Tripura High Court
Srei Infrastructure Finance Limited vs State Of Tripura Represented By … on 25 September, 2024
Author: Arindam Lodh
Bench: Arindam Lodh
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HIGH COURT OF TRIPURA
AGARTALA
WP(C) No. 260 of 2024
SREI Infrastructure Finance Limited, having its registered office at
"Viswakarma", 86C, Topsia Road (South), Kolkata-700046 and its corporate
office at Room No. 12 & 13, 6A, Kiran Shankar Roy Road, Kolkata -
700001; being represented by Mr. Sohan Kumar Jha being the Authorized
Signatory as per resolution taken by Board of Directors dated 26.02.2024
...... Petitioner(s)
VERSUS
1. State of Tripura represented by Director, Urban Development Department,
Government of Tripura, 5th Floor, UD Bhawan, Sakuntala Road, near
Rabindra Bhawan, Agartala, Tripura (W) PIN: 799001.
2. Chief Engineer, Urban Development Department, Government of Tripura,
5th Floor, UD Bhawan, Sakuntala Road, near Rabindra Bhawan, Agartala,
Tripura (W) PIN : 799001
...... Respondent(s)
For petitioner(s) : Mr. Jishnu Saha, Sr. Advocate
Mr. RG Chakraborty, Advocate
Ms Suprana Sardar, Advocate
For Respondent(s) : Mr. SS Dey, Advocate General
Mr. Kohinoor N Bhattacharyya, GA
Mr. Raju Datta, Advocate
Ms. A Chakraborty, Advocate
Date of hearing : 18.09.2024
Date of pronouncement : 25.09.2024
Whether fit for reporting : YES
HON'BLE THE CHIEF JUSTICE MR. APARESH KUMAR SINGH
HON'BLE MR. JUSTICE ARINDAM LODH
JUDGMENT AND ORDER
This writ petition seeks quashing of the order dated 5 th October,
2023 issued by the respondents whereby the petitioner has been blacklisted
for a period of three years and debarred from participating in the tender
process for any work advertised by the Government of Tripura (Annexure-1
to the writ petition).
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2. The order of blacklisting has been passed after approval of the
resolution plan under Section 31 of the Insolvency and Bankruptcy Code,
2016 on 11th August, 2023 by the learned NCLT, Kolkata whereby the
petitioner’s management has been transferred to a new management. Earlier
the petitioner was blacklisted vide order dated 6th March, 2023 and debarred
from participating in any tender process for any work of the Government of
Tripura. This was the subject matter of challenge in WP(C) No.271 of 2023
wherein this court vide order dated 29th May, 2023 quashed the blacklisting
order dated 6th March, 2023. Thereafter, the impugned order of blacklisting
has been passed.
3. The genesis of the dispute is the allotment of work for providing
consultancy services for the Geographic Information System (GIS) based
Master Plan Formulation for 20 cities in the State of Tripura under Tripura
Town and Country Planning Act, 1975 as per the Request for Proposal issued
on 23rd August, 2017 by the respondent.
4. As per the averments of the petitioner, the work was awarded
after opening of price bids vide letter of acceptance dated 29 th November,
2018 for a sum of Rs.4,77,90,000/- (Rupees Four Crore Seventy Seven Lakh
and Ninety Thousand only). The petitioner furnished a Performance Bank
Guarantee of Rs. 95,58,000/- (Rupees Ninety Five Lakhs and Fifty Eight
thousand only) on 14th December, 2018. Parties entered into an agreement on
7th January, 2019 wherein the petitioner was engaged to provide consultancy
services for the above work. The petitioner was asked to complete the work
within 345 days from the date of signing of the contract vide letter dated 8 th
January, 2019. He submitted an inception report on 25th January, 2019. In the
first meeting of the Consultancy Evaluation and Review Committee of the
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AMRUT sub-scheme for formulation of Master Plan held on 26th March,
2019 it was decided that the petitioner would finalize the planning areas of 20
towns. The first installment of consultancy fee was also recommended for
release. Thereafter, the petitioner submitted the base map of the master plan
for the city of Agartala and 19 towns in Tripura on 15 th November, 2019. A
sum of Rs. 95,58,000/- (Rupees Ninety Five Lakhs and Fifty Eight thousand
only) was sanctioned towards 20% of the consultancy fee on approval of the
base map on 25th November, 2019. On 13th December, 2019 a cheque of
Rs.84,11,040/- (Rupees Eighty Four Lakhs Eleven Thousand and Forty only)
was issued in favour of the petitioner. The respondents granted extension of
time for completion of the project on 21st December, 2019.
5. The respondents further issued a memorandum for sanction of
Rs.9,58,443/- (Rupees Nine Lakhs Fifty Eight thousand Four hundred and
Forty Three only) towards payment of income tax. The petitioner submitted
the Differential Global Positioning System Survey Report for remaining three
towns in Tripura on 5th February, 2020. On 7th February, 2020 the petitioner
submitted the Revised Socio-Economic Report for 20 towns in the State of
Tripura. On 17th February, 2020 it submitted the Secondary Data Collection
Report which included the crime report for the last three years, education
data, tourism data and industry data for 20 cities in Tripura for the project of
Preparation of GIS based Master plan for Agartala and 19 cities in Tripura.
6. On 24th March, 2020 a nationwide lockdown was imposed by the
Central Government to restrict the spread of Novel Corona Virus. This,
according to the petitioner, brought the entire system to a standstill. Petitioner
sought extension of timeline vide letter dated 14 th August, 2020. The
petitioner also informed that the planning area had increased by three-folds
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which is not as per the agreement and requested the respondent to increase the
consultancy fee proportionately and also the timeline for the period on 25 th
August, 2020.
7. On 24th December, 2020 the respondents granted time extension
for completion of the project work till 30th June, 2021. Petitioner again sought
extension of timeline vide letter dated 19th July, 2021. He submitted GIS data
for Agartala & Khowai to the respondents on 4th August, 2021. The
respondents further granted extension of time for completion of project till
31st December, 2021 vide letter dated 1st September, 2021. On 8th October,
2021 the petitioner was admitted into Corporate Insolvency Resolution
Process (CIRP) by the National Company Law Tribunal, Kolkata Bench in
CP (IB No. 295/KB/2021) under the Insolvency and Bankruptcy Code, 2016.
8. Further, correspondences ensued between the parties and the
respondents provided time extension till 22nd July, 2022 vide letter dated 21st
January, 2022. On 1st August, 2022 the respondents issued a communication
to the petitioner granting extension of time regarding formulation of master
plan for Agartala and 19 towns of Tripura up to 30th June, 2023. Thereafter,
the Tripura Urban Planning and Development Authority (TUDA) vide letter
dated 22nd September, 2022 expressed its dis-satisfaction with the progress
and delay in the completion of project work despite extension of time granted
to the petitioner. The petitioner replied on 22nd July, 2022.
