Delhi High Court
Pnc Infratech Limited vs Union Of India Through Ministry Of Road … on 29 October, 2024
Author: Sanjeev Narula
Bench: Sanjeev Narula
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 23rd October, 2024
Pronounced on: 29th October, 2024
+ W.P.(C) 14903/2024, CM APPL. 62511/2024, CM APPL.
62512/2024
PNC INFRATECH LIMITED ..... Petitioner
Through: Mr. Rajiv Nayar and Mr. Dayan
Krishnan, Senior Advocates with
Mr. Adhip Ray and Ms. Saima
Mahmood, Advocates.
versus
UNION OF INDIA THROUGH MINISTRY OF ROAD
TRANSPORT AND HIGHWAYS & ANR. ..... Respondents
Through: Mr. Santosh Kumar, SC with
Mr. Adithya Ramani, Advocate for
NHAI.
Mr. Syed Abdul Haseeb, CGSC with
Mr. Himanshu Sethi, GP.
Ms. Akanksha Kaul, CGSC with
Mr. Akash Kr. Singh, GP.
+ W.P.(C) 14904/2024, CM APPL. 62517/2024, CM APPL.
62518/2024
PNC BUNDELKHAND HIGHWAYS PVT LTD ..... Petitioner
Through: Mr. Darpan Wadhwa, Senior
Advocate with Mr. Shashwat Singh
and Mr. Kushagra, Advocates.
versus
UNION OF INDIA THROUGH MINISTRY OF ROAD
TRANSPORT AND HIGHWAYS & ANR. ..... Respondents
Through: Mr. Santosh Kumar, SC with
Mr. Adithya Ramani, Advocate for
NHAI.
Ms. Anushkaa Arora, SPC with
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Signing Date:29.10.2024
19:55:40
Ms. Soumya Kapoor, GP for R-1.
+ W.P.(C) 14905/2024, CM APPL. 62520/2024, CM APPL.
62521/2024
PNC KHAJURAHO HIGHWAYS PVT LTD ..... Petitioner
Through: Mr. Nilava Bandyopadhyay,
Advocate.
versus
UNION OF INDIA THROUGH MINISTRY OF ROAD
TRANSPORT AND HIGHWAYS & ANR. ..... Respondents
Through: Mr. Santosh Kumar, SC with
Mr. Adithya Ramani, Advocate for
NHAI.
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J.
1. The Petitioners seek inter-alia quashing of the order dated 18th
October, 2024 (“Impugned order”) issued by Respondent No.1- Ministry of
Road Transport and Highways (“MoRTH”) disqualifying them from
participating in any MoRTH tender process for a period of 1 year.
Additionally, they seek to quash the Show Cause Notice (“SCN”) dated 30th
August, 2024 issued by Respondent No. 2– National Highway Authority of
India (“NHAI”) which led to the impugned disqualification. Furthermore,
they also seek to quash the Office Memorandum bearing O.M. No. NH-
35014/20/2020-H-Part(2) dated 18th August, 2022.
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2. The factual background in all the Petitions is nearly identical with the
Petitioners raising similar legal grounds of challenge. Petitioner in W.P.(C)
14904/2024 and W.P.(C) 14905/2024 are subsidiaries of Petitioner in
W.P.(C) 14903/2024 who have been disqualified from participating in the
tender process of Respondent No.1 through the same order and show cause
notice as noted above. Given the substantial overlap in both facts and legal
submissions, advanced by respective counsel, it is deemed appropriate to
address them collectively through a common order.
Brief Facts
3. NHAI issued a notice inviting tender along with Request for Proposal
for four-laning of Jhansi- Khajuraho section from Km 0.00 to Km 76.3 of
NH- 75/76 (“Package- I”) and four-laning of Jhansi-Khajuraho section of
NH- 75/76 from Design Chainage Km 76.3 (“Package-II”). PNC Infratech
Limited was the successful bidder of this tender. In compliance of the Letter
of Acceptance dated 31st March, 2017 for Package-I and 28th March 2017
for Package-II, PNC Infratech Limited formed Special Purpose Vehicles
(“SPVs”)- PNC Bundelkhand Highways Private Limited [Petitioner in
W.P.(C) 14904/2024] and PNC Khajuraho Highways Private Limited
[Petitioner in W.P.(C) 14905/2024] respectively. For this project, an
Integrity Pacts (“IP”) was executed between PNC Infratech Limited and its
subsidiaries and NHAI, in respect of Package-I and Package-II respectively,1
setting forth the commitments to ethical practices and transparency.
4. During the Operation and Management of Package-I and Package-II,
the CBI registered an FIR dated 8th June, 2024 against certain former
officials of the NHAI along with other accused persons including PNC
1
Collectively referred to as “IP”
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Infratech Limited and some of its employees under Section 7, 8, 9, 10 and
12 of the Prevention of Corruption Act, 1988 (“PC Act”) and under Section
120B of the Indian Penal Code 1860 (“IPC”). Subsequently, a chargesheet
was filed on 8th August, 2024, before the Court of the Special Judge for CBI
Cases in Bhopal. While the chargesheet has been submitted, the court is yet
to take cognizance of the matter, and charges have not yet been framed.
5. In light of the aforenoted criminal prosecution launched by the CBI,
NHAI issued a show cause notice dated 30th August, 2024 to the Petitioners,
alleging a breach of Article 2 of the IP. According to NHAI, this violation
warranted the Petitioners’ exclusion and potential blacklisting from future
contracts as provided under Article 3(2) of the IP and clause 4.2 of the
Request for Proposal dated 9th November, 2016. Subsequently, MoRTH
issued the Impugned order dated 18th October, 2024, disqualifying the
Petitioners from participating in any MoRTH tender processes for one year,
effective immediately in terms of the General Financial Rules, 2017 (“GFR
Rules”) read with the Office Memorandum bearing O.M. No. NH-
35014/20/2020-H-Part (2) dated 18th August, 2022 (“Impugned OM”).
