Allahabad High Court · 2025 on 17 Feb 2025

Judgment

1. Heard Shri Prashant Chandra, learned Senior Counsel assisted by Shri Anshuman Singh and Ms. Geetika Yadav for the petitioners and Sri Sanjay Bhasin, learned Senior Counsel assisted by Shri Sarvesh Kumar Dubey and Ms. Samidha, learned counsel for the opposite parties no. 1 to 4.

2. The petitioners, who are three in number and were part of a joint venture comprising of four members and had entered into an agreement with the National Highway Authority of India for rendering consultancy services as Authority Engineer for certain projects, have challenged two orders, one is dated 18.07.2024 by which certain deficiencies were Page No. 2 pointed out in the services being rendered by the Authority Engineer with reference to prior correspondence and proposal/ recommendation for change of scope in respect of the Engineering Procurement and Construction Contract (For short 'the EPC Contract'), which was returned unapproved with a further request to the Authority Engineer to submit an explanation/ justification for change in their opinion vis-a-vis earlier proposal/recommendation without supporting guidelines/ provisions/ judgments, omitting to mention the earlier opinion rendered on 30.05.2024 on the subject, without following the procedure prescribed under Article 13 of the Contract Agreement for change of scope. The explanation was required to be submitted within 7 days. The other order under challenge is dated 24.10.2024 by which the Authority Engineer as aforesaid has been debarred from participation in any future works of MORTH/NHAI/NHIDCL/ State PWD for a period of one year.

3. We may point out that the 4th member of the joint venture M/s UN-Infra Engineering Pvt. Ltd. has not joined in the writ petition.

4. A preliminary objection was raised by Sri Sanjay Bhasin, learned Senior Counsel appearing for the opposite parties no. 1 to 4 regarding maintainability of this writ petition under Article 226 of the Constitution of India in view of an Arbitration Clause contained in the contract entered into between Official opposite parties and the petitioners.

5. We have perused the arbitration clause and on being confronted learned Senior Counsel appearing for the petitioners Shri Prashant Chandra did not dispute the same, however, he submitted that a writ petition challenging an order of debarring is very much maintainable, specially as, the ground of challenge is violation of the principles of natural justice and non consideration of the reply dated 23.07.2024 submitted by the petitioner in pursuance to the alleged show cause notice dated 18.07.2024 issued by the concerned opposite parties in this regard. Page No. 3

6. Violation of principals of natural justice, apparent errors, unfairness and proportionality are grounds on which a writ petition would be maintainable in a case of debarment or black listing even if there is an arbitration clause. We have to consider the matter keeping the aforesaid in mind.

7. The facts of the case in brief are that an EPC Agreement for improvement and Up-gradation of Existing Road to 2/4-lane with Paved Shoulder from Km. 40.000 to 88.750, start of Khutar bypass to start of Shahjahanpur bypass of NH 731 (PKG-1) in the State of U.P. was entered into between the National Highway Authority of India and opposite party no. 7 herein on 21.11.2022. The petitioners along with 4th member of the joint venture were engaged as Authority Engineers for the said purpose and for the variation work of Supervision Consultancy Services for the project Strengthening and Overlay works of Km.0.000 to Km. 40.000 to two lane Palia-Khutar section of NH-731 (Pkg-1A) in the state of Uttar Pradesh vide contract agreement dated 22.11.2022 and

27.02.2024.

8. There was a provision for change of scope of the work/contract in the EPC Contract referred above vide Article 13 thereof, copy of which is annexed as Annexure No. 5. In pursuance to the aforesaid provision a proposal for change of scope of the work was initiated and ultimately, the Contractor i.e. opposite party no. 7 submitted a composite proposal in this regard on 26.04.2023 referred as Change of Scope-I (COS-I). In response to which the Authority Engineer submitted its recommendation on 31.05.2023, however, in a Project Review Meeting held on

08.06.2023 the aforesaid project i.e. COS-I was split into two parts and this was communicated to the Authorized signatory of petitioner no. 2 vide letter of the Project Director of National Highway Authority of India, Bareilly dated 09.06.2023, according to which, the change of scope proposal for Underpasses on cross roads of bypasses would form Page No. 4 Part-1. The change of scope proposal claimed by Contractor regarding bypass length, Minor Bridge, embankment etc., would form Part- 2 and a separate proposal was required to be submitted as per provision of Contract Agreement which may be forwarded to NHAI-HQ for interpretation as per Contract provisions. The Authority Engineer was accordingly requested to submit the proposal after required rectification at the earliest for further necessary action.