9. On 15th December, 2022 a show cause notice was issued to the
petitioner regarding termination of the contract under clause 2.9 of the
Agreement. The petitioner furnished reply on 21st December, 2022. Again on
23rd December, 2022 the respondents issued another notice to the petitioner as
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to why punitive action be not taken against it. Thereafter, on 27th December,
2022 the bank performance guarantee of Rs. 95,58,000/- (Rupees Ninety Five
Lakhs and Fifty Eight thousand only) submitted by the petitioner was
forfeited by the respondents. Petitioner submitted his reply to the 2nd Show
cause notice on 28th December, 2022 reiterating his stand in the reply dated
21st December, 2022.
10. On 6th March, 2023 the notice of termination was issued in view
of clause 2.9.1(a), 2.9.1(b), 2.9.1(g) and 2.9.1(h) of the agreement dated 7 th
January, 2019. The petitioner requested the respondents to withdraw the
notice dated 14th March, 2023 vide letter dated 22nd March, 2023. Thereafter,
the petitioner approached this court on 26th April, 2023 for quashing the letter
dated 6th March, 2023 whereby the contract was terminated and the
performance security of Rs. 95,58,000/- (Rupees Ninety Five Lakhs and Fifty
Eight thousand only) was forfeited and also challenged the blacklisting and
debarment of the petitioner.
11. This court vide order dated 29th May, 2023 passed in
WP(C)271/2023 quashed the letter dated 6th March, 2023 in the following
terms:
“[6] Learned Advocate General submits that having regard to the
limited issue at hand it would be proper that the matter may be remitted
to the competent authority to take a fresh decision as regards the issue of
blacklisting.
[7] We have considered the submissions of learned counsel for the
parties and taken note of the limited gamut of facts in connection with
the impugned order of blacklisting contained in the letter dated
06.03.2023 [Annexure-44]. It appears from a bare perusal of the two
show-cause notices at Annexure-37 and Annexure-39 dated 15.12.2023
and dated 23.12.2022 that no notice in the eye of law had been issued
upon the petitioner proposing to blacklist him and also indicating the
proposed quantum of penalty of blacklisting. In this regard, it is apposite
to quote the ratio rendered by the Apex Court in case of Gorkha
Security Services versus Government (NCT of Delhi) and others
reported in (2014) 9 SCC 105, paragraphs 21 and 22 of which are
reproduced hereunder :
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“21.The central issue, however, pertains to the requirement of
stating the action which is proposed to be taken. The fundamental
purpose behind the serving of show-cause notice is to make the
notice understand the precise case set up against him which he has
to meet. This would require the statement of imputations detailing
out the alleged breaches and defaults he has committed, so that he
gets an opportunity to rebut the same. Another requirement,
according to us, is the nature of action which is proposed to be
taken for such a breach. That should also be stated so that the
noticee is able to point out that proposed action is not warranted
in the given case, even if the defaults/breaches complained of are
not satisfactorily explained. When it comes to blacklisting, this
requirement becomes all the more imperative, having regard to
the fact that it is harshest possible action.
22. The High Court has simply stated that the purpose of
show-cause notice is primarily to enable the notice to meet the
grounds on which the action is proposed against him. No doubt,
the High Court is justified to this extent. However, it is equally
important to mention as to what would be the consequence if the
noticee does not satisfactorily meet the grounds on which an
action is proposed. To put it otherwise, we are of the opinion that
in order to fulfill the requirements of principles of natural justice,
a show-cause notice should meet the following two requirements
viz:
(i) The material/grounds to be stated which according to the
department necessitates an action;
(ii) Particular penalty/action which is proposed to be taken. It
is this second requirement which the High Court has failed to
omit. We may hasten to add that even if it is not specifically
mentioned in the show- cause notice but it can clearly and safely
be discerned from the reading thereof, that would be sufficient to
meet this requirement.”
[8] The position in law has been consistently followed thereafter by the
Apex Court as held in case of Vetindia Pharmaceuticals Limited versus
State of Uttar Pradesh and another reported in (2021) 1 SCC 804.
Perusal of the impugned order also shows that there is no reference of
any show-cause preceding the order of blacklisting neither any reference
to consideration of any reply thereto by the petitioner as there was no
show- cause notice for blacklisting. Therefore, order of blacklisting is not
only vitiated for lack of compliance of principles of natural justice but
also shows complete non-application of mind.
[9] As such, the impugned order of debarment and blacklisting as
contained in the letter dated 06.03.2023 is quashed. However, the
respondents are at liberty to take a fresh decision, in accordance with
law, after a proper show-cause notice within a stipulated time. Let it be
made clear that we have not made any comments on merits of the case.
[10] The writ petition is allowed in the manner and to the extent
indicated above.
Pending application(s), if any, also stands disposed of.”
12. This court vide its order dated 15th May, 2023 passed in the same
writ petition had clearly indicated that the issue of termination of agreement is
not required to be gone into in writ jurisdiction as the petitioner has an
alternative remedy through arbitration or before the competent Civil Court,
more so, for the reason that the adjudication on the subject may involve
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determination on disputed questions of fact and evidence as may be required to
be adduced by the rival parties.
13. Thereafter, vide letter dated 6th June, 2023 the petitioner invoked the
arbitration clause No. 8.2 of the agreement letter dated 7th January, 2019 for
reference of the dispute relating to invocation of Performance Bank Guarantee by
the respondents of Rs. 95,58,000/- (Rupees Ninety Five Lakhs and Fifty Eight
thousand only).
14. The respondents on 10th July, 2023 issued another show cause
notice for blacklisting the petitioner for a period of three years. The petitioner
submitted its reply vide letter dated 25th July, 2023 and requested for withdrawal of
the show cause notice. Thereafter on 11th August, 2023 the learned NCLT, Kolkata
approved the resolution plan of the National Asset Reconstruction Company Ltd.
(hereinafter referred to as “NARCL”) of the successful resolution applicant of the
petitioner under Section 31 of the IBC. The respondents replied to the letter dated
25th July, 2023 of the petitioner. Further replies were given by the petitioner on 17 th
August, 2023 reiterating its stand and refuting the allegations made in the letter
dated 11th August, 2023. Finally, the impugned order was passed on 5th October,
2023 blacklisting the petitioner for a period of three years and debarring him from
participating in any tender process for the works advertised by the Government of
Tripura.
15. Thereafter, an Arbitral Tribunal was constituted on reference of
the dispute raised by the petitioner. Petitioner had invoked the arbitration
proceeding with a claim for damages due to illegal termination of the
agreement and illegal invocation of the bank guarantee along with interest
thereupon. However, after filing its claim statement it also sought quashing to
the blacklisting order dated 5th October, 2023 and for restraining
them from giving effect to the order of blacklisting till
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disposal of the arbitration proceedings. The learned Arbitral Tribunal by a
majority of 2:1 dismissed the application filed under Section 17 of the Act of
1996 and held that the order dated 5th October, 2023 was outside the purview
of the arbitration proceedings. Thereafter the present writ petition has been
preferred.