6. Aggrieved by the same, the Petitioners have filed the present petition
seeking setting aside of the SCN dated 30th August, 2024 and debarment
order dated 18th October, 2024.
Contentions
7. Counsels for the Petitioners strongly press for quashing of Impugned
order by arguing the following:
7.1 The Impugned order has been passed without jurisdiction. A
bare perusal of the SCN and the Impugned order would reveal that the action
has been taken against Petitioners on account of alleged breach of the IP.
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However, for “transgression” of the terms of the IP, including that of Article
2, Article 3(2) provides the power only to the “Principal” (in this case
Respondent No-2) to blacklist or put on holiday. However, in the present
case, while Respondent No. 2 has issued the SCN, the Impugned order was
passed by Respondent No. 1. Respondent No. 1 is neither a signatory to the
IP, nor a signatory to the Concessionaire Agreement. Moreover, neither the
IP, nor the Concessionaire Agreement authorizes Respondent No-1 to take
any action related to IP. Therefore, the Impugned order passed by
Respondent No-1 is without jurisdiction and non-est. As regards the OM
No. NH-35014/20/2020-H-Part(2) dated 18th August, 2022 empowering
Respondent No.1 to pass such Impugned orders, the same is not applicable
as it is an Inter-Departmental Memo of Respondent No.1 and cannot
unilaterally confer jurisdiction to Respondent No. 1 to act beyond the agreed
terms of the IP, or unilaterally amend the IP. Any change to the IP has to be
made in writing in terms of Article 10(2) of the IP which was not done.
Moreover, the Impugned OM was issued five years after the execution of the
IP and cannot have retrospective application or amend the terms of any IP
unilaterally. The Respondents do not have any legal basis of applying the
OM dated 18th August, 2022.
7.2 The Impugned order fails to demonstrate “transgression” by the
Petitioner which is a sina qua non for debarment of an entity. The triggering
point of Article 3(2) of IP is ‘transgression’ which can finally lead to
debarment of the Contractor. Article 3(2) has to be read with Article 3(3),
which defines “transgression”. A transgression is considered to have
occurred, if the principal, after due consideration of the available evidence,
concludes that “On the basis of facts available there are no material doubts”.
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The Impugned order miserably fails to satisfy the mandatory threshold of
Article 3(2) and 3(3) of the IP. The entire action of Respondents including
the Impugned order lacks “due consideration” and the Respondents have
failed to disclose any “evidence” which has led Respondent No. 1 or 2 to
conclude that there were “no material doubts” that a transgression has been
committed. Furthermore, a bare perusal of the Impugned Order, especially
Para 10(i) and 10(vi) makes it clear that the sole consideration of
Respondent No.1 while passing the Impugned Order is launch of criminal
proceedings by CBI and the Chargesheet. However, the same cannot be a
valid basis for passing the Impugned Order as mere launch of criminal
proceedings cannot be basis for action of debarment. In view of the legal
principles and the conduct of Respondent No.2, it is clear that the entire
action of the Respondents is bad in law. That apart, it is pertinent to note that
the Impugned SCN issued by Respondent No. 2 in para 4 states – “that
employees of Ms. PNC Infratech Ltd have allegedly provided illegal
gratification through illicit means to some of the employees of the
Authority.” The use of the term “allegedly” makes it evident that
Respondent No.2 accepts that the FIR and Chargesheet contains only
allegations and not evidence. Moreover, the Impugned order discloses that
the only basis for the Impugned action is the Chargesheet which too cannot
form the basis for debarment as no cognizance has been taken by the CBI
Court as Respondent No. 2 itself has not till date given the requisite
sanction. Therefore, the Chargesheet is a ‘dead letter’ and cannot be the
basis of any action. It is settled law that FIR and Chargesheet are not
“evidence” in law. Therefore, there can be no question of there being any
evidence that transgressions have been committed beyond material doubt. In
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any case, there is nothing in the FIR or Chargesheet regarding the accused
being caught red handed. It is highlighted that the Petitioners [PNC
Bundelkhand Highways Private Limited and PNC Khajuraho Highways
Private Limited] have not been named as an accused in either the FIR or the
Chargesheet. Therefore, the presence of material doubt is clearly established
as the SCN mentioned “allegedly provided” and no sanction has been given
by Respondent No.2. In view thereof, no action can be taken by the
Respondents for alleged violation of IP based on transgression.
7.3. The Impugned order was passed with a predetermined mindset and
undue haste, violating principles of natural justice. The instances of pre-
meditated mind can be substantiated from the content of the SCN itself
wherein without any basis or contrary to its own noting in Para 4 of
‘allegedly provided’ at Para 5 and 7, Respondent No. 2 concluded that the
Petitioner is guilty of transgression. Having come to this pre-meditated
conclusion, Respondent No. 2 in para 7 stated “However, before taking any
action and in order to comply with the principles of natural justice, the
Authority hereby issues this Show Cause Notice to both the entities
mentioned above to show cause as to why action should not be taken to
debar /blacklist them….”. Furthermore, the subsequent letters dated 18th
September, 2024 and 20th September, 2024 from Respondents No. 1 and 2
suggest they had already decided to debar the Petitioner, making the hearing
merely a formality. Further, the hearing lasted from 11:00 AM to 11:45 AM
on 18th October 2024, yet the order was communicated that same evening at
8:13 PM without addressing the Petitioner’s detailed 646-page written
submission. This shows that the Order was unduly rushed and pre-meditated
by the Respondent No.1, making the Impugned order bad in law.
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8. Counsels for the Respondents, contest the relief sought by the
Petitioners, asserting the following grounds:
8.1. Given that Ms. PNC Infratech Ltd’s employees and directors
allegedly engaged in obtaining undue favors from NHAI, there is a
legitimate basis for the debarment action. The FIR registered on reliable
information against the company employees substantiates the Respondents’
decision.
