in question - On 18.09.2019, the respondent No.2 dealing with the
procurement specifically informed the appellant that the supply
under the purchase order in question was to be deferred - After
such an order of deferment, there had not been any other
communication or even indication from the respondents which would
have informed the appellant to resume supplies - Debarment order
was issued against the appellant without due regard to the
undeniable factual situation where the entire blame could not have
been foisted upon or shifted towards the appellant - Impugned
orders imposing penalty and debarring the appellant are quashed
and set aside.
Practice & Procedure - Maintainability of fresh appeal after
withdrawal of the earlier one and after another round of approach
to the High Court - Discussed.
[2023] 4 S.C.R. 445
445
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
Allowing the appeals, the Court
HELD: 1.1 Imposition of penalty cannot be approved for
two major factors: The first and foremost being that in the showcause notice dated 26.11.2019, the appellant was put to notice
only as regards the proposition of debarment and in the said
notice, nothing was indicated about the proposed imposition of
penalty. Though in the cancellation orders dated 19.11.2019 and
21.11.2019, the respondents purportedly reserved their right to
take appropriate steps, those orders cannot be read as showcause notice specifically for the purpose of imposition of penalty.
The submissions on behalf of the respondents in this regard that
the said orders dated 19.11.2019 and 21.11.2019 have attained
finality do not take their case any further. Finality attaching to
the action of cancellation cannot be read as a due notice for
imposition of penalty even if the respondents chose to employ
the expression 'cancelled with imposition of penalty' in those
orders. Looking to the terms of contract, quantification of the
amount of penalty (if at all the penalty is considered leviable)
could not have been carried out without affording adequate
opportunity of response to the appellant. That being the position,
the action of the respondents in imposing the penalty without
even putting the appellant to notice as regards this proposed
action cannot be approved. [Paras 23][470-A-E]
UMC Technologies Private Limited v. Food Corporation
of India and Anr. (2021) 2 SCC 551; A.P. State Financial
Corporation v. C.M. Ashok Raju and Ors. (1994) 5 SCC
359 : [1994] 1 Suppl. SCR 474 - relied on.
1.2 Secondly, the authority concerned has proceeded to
impose the maximum of penalty to the tune of 10% of the deficit
supply without specifying as to why the maximum of penalty was
sought to be imposed. In this regard, the relevant factors as
indicated by the appellant could not have been ignored altogether.
Unfortunately, the High Court has totally omitted to consider this
aspect of the grievance of the appellant. Though, ordinarily, for
such an omission of the High Court, the course would have been
to remit the issue for consideration but, no useful purpose would
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be served by remitting such an issue in this m

## Text

_Characters 0–39,674 of 62,676. This is a partial read: ask again with offset=39674 for what follows._

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ISOLATORS AND ISOLATORS THROUGH ITS PROPRIETOR
MRS. SANDHYA MISHRA
v.
MADHYA PRADESH MADHYA KSHETRA VIDYUT VITRAN
CO. LTD. AND ANR.
(Civil Appeal Nos. 2890-2891 of 2023)
APRIL 18, 2023
[DINESH MAHESHWARI AND SANJAY KUMAR, JJ.]
Contract - Imposition of penalty, debarment/blacklisting of
the appellant-firm - Requirement of specific show-cause notice -
Held: Cancellation orders dtd. 19.11.19 and 21.11.19 cannot be
read as show-cause notice specifically for the purpose of imposition
of penalty - Finality attaching to the action of cancellation cannot
be read as a due notice for imposition of penalty even if the
respondents chose to employ the expression 'cancelled with imposition
of penalty' in those orders - Thus, the action of the respondents in
imposing the penalty without even putting the appellant to notice as
regards this proposed action cannot be approved - Further, even
the order debarring the appellant for a period of 3 years for default
in making the requisite supplies has its own shortcomings - Appellant
had indeed made substantial supplies against the purchase orders
in question - On 18.09.2019, the respondent No.2 dealing with the
procurement specifically informed the appellant that the supply
under the purchase order in question was to be deferred - After
such an order of deferment, there had not been any other
communication or even indication from the respondents which would
have informed the appellant to resume supplies - Debarment order
was issued against the appellant without due regard to the
undeniable factual situation where the entire blame could not have
been foisted upon or shifted towards the appellant - Impugned
orders imposing penalty and debarring the appellant are quashed
and set aside.
Practice & Procedure - Maintainability of fresh appeal after
withdrawal of the earlier one and after another round of approach
to the High Court - Discussed.
[2023] 4 S.C.R. 445
445
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
Allowing the appeals, the Court
HELD: 1.1 Imposition of penalty cannot be approved for
two major factors: The first and foremost being that in the showcause notice dated 26.11.2019, the appellant was put to notice
only as regards the proposition of debarment and in the said
notice, nothing was indicated about the proposed imposition of
penalty. Though in the cancellation orders dated 19.11.2019 and
21.11.2019, the respondents purportedly reserved their right to
take appropriate steps, those orders cannot be read as showcause notice specifically for the purpose of imposition of penalty.