9. In response to this, the Authority Engineer submitted the proposal for COS-I (Part- 1) on 19.06.2023 which was ratified by the official

opposite parties on 23.12.2023 and there is no dispute in this regard. The proposal regarding COS-I (Part- 2) was submitted in pursuance to the letter dated 09.06.2023, on 22.06.2023. This letter pertaining to COS-I (Part-2) was not responded by the Official opposite parties till

28.05.2024 i.e. almost 11 months when the Project Director, PIU, Bareilly wrote to the Petitioner no. 2 that the proposal dated 22.06.2023 was forwarded to NHAI HQ for contractual interpretation and after examination NHAI HQ has directed to examine the matter contractually and submit COS with clear cut recommendation as per contract provisions, meaning thereby, according to the NHAI, the recommendations were not clear cut as per the contract provisions. However, the fact is that this letter was sent after 11 months. Moreover, the opinion solicited in the letter dated 22.06.2023 was never provided to the Authority Engineer and no explanation has been offered in this regard by NHAI.

10. Be that as it may, in response to the letter dated 28.05.2024 the Authority Engineer submitted its recommendation/proposal regarding COS-I (Part- 2). The said recommendation/proposal dated 30.05.2024 was also communicated by e-mail on the same day at 04.20 p.m., but, in the evening i.e. 07.59 p.m. on the same day, this was withdrawn, which Page No. 5 is evident from the subsequent mail stating - "the trailing mail is hereby withdrawn."

11. On 05.06.2024 a fresh proposal of COS Contractor for change of scope Rs.118.68 crores was received. On 12.07.2024 the Authority Engineer in response to a letter of NHAI dated 28.05.2024 submitted its opinion/proposal/recommendation regarding COS-I (Part- 2), thereafter, on 18.07.2024 the impugned order/ notice contained in Annexure No. 2 to the writ petition was passed.

12. As per the said order dated 18.07.2024 which is also in the form of a Notice to the Authority Engineer, on an examination of the proposals/recommendations sent by the Authority Engineer, especially letters on 22.06.2023, 13.05.2024 and 12.07.2024 it was found that the Authority Engineer had swiftly changed its current opinion (contained in letter dated 12.07.2024) from earlier submission (contained in letters dated 22.06.2023 and 30.05.2024). The order, then, discusses the opinion rendered by the Authority Engineer on 22.06.2023 and

30.05.2024 and the change of opinion, as perceived by the opposite parties, in the letter dated 12.07.2024. It also discusses the comments of the PIU, Bareilly on the same in respect of various aspects of COS-I (Part -2) and ultimately it has been opined that disparate opinion in comparison to previous submissions/ interpretation without any proper explanation / justification, which does not seem in line for further processing of the proposal, were found. The order/ notice expresses surprise at a different opinion (12.07.2024) being given by the Authority Engineer vis-a-vis the earlier opinion dated 30.05.2024 without any supporting revised guidelines/judgment etc. Clause 3.1.1 of Standard of Performance under obligation of consultants has been referred in this context which required the consultant to perform all the services to carry out their obligations hereunder with all due diligence, efficiency and economy and act as a faithful advisers to the client. Thereafter, an Page No. 6 inference has been drawn from the preceding discussion that it was amply clear that Authority Engineer has not performed its duties with due diligence and submitted proposal with such huge financial implication with arithmetical errors, hiding the facts/previous submissions and creating confusion by providing different/delayed opinions at different point of time. It emphasized the fact that the PIU opinion was against the recommendation/ proposal submitted by the petitioners, therefore, the change of scope recommended was not acceptable nor tenable. The order thereafter disapproved and returned the COS recommendation submitted by the petitioners and called upon the petitioners to submit their explanation as already referred to earlier, within 7 days.

13. Thus, the order dated 18.07.2024 is in two parts, one is an order disapproving the recommendation sent by the COS and other is a notice to the petitioners to submit an explanation in the light of what had been observed in the order as already referred but this notice part does not mention about proposed action of debarment or blacklisting, a fact which was emphasized greatly by Shri Prashant Chandra, learned Senior Counsel appearing for the petitioners.

14. The Authority Engineer submitted his response to the letter dated

18.07.2024 on 23.07.2024 which is annexed as Annexure No. 17 to the writ petition.