16. The following grounds have been raised on behalf of the
petitioner to challenge the order of blacklisting dated 5th October, 2023:
17. That with the approval of the resolution plan of the petitioner
under Section 31 of the Insolvency and Bankruptcy Code, 2016, all prior
liabilities of the petitioner, apart from those provided for in the resolution
plan, stood extinguished. The mandate of Section 31 of the Code is aimed at
enabling the insolvent corporate debtor to start with a clean slate under the
new management. Therefore, there could be no basis or justification for
blacklisting the petitioner after approval of the resolution plan transferring the
management of the petitioner to an entirely new entity. Reliance has been
placed on the case of Ghanashyam Mishra & Sons Pvt. Ltd. Vs. Edelweiss
Asset Reconstruction Co. Ltd., (2021) 9 SCC 657, paragraphs 61, 65, 93 and
102 in order to submit that one of the dominant objects of the I&B Code is for
revival of the corporate debtor in order to make it a growing concern. The
further case of the petitioner is that Section 32A of the Code was introduced
with an objective that the liability of a corporate debtor for an offence
committed prior to the commencement of the corporate insolvency resolution
process shall cease, and the corporate debtor shall not be prosecuted for such
an offence from the date the resolution plan has been approved by the
Adjudicating Authority under Section 31, if the resolution plan results in the
change in the management and control of the corporate debtor to a person
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who was not a promoter or in the management and control of the corporate
debtor. The object behind introducing Section 32A in the Code of 2016 has
been referred to in the case of Manish Kumar Vs. Union of India & Anr.,
(2021) 5 SCC 1 paragraphs 317 to 329.
17.1. It is submitted that sub-section (2) of Section 32A declares a bar
against taking any action against the property of the corporate debtor. Section
3(27) of the Code defines “property” as including money, goods, actionable
claims, land and every description of property situated in India or outside
India and every description of interest including present or future or vested or
contingent interest arising out of, or incidental to, property. Therefore, it is the
submission of the petitioner that property of the corporate debtor would
include its goodwill and reputation in the play and that any decision against
such property of the corporate debtor will be barred. Reliance is also placed
on the decision of P. Mohanraj & Ors., Vs Shah Brothers Ispat Private Ltd.,
(2021) 6 SCC 258, paragraph 41 in support of the aforesaid submission. The
new management should be allowed to make a clean break with the past and
start with a clean slate as the amended provision has the objective of value
maximization and the need to obviate lower recoveries to creditors as a result
of corporate debtor continuing to be exposed to criminal liability. It is the
submission of the petitioner that the provisions of this nature should receive
purposive construction. Reliance is placed on the case of Ramesh Kymal Vs.
Siemens Gamesa Renewable Power Private Limited, (2021) 3 SCC 224,
paragraph 31 while interpreting Section 10A of the Code.
17.2 Based upon the aforesaid decision, it is submitted that when a
resolution plan takes off and the corporate debtor is brought back into the
economic main stream, it is able to repay its debts, which, in turn, enhances
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the viability of credit in the hands of banks and financial institutions. Above
all, the interests of all stakeholders are looked after as the corporate debtor
itself becomes a beneficiary of the resolution scheme, workers are paid, the
creditors in the long run will be repaid in full and the shareholders/investors
are able to maximize their investment. Petitioner has also referred to the
decision in Bank of Baroda & Anr. Vs. MBL Infrastructures Limited &
Anr, (2022) 5 SCC 661, paragraph 43 on the purposive interpretation of
Section 29A(h) of the Code where the Apex Court has once again relied on
the observations in the case of Swiss Ribbons (P) Ltd. Vs. Union of India,
(2019) 4 SCC 17. Further reliance has also been placed on the case of Anuj
Jain, Interim Resolution Professional for Jaypee Infratech Limited Vs. Axis
Bank Limited & Ors., (2020) 8 SCC 401, paragraphs 28.4, 28.5 and 50.1 on
the purposive interpretation of Section 43 of the Code.
18. Based on these submissions, it is urged that the blacklisting order
dated 5th October, 2023 if not interfered shall have the effect of impairing the
right of the new management of the petitioner to carry on the petitioner’s
business on a clean slate under the resolution plan. Reference is also made to
Section 238 of the Code of 2016 which provides that the provisions of this
Code will override other laws.
19. Learned Senior counsel for the petitioner has assailed the order
of blacklisting based on the doctrine of proportionality. It has been argued
that an order of blacklisting has civil consequences and operates to the
prejudice of a commercial person not only in praesenti but also puts a taint
which attaches far beyond and may well spell the death knell of the
organization/Institution for all times to come. Reliance has been placed on the
case of Vetindia pharmaceuticals Ltd. Vs. State of Uttar Pradesh & Anr,
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(2021) 1 SCC 804, in particular paragraph 12 thereof, to submit that a
simplicitor breach of contract cannot justify an order of blacklisting.
Reference has also been made to the case of JP Iscon Pvt. Ltd. Vs. State of
Gujarat MANU/GJ/1647/2021, paragraph 95 to 99, where the case of
Erusian Equipment and Chemicals Ltd. Vs. State of West Bengal & Anr.,
(1975) 1 SCC 70 has been also relied upon. The Gujarat High Court has held
that if a contractor is to be visited with the punitive measure of blacklisting on
account of an allegation that he has committed a breach of a contract, the
nature of his conduct must be so deviant or aberrant so as to warrant such a
punitive measure. A mere allegation of breach of contractual obligations that
is disputed, per se, does not invite any such punitive action.
20. Petitioner has also referred to similar observations made in the
case of Medico Remedies Limited through its Director Harsu Mehta Vs.
Municipal Corporation of Greater Mumbai and Others, 2020 SCC OnLine
Bom 4498, paragraph 25. Petitioner has relied upon a recent decision of the
Apex Court in The Blue Dreamz Advertising Pvt. Ltd. & Anr. Vs. Kolkata
Municipal Corporation & Ors., 2024 SCC OnLine SC 1896 and submitted
that where the case is of an ordinary breach of contract and the explanation
offered by the person concerned raises a bona fide dispute,
blacklisting/debarment as a penalty ought not to be resorted to as it
tantamounts to civil death for a certain number of years inasmuch as the said
person is commercially ostracized resulting in serious consequences for the
person and those who are employed by him. Too readily invoking the
debarment for ordinary cases of breach of contract where there is a bona fide
dispute, is not permissible. Each case, no doubt, would turn on the facts and
circumstances thereto.
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21. It is the case of the petitioner that the respondent while passing
the blacklisting order on 5th October, 2023 did not take into account that
petitioner had been admitted into insolvency on 8 th October, 2021 and its
insolvency has been resolved by approval of the resolution plan of the
successful resolution applicant on 11th August, 2023 which not only
extinguished all liability of the petitioner apart from those provided for in the
resolution plan, but also resulted in change of the management of the
petitioner in its entirety. The respondents have failed to take into account the
fact that the object of extinguishing all liability of the petitioner, apart from
those provided for in the resolution plan, and the object of changing the
management in its entirety, was to allow the petitioner, under the new
management, to start on a clean slate. The impugned order is clearly arbitrary
and passed mechanically without any application of mind. It is also in
violation of the principles of natural justice as the respondents did not deal
with the petitioner’s contention in response to the notice of blacklisting dated
10th July, 2023. Petitioner had duly submitted its reply in detail on 25 th July,
2023 and thereafter again on 11th August, 2023 and 17th August, 2023. The
order of blacklisting is also bad as there is no finding that the petitioner’s
conduct was so deviant that it warranted the imposition of the penalty of
blacklisting of the petitioner. Further, the respondent proceeded to pass the
order of blacklisting notwithstanding the fact that the contract itself provided
for furnishing of performance security by the petitioner, which the respondent
had already invoked and encashed.