The submissions on behalf of the respondents in this regard that
the said orders dated 19.11.2019 and 21.11.2019 have attained
finality do not take their case any further. Finality attaching to
the action of cancellation cannot be read as a due notice for
imposition of penalty even if the respondents chose to employ
the expression 'cancelled with imposition of penalty' in those
orders. Looking to the terms of contract, quantification of the
amount of penalty (if at all the penalty is considered leviable)
could not have been carried out without affording adequate
opportunity of response to the appellant. That being the position,
the action of the respondents in imposing the penalty without
even putting the appellant to notice as regards this proposed
action cannot be approved. [Paras 23][470-A-E]
UMC Technologies Private Limited v. Food Corporation
of India and Anr. (2021) 2 SCC 551; A.P. State Financial
Corporation v. C.M. Ashok Raju and Ors. (1994) 5 SCC
359 : [1994] 1 Suppl. SCR 474 - relied on.
1.2 Secondly, the authority concerned has proceeded to
impose the maximum of penalty to the tune of 10% of the deficit
supply without specifying as to why the maximum of penalty was
sought to be imposed. In this regard, the relevant factors as
indicated by the appellant could not have been ignored altogether.
Unfortunately, the High Court has totally omitted to consider this
aspect of the grievance of the appellant. Though, ordinarily, for
such an omission of the High Court, the course would have been
to remit the issue for consideration but, no useful purpose would
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be served by remitting such an issue in this matter. This is for
the simple reason that imposition of penalty against the appellant
cannot be approved because of the want of specific show-cause
notice. Moreover, no specific quantum of loss has been specified
by the respondents so as to justify the imposition of maximum of
penalty. [Paras 23.1, 23.2][470-E-G]
1.3 Even the order debarring the appellant for a period of 3
years for default in making the requisite supplies carries its own
shortcomings. The appellant had indeed made substantial supplies
against the purchase orders in question. On 18.09.2019, the
respondent No. 2 dealing with the procurement specifically
informed the appellant that the supply under the purchase order
in question is to be deferred. After such an order of deferment,
there had not been any other communication or even indication
from the respondents which would have informed the appellant
to resume supplies. The written submissions on behalf of the
respondents do not answer the root question in the matter as to
how the appellant could have been made solely responsible for
delay or default in supply after the communication dated
18.09.2019 when the respondents themselves informed the
appellant that taking of balance delivery was being deferred (until
further instructions). In the length and breadth of the arguments
on behalf of the respondents, it has nowhere been pointed out if
such "further instructions" were ever issued to the appellant
before issuance of the cancellation orders dated 19.11.2019 and
21.11.2019 as also before issuance of show-cause notice dated
26.11.2019. That being the position, the debarment order had
been issued against the appellant without due regard to the
undeniable factual situation where the entire blame could not have
been foisted upon or shifted towards the appellant. The impugned
orders dated 23.04.2021 in W.P. No. 12075 of 2020 and dated
13.12.2021 in Review Petition are set aside; and the writ petition
filed by the appellant is allowed. Impugned orders dated
30.07.2020 in debarment of the appellant and dated 17.08.2020
in imposition of penalty are quashed and set aside. Such debarment
is annulled for all practical purposes and the order dated
30.07.2020 shall not operate against the rights and interests of
the appellant in any future tender process. [Paras 24, 26, 26.1][470H; 471-A-F; 472-A-C]
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
Gorkha Security Services v. Government (NCT of Delhi)
and Ors. (2014) 9 SCC 105 : [2014] 13 SCR 617;
Raghunath Thakur v. State of Bihar and Ors. (1989) 1
SCC 229 : [1988] 3 Suppl. SCR 867; M/s Erusian
Equipment and Chemicals Ltd. v. State of West Bengal
and Anr. (1975) 1 SCC 70 : [975] 2 SCR 674 - referred
to.
Case Law Reference
[2014] 13 SCR 617
referred to
Para 16.2
(2021) 2 SCC 551
relied on
Para 16.2
[1994] 1 Suppl. SCR 474
relied on
Para 17.1
[1988] 3 Suppl. SCR 867
referred to
Para 19.3
[1975] 2 SCR 674
referred to
Para 19.3
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 28902891 of 2023.
From the Judgment and Order dated 23.04.2021 in WP No.12075
of 2020 and dated 13.12.2021 in RP No.894 of 2021 of the High Court
of Madhya Pradesh Principal Seat at Jabalpur.
Vinay Navare, Sr. Adv., R. M. Sharma, Prashant R Dahat, T. R.