8.2. The Petitioners were afforded due process, receiving SCNs that
provided ample opportunity to respond. MoRTH considered the Petitioners’
reply before issuing the Impugned order.
8.3. MoRTH’s authority to issue the debarment order is established
by OM no. NH-35014/20/2020-H-Part(2) dated 18th August, 2022, which
aligns with the Supreme Court’s ruling in M/s Erusian Equipment &
Chemicals Ltd. vs. State of West Bengal and Anr.2
8.4. Debarment is permissible even prior to conviction, provided
there is compelling evidence to suspect misconduct by the company’s
employees. The Division Bench ruling of this court in UEE Electrical
Engineers P. Ltd. v. Delhi Development Authority and Ors.3 supports this
position.
8.5. The Impugned order is well-reasoned, satisfying the
requirement for administrative orders to be based on rational and justified
grounds, even if it lacks the detailed analysis typical of judicial rulings.
Analysis and Findings
9. Before proceeding to analyse the aforenoted contentions, it would be
2
(1975) 1 SCC 70
3
2005 (81) DRJ 56 DBSignature Not Verified
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appropriate to outline the principles guiding judicial review in matters of
public procurement and administrative decisions on debarment or
disqualification. In such cases, government agencies retain a considerable
degree of discretion in awarding, managing, or rescinding contracts. Judicial
intervention is done with caution, with courts generally refraining from
substituting their own judgment for that of the competent authority, provided
statutory and procedural safeguards have been observed. The scope of
review in cases concerning debarment or disqualification is, therefore,
limited to determining whether the administrative decision was arbitrary,
unreasonable, or violated principles of natural justice, rather than assessing
the merits of the decision itself.
10. With this framework in mind, the Court will first address Petitioners’
contention relating to jurisdictional overreach by Respondent No.1.
11. Whether the Impugned order has been passed without jurisdiction?
11.1 The NHAI was constituted by an Act of Parliament in 1988 and
operates under the administrative control of the MoRTH who retain
overarching regulatory authority over NHAI’s operations. NHAI functions
as a Central Authority specifically mandated to develop, maintain, and
manage the National Highways entrusted to it by the Government of India.
Consequently, MoRTH, as the supervisory body, possesses inherent
jurisdiction to intervene in matters involving integrity and compliance
within projects managed by NHAI. This administrative control grants
MoRTH the discretion to issue directives and enforce compliance measures
across its affiliated bodies, including actions to maintain ethical standards
and uphold public trust.
11.2 The Impugned debarment order has been issued by MoRTH, drawing
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its authority from OM No. NH-35014/20/2020-H H-Part (2) dated 18th
August, 2022. This OM outlines the procedural requirements for
implementing agencies under the MoRTH in matters of public procurement,
specifically in relation to debarment of bidders or contractors who are found
in breach of the IP or code of conduct. The OM is extracted hereinbelow:
“OFFICE MEMORANDUM
Subject: Integrity in Public ProcurementIn order to ensure transparency, equity and competitiveness,
Integrity Pact provisions have been made in the RFP and contract
documents. Further, Integrity Pacts are being monitored by a panel of
Independent External Monitors.
2. Ministry of Finance has issued Guidelines on Debarment of firms
from Bidding vide O.M. No. F.1/20/2018-PPD, dated 02.11.2021 (copy
enclosed). Subsequently, Compliance Report of the said Guidelines has
also been sought by Ministry of Finance vide O.M No. F.1/20/2018-
PPD, dated 02.08.2022 (copy enclosed).
3. All the implementing agencies of MORTH shall follow these
Guidelines in letter and spirit.
4. In the above context, it is further clarified that:
i. As per Clause (iii) of Rule 151 of GFR, 2017, an entity may be
blacklisted/debarred if the bidder has breached the code of integrity.
ii. There is no need to wait till the criminal case instituted by the
investigating agency is concluded. In case, there is enough material to
proceed, implementing agency shall go ahead with the imposition of
penalty.
iii. The kind of evidence required to be certain of a violation by a
bidder so as to trigger such sanctions is adequate evidence of a violation
if “on the basis of the facts available there are no material doubts” or
“it is more likely than not” that the violation has occurred. The Supreme
Court of India in M/s Erusian Equipment and Chemicals Ltd. [(1975) 1
SCC 70] inter alia held that “strong justification for believing that the
proprietor or employee of the firm has been guilty of malpractices such
as bribery, corruption, fraud” can be one of the grounds for
blacklisting. The Report of the Investigating Agency (e.g. CBI Report)/
Investigating Officer’s Report under section 173 of Code of Criminal
Procedure (Charge Sheet) or any other reliable source shall be the basis
for determining violations.
iv. There shall not be any delay in taking action on all such
violations as such a delay will result in giving benefit of allowing
defaulters to bid and get new projects with the Government.
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v. AS(H) shall be the competent authority to debar the firms, as per
Ministry of Finance O.M No. F.1/20/2018-PPD, dated 02.11.2021.
5. This issues with the approval of Secretary (RT&H).”
11.3 The Supreme Court in M/s Erusian Equipment & Chemicals
Ltd.,4 recognized that public bodies have the right to protect themselves
against contractors involved in malpractices such as bribery, corruption, and
fraud, and affirmed that debarment can proceed on the basis of “adequate
evidence” or “strong justification” for believing that malpractices have
occurred. The OM, in line with the Supreme Court’s judgment in Erusian
establishes MoRTH’s jurisdiction to debar entities under suspicion of
corrupt practices. The Impugned OM further clarifies that investigating
agency reports, such as a CBI report or a charge sheet, are considered
reliable sources for determining violations that may trigger debarment.
11.4 The OM designates the Additional Secretary (Highways) as the
competent authority to issue debarment orders on behalf of MoRTH. This
power includes the discretion to bar entities from future contracts, even prior
to conviction, where credible evidence indicates corrupt practices. The
Impugned OM also stipulates that the reports of the investigating agency or
any other reliable source shall be the basis for determining any violation by
a bidder.