22. In the aforesaid factual background and legal submissions,
learned senior counsel Mr. Jishnu Saha has prayed that the order of
blacklisting deserves to be quashed as otherwise it would defeat the very
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object of the revival of the company under the resolution plan approved by
the NCLT, Kolkata under Section 31 of the I&B Code, 2016. The order also
suffers on grounds of proportionality and violation of principles of natural
justice as the grounds raised in the petitioner’s reply have not been dealt with.
23. The State has been represented by Mr. SS Dey, learned Advocate
General. It is contended that the order of blacklisting is liable to be upheld on
the following grounds:
(i) The agreement was signed between the parties on 7th
January, 2019 with full consent of the parties agreeing to all the
terms and conditions to complete the work in all respects.
Respondent No.2 extended time on several occasions for
completion of the works but each time the duration lapsed. The
petitioner never supplied the relevant inputs and deliverables to
the respondent No.2.
(ii) The base maps provided by the petitioner failed to
meet with the reality when ground checking was done by the
respondent No.2 as the base maps did not concede with the
satellite images received from NRSC and the said deviations
were not even considered and there were other defects with the
base maps submitted by the writ petitioners. The digitization
work done by the petitioner was found to be very poor and not
considerable, many of the features visible in the satellite images
were not digitized at all or wrongly digitized, the draft base
maps did not contain the revenue plot boundaries/settlement
survey sheets and the classification and attached attributes were
found to be not matching with ground reality.
(iii) Similarly, the socio-economic survey submitted by
the writ petitioner was not acceptable by the respondent No.2 as
the estimated error in the survey was found to be about 74%. An
amount of Rs.95,58,000/- was accorded to the petitioner
towards the payment of 20% consultancy fee for preparation of
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the Master Plan of 20 towns of Tripura vide letter dated 25 th
November, 2019 and in addition to that, a cheque amounting to
Rs.84,11,040/- was also issued in favour of the petitioner but
only 1-2% of the work was completed by the petitioner and the
documents submitted by the writ petitioner in support of their
bill were also found to have errors both in presentation as well
as in methodology.
(iv) In the CERC review meeting dated 03.11.2020
which was conducted in presence of the officials of the
respondents and the representatives of the writ petitioner it was
specifically observed that the progress of the project after 22
months from the date of work order was negligible.
(v) Similarly in the review meting dated 08.12.2020 it
was specifically observed that the manpower deployment
schedule submitted by the consultant was very sketchy and the
deployment period was not clearly mentioned. On-site
deployment of experts was negligible looking at the type of
work in 20 cities at a time. No approval was sought from the
respondents before engaging sub-consultant/Technical
professional which attracted Clause No.3.6 of General
Conditions of Contract.
(vi) The petitioner through its letter dated 17.11.2022
expressed their inability to carry out the project which is not a
formal way to terminate the agreement from their part. The
petitioner cannot simply walk away from the execution of the
work putting the respondent in uncertainty.
(vii) The writ petitioner company made false statement
and did not disclose the fact that CIRP Order was passed on
08.10.2021. Rather, on 17.11.2022 they expressed their inability
to further carry on the work after more than 1(one) year from
the date of passing of CIRP Order dated 08.10.2021, which
showed that the petitioner did not have the intention to execute
the work. This hampered the vision and work program of the
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Government of Tripura to utilize the proposed master plan for
different government works for the benefit of the people.
24. Therefore, failure of the petitioner to execute the work and its
unprofessional conduct made it liable to be blacklisted and debarred for a
period of three years. The impugned order of blacklisting has been passed
after a proper show cause asking the writ petitioner as to why it should not be
blacklisted for three years and debarred from participating in any such process
under the government of Tripura. Only upon consideration of the petitioner’s
reply on 25th July, 2023, the impugned order dated 5 th October, 2023 has been
passed debarring the petitioner from participating in any tender process under
the Government of Tripura for a period of three years. It is submitted that
long before the resolution plan was approved by the National Company Law
Tribunal, Kolkata vide order dated 11th August, 2023 the process for
blacklisting was initiated by the respondent, i.e. vide show cause notice dated
10th July, 2023. The petitioner even did not inform the respondent No.2
regarding the passing of the order dated 11th August, 2023. The blacklisting
order is not in contravention of the judgment passed by the NCLT, Kolkata
which has been upheld by the Apex Court.
25. It has been argued that both proceedings are independent and
separate in nature. Petitioner is vaguely trying to connect two separate issues.
There is no bar on the respondent in passing the order of blacklisting on
account of approval of the resolution plan by the learned NCLT vide order
dated 11th August, 2023.
26. It is submitted that the petitioner has approached the Arbitral
Tribunal against the order of blacklisting to which written objection was
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submitted by the respondents. The learned Arbitral Tribunal has rejected the
application of the petitioner by a reasoned order dated 17 th February, 2024.
Therefore, there is no right in favour of the petitioner to approach this court
challenging the blacklisting order.
27. It is the case of the respondents that the Supreme Court has
recognized the power of debarment/blacklisting as an effective method of
disciplining deviant suppliers/contractors who have committed acts of
omission and commission, in the facts and circumstances of the case.
28. Respondents have placed reliance on the case of State of Odisha
& Ors. Vs. Panda Infraproject Limited, (2022) 4 SCC 706 in support of the
proposition that the impugned order of blacklisting does not suffer from any
violation of principles of natural justice as it has been passed after due show
cause notice upon the petitioner. Reliance is also placed on the case of Deep
Industries Ltd. Vs. ONGC & Anr., (2020) 15 SCC 706 wherein the Apex
Court has observed that the High Court under Article 226 and 227 should be
extremely circumspect in interfering with proceedings/orders passed under the
Arbitration and Conciliation Act, 1996 and it should interfere only in cases
where the orders are patently lacking in inherent jurisdiction. Therefore, once
the Arbitral Tribunal has refused to interfere in the blacklisting order this
court should not exercise its extra ordinary jurisdiction under Article 226 of
the constitution of India.
29. The respondents have also placed reliance on the case of
Sukanya Holdings (P) Ltd. Vs. Jayesh H Pandya & Others, (2003) 5 SCC
531, para 16 thereof in order to submit that the splitting of the cause of action
on the part of the petitioner by approaching this court against the order of
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blacklisting is not proper. Reliance is also placed on the case of Rashtriya
Ispat Nigam limited & Anr Vs. M/S Verma Transport Company, (2006) 7
SCC 275 para 42 thereof and Sukanya Holdings (P) Ltd.(supra), particularly
paragraphs 16 & 17 in support of their submission that the power to blacklist
is independent of the power to recover dues. Mere pendency of such
proceedings would not bar the exercise of power to blacklist. Permitting such
a challenge to be made by in an independent proceeding would only lead to
multiplicity of proceedings and conflicting views which are to be best
avoided.