15. In the interregnum i.e. on 19.07.2024 the EPC Contractor complained of delay in the matter of change of scope and the financial loss ensuing to it and on 29.07.2024 it raised a claim for compensation against the NHAI. 16 After submission of the reply dated 23.07.2024 for the first time a notice was issued to the petitioners on 18.09.2024, as claimed by them, proposing action of debarment for a period of one year. Page No. 7

17. The notice dated 18.09.2024 referred to the letter dated

18.07.2024 and the reply of the petitioner dated 23.07.2024 and that the reply dated 23.07.2024 was reviewed and found unsatisfactory. The notice dated 18.09.2024 further went on to state that apart from the reply being unsatisfactory various deficiencies had been noticed on the part of the Authority Engineer including but not limited to improper recommendation of change of scope (Part B) without supportive guidelines/ provisions/ judgments, omission of your either letters, which is obviously a reference to the letter dated 22.06.2024 and 30.05.2024, which showed lackadaisical and unprofessional approach in handling highway project. Accordingly, it called upon the petitioners to submit explanation/justification in person before Member (Administration) on

20.09.2024 at 11.00 A.M. at NHAI HQ as to why action should not be initiated against the Authority Engineer including but not limited to debarment, initially for a period of one year. The notice clearly mentioned - "In case of non- receipt of reply/ your appearance in the subject matter on the prescribed date and time, it shall be presumed that you have nothing to say in your defence and action shall be initiated as per Consultancy Agreement/ extent NHAI policy as deemed appropriate by competent authority."

18. Now, in response to the notice dated 18.09.2024 the petitioner did not submit any written reply, instead, the representative of the petitioners appeared for personal hearing on 20.09.2024. This is evident from the subsequent communication dated 20.09.2024 to the Authority Engineer which again referred to the letter of PIU, Bareilly dated 18.07.2024 and the reply of the petitioners dated 23.07.2024 as also the show cause notice dated 18.09.2024. It stateds that personal hearing regarding the subject matter was called under the Chairmanship of Member (Administration) on 20.09.2024 with representative of the Authority Engineer. It was requested on behalf of the Authority Engineer during the hearing to grant few days in order to present proper justification Page No. 8 regarding the subject matter. Accordingly, the next date regarding personal hearing was fixed on 26.09.2024 and the petitioners were again called upon to explain/justify on the same terms as mentioned in the earlier notice dated 18.09.2024.

19. This second notice dated 20.09.2024 given to the petitioners also clearly proposed debarment and also mentioned that in the event of non receipt of reply/non appearance it shall be presumed that the Authority Engineer has nothing to say in defence and action would be initiated accordingly as per agreement etc.

20. No reply was submitted either to the notice dated 18.09.2024 or to the notice dated 20.09.2024, though, the representative appeared on

20.09.2024 and thereafter, on 26.09.2024 also.

21. A personal hearing was again given on 20.09.2024, and,

26.09.2024, thereafter, on 24.10.2024 the order of debarment was passed.

22. The order of debarment, inter alia, states that during execution of work various deficiencies had been noticed on part of Authority Engineer including but not limited to improper recommendation of change of scope- I (Part - 2) without supporting guidelines/ provisions etc. which showed lackadaisical and unprofessional approach in handling highway project. It refers to the letter dated 18.07.2024 calling an explanation and justification from the Authority Engineer, the reply of the petitioners dated 23.07.2024, and, then, it observers that the Authority Engineer had just tried to cover up its mistake by making incorrect/vague statements, which is totally misleading and unacceptable. The fact that the reply was unsatisfactory was communicated to the Authority Engineer vide letter dated 18.09.2024. It then goes on to state that apart from cast over burden from misleading and wrongful submission, the project could have suffered time over run, Page No. 9 and its consequential effects, which may have lead to contractual claims of EPC contractor on account of prolongation cost for undue benefits to EPC Contractor. Moreover, the Authority Engineer had been given full opportunity through notices and personal hearing on 20.09.2024 and

26.09.2024 in order to comply the natural justice. Reference has been made to Clause 3.1.1 of Standard of Purpose under obligation of consultants which was also referred in the letter dated 18.07.2024 wherein it has been clearly mentioned that consultant shall perform all the services and carry out their obligations thereunder with all due diligence, efficiency and economy and act as faithful advisers to the client. Accordingly, in pursuance to the guidelines dated 18.01.2022 personal hearing was granted to the Authority Engineer twice i.e. on

20.09.2024 and 26.09.2024, however, the submissions were not found satisfactory. What were the submissions during personal hearing which were not found satisfactory, is not mentioned.