B. Sivakumar, Advs. for the Appellant.
Bharat Singh, AAG, Ashish Pandey, Kshitiz Singh, Amit Pawan,
Advs. for the Respondents.
The Judgment of the Court was delivered by
DINESH MAHESHWARI, J.
Leave granted.
2. The present appeals are in challenge to the order dated
23.04.2021 as passed by the High Court of Madhya Pradesh, Principal
Seat at Jabalpur in Writ Petition No. 12075 of 2020 whereby the High
Court partly allowed the writ petition and while maintaining the order of
debarment as passed against the appellant, modified its term of operation
by making the same effective from 13.02.2020 for a period of three
years, instead of being effective from 30.07.2020. The appellant has
also challenged the order dated 13.12.2021 in Review Petition No. 894
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of 2021, whereby the High Court dismissed the review petition against
the said order dated 23.04.2021.
3. Shorn of unnecessary details, the case of the appellant has
been as follows:
3.1. The appellant, being a proprietorship firm, has been in the
business of manufacturing and repairing of transformers, having its plant
at 83, Sector I, Industrial Area, Govindpura, Bhopal for past 30 years.
The only customers of the appellant are the distribution companies
(Discoms).
3.2. Two tenders, bearing numbers 494 and 5321, were floated by
the respondent Madhya Pradesh Madhya Kshetra Vidyut Vitran Company
Limited2. In relation to TS-494, a purchase order was issued by the
respondents on 30.06.2017 for the supply of 586 distribution transformers
(DTR) - Level I. The period for the supply was specified as six months
starting from the third month of the purchase order issue date. However,
the appellant received the purchase order through email on 13.09.2017
and physically on 15.09.2017. The appellant made a request to the
respondents to modify the delivery schedule due to delay of 75 days in
the receipt of the purchase order, as also to adjust the rates as per Goods
and Services Tax (GST), which came into effect on 01.07.2017.
3.3. The appellant has averred that despite receiving no response
from the respondents, they had proceeded to submit drawings for approval
on 04.10.2017, with the intention of commencing production. In addition,
the appellant made two separate requests, dated 13.09.2017 and
18.11.2017, for modifications of the delivery schedule and adjustments
of rates in accordance with GST. According to the appellant, on
28.11.2017, the department responded only to the request for approval
of drawings and disregarded the request for rescheduling of supplies.
3.4. A revised order, incorporating GST, was issued by the
respondents on 02.01.2018. However, the request for rescheduling of
supplies made by the appellant was ignored and, instead, the order stated
that the appellant was already running late in their supply schedule.
Thereafter, a notice dated 13.02.2018 was issued alleging that the
appellant was responsible for the delay in supply. The appellant, by letter
1 Hereinafter also referred to as 'TS-494' and 'TS-532' respectively.
2 'MPMKVVCL', for short.
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
dated 18.02.2018, responded that there was no delay on their part while
againseeking modification of the delivery schedule.
3.5. It has been the case of the appellant that despite making five
separate requests to reschedule the supply, no response was received
from the respondents. The appellant submitted yet another letter dated
07.03.2018, requesting for extension of time. The appellant has stated
the grievance that despite their efforts to supply Level-I transformers,
starting from 02.05.2018 and delivering 300 transformers, the respondents
did not reschedule the supply, and instead imposed late supply penalties
on the appellant's bills; and deducted penalties to the tune of over Rs. 11
lakh from the bills of the appellant for 300 transformers.
3.6. On the other hand, the appellant had received a purchase
order from the respondents for the supply of 593 transformers for Tender
No. TS-532, which was for the supply of 63 KVA and 25 KVA level-II
transformers. The total requirement for the respondents and two other
Discoms was around 75,000 transformers. The purchase order was issued
on 22.02.2018 by the respondents and was received by the appellant
through email on 03.03.2018. According to the appellant, as for 25 KVA
transformers, they submitted the drawings for approval on 19.04.2018,
which were approved by the respondents on 09.05.2018. Subsequently,
the appellant began manufacturing 100 transformers of Lot-1 under the
contract and offered the same for inspection to the respondents through
a letter dated 29.05.2018. On 04.06.2018, a stage inspection was
conducted, and clearance was granted on 05.06.2018.On 22.06.2018,
the appellant was directed to supply the aforementioned 63 KVA
Transformers to West Zone Discom (Indore) through a purchase order,
which was executed without any breach.
3.7. It has been the case of the appellant that on the intervening
night of 20th and 21st August 2018, an extraordinary storm accompanied
by heavy rains caused the roof of their plant to collapse. As a result,
most of the raw material, which was stored for the manufacture of
transformers, was destroyed. Only 50 transformers from the fourth lot
of the aforementioned purchase order were saved, as they were complete
in all respects and had already been packed up for delivery. These 50
transformers were supplied on 01.09.2018.