30. Learned counsel for the respondents has distinguished the
judgments relied upon by the petitioner. While referring to the case of
Ghanashyam Mishra & Sons Pvt. Ltd. (supra), it is submitted that the
respondents have not initiated any claim against the petitioner and the
respondents are not creditors of the petitioner firm. Moreover, the petitioner
with mala fide intentions did not inform that they are undergoing resolution
process. Therefore, the decision is not applicable. Further, in context of the
decision in Vetindia pharmaceuticals Ltd. (supra) relied upon by the
petitioner, it is submitted that the impugned order of blacklisting has been
passed after due show cause notice upon the petitioner and consideration of
his reply. Therefore, this case is also not applicable to the present case. The
respondents have further distinguished the case of JP Iscon Pvt. Ltd. (supra)
on the ground that the petitioner has not only committed breach of contract
but suppressed information about the ongoing resolution process and by
supplying faulty base maps whereas they have received more than 20% of the
amount in advance but completed only 1.12% of the work even after repeated
extension of time.
Page 18 of 34
31. Respondents further contend that the decision in the case of
Medico Remedies Limited (supra) rendered by the Bombay High Court does
not help the petitioner’s case as no liquidated damages have been charged
from the petitioner. He has only been blacklisted after following the due
process of law. According to the respondents, the case of The Blue Dreamz
Advertising Pvt. Ltd. (supra) is also not applicable to the case of the present
petitioner as the present case is not of ordinary breach of contract. The order
of blacklisting was passed against the petitioner as he was found to be not
reliable and trustworthy in the context of a commercial transaction. The
respondents have suffered huge financial loss and dereliction in executing the
work on the part of the petitioner which deserves exemplary action.
32. Based on these submissions, the respondents have opposed the
challenge to the impugned order of blacklisting.
33. On the part of the State, it has also been argued by the learned
Advocate General that the revival of the company does not exclude or protect
the petitioner from the civil consequences arising from the breach of promise
resulting in delay in execution of the work despite several extensions by the
petitioner. It is the case of the respondents that while the I&B Code, 2016
provides for revival of the company and waiver from civil liabilities and also
prosecution under Section 32A of the I&B Code, the legislature has
consciously not provided for waiver of the imposition of penalty of
blacklisting or debarment upon an agency like the petitioner for gross mis-
conduct and also suppression of facts relating to the NCLT proceedings
before the respondents. The order dated 8th October, 2021 passed by the
learned NCLT, Kolkata whereby the petitioner was admitted to corporate
Page 19 of 34
insolvency resolution process was not even brought to the notice of the
respondents.
34. After the earlier order of blacklisting was set aside by this court
on the ground of violation of principles of natural justice, the respondents
have complied with the requirements of a proper show cause notice
containing the ingredients of charge or misconduct and also the proposed
penalty upon the petitioner and only after proper consideration of the reply of
the petitioner, imposed the penalty of blacklisting which is proportionate to
the established misconduct on the part of the petitioner in the execution of the
project. The entire process of town planning has suffered because of delay in
finalizing of the master plan due to the acts and omissions of the petitioner
who was engaged for providing consultancy services for Geographic
Information System for preparation of master plan for 20 cities in the State of
Tripura.
35. Both the sides have relied upon decisions on the effect of
approval of the resolution plan for the revival of the Company under I&B
Code and also on the issue as to the proportionality of the penalty imposed
upon the petitioner.
36. We have heard learned counsel for the parties. Upon
consideration of the rival submissions of the learned counsel for the parties
and the materials placed from record and also the impugned order dated 5th
October, 2023 whereby the petitioner has been blacklisted for a period of
three years and further debarred from participating in any tender process for
works advertised by the Government of Tripura, the following question arises
for determination:
Page 20 of 34
Whether the order of blacklisting dated 5th October, 2023 is
proper in the eye of law and on facts?
37. Upon consideration of the rival submission of the parties in the
gamut of the facts and circumstances of the case, as noted above, we are of
the considered view that the impugned order of blacklisting for a period of
three years and debarment of the petitioner from participating in the future
tender processes for any work advertised by the Government of Tripura
cannot be held to be proper in the eye of law for the reasons recorded
hereinafter.
38. The object of revival of a sick company on approval of the
resolution plan by the NCLT is intended to provide a clean slate for the
company to ensure that the new management makes a clean break from the
past. The resolution plan of the successful resolution applicant has been
approved under Section 31 of the I&B Code by the learned NCLT vide its
order dated 11th August, 2023 which is Annexure-2 to the writ petition. It
records that on the date of approval of the resolution plan by the adjudicating
authority all such claims which are not a part of resolution plan, shall stand
extinguished and no person will be entitled to initiate or continue any
proceedings in respect to a claim, which is not part of the resolution plan. It
has referred to the decision of the Apex Court in Ghanashyam Mishra &
Sons Pvt. Ltd (supra) wherein it has been held that once a resolution plan is
duly approved by the Adjudicating Authority under sub-section (1) of section
31, the claims as provided in the resolution plan shall stand frozen and will be
binding on the Corporate Debtor and its employees, members, creditors,
including the Central Govt. any State Govt. or any local authority, guarantors
and other stakeholders. The Apex Court also held that all dues including the
Page 21 of 34
statutory dues owed to the Central Govt. any State govt. or any local
authority, if not part of the resolution plan, shall stand extinguished and no
proceedings in respect of such dues for the period prior to the date on which
the Adjudicating Authority grants its approval under Section 31 could be
continued.
39. However, waiver sought in relation to guarantors would not be
allowed to operate in view of the judgment of the Apex Court in Lalit Kumar
Jain Vs. Union on India & Ors., 2021 SCC OnLine SC 396 as sanction of a
resolution plan and finality imparted to it by section 31 does not per se
operate as a discharge of the guarantor’s liability. With respect to the relief of
waivers sought for all inquiries, litigations, investigations and proceedings the
same shall be granted strictly as per the section 32A of the code and the
provisions of the law as may be applicable.
40. In case of non-compliance of the order or withdrawal of the
resolution plan, the payments already made by the Resolution Applicant shall
be liable for forfeiture. The moratorium imposed under Section 14 of the
Code shall cease to have effect from the date of the approval of the resolution
plan passed by the NCLT. In the present case, the erstwhile management of
the corporate debtor i.e. the present company has been replaced by a new
management.
41. In the case of Ghanashyam Mishra & Sons Pvt. Ltd (supra) the
apex court held that one of dominant objects of the I&B Code is to see that an
attempt has to be made for revival of the corporate debtor and make it a
running concern. The scheme of the I&B Code is therefore to make an
attempt by divesting the erstwhile management of its powers and vesting it in
Page 22 of 34
a professional agency to continue the business of the corporate debtor as a
going concern until a resolution plan is drawn up. The moratorium ceases to
operate under Section 14 once the adjudicating authority approves the
resolution plan. Once the resolution plan is approved, the management is
handed over under the plan to the successful applicant so that the corporate
debtor is able to pay back its debts and get back on its feet. At paragraph 93 of
the report, the Apex Court has again reiterated that the legislative intent
behind this is to freeze all the claims so that the resolution applicant starts on
a clean slate and is not flung with any surprise claims. The apex court held
that one of the principal object of the I&B Code is to provide for revival of
the corporate debtor and make it a growing concern.