11.5 The Petitioners have sought the quashing of the Impugned OM,
challenging its validity. Although they did not present any cogent arguments
regarding this challenge in their written submissions, the court has
nonetheless reviewed the grounds mentioned in their petitions and will
4
“(1975) 1 SCC 70”
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address them here. It is firstly imperative to note that the validity of the
Impugned OM has already been examined by this court in W.P.(C)
16110/2022, where the arguments, similar to the ones raised in the
aforenoted petitions, were rejected, and the Impugned OM was upheld. The
Petitioners also cited Orion Security Solutions Pvt. Ltd. v. University of
Delhi5 to claim that the Impugned OM violates that judgment. However,
this argument has already been rejected by this court in the decision
rendered in W.P.(C) 16110/2022 holding Orion Security to be inapplicable.
11.6 The Court also finds the Petitioners’ argument regarding the
timing of the OM relative to the execution of the IP to be unpersuasive. The
purpose of OM is to codify principles set out in Erusian and other relevant
cases, which already permit debarment for public safety and integrity in
procurement, regardless of when the IP was executed. Consequently, the
provisions of Impugned OM apply as procedural guidelines and are not
restricted by the date of IP, nor do they violate principles against
retrospective application. The Court, therefore, finds no jurisdictional defect
in MoRTH issuing the Impugned order.
11.7 Moreover, NHAI has initiated the exercise by issuing notice,
sending a report to MoRTH and participating in hearing and assisting
MoRTH. The MoRTH, being the higher authority of NHAI, therefore, in the
opinion of the Court, is well vested with the jurisdiction to pass the
Impugned order. It is also pertinent to note that this order has been passed,
keeping in mind the grave allegations of corruption. It must be noted that the
MoRTH has in the Impugned Order disqualified the Petitioners from
participating in any tender process of the ‘Ministry’ for a period of one year.
5
[W.P. (C) 252/2018]
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Since the effect of the Impugned order had wide ramifications debarring the
Petitioners from participating in any government contracts, it necessarily
followed that a senior officer of the Nodal Ministry of NHAI would take a
decision on the debarment. In this context, the involvement of a more senior
official from the Ministry demonstrates a commitment to propriety and
reasonableness. In fact, by notifying MoRTH, Respondent No. 2 has taken a
fair approach by keeping some distance from the final decision on
debarment. As a result, an independent body, after hearing both parties and
considering the available evidence, ultimately reached a decision. Thus, in
the Court’s view, there is no jurisdictional error.
11.8 The Petitioners have also asserted that the Impugned OM
cannot unilaterally confer jurisdiction to Respondents to act beyond the
agreed terms of the IP, or unilaterally amend the IP. It must be noted that the
powers to pass the Impugned order has been drawn from the Impugned OM
which is to be read with the IP. The reasons for referring the matter to
MoRTH has in fact been delineated in communication dated 18 th September,
2024, which reads as follows:
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11.9 The Court finds no merit in the Petitioner’s argument that
MoRTH cannot enforce sanctions simply because it is not a party to the IP.
This contention overlooks the broader objective of ensuring integrity in
public contracts. Courts have consistently held that public interest
considerations take precedence over narrow contractual interpretations,
especially when dealing with issues of corruption or malpractice. As the
regulatory body, MoRTH holds inherent authority to intervene when ethical
violations are suspected, even if specific contractual clauses seem restrictive.
Therefore, in the opinion of the Court, there is no jurisdictional error.
12. Whether the Impugned order fails to demonstrate “transgression” by
Petitioner rendering the debarment invalid?
12.1. The Petitioners contend that under Article 3(2) of the IP, a
finding of “transgression” is the foundational requirement that may justify a
contractor’s debarment. They argue, however, that Article 3(2) must be
interpreted alongside Article 3(3), which defines “transgression” as
occurring only when the authority, upon a thorough evaluation of available
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evidence, determines there is an absence of material doubt regarding the
infraction. According to the Petitioners, the Respondents have neither
disclosed nor demonstrated any evidence that would allow a reasoned
conclusion of “no material doubts” concerning a transgression, thereby
rendering the debarment order invalid.
12.2. The Court has carefully considered the arguments advanced by
the Petitioners but remains unconvinced. The concept of transgression is
found in the contractual terms, particularly, the IP executed between the
parties, whose relevant clauses read as follows:
“Article 2: Commitments of the Bidder/Contractor(s)/
Concessionaire(s)/ Consultant(s).
The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
commit himself to take all measures necessary to prevent
corruption. He commits himself to observe the following
principles during his participation in the tender process and
during the contract execution.
(a) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
will not, directly or through any other person or firm, offer,
promise or give to any of the Principal’s employees involved
in the tender process or the execution of the contract or to
any third person, any material or other benefit which he/ she
is not legally entitled to, in order to obtain in exchange any
advantage of any kind whatsoever during the tender process
or during the execution of the contract
(b) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
will not enter with other bidders into any undisclosed
agreement or understanding, whether formal or informal.
This applies in particular to prices, specifications,
certifications, subsidiary contracts, submission or non-
submission of bids or any other actions to restrict
competitiveness or to introduce cartelization in the bidding
process.
(c) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
will not commit any offence under the relevant IPC/PC Act
and other Statutory Acts; further the Bidder(s)/Contractor(s)/
concessionaire(s)/consultant(s) will not use improperly, for
purposes of completion or personal gain, or pass on to
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others, any information or document provided by the
Principal as part of the business relationship, regarding
plans, technical proposals and business details, including
information contained or transmitted electronically .
(d) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
of foreign shall disclose the name and address of the Agents /
representatives in India, if any similarly the
Bidder(s)/Contractor(s)/ concessionaire(s)/consultant(s) of
Indian Nationality shall furnish the name and address of the
foreign principle, if any.