4. On 18.09.2019, the respondent No. 2 Chief General Manager
(Procurement), MPMKVVCLsent a letter to the appellant in relation to
TS-532 that they had decided to defer the balance deliveries of 593
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Nos. of transformers under the said contract until further instructions.
The relevant contents of said letter read as under: -
"No. MD/ MK /04/P-III/TS-494/2824 Bhopal, dated 18/09/2019
To,
M/s. Isolators & Isolators,
Plot No. 83 Sector. 1,
Industrial Area, Govindpura,
Bhopal - 462023 MP
Sub- Supply of BIS Certified Level- II/0433 KVA.2s KVA
Conventional Distribution Transformer against Saubhagya Yojana
- Deferment of Supply thereof.
Ref. This Order PO No. MD/MK/04/TS-532/P-III/2166 dated
22.02.2018.
Dear Sir,
The order under reference above has been placed on you
or supply of BIS Certified Level- II/0433 KVA.2s KVA
Conventional Distribution Transformer against Saubhagya Yojana.
Against the scheduled deliveries of BIS Certified Level- II/0433
KVA.2s KVA Conventional Distribution Transformer as mentioned
therein, it has been decided to defer the balance deliveries of the
same ie. 593 Nos till further instructions.
The other terms and conditions shall be remain same."
5. However, an order dated 19.11.2019 was issued by the
respondent No. 2 cancelling the supply of balance quantity of 286 Level1 transformers under TS-494. The relevant contents of said letter are
reproduced as under: -
"No. MD/MK/04/P-III/3491
 Bhopal, dated: 19.11.2019
To,
M/s Isolators & Isolators,
Plot No.- 83 Sector-1,
Industrial Area, Govindpura,
Bhopal-462023 (M.P.).
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
Sub:- Cancellation of Purchase Order No. MD/MK/04/TS494/P-IIl/1988 dated 30.06.2017 for supply of BIS Certified,
Level-l, 11/0.433 KV, 25 KVA Conventional Distribution
Transformers for unsupplied quantity.
Ref:- 01. This office RCA No. MDIMK/04/TS-494/P-III/1987
dated 30.06.2017
02. This office letter No. MD/MK/04/P-III/4872 dated
02.11.2018.
Purchase order MD/MK/04/P-IIl/TS-494/1988 dated
30.06.17 for supply of 586 nos. BIS Certified, Level-l, 11/0.433
KV, 25 KVA Conventional Distribution Transformers was issued
to your firm. The delivery schedule of above Purchase Order
was as belowYour firm has not supplied any quantity even lapse of
schedule period of six months i.e. up to Feb-18. After repeated
telephonic requests, a letter was issued vide letter no. MD/MK/
04/TS-494P-lll/6099 dated 13.02.2018. Subsequently, 300 Nos.
DTRs were supplied against above purchase Order and remaining
286 Nos. DTRs have not been supplied till date.
It was informed to your firm vide letter referred above for
non-supply of 25 KVA Level-l DTRs and initiating stern action
against the against your firm. In addition you were also informed
that the number of DTRs equivalent to unsupplied quantity will be
purchased from other firm at the risk and cost of your firm.
As per tender clause -12 delivery and supply of material of
Annexure-II of TS -494 read with clause 28 cancellation of rate
contract of Annexure -II the competent authority has accorded
approval for cancellation of PO NO. MD/MK/04/TS-494/P-lll/
1988 dated 30.06.2017 for 286 Nos. unsupplied quantity of 25
KVA DTRs with imposition of penalty.
Therefore, PO NO. MD/MK/04/TS-494/P-III/1988 dated
30.06.2017 for 286 Nos. of 25 KVA DTRs is hereby cancelled
with imposition of penalty on unsupplied quantity. Other punitive
action as per terms of the tender will be initiated separately."
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6. Subsequently, the respondent No. 2issued another order dated
21.11.2019 cancelling the supply of the remaining quantity of transformers
under TS-532 too. The relevant contents of said letter are also reproduced
as under: -
"No. MD/MK/04/P-III/3593
 Bhopal, dated: 21.11.2019
To,
M/s lsolators&lsolators,
Plot No. - 83 Sector-1,
Industrial Area, Govindpura,
Bhopal-462023 (M.P.)
Sub:- Cancellation of Purchase Order No. MD/MK/04/TS532/P-III/2166 dated 22.02.2018 for supply of BIS Certified,
EEL-II, 11/0.433 KV, 25 KVA Conventional Distribution
Transformers for unsupplied quantity.
Ref:- 01. This office RCA No. MD/MK/04/TS-4532/P-III/2092
dated 20.01.2018.
02. This office letter No MD/MK/04/P-III/2824 dated 18.09.
2019.