23. Accordingly, the Authority Engineer (Petitioners) was debarred, as already mentioned.

24. Now, against the aforesaid background, the contention of the learned Senior Counsel appearing for the petitioners was that alleged letter dated 18.07.2024 was not a show cause notice for debarment and therefore, it can not be treated as such. Secondly, the two alleged notices dated 18.09.2024 and 20.09.2024 can also not be treated as show cause notice for debarment in the eyes of law, as, they do not satisfy the requirement of a show cause notice which should necessarily contain specific allegations/grounds on which the action of debarment is proposed. Vague and unfounded allegations in a notice are against the principles of natural justice. According to the petitioners' counsel, these notices dated 18.09.2024 and 20.09.2024 did not contain requisite allegations so as to confirm to the principles of natural justice, therefore, these were no notices in the eyes of law, as, a notice without stating the Page No. 10 grounds or allegations on which it has been issued, is no notice at all. He further relied upon Para 7 of the guideline dated 18.01.2022 to contend that it mandated 15 days notice which was never given to the petitioners. Even the letter dated 18.07.2024 gave only 7 days time and the subsequent notices dated 18.09.2024 and 20.09.2024 gave even less time, therefore, there was abject denial of reasonable opportunity and the principles of natural justice. Moreover, the allegations were vague as was evident from the language used therein.

25. It was also the submission of the learned counsel for the petitioners that the reply submitted on 23.07.2024 has not all been taken into consideration while passing the order of debarment which does not mention as to why the reply is not satisfactory. The contention of the petitioners' counsel in this regard is that this cryptic observation regarding reply being unsatisfactory does not meet the requirement of the law. The observation in this regard in the notice dated 18.09.2024 is only, prima facie and that too is not supported by any reasoning nor any reasoning is contained in the order of debarment, therefore, this is another example of violation of principles of natural justice, therefore, for all these reasons not only the writ petition is maintainable but it is also liable to be allowed and the impugned orders are liable to be quashed. In fact, as is evident from the letter dated 18.07.2024, the Authority had already decided against the petitioners, therefore, this predetermination vitiated any subsequent exercise/ order.

26. On the question of delay in giving opinion and change opinion in the recommendations submitted by the Authority Engineer Shri Chandra submitted that the impugned order is bad for the reason that they have taken into consideration the recommendation dated 22.06.2023 which was only a tentative recommendation with a clear stipulation that it was subject to an opinion which was being sought from the Authority on interpretation of relevant contract clauses to decide the admissibility of Page No. 11 claims so as to enable the AE to process the claims for being approval of the competent authority. This letter was not responded for a period of 11 months and when it was disapproved by the letter dated 28.05.2024, then, in pursuance to the meeting dated 02.06.2024, and fresh proposal of the EPC Contractor dated 05.06.2024, the recommendation was submitted on 12.07.2024. The petitioners can not be faulted for this and there is no delay or disparity in the change of scope of work recommended on 12.07.2024, as, the earlier recommendation dated

22.06.2023 was a tentative one and the condition mentioned therein was never satisfied in the sense that no opinion was rendered by the opposite parties, therefore, it remained as it is. It is the opinion rendered on

12.07.2024 which was final.

27. In this context he also referred to the reliance placed on another recommendation dated 30.05.2024 in the impugned orders and submitted that this had already been withdrawn on the same date by a subsequent e-mail, but, this fact has been omitted from consideration and once this recommendation was withdrawn it could not have been made the basis to allege that the petitioners were frequently changing their opinion. Only one final opinion was rendered i.e. on 12.07.2024. In this regard he also submitted that in the reply dated 23.07.2024 it was categorically mentioned that the opinion dated 30.05.2024 had been withdrawn on account of communication error and in the impugned orders there is no mention that it was not so nor this reply has been taken into consideration. All this shows that the opposite parties have merely made the petitioners an escape goat. According to him, there was ill will between the earlier Project Director and subsequent Project Director. The moment the new Project Director joined he started raking up old issues which were settled by the earlier Project Director and the petitioners have been made an escape goat in this rivalry. For all these reasons he submitted that there was no delay nor any other impropriety in the sense of modifying the earlier recommendations frequently, as Page No. 12 alleged. Shri Prashant Chandra, learned Senior Counsel for the petitioners relied upon the judgment reported in (2021) 2 SCC 551; UMC Technologies Private Limited Vs. Food Corporation of India and Anr., (2012)13 SCC 427; Oryx Fishries Private Limited Vs. Union of India and Ors., 2022 SCC OnLine ALL 2371; M/s Atts Associates Vs. Bharat Petroleum Ltd. and Ors., and 2024 SCC OnLine Sc 1896; Blue Dreamz Advertising Pvt. Ltd. and Anr. Vs. Kolkata Municipal Corporation and Ors.