42. In the case of Ghanashyam Mishra & Sons Pvt. Ltd (supra) the
issues before the apex court were three-fold:
“(i) As to whether any creditor including the Central Government, State
Government or any local authority is bound by the resolution plan once
it is approved by an adjudicating authority under sub-section (1) of
Section 31 of the Insolvency and Bankruptcy Code, 2016 (hereinafter
referred to as “the I&B Code”)?
(ii) As to whether the amendment to Section 31 by Section 7 of Act 26 of
2019 is clarificatory/declaratory or substantive in nature?
(iii) As to whether after approval of resolution plan by the adjudicating
authority a creditor including the Central Government, State
Government or any local authority is entitled to initiate any proceedings
for recovery of any of the dues from the corporate debtor, which are not
a part of the resolution plan approved by the adjudicating authority?”
43. The answer to the aforesaid questions has been provided in
paragraph 102 which is extracted hereinunder:
“102. In the result, we answer the questions framed by us as under:
102.1. That once a resolution plan is duly approved by the adjudicating
authority under sub-section (1) of Section 31, the claims as provided in
the resolution plan shall stand frozen and will be binding on the
corporate debtor and its employees, members, creditors, including the
Central Government, any State Government or any local authority,
guarantors and other stakeholders. On the date of approval of resolution
plan by the adjudicating authority, all such claims, which are not a part
of resolution plan, shall stand extinguished and no person will be entitled
Page 23 of 34to initiate or continue any proceedings in respect to a claim, which is not
part of the resolution plan.
102.2. The 2019 Amendment to Section 31 of the I&B Code is
clarificatory and declaratory in nature and therefore will be effective
from the date on which the I&B Code has come into effect.
102.3. Consequently all the dues including the statutory dues owed to the
Central Government, any State Government or any local authority, if
not part of the resolution plan, shall stand extinguished and no
proceedings in respect of such dues for the period prior to the date on
which the adjudicating authority grants its approval under Section 31
could be continued.”
44. In answering these issues, the Apex Court observed that the
dominant purpose of the Code is for providing revival of the corporate debtor
and to make it a going concern. At paragraph 93 of the judgment, the Apex
Court held as under:
“93. As discussed hereinabove, one of the principal objects of the I&B
Code is providing for revival of the corporate debtor and to make it a
going concern. The I&B Code is a complete Code in itself. Upon
admission of petition under Section 7 there are various important duties
and functions entrusted to RP and CoC. RP is required to issue a
publication inviting claims from all the stakeholders. He is required to
collate the said information and submit necessary details in the
information memorandum. The resolution applicants submit their plans
on the basis of the details provided in the information memorandum.
The resolution plans undergo deep scrutiny by RP as well as CoC. In the
negotiations that may be held between CoC and the resolution applicant,
various modifications may be made so as to ensure that while paying
part of the dues of financial creditors as well as operational creditors and
other stakeholders, the corporate debtor is revived and is made an on-
going concern. After CoC approves the plan, the adjudicating authority
is required to arrive at a subjective satisfaction that the plan conforms to
the requirements as are provided in sub-section (2) of Section 30 of the
I&B Code. Only thereafter, the adjudicating authority can grant its
approval to the plan. It is at this stage that the plan becomes binding on
the corporate debtor, its employees, members, creditors, guarantors and
other stakeholders involved in the resolution plan. The legislative intent
behind this is to freeze all the claims so that the resolution applicant
starts on a clean slate and is not flung with any surprise claims. If that is
permitted, the very calculations on the basis of which the resolution
applicant submits its plans would go haywire and the plan would be
unworkable.”
45. It is not in dispute that upon approval of the resolution plan by
the NCLT vide order dated 11th August, 2023 (Annexure-2 to the writ
petition) the erstwhile management of the company has been replaced by a
new management. The entire allegation of the respondents is directed against
the delay in execution of work on the part of the company represented
Page 24 of 34
through its erstwhile management. A Company, being a juristic person, is
managed by a set of promoters/directors. In this context, it is also necessary to
look into the provision of Section 32-A of the Code which provides protection
from criminal prosecution to the corporate debtor.
46. Section 32A provides for protection from liability of prior
offences of a corporate debtor, i.e. offences committed prior to the
commencement of the corporate insolvency resolution plan, and the corporate
debtor shall not be prosecuted for such an offence from the date the resolution
plan has been approved by the Adjudicating Authority under Section 31,
notwithstanding anything to the contrary contained in this Code or any other
law for the time being in force.
47. It provides that the corporate debtor shall not be prosecuted for
such an offence from the date the resolution plan has been approved by the
adjudicating authority under Section 31, and if the resolution plan results in
the change in the management or control of the corporate debtor to a person
who was not –
(i) a promoter or in the management or control of the corporate
debtor or a related party of such a person; or
(ii) a person with regard to whom the relevant investigating
authority has, on the basis of material in its possession reason to believe
that he had abetted or conspired for the commission of the offence, and
has submitted or filed a report or a complaint to the relevant statutory
authority or Court.
Provided that if a prosecution had been instituted during the
corporate insolvency resolution process against such corporate debtor,
it shall stand discharged from the date of approval of the resolution
plan subject to requirements of this sub-section having been fulfilled.
Page 25 of 34
48. Sub-section (2) of Section 32-A further provides that no action
shall be taken against the property of the corporate debtor in relation to an
offence committed prior to the commencement of the corporate insolvency
resolution process of the corporate debtor, where such property is covered
under a resolution plan approved by the Adjudicating Authority under section
31, which results in the change in control of the corporate debtor to a person,
or sale of liquidation assets under the provisions of Chapter III of Part II of
this Code to a person, who was not –
(i) a promoter or in the management or control of the corporate
debtor or a related party of such a person; or
(ii) a person with regard to whom the relevant investigating
authority has, on the basis of material in its possession reason to believe
that he had abetted or conspired for the commission of the offence, and
has submitted or filed a report or a complaint to the relevant statutory
authority or Court.
49. The explanation to this sub-section clarifies that an action against
the property of the corporate debtor in relation to an offence shall include the
attachment, seizure, retention or confiscation of such property under such law
as may be applicable to the corporate debtor. Sub-clause (ii) of this sub-
section further provides that nothing in this sub-section shall be construed to
bar an action against the property of any person, other than the corporate
debtor or a person who has acquired such property through corporate
insolvency resolution process or liquidation process under this Code and
fulfils the requirements specified in this section, against whom such an action
may be taken under such law as may be applicable.