**********
Purchase order MD/MK/04/P-III/TS-532/2166 dated
22.02.2018 for supply of 593 nos BIS Certified, EEL-II, 11/0. 433
KV. 25 KVA Conventional Distribution Transformers was issued
to your firm. The delivery schedule of above Purchase Order
was as belowFirm offered 100 nos. DTRs for stage inspection against
the Purchase order. The inspection was carried out on 04.06.18
and stage clearance letter was issued vide letter no. 1469 dtd
05.06.18. In general procedure, after the stage clearance, firm
has to offer the material for final inspection but M/s Isolators &
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
Isolators, Bhopal has never offered the DTRs for final inspection
till date.
It was informed to your firm vide letter referred above for
non-supply of 25 KVA EEL-II DTRs and initiating stern action
against your firm.
As per tender clause 04 "Delivery of materiel" of AnnexureIV of TS - 532 read with clause 17 "Cancellation/Termination of
Purchase order of Annexure -III, the competent authority has
accorded approval for cancellation of PO NO. MD/MK/04/TS532/P-III/2166 dated 22.02.2018 for 593 Nos. unsupplied quantity
of 25 KVA DTRs with imposition of penalty.
Therefore, PO NO.MD/MK/04/TS-532/P-III/2166 dated
22.02.2018 for 593 Nos. of 25 KVA DTRs is hereby cancelled
with imposition of penalty on unsupplied quantity. Other punitive
action as per terms of the tender will be initiated separately.
SD/-
Chief General Manager (Proc.)
O/o MD (CZ) MPMKVVCL, Bhopal."
7. On 26.11.2019, a notice was issued by the respondent No. 2
asking the appellant to show-cause within 15 days as to why they should
not be debarred from participating in further tenders on account of nonsupply of transformers. In the said notice dated 26.11.2019, the Chief
General Manager (Procurement), after referring to the background
aspects relating to the purchase orders issued to the appellants; the
appellant's failure to effect the necessary supplies within time schedule;
and cancellation of the purchase orders, stated as under: -
"***
***
 ***
Your firm had offered 100 nos. DTRs for stage inspection
against the Purchase order. The inspection was carried out on
04.06.18 and stage clearance letter was issued vide letter no.1469
dtd 05.06.18. In general procedure, after the stage clearance, your
firm were required to offer the material for final inspection but
the above DTRs were not offered by your firm for final inspection.
Therefore, the PO No. MD/MK/04/P-III/TS-532/2166
dated 22.02.18 has been cancelled vide letter no. MD/MK-04/P-
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III/3593 dated 21.11.2019 with imposition of penalty on unsupplied
quantity. With note that other punitive action as per terms of the
tender will be initiated separately.
As per Tender Clause 17 of Annexure-III. General Terms
and Condition:-
The Purchaser may upon written notice of default,
terminate/cancel the purchase order/contract in whole or for a
part quantity with recovery of liquidate damages at the rate of
10% of ex-works price(s) of stores not delivered by them or liability
on account of risk and cost, whichever is higher in the
circumstances detailed hereunder:-
17.1. If in the opinion of the Purchaser, the supplier fails to deliver
the material within the time specified or during the period for which
extension has been granted by the Purchaser.
17.4. In pursuance to clause no. 17.1, 17.2 &17.3 above, Purchaser
maydebar the supplier/contractor for further business with
Purchaser for a declared period on breach of the Purchase Order.
Since MPMKVVCL was in urgent need of 25 KVA DTRs
for completion of urgent works under Government Schemes but
your firm hadnot complied with the provisions of tender therefore
both the purchase orders MD/MK-04/P-III/TS-494/1988 dated
30.06.17 and TS-532/2166 dated 22.02.18 have been cancelled.
In view of above default on your part, this office is sending
this notice asking you to clarify as to why strict action as per
tender terms should not be taken against you for blatant violation
of Purchase Order andfor the large insensitivity shown by you to
a number of government development schemes which were
severely hit due to non-executing of Purchase Order issued upon
your firm. Also intimate that why your firm should not be debarred
as per Tender Provisions stated above. You have also been given
sufficient time to supply the material but you have ignoredthe set
timeliness persistently and knowingly.
Please submit your reply within 15 days and in case you
want personal hearing then intimate to this office within 07 days
from issue Of this letter, failing which, it will be presumed that
you have no plausible explanation to offer in your defense and
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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[2023] 4 S.C.R.
then this office would be constrained to take action towards
debarment of your firm for non-performance in material supply.
Hence kindly take due cognizance andsend your reply within time
given."