(e) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
will, when presenting his bid, disclose c1ny and all payments
he has made, is committed to or intends to make to agents,
brokers or any Other intermediaries in connection with the
award of the contract. He shall also disclose the details of
services agreed upon for such payments.
(f) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
will not instigate third persons to commit offences outline
above or be an accessory to such offences.
(g) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
will not bring any outside influence through any Govt.
bodies/quarters directly or indirectly on the bidding process
in furtherance of his bid.
Articles 3: Disqualification from tender process and exclusion from
future contracts.
(1) If the Bidder(s)/Contractor(s)/concessionaire(s)
/consultant(s), before award or during execution has
committed a transgression through a violation of any
provision of Article – 2, above or in any other form such as to
put his reliability or credibility in question, the Principal is
entitled to disqualify the
Bidder(s)/Contractor(s)/concessionaire(s) /consultant(s)
from the tender process.
(2) If the Bidder/ Contractor/ Concessionaire/ Consultant has
committed a transgression through a violation of Article-2
such as to put his reliability or credibility into question, the
Principal shall be entitled to exclude including blacklist and
put on holiday the
Bidder/Contractor/Concessionaire/Consultant for any future
tenders/contract award process. The imposition and duration
of the exclusion will be determined by the severity of the
transgression. The severity will be determined by the
Principal taking into consideration the full facts and
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circumstances of each case particularly taking into account
the number of transgressions, the position of the
transgressors within the company hierarchy or the
Bidder/Contractor/Concessionaire/Consultant and the
amount of the damage. The exclusion will be imposed for a
minimum of 1 year.
(3) A transgression is considered to have occurred if the
Principal after due consideration of the available evidence
concludes that ·on the basis of facts available there are no
material doubts·.
(4) The Bidder(s)/Contractor(s)/concessionaire(s)/consultant(s)
with its free consent and without any influence agrees and
undertakes to respect and uphold the Principal’s absolute
rights to resort to and impose such exclusion and further
accepts and undertakes not to challenge or question such
exclusion on any ground, including the lack of any hearing
before the decision to resort to such exclusion is taken. This
undertaking is given freely and after obtaining independent
legal advice.
(5) The decision of the Principal to the effect that a breach of the
provisions of this Integrity Pact has been committed by the
Bidder(s)/Contractor(s)/concessionaire(s)/consultant shall be
final and binding on the
Bidder/Contractor/concessionaire/consultant.
(6) On Occurrence of any sections/disqualification etc arising
out from violation of integrity pact
Bidder/Contractor/concessionaire/consultant shall not be
entitled for any compensation on this account.
(7) Subject to full satisfaction of the Principal, the exclusion of
the Bidder/Contractor/concessionaire/consultant could be
revoked by the Principal if the
Bidder/Contractor/concessionaire/consultant can prove that
he has restored/recouped the damage caused by him and has
installed a suitable corruption prevention system. in his
organization.”
12.3 While the Petitioners may argue that mere initiation of criminal
proceedings is insufficient to warrant debarment, but it must be noted that
the Impugned order and the SCN is based on cogent evidence and not mere
initiation of criminal proceedings. The record suggests that an FIR dated 8th
June, 2024 has been registered on credible source information, alleging that
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the directors and other employees of PNC Infratech Limited, engaged in a
scheme to secure undue favours from certain NHAI officials by offering
bribes in exchange for favourable treatment. These alleged favours
encompassed actions such as the facilitation of project handovers, issuance
of No Objection Certificates (“NOCs”), and expedited processing of final
bills related to the Jhansi-Khajuraho project awarded to the Petitioner by
NHAI. The FIR further indicates that specific employees of PNC Infratech
Limited maintained persistent and targeted communications with NHAI
officers, with the aim of obtaining these benefits, including clearance of
pending bills and issuance of NOCs to enable changes in project ownership.
12.4 The material on record before the competent authority thus
extends beyond mere allegations. The FIR dated 8th June, 2024,
unambiguously outlines the intent behind these illicit transactions,
demonstrating that the financial inducements were intended to manipulate
the project’s procedural outcomes. Furthermore, the chargesheet filed on 8 th
August, 2024, substantiates these allegations by detailing the trap laid by the
Investigating Officer, capturing employees on CCTV, and revealing
intercepted conversations between the Petitioner’s staff and the employees
of NHAI named as accused in the FIR.
12.5 While the Petitioners correctly observe that the Court has not
yet taken cognizance of the chargesheet, this fact does not, in the Court’s
opinion, detract from the substantial evidence supporting the Respondents’
actions. The interception of calls, the CCTV footage, and other evidence
referenced in the chargesheet together establish, with compelling clarity, that
the alleged transgressions occurred beyond any material doubt. The Court
finds that this evidence satisfies the threshold of “transgression” as
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contemplated under Articles 3(2) and 3(3) of the Integrity Pact, supporting
the Respondents’ decision to impose the debarment on firm, documented
grounds.
12.6 The OM provides that there is no need to wait till the criminal
case instituted by the investigating agency is concluded. The threshold for
determining a violation by a bidder, as per the OM, is satisfied by the
presence of “adequate evidence of a violation” if, based on the facts
available, there are “no material doubts” or if it is “more likely than not” that
the violation has occurred. This threshold permits the authority to act
decisively once sufficient preliminary evidence supports the conclusion of
misconduct, thus enabling timely intervention in the interest of safeguarding
the integrity of public contracts.
12.7 In M/s Erusian Equipment, the Supreme Court clarified that
one of the grounds justifying blacklisting is the existence of “strong
justification” to believe an employee or representative of a firm is involved
in malpractice. In that case, the Petitioner company was blacklisted based on
confidential information from the Collector of Customs, implicating the firm
in dubious practices while an investigation was underway. This decision,
highlights that government agencies, when dealing with credible information
indicating potential fraud or corruption, need not wait for judicial
confirmation before acting to preserve public interests. The rationale is to
enable government entities to pre-emptively protect procurement processes
from entities suspected of ethical violations.