50. Section 32-A of the I&B Code was introduced w.e.f. 28th
December, 2019 by Amendment Act 1 of 2020. The provisions of Section 31
Page 26 of 34
and Section 32-A when read together in the light of the opinion of the apex
Court rendered in the case of Ghanashyam Mishra & Sons Pvt. Ltd (supra)
and in the case of Swiss Ribbons (P) Ltd. (supra) do give an insight that the
entire purpose of the I&B Code is to ensure the revival of the corporate debtor
upon approval of the resolution plan by the adjudicating authority in order to
ensure a clean slate to the new management of the corporate debtor so that it
leads to value maximization of the assets of the company and obviate lower
recovery to the creditors as a result of the corporate debtor continuing to be
exposed to civil and criminal liability. The same view has been expressed by
the apex court in the case of P. Mohanraj & Ors. (supra) at para 41 which is
extracted hereunder:
41. Section 32-A cannot possibly be said to throw any light on the true
interpretation of Section 14(1)(a) as the reason for introducing Section
32-A had nothing whatsoever to do with any moratorium provision. At
the heart of the section is the extinguishment of criminal liability of the
corporate debtor, from the date the resolution plan has been approved
by the adjudicating authority, so that the new management may make a
clean break with the past and start on a clean slate. A moratorium
provision, on the other hand, does not extinguish any liability, civil or
criminal, but only casts a shadow on proceedings already initiated and
on proceedings to be initiated, which shadow is lifted when the
moratorium period comes to an end. Also, Section 32-A(1) operates only
after the moratorium comes to an end. At the heart of Section 32-A is the
IBC’s goal of value maximisation and the need to obviate lower
recoveries to creditors as a result of the corporate debtor continuing to
be exposed to criminal liability.
51. In the case of Bank of Baroda & Anr. (supra) once again while
interpreting Section 29A(h) of the I&B Code the supreme court relied upon
the observations in Swiss Ribbons (P) Ltd. (supra) and at para 43 observed as
under:
“43. The Code has got its laudable object. The idea is to facilitate a
process of rehabilitation and revival of the corporate debtor with the
active participation of the creditors. Thus, there are two principal actors
in the entire process viz. (i) the committee of creditors, and (ii) the
corporate debtor. The others are mere facilitators. There can never be
any other interest than that of the committee of creditors and the
corporate debtor. We do not wish to multiply the rationale behind the
enactment except by quoting the decision of this Court in Swiss Ribbons
(P) Ltd. v. Union of India [Swiss Ribbons (P) Ltd. v. Union of India,
(2019) 4 SCC 17] , which has also found acceptance by the subsequent
decision in Arun Kumar [Arun Kumar Jagatramka v. Jindal Steel &
Page 27 of 34Power Ltd., (2021) 7 SCC 474] : (Swiss Ribbons case [Swiss Ribbons (P)
Ltd. v. Union of India, (2019) 4 SCC 17] , SCC p. 55, paras 27-28)“27. As is discernible, the Preamble gives an insight into what is
sought to be achieved by the Code. The Code is first and foremost,
a Code for reorganisation and insolvency resolution of corporate
debtors. Unless such reorganisation is effected in a time-bound
manner, the value of the assets of such persons will deplete.
Therefore, maximisation of value of the assets of such persons so
that they are efficiently run as going concerns is another very
important objective of the Code. This, in turn, will promote
entrepreneurship as the persons in management of the corporate
debtor are removed and replaced by entrepreneurs. When,
therefore, a resolution plan takes off and the corporate debtor is
brought back into the economic mainstream, it is able to repay its
debts, which, in turn, enhances the viability of credit in the hands
of banks and financial institutions. Above all, ultimately, the
interests of all stakeholders are looked after as the corporate
debtor itself becomes a beneficiary of the resolution scheme–
workers are paid, the creditors in the long run will be repaid in
full, and shareholders/investors are able to maximise their
investment. Timely resolution of a corporate debtor who is in the
red, by an effective legal framework, would go a long way to
support the development of credit markets. Since more
investment can be made with funds that have come back into the
economy, business then eases up, which leads, overall, to higher
economic growth and development of the Indian economy. What
is interesting to note is that the Preamble does not, in any manner,
refer to liquidation, which is only availed of as a last resort if there
is either no resolution plan or the resolution plans submitted are
not up to the mark. Even in liquidation, the liquidator can sell the
business of the corporate debtor as a going concern.
28. It can thus be seen that the primary focus of the legislation is
to ensure revival and continuation of the corporate debtor by
protecting the corporate debtor from its own management and
from a corporate death by liquidation. The Code is thus a
beneficial legislation which puts the corporate debtor back on its
feet, not being a mere recovery legislation for creditors. The
interests of the corporate debtor have, therefore, been bifurcated
and separated from that of its promoters/those who are in
management. Thus, the resolution process is not adversarial to the
corporate debtor but, in fact, protective of its interests. The
moratorium imposed by Section 14 is in the interest of the
corporate debtor itself, thereby preserving the assets of the
corporate debtor during the resolution process. The timelines
within which the resolution process is to take place again protects
the corporate debtor’s assets from further dilution, and also
protects all its creditors and workers by seeing that the resolution
process goes through as fast as possible so that another
management can, through its entrepreneurial skills, resuscitate
the corporate debtor to achieve all these ends.””
52. Though the expression “blacklisting” has not been specifically
used in the I&B Code but the dominant intent of the legislature is to relieve
the corporate debtor and its new management from civil liabilities including
taxation and also from criminal prosecution from past offences. It can well be
understood that a penalty like blacklisting and debarment from participating
in future tender against the revived company would only defeat the dominant
Page 28 of 34object of the I&B Code. As otherwise, the company would not be able to
enter into any business on account of the scar and stigma operating due to
blacklisting and debarment imposed in respect of a contract which could not
been executed allegedly due to the wrong doings or negligence or deliberate
misconduct on the part of the erstwhile management of the company.
53. Apart from wrecking vengeance on the corporate debtor
operating with a new management which is not responsible for the past
misdeeds of the erstwhile management, such an order of blacklisting would
not serve any fruitful purpose. Rather it would defeat the corporate debtor
from reviving itself after approval of the resolution plan by entering into new
business. It is commonly known that nowadays in all such tender documents
floated by the state or its instrumentalities or even by private parties, the
bidders have to disclose their past history including whether they have been
blacklisted or debarred earlier. In such circumstances, the considerations of
the bids by the revived company would be vitiated, if its past continues to
haunt it.
54. The petitioners have assailed the impugned order of blacklisting
on the doctrine of proportionality as well. Relying upon the recent judgment
of the apex court in the case of The Blue Dreamz Advertising Pvt. Ltd.
(supra) it has been contended that in a ordinary breach of contract where a
party raises a bona fide dispute, blacklisting/debarment as a penalty ought not
to be resorted to as it amounts to civil death inasmuch as the said person is
commercially ostracized resulting in serious consequences for the person and
those who are employed by him.
Page 29 of 34
55. On the part of the respondent State, detailed justification on merit
of the allegations made by the company for the tardy progress and delay in
execution in work against the petitioner has been adverted but it is also
evident that for such acts of breach the respondents have terminated the
agreement and forfeited the performance bank guarantee of the petitioner for
Rs.95,58,000/-. The petitioner has claimed damages for illegal termination of
the agreement and invocation of bank guarantee which is a subject matter of
arbitration proceedings. The Arbitral Tribunal, however, refused to interfere
in the order of blacklisting as it was beyond the claim and dispute raised in
the arbitration proceeding.