8. The appellant responded to the aforementioned notice on
30.11.2019, setting out the circumstances for which, theyhad been unable
to undertake the supply against the purchase orders. However, the
respondent issued an order dated 13.02.2020 debarring the appellant
from participating in future tenders for a period of three years. A
representation was made by the appellant on 27.02.2020 requesting the
respondents to reconsider and recall the order dated 13.02.2020 but in
vain. In the said order dated 13.02.2020, the Chief General Manager
(Procurement), after recounting the background aspects including the
said show-cause notice dated 26.11.2019, stated and ordered as under:-
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In view of above default on your part, this office had sent a
notice ofdebarring for violation of PO Terms & Conditions, asking
you to clarify as towhy strict action as per tender terms should
not be taken against you forblatant violation of Purchase Order
and for the large insensitivity shown byyou to a number of
Government Development Schemes. You were alsointimated that
why your firm should not be debarred as per Tender
Provisionsstated above. You were also given 15 day's time to
furnish a reply of notice ofdebarring to this office personal hearing.
Your firm vide letter no.I&I/BPL/19-20/Reply/1025 dated
30.11.2019 has submitted reply to debarring notice and your firm
could not produce anydocument/statement which restrains the firm
from debarring. Your firm hasviolated Tender conditions as
stipulated in TS-494 and TS-532.
Therefore, after given full opportunity and due consideration,
thecompetent authority has accorded approval to recover penalty
on rejectedand unsupplied DTRs from the firm. Further.
M/s Isolators, Bhopal and itsCompany/Firms should be debarred
for future business for the period of 3(Three) years.
Accordingly, your firm M/s Isolators & Isolators. Bhopal
havingregistered office at Plot No.-83 Sector-I, Industrial Area.
Govindpura. Bhopal-462023 (M.P.) is hereby debarred for
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participating in tenders of MPMKVVCLfor a period of 3(Three)
years from the date of issuance of this letter. All ofyour associated
concerns and their Business dealings with this companyhave also
been banned for the same period."
9. In the given circumstances, the appellant approached the
Madhya Pradesh High Court, Principal Seat at Jabalpur by way of WP
No. 7579 of 2020 challenging the aforesaid order dated 13.02.2020. The
High Court, by its order dated 08.07.2020, set aside the order dated
13.02.2020 and permitted the respondents to pass a fresh order within
15 days after affording an opportunity of hearing to the appellant.
10. Thereafter,by a notice dated 16.07.2020, the appellant was
called for hearing through video-conferencing on 20.07.2020. Duringthis
video-conferencing, three representatives of the appellant including its
proprietor were afforded the opportunity of hearing and thereafter, the
Chief General Manager (Procurement)-respondent No. 2 proceeded to
passa detailed order on 30.07.2020, while point-by-point dealing with all
the relevant submissions, as made by the appellant through the letters
dated 27.02.2020 and 18.07.2020 as also by the three representatives.
Ultimately, the orders were maintained to the effect that penalty on
rejected and unsupplied transformers shall be recovered from the
appellant firm; and the appellant firm and its subsidiary/affiliated company/
firms shall stand debarred from participating in tenders of MPMKVVCL
for a period of three years from date of issuance of that order.The
respondent No. 2 finally ordered as under: -
"***
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***
Therefore, after given full opportunity and due consideration, the
competent authority has accorded approval to recover penalty
on rejected and unsupplied DTRs from the firm. Further,
M/s. Isolators & Isolators, Bhopal and its subsidiary/
affiliated Company/[Firms should be debarred for future
business for the period of 3 (Three) years.
Accordingly, your firm M/s Isolators & Isolators, Bhopal
having registered office at Plot No.- 83 Sector-I, Industrial
Area, Govindpura, Bhopal-462023 (M.P.) is hereby
debarred for participating in tenders of MPMKVVCL for a
period of years from the date of issuance of this letter. All
of your associated concerns and their Business dealings
with this Company have also been the same period (sic)."
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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SUPREME COURT REPORTS
[2023] 4 S.C.R.
11. Later, the respondent No. 2 also issued another order dated
17.08.2020, imposing penalty on the appellantto the tune of Rs.27,98,960/
- in relation to TS-532, being 10% of the ex-works price of the quantity
not deliveredtogether with GST @ 18%.Therelevantcontents of the
said order dated 17.08.2020 read as under:-
"***
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Purchase order MD/MK/04/P-III/TS-532/2166 dated
22.02.2018 for supply of 593 nos BIS Certified, Level-II, 11/0.
433 KV. 25 KVA Conventional Distribution Transformers was
issued to your firm. For not making complete supply as per the
conditions of tender no. 532 and for violating the terms and
conditions of the tender, this office vide letter no. MD/MK/P -
III/3593 dated 21/11/2019 had imposed penalty for non-supply of
593 items and cancelled your order. As per letter no. 3593 dated
21/11/2019 your firm is liable to pay the penalty amount as under
(Total penalty amount Rs. Twenty Seven lakh Ninety Eight
Thousand Nine Hundred Sixty only )
Therefore, you are requested to kindly deposit the penalty
amount of Rs. 27,98,960/- (Rs. Twenty Seven lakh Ninety Eight
Thousand Nine Hundred Sixty only) vide demand draft in the
account of the company within 15 days failing which appropriate
action against your form shall be taken."