12.8 A similar approach was endorsed by a coordinate bench of this
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Court in M/s Sabharwal Medicos Pvt. Ltd. v. Union of India and Ors.,6
where it was held that the authority vested with the power to blacklist must
independently assess whether the facts and circumstances warrant such an
action. The bench emphasized that, once the investigation of the
investigating agency, results in a chargesheet, the State is neither obligated
nor expected to wait for the final outcome of the criminal trial to impose
preventive measures, such as blacklisting. The Court noted that the filing of
chargesheet establishes a reasonable foundation to act, especially where the
public interest may be jeopardized by continued dealings with the accused
entity.
12.9 Further reinforcing this principle, this court in Shoghi
Communications Ltd. v. Union of India7 also upheld a blacklisting order
against a company following the filing of a chargesheet against its director,
even while the criminal trial was still pending. The court ruled that pending
criminal proceedings do not preclude the imposition of preventive sanctions
like blacklisting, where prima facie evidence substantiates the allegations.
12.10 Additionally, the Division Bench of this Court, in UEE
Electrical Engineers Pvt. Ltd. v. Delhi Development Authority,8 upheld an
order of blacklisting based solely on an FIR registered against a company
employee. Notably, at the time of the debarment, the FIR remained under
investigation, underscoring that the pendency of an investigation does not
preclude the imposition of preventive measures like blacklisting. This
judgment reinforces the principle that a formal indictment or conviction is
not a prerequisite for blacklisting when there is substantive cause for
6
2013 SCC Online Del 3839
7
2011 SCC Online Del 329
8
2005 (81) DRJ 56 DB
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concern founded on credible allegations of misconduct. These aforenoted
judgments reflect a judicial consensus recognizing that while blacklisting
has serious implications, its exercise is permissible based on credible
preliminary findings that safeguard public resources and trust.
12.11 The Petitioners’ reliance on Kailash Gour v. State of Assam,9
invoking the presumption of innocence in criminal jurisprudence, is
misplaced in the present context. This case does not engage principles of
criminal law for establishing individual guilt but instead centers on
administrative action grounded in public interest. The Court does not apply
the presumption of innocence or principles of criminal jurisprudence in the
administrative domain, where preventive action can be taken on strong
suspicion supplemented by credible evidence, rather than on definitive proof
of guilt.
12.12 The Petitioners’ reference to Orion Securities is similarly
unpersuasive. That decision turned on whether an applicant could be
disqualified solely due to registration of an FIR. In contrast, the present case
involves an FIR that has culminated in a chargesheet, substantiated by
cogent evidence, which together meet the threshold for determining
“transgression” under the Integrity Pact. The evidence gathered by the CBI
establishes more than a mere suspicion, providing a sound basis for
debarment in alignment with administrative law principles.
12.13 Likewise, Baldev Singh & Anr. v. State of Punjab10 and
Kartongen Kemi Och Forvaltning AB v. State11 are distinguishable, as
these cases dealt with the weight of an FIR as substantive evidence in
9
[Criminal Appeal Petition No. 1068 of 2006]
10
1996 AIR 372
11
2004 DHC 111407
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criminal proceedings. In the administrative context here, the chargesheet–
supported by concrete evidence including recorded conversations and CCTV
footage–serves as a substantive basis for action. Thus, while these criminal
cases emphasize high thresholds of proof, administrative decisions of
debarment rely on a standard of credible evidence that firmly supports the
action in question.
12.14 It is indeed a fundamental tenet of criminal law that every
individual is presumed innocent until proven guilty by a competent court
following a fair trial. However, in the present case, the issue before the
Court does not concern establishing guilt in the criminal sense but rather
determining whether a “transgression” has occurred under the terms of the
Integrity Pact (IP). The IP is structured to enforce ethical integrity and
transparency in public contracts, and its objectives would be undermined if
the Petitioners’ arguments were to be accepted. This mechanism is
preventive rather than punitive, aimed at promoting public trust by
precluding contractors suspected of unethical practices from participating in
public tenders.
12.15 The Court is of the view that the breaches alleged against the
Petitioners constitute serious infractions that cannot be overlooked or
trivialized. The evidence that emerges in the chargesheet –comprising
intercepted communications, video footage, and documented instances of
bribery–reflects conduct that strikes at the very core of public procurement
integrity. The severity of these allegations, coupled with the corroborative
material unearthed and referenced in the chargesheet, firmly justifies the
Respondents’ decision to debar the Petitioners from participating in tender
processes.
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12.16 Moreover, the Court reiterates that it is not within its purview
to supplant the judgment of the competent authority with its own, except
where it is shown that the authority’s decision is arbitrary, capricious, or
taken in violation of procedural propriety. Here, the Respondents have
exercised their discretion in a manner consistent with the objectives of IP,
relying on substantial evidence indicative of transgressive practices. The
decision to refrain from engaging in contractual relationships with entities
under a cloud of suspicion is a rightful prerogative of the State. Imposing an
alternative view would place undue limitations on the State’s authority to
protect its interests by excluding parties it reasonably deems untrustworthy
or undesirable. The Court finds that such discretion is particularly
appropriate in this context, where public trust and the ethical management of
resources are paramount.
13. Whether the Impugned order was passed with a pre-determined
mindset and undue haste
13.1. The Petitioners assert that the Respondents approached the
decision-making process with a pre-determined mindset, evident from the
content and tone of the SCN, which, they argue, lacked a factual basis and
reflected a foregone conclusion of guilt. According to the Petitioners, the
language of SCN and structure imply that the Respondents had already
resolved to impose sanctions on the Petitioner, treating the hearing as a mere
formality rather than an opportunity for meaningful engagement. They
further contend that letters issued by NHAI on 18 th September, 2024, and by
MoRTH on 20th September, 2024, underscore this pre-meditated approach,
revealing that the decision to debar the Petitioner had effectively been made
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before considering any response.