56. From the above stand of the respondents, it can thus be seen that
the order of blacklisting has been passed being guided by the past misdeeds or
misconducts on the part of the erstwhile management of the Company in
execution of the contract. Whether such an action could be justified against
the company revived with a new management to start on a clean slate? The
objectives of the I&B Code are not only to protect the interest of the debtors
whose claims have been admitted in the resolution plan and the employees but
also that the assets of such a corporate debtor are revived so that it does not
lead to total waste and a loss to national economy.
57. On this count also, therefore, We are of the considered view that
once action in the nature of forfeiture of performance bank guarantee to the
tune of Rs.95,58,000/- has been imposed upon the company for the delay in
the execution of the work of the contract, the order of blacklisting would not
be proper in the eye of law. The penalty of blacklisting for a period of three
years and debarment from future contracts with the Government of Tripura
would thus be disproportionate as the petitioner would be practically unable
Page 30 of 34to enter into new contracts and undertake business in order to become a
growing and running concern.
58. The Apex Court in Kulja Industries Limited Vs. Chief General
Manager, Western Telecom Project Bharat Sanchar Nigam limited & Ors.,
(2014) 14 SCC 731 has explained that “debarment” is an effective method for
disciplining deviant suppliers/contractors who may have committed acts of
omission and commission or frauds including misrepresentations, falsification
of records and other breaches of the regulations under which such contracts
were allotted. It has also been held “debarment” is never permanent. It would
invariably depend upon the nature of the offence committed by the erring
contractor. In the facts and circumstances of the case discussed above such
disciplining of the revived company for the past deeds of its erstwhile
management would be unwarranted and not serve the purpose and the
objectives of the I&B Code.
59. The issue whether the petitioner had duly informed the
respondents about its admission in the CIRP or not would not in the ultimate
analysis make a difference on propriety of imposing the penalty of
blacklisting and debarment once the resolution plan has been approved by the
learned NCLT on 11th August, 2023 and the new management has taken over
the company to ensure that the company starts on a clean slate.
60. The respondents have also further sought to distinguish the
decision in Vetindia pharmaceuticals Ltd. (supra) on the ground that the
order of blacklisting was passed after due consideration of his reply to the
show cause notice. The interference in the order of blacklisting by this court is
not on account of violation of principles of natural justice as the order has
Page 31 of 34been passed after due show cause notice upon the petitioner. Therefore, the
decision in the case of Panda Infraproject Limited (supra) relied upon by the
respondents is also not applicable for deciding the issue.
61. Further, the respondents have relied upon the case of Deep
Industries Ltd. (supra) to submit that the High Court should not interfere
under Article 227 of the Constitution of India in such matters. However, in
the facts of the said case, the Apex Court had observed that the exercise of
jurisdiction of the High Court under Article 227 of the Constitution of India to
set aside an interlocutory order passed by an arbitrator when the appeals
against the same under Section 37 were dismissed by the subordinate court
was not proper. The High court must be extremely circumspect in interfering
with the same. In the present case the arbitral tribunal by a majority of 2:1 has
refused to interfere with the order of blacklisting as that was not one of the
claims raised. As such, no adjudication on the challenge to the order of
blacklisting was made by the learned arbitral tribunal. The petitioner thus had
to approach this court under Article 226 of the Constitution of India against
the impugned order of blacklisting. As such, the present case is also
inapplicable to the present case.
62. The decision in Sukanya Holdings (P) Ltd. (supra) cited by the
respondents is on the issue that the Arbitration and Conciliation Act does not
provide for bifurcating the suit into two parts, one which is referred to the
arbitration for adjudication and the other that is referred to the civil court and
as such there was no provision for splitting the cause of parties in referring the
subject matter of the suit to arbitrators by the Trial Court under Section 8 of
the Arbitration and Conciliation Act.
Page 32 of 34
63. The word “a matter” used in Section 8 indicates that the entire
subject matter should be subject to arbitration agreement. In the present case,
there is no suit pending as such in relation to the dispute between the parties
arising out of the agreement though an arbitration proceeding has been
commenced. However, the order of blacklisting was not an issue before the
learned Arbitral Tribunal. Even otherwise, the order of blacklisting passed by
the State or its instrumentality could be amenable to the writ jurisdiction.
Therefore, reliance on the said decision is misplaced.
64. The respondents have taken a stand that challenge to the order of
blacklisting in an independent proceeding would lead multiplicity of
proceedings and conflicting views which are best avoided. However, as it
appears that the learned Arbitral Tribunal has not entertained the plea against
the order of blacklisting as no such claim was made before it. In such a case,
refusal to entertain a challenge to the order of blacklisting by this Court under
Article 226 of the Constitution of India would amount to denying a remedy
available in law.
65. Though, the learned counsel for the respondents have sought to
distinguish the judgments relied upon by the petitioner, such as Ghanashyam
Mishra & Sons Pvt. Ltd. (supra) but such a plea is not tenable for the reasons
recorded in the foregoing paragraphs. In the case of Ghanashyam Mishra &
Sons Pvt. Ltd. (supra) the Apex Court while examining the dominant object
of the I&B Code, 2016 had held that it is intended with an object to provide a
clean slate to the company upon its revival. If the company is unable to
undertake business only on account of the order of blacklisting and
Page 33 of 34
debarment, the object of the resolution plan, as approved by the NCLT, would
stand defeated.
66. Though the respondents have sought to distinguish the decision
in the case of JP Iscon Pvt. Ltd. (supra) and The Blue Dreamz Advertising
Pvt. Ltd.(supra) on the ground that the petitioner had suppressed information
of the ongoing resolution process and was not found to be reliable and
trustworthy warranting the blacklisting of the petitioner but as held by us
hereinbefore the order of blacklisting if allowed to perpetuate against the
revived company with a new management would defeat the very dominant
object of the I&B Code, 2016.
67. As noticed earlier, the grounds and the facts and circumstances
of the case on which the respondents have justified the order of blacklisting
are essentially allegations against the erstwhile management of the company
in causing delay and tardy progress of the works allotted to it. However, upon
approval of the Resolution Plan and the change in management, if the order of
blacklisting is allowed to survive the past misconducts of the erstwhile
management would continue to haunt the petitioner company and would not
serve the purpose of revival of the company. Moreover, the respondents have
already forfeited the performance bank guarantee of the petitioner for
Rs.95,58,000/- for breach of terms and conditions of the contract.
68. Therefore, on consideration of the issues involved and the
elaborate discussion made hereinbefore, we are persuaded to interfere in the
matter on the ground that such order of blacklisting and debarment of the
petitioner company after approval of the resolution plan with a new
management would defeat the dominant aim and object of the Insolvency and
Page 34 of 34
Bankruptcy Code, 2016 and in all likelihood defeat the very purpose of
revival of the company.
69. Therefore, the impugned order dated 5th October, 2023 whereby
the petitioner was blacklisted for a period of three years and debarred from
participating in future contracts with the Government of Tripura is quashed.
70. The writ petition is allowed. No order as to costs.
Pending application(s), if any, stands disposed.
(ARINDAM LODH), J (APARESH KUMAR SINGH), CJ lodh Digitally signed by DIPESH DEB DIPESH DEB Date: 2024.10.07 15:16:21 +05'30'