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12. Being aggrieved of the aforesaid orders dated 30.07.2020 and
17.08.2020, the appellant preferred another writ petition in the High Court,
being W.P. No. 12075 of 2020 that has been considered and disposed of
by the impugned order dated 23.04.2021.
13. In its order dated 23.04.2021, the High Court took note of the
rival submissions where on one hand, the appellant contended that the
impugned orders were suffering from violation of principles of natural
justice; that there was no reason recorded in the orders impugned by the
respondents for taking the extreme and extraordinary measure of
debarringthe appellant; that after substantial supply of transformers against
purchase order No. 586, cancelling the order for supply of remaining
transformers was suffering from malice in law; and that the respondents
had deliberately not considered the factors regarding extraordinary rainfall
and storm between 20.08.2018 and 21.08.2018, resulting in damage to
the plant and loss of raw material. On the other hand, it was contended
on behalf of the respondents that blacklisting or debarring was
orderedafter giving full opportunity to the contractor, who was at fault in
not supplying the material as per the terms of the contract;that there
was nothing illegal or arbitrary in exercise of powers when the
respondents took recourse to the relevant clauses of the purchase order;
and that reliance of the appellant on force majeure clause was also
misplaced, for no suchinformation was furnished within 15 days, as
required by the terms of the contract.
14. Having taken note of the rival submissions, respectively in
paragraphs 5 and 6 of the order impugned, in the next paragraph, the
High Court proceeded to state its opinion that the order of blacklisting
contained justified and plausible reasons and no case for exercising
extraordinary powers under Article 226 of the Constitution of India was
made out. The High Court observed that the appellant failed to substantiate
the lapsesin not supplying the required transformers as per contract.
Thereafter, the High Court merely observed that the second order of
debarment was passed on 30.07.2020 but factually, the appellant-firm
was debarred by the order dated 13.02.2020 and therefore, provided a
slight modification in the manner that the period of 3 years' debarment
would be reckoned w.e.f.13.02.2020. With these observations and
modifications, the High Court proceeded to dispose of the writ petition
filed by the appellant.The relevant passages in the order so passed by
the High Court read as under: -
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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"7. Considering the rival contention of the parties and perusal of
record, we are also of the opinion that so far as the orderof
blacklisting is concerned, it contains the reason and in no way we
find those reasons unjustified. Considering the existing fact situation
of the case, we find that the assigned reason appear to be primafacie, plausible and are sufficient to maintain the order of
blacklisting. In the circumstances, as have been set forth before
us, exercising extraordinary power under Article 226 of the
Constitution of India, interference in a decision making process is
not permissible when the orders have been passed after following
the principle of natural justice and are supported by plausible
reasons. Indubitably the petitioner's firm failed to substantiate the
lapses on their part for not supplying the required transformers as
per the contract. We do not find any such reason available in the
case holding the orders passed by the respondents illgal and
arbitrary. Therefore, interference in the matter under Article 226
of the Constitution of India is not warranted. However, we have
noticed that the order of debarment has been passed on 30.07.2020
restraining the petitioner from participating in further tender
proceedings of respondents, but, factually the petitioner firm was
debarred vide order dated 13.02.2020, the first order, which was
set aside by this Court. Accordingly, the period of three years
debarring the petitioner be considered to be reckoned w.e.f.
13.02.2020 and would be ended accordingly after completion of
three years from the said date.
8. Accordingly, the petition is partly allowed modifying the order
of debarment making the same effective w.e.f. 13.02.2020 till the
period of three years."
15. At this juncture, we may also take note of the fact that as
against the aforesaid order dated 23.04.2021 passed in W.P. No. 12075
of 2020, the appellant had earlier approached this Court by way of SLP(C)
No. 13571 of 2021 but then, sought permission to withdraw with liberty
to take recourse to other appropriate remedy in accordance with law.
By the order dated 24.09.2021, the said SLP(C) No. 13571 of 2021 was,
accordingly, dismissed as withdrawn with liberty as prayed. Thereafter,
the appellant filed a review petition in the High Court that came to be
summarily rejected by the High Court with a short order dated 13.12.2021
that reads as under:-
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"On hearing learned counsels, we do not find any error
apparent on the face of the record that calls for any interference.
In the absence of any error on the face of the record, this
review petition is dismissed."