13.2 The Petitioners also argue that these correspondences indicate
that the hearing process lacked genuine intent, serving only as a procedural
formality to comply with documentation requirements. They contend that
the Respondents’ actions amounted to a gross breach of the principles of
natural justice, particularly the right to a fair hearing, as the opportunity to
present their case was illusory, and the decision was pre-determined. By
failing to afford a fair, impartial, and open-minded consideration of the
Petitioner’s representations, the Petitioners argue that the Respondents
undermined the legitimacy of the administrative process.
13.3 In the Court’s opinion, these contentions are entirely
misconceived and unsupported by the record. The mere fact that the
Respondents acted with promptness does not substantiate the claim of a pre-
determined mindset or undue haste. Assertions to this effect are devoid of
merit and overlook the procedural fairness afforded to the Petitioners.
13.4 The record reflects that the Respondents fully adhered to
principles of natural justice, as evidenced by the SCN dated 30th August,
2024, issued by NHAI. This notice explicitly outlined the allegations against
the Petitioner company, including the specific breaches alleged under the
Integrity Pact and the potential sanctions under consideration. The SCN
provided the Petitioners with a clear and comprehensive account of the
charges, enabling them to understand the case against them and respond
meaningfully. Furthermore, the SCN offered the Petitioners an opportunity
to make representations before a final decision was rendered, fulfilling the
procedural requirement to ensure a fair hearing.
13.5 The said SCN is as follows:
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“Sub.: Show Cause Notice: Violation of the conditions of Article 2 of
Integrity Pact of the contract agreement signed between NHAI & PNC
Khajuraho Highways Pvt. Ltd. and M/s PNC Bundelkhand Highways
Private Limited.
This is to bring to your kind attention that M/s PNC Infratech Ltd was
awarded the work of “Four laning of Jhansi-Khajuraho section (Pkg-1 &
Pkg-II) of NH-75/76 in the state of U.P. & M.P. under NHDP (Phase III)
on Hybrid Annuity mode” and Concession Agreement for the work was
signed on 07.06.2017.
2. The Integrity Pact (“IP”) was also signed as part of the Concession
Agreement. The Article-3 of IP states that “If the Bidder(s)/ Contractor(s)/
Concessionaire(s)/ Consultant(s) has committed a transgression through a
violation of Article-2 such as to put his reliability or credibility into
question, the Principal shall be entitled to exclude including blacklist and
put on holiday the Bidder(s)/Contractor(s)/ Concessionaire(s)/
Consultant(s) for any future tenders/ contract award process.
3. It is pertinent to mention that Article 2 of the IP provides for the
commitment of the Bidder/ Contractor/Concessionaire and the relevant
part is reproduced as under:
“The Bidder(s)/Contractor(s)/Concessionaire(s) Consultant(s) will not
directly or through any other person or firm, offer, promise or give to any
of the Principal’s employees involved in the tender process or the
execution of the contract or to any third person any material or other
benefit which he/she is not legally entitled to, in order to obtain in
exchange any advantage of any kind whatsoever during the tender process
or during the execution of the contract”
4. Recently, it has come to the notice of the Authority that CBI has
filed RC No. RC2182024A0012 dated 08.06.2024 and chargesheet dated
08.08.2024 on the ground that employees of M/s PNC Infratech Ltd. have
allegedly provided illegal gratification through illicit means to some of the
employees of the Authority. The said case has been registered against the
employees of NHAI as well as employees and one of the promotors of M/s
PNC Infratech Ltd under the provisions of Prevention of Corruption Act
and Indian Penal Code. It is noted that one of the directors of PNC
Infratech Ltd., Shri T.R. Rao, is the managing director of PNC Khajuraho
Highways Pvt. Ltd., and M/s PNC Bundelkhand Highways Private
Limited, the SPV.
5. In light of the above facts and circumstances, the Authority is of
the view that M/s PNC Infratech Ltd & PNC Khajuraho Highways Pvt.
Ltd. and M/s PNC Bundelkhand Highways Private Limited have
committed a transgression through a violation of the provisions of Article
2 of the IP as extracted above and are thus liable to be excluded including
blacklisting for any future tenders/contract in terms of Article 3 (2) of IP.
Not only this, in view of the above, the abovenamed companies have also
indulged in corrupt practice in terms of Clause 4.2 of Section 4 (Fraud
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and Corrupt Practices) of the Request For Proposal dated 09.11.2016
issued for the instant project (“RFP”) which provides that if a bidder is
found by the Authority to have directly or indirectly or through an agent,
engaged or indulged, inter alia, in any corrupt practice, then such Bidder,
at the sole and absolute discretion of the Authority, shall not be eligible to
participate in any tender or RFP issued by the Authority during a period
of 2 (two) years.
6. Moreover, it is also important to highlight that General Financial
Rules (“GFR”) 2017 vide Rule 151 (iii) provide that a procuring entity
may debar a bidder or any of its successor, from participating in any
procurement process undertaken by it, for a period not exceeding two
years, if it determines that the bidder has breached the code of integrity.
7. In view of the aforesaid transgression, M/s PNC Infratech Ltd,
PNC Khajuraho Highways Pvt. Ltd. and M/s PNC Bundelkhand Highways
Private Limited have put their reliability and credibility into question and
indulged into the corrupt practice, therefore, they are liable to be
proceeded against as per the actions envisaged under Article 3 (2) of the
IP and GFR 2017 read with Clause 4.2 & 4.3 of Section 4 of the RFP.