16. Assailing the orders so passed by the High Court, learned
senior counsel for the appellant has essentially put forward two principal
contentions. In the first place, it has been argued that the show-cause
notice dated 26.11.2019was only about debarment but then, the
respondents proceeded to pass the orders debarring the appellant for 3
years as also imposing penalty. Even in regard to the question of penalty,
according to the learned counsel, as per Clause 4 of the contract, the
quantum of penalty could have been from 1⁄2% to 10% for delay in delivery
but the respondents have chosen to impose the maximum thereof without
assigning any reason as to why the highest of such quantum was chosen.
In the second place, learned counsel has contended that the order
debarring the appellant and the order imposing penalty both were
challenged in the writ petition but the High Court chose to consider only
the challenge with respect to the order of the debarment and nothing
was considered about the order imposing penalty.
16.1. With reference to the facts of the case, learned senior counsel
has submitted that the appellant is manufacturer of transformers and by
the very nature of its product, the distribution company like the respondents
are the only purchasers and that way, the present one is a case of single
purchase market. The appellant had been supplying transformers to the
respondents since the year 1989 without any default or difficulties and in
the totality of circumstances, delay in execution of the present purchase
orders,that had occurred because of the reasons and circumstances
explained by the appellant, debarment for a maximum period of 3 years
and imposition of maximum penalty had been highly disproportionate
and too harsh. Learned counsel has particularly referred to the fact that
as regards TS-494, the appellant had supplied 300 out of 586 transformers
and as regards TS-532, the appellant had supplied all the 63 KVA
transformers. The want of supply of other transformers had been for
the reasons explained by the appellant and entire fault could not have
been attributed to the appellant alone. In this regard, learned counsel has
particularly underscored the submissions that by the letter dated
18.09.2019,the respondents deferred the delivery and thereafter,there
was no communicationfor withdrawing deferment. In this background,
ISOLATORS AND ISOLATORS THR. ITS PROP. MRS. SANDHYA MISHRA
v. MPMKVVCL [DINESH MAHESHWARI, J.]
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the order cancelling contract on 21.11.2019 for want of supply could
have only been considered as arbitrary and unreasonable.
16.2. The learned counsel has also relied upon the decisions of
this Court in Gorkha Security Services v. Government (NCT of Delhi)
and Ors.: (2014) 9 SCC 105 and UMC Technologies Private Limited
v. Food Corporation of India and Anr.: (2021) 2 SCC 551 to submit
that show-cause notice must indicate the proposed action and in the
show-cause notice in question, there being no indication of the proposed
action of imposing penalty, the order imposing penalty remains patently
illegal and deserves to be set aside.
17. In the present case, while preliminarily entertaining thepetitions
seeking leave to appeal, this Court had taken note of the facts regarding
earlier filing of the petition, being SLP(C) No. 13571 of 2021 against the
order dated 23.04.2021 passed in W.P. No. 12075 of 2020; and the
appellant having withdrawn on 24.09.2021 with liberty to take recourse
to other appropriate remedy in accordance with law. As noticed,thereafter,
the appellant filed a review petition in the High Court that came to be
summarily rejected by the High Court after finding no error apparent on
the face of the record. In this backdrop, this Court had left the question
of maintainability of the petitions, particularly in challenge to the original
order dated 23.04.2021 open.
17.1. In regard to the above question, learned senior counsel has
referred to a decision of this Court in the case ofA.P. State Financial
Corporation v. C.M. Ashok Raju and Ors.: (1994) 5 SCC 359 to
submit that the first order of the High Court dated 23.04.2021 cannot be
said to have attained finality. He would also submit that the order dated
23.04.2021 suffered from several errors apparent on the face of record,
including that the challenge to the order imposing penalty was not even
gone into but, the High Court rejected the review petition without even
examining the record.
18. Per contra, learned counsel for the respondents has duly
supported the orders impugned with particular reference to Clauses 13,
14 and 15 of the conditions of purchase order No. TS-494 and Clauses
8,10 and 17 of TS-532. The learned counsel would submit that since the
appellant did not comply with the terms and conditions of the contract, a
notice was issued on 13.02.2018 which was followed by the
communications dated 02.05.2018, 12.06.2018, 16.08.2018 and
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01.09.2018 about dispatch instructions for supply of transformers LevelI. According to the learned counsel, the appellant having failed to fulfil
the terms and conditions of TS-494, by the order dated 19.11.2019, the
respondents rightly cancelled the said purchase order with imposition of
penalty for non-supply of 286 transformers. It has been argued that the
said termination order had never been challenged by the appellant and
the same has attained finality. As regards the supply of 593 DTRs LevelII, the appellant was informed by the communication dated 22.02.2018
that the respondents had reserved the right to defer, reduce or reschedule
the supply as per the requirement. According to the learned counsel, the
appellant having failed to make the requisite supplies despite various
requests, by the communication dated 18.09.2019, the appellant was
informed about deferment of supply until further instructions.
19.