However, before taking any action and in order to comply with the
principles of natural justice, the Authority hereby issues this Show Cause
Notice to both the entities mentioned above to show cause as to why action
should not be taken to debar/blacklist them, for breaching Article 2(a) of
the IP and Clause 4 of Section 4 of the RFP as per MoRTH Guideline
dated 18.08.2022 from participating in future tenders/contract award
process, as per Article 3(2) of IP, Rule 151(iii) of GFR 2017 read with
Office Memorandum No. NH-35014/20/2020-H-Part(2) dated 18.08.2022
of the Ministry of Road Transport & Highways and Clause 4.2 & 4.3 of
Section 4 of the RFP.
8. The reply(ies) from both the aforementioned companies in the
matter should be received within 15 days of receipt of this letter i.e. on or
before 14.09.2024. In case, no response is received by the said date it will
be presumed that the said companies don’t have anything to say in the
matter and action will be taken as proposed herein above which includes
debarment/blacklisting without further notice to them as per Contractual
provisions, extent guidelines issued from time to time by Ministry of
Finance Govt of India & MORTH.
9. This is issued without prejudice to any other rights and remedies
that the Authority may have, now or in future, against the abovenamed
companies, whether in law, contract or otherwise.”
13.6 The swift action taken by the Respondent No.2, far from
indicating a pre-meditated conclusion, demonstrates an efficient response to
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serious concerns that were properly detailed and disclosed. Consequently,
the Court holds that the Petitioners’ allegations of a biased or pre-
determined approach are unfounded and fail to meet the threshold for
establishing a breach of natural justice. The Petitioners submitted a detailed
reply to the SCN on 14th September, 2024, denying all allegations.
Subsequently, NHAI, via its letter dated 18th September, 2024, forwarded all
pertinent documents related to the matter to MoRTH, as the OM vests
MoRTH with the authority to impose debarment in cases involving pre-
conviction corruption or criminal allegations. MoRTH, in turn, issued an
SCN to the Petitioner on 20th September, 2024, instructing them to submit
all relevant documents and evidence by 30th September, 2024. Additionally,
MoRTH directed the Petitioner to attend a hearing, either in person or
through an authorized representative, scheduled for 30th September, 2024, at
11:00 AM.
13.7 As the Petitioners were unable to attend the hearing, at their
request, MoRTH, through another communication dated 30th September,
2024, directed Petitioner to appear on 18th October, 2024 at 11:00 AM and
submit documents.
13.8 MoRTH conducted a hearing for the Petitioner, attended by
NHAI officers, before issuing a reasoned order on 18 th October, 2024,
imposing a one-year debarment. Pertinently, SCNs were issued by both
NHAI and MoRTH, each explicitly detailing the allegations against the
Petitioner and the potential consequences. Following this, the Petitioner was
provided the opportunity to file comprehensive written submissions and
present its case at a personal hearing.
13.9 The Court finds that the Respondents’ actions complied with
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both the letter and spirit of the natural justice principles, offering the
Petitioners a legitimate chance to defend the allegations.
13.10 The Court also does not find merit in Petitioners’ assertion that
the Impugned Order, did not deal with, or even refer to the grounds and
submissions in the detailed Written Submissions running into more than 700
pages. The Impugned order was passed by MoRTH after considering the
Petitioner’s arguments, as noted in the very same order. The issuance of
SCNs and the involvement of both NHAI and MoRTH exhibit a deliberate
and comprehensive review process, ensuring that all allegations were
conveyed transparently to the Petitioner. This procedural thoroughness
suggests an intention to uphold due process rather than hastily implement
debarment. Additionally, the opportunity for a personal hearing allowed the
Petitioner to present clarifications in person, a step that further demonstrates
the Respondents’ adherence to procedural fairness. This approach
underscores that the Respondents fully adhered to the principles of natural
justice, affording the Petitioner every opportunity to respond and defend its
position. The allegations of a pre-determined or biased mindset are therefore
unsubstantiated, as the procedural record demonstrates a fair, balanced, and
transparent process by the Respondents.
13.11 In Diwan Chand Goyal v. National Capital Region Transport
Corporation12 this court has detailed the principles of debarment by
analysing several judgments of the Supreme Court and has inter alia, held
that the order of blacklisting ought to contain reasons but the reasons need
not be detailed or elaborate. It is sufficient to give brief reasons. Further
reasons can also be inferred from the documents on record and not
12
W.P. (C) 3301 of 2020
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necessarily be contained in the Impugned order.
Conclusion
14. In light of the foregoing analysis, the Court finds no merit in the
Petitioners’ contentions challenging the Impugned order or the SCN. The
Respondents, through NHAI and MoRTH, adhered to a structured process
that safeguarded procedural fairness and complied with the principles of
natural justice. The record demonstrates that the Petitioner was adequately
informed of the allegations and given sufficient opportunity to present its
case, both through written submissions and a personal hearing.
15. The Impugned decision was based on a reasoned assessment of
credible evidence, as outlined in the Show Cause Notice, the chargesheet,
and the Impugned order. The Respondents acted within their statutory
discretion, and the decision to impose debarment is neither arbitrary nor
capricious. Allegations of a pre-determined mindset or undue haste are
unfounded, as the Respondents followed due process with transparency and
diligence. The preventive action taken is in furtherance of the public policy
objectives to maintain integrity in public procurement and contracting.
16. Accordingly, the writ petitions stand dismissed, with no grounds for
interference in the Respondents’ decision to impose debarment. This Court
finds no reason to substitute its own judgment for that of the competent
authority, which has exercised its discretion lawfully and rationally in light
of the evidence presented.
17. The Court also finds no merit in the Petitioners’ challenge to the SCN
or the Impugned OM.
18. Before parting, it is clarified that the observations regarding the
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sufficiency of evidence against the Petitioner- PNC Infratech Limited, its
directors and other employees are limited to the finding of a breach of the
Integrity Pact by the Petitioners. The Court’s observations on the FIR or
chargesheet shall not prejudice rights and contentions of any of the
Petitioners or influence the ongoing criminal proceedings.
19. Dismissed, along with pending applications.
SANJEEV NARULA, J
OCTOBER 29, 2024
d.negi
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