28. Much emphasis was laid by the learned counsel for the petitioners on Para 9 of the impugned order which refers to two show cause dated

20.09.2024 and 26.09.2024, however, learned counsel for the opposite parties submitted that this was a typing error and in fact, it should have been '20.09.2024' on '26.09.2024'. It may be pointed out that on the earlier dates of hearing the learned counsel for the petitioner had mentioned that none of the documents mentioned in the impugned orders as a reference, were supplied to the petitioners and that the impugned order contained in Annexure No. 1 had been passed without approval of the competent authority as per Para 7 of the guidelines, however, these aspects were satisfied by the learned Senior Counsel appearing for the opposite parties who demonstrated that documents were provided to the petitioners and that the approval of the C.G.M. was also taken prior to passing of the said order. Affidavits have been filed in this regard which are on record. Learned Senior Counsel for the petitioner did not press these grounds at the time of final hearing.

29. Per contra, Shri Sanjay Bhasin, learned Senior Counsel for the opposite parties submitted that job of the Authority Engineer is to submit independent opinion in respect of matters relating to the EPC Contract. He invited our attention to Article 13 of the EPC Contract. He also took us through letters dated 22.06.2023, 30.05.2024 and 12.07.2024 to submit that recommendations contained in letter dated 12.07.2024 were Page No. 13 at variance with the earlier recommendations dated 30.05.2024 and

22.06.2023 and therefore, the action taken against the petitioner, which is in terms of the contract between the parties, is justified. It being a contractual matter the scope of interference is very limited, especially in a case where there is an Arbitration Clause which has not been invoked by the petitioners. He emphasized the last line of the reply dated

23.07.2024 to contend that the petitioners had admitted their guilt (as already discussed earlier) and they did not submit any reply to the show cause notice dated 18.09.2024 and 20.09.2024, therefore, the plea of violation of the natural justice or denial of 15 days time to respond, is meaningless. Once, they have admitted their deficiencies, then, they can not press non observance of principles of justice. He also submitted that the impugned order was passed on 21.10.2024 and the petitioner had ample time to respond in writing to the show cause notice dated

18.09.2024 and 20.09.2024 which, they did not do. Shri Bhasin also submitted that no justification was submitted by the petitioners for which time had been sought on 20.09.2024. In a contractual matter especially involving projects having huge financial implication as also involving public interest the Authority Engineer can not have any indefeasible right to challenge the order of debarment or for that matter the order dated 18.07.2024. Learned Senior Counsel for the opposite parties relied upon judgments reported in (2003) 7 SCC 410; National Highway Authority of India Vs. Ganga Enterprises and Anr., (2008) 8 SCC 172; Pimpri Chinchwad Municipal Corporation and Ors. Vs. Gayatri Construction Company and Anr., 2023 SCC Online SC 971; Tata Motors Limited Vs. Brihan Mumbai Electric Supply and Transport Undertaking (BEST) and (2014) 14 SCC 731; Kulja Industries Limited Vs. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited and Ors.

30. Much emphasis was laid by Shri Sanjay Bahsin, learned Senior Counsel appearing for the opposite parties on the last line contained in Page No. 14 the said reply dated 23.07.2024 to the effect that- "AE hereby agree to the aforesaid final interpretation of Authority and rejection of the instant COS proposal" to submit that this amounts to admission of the deficiencies pointed in the letter/notice dated 18.07.2024, therefore, any assertion regarding denial of natural justice is of no avail, as, once the deficiencies have been admitted, then, there is no question of non observance of principles of natural which in any case had been substantially complied. However, Shri Prashant Chandra, learned Senior Counsel appearing for the petitioners submitted that this last line of the reply meant that the proposal/ recommendation of the Authority Engineer not being final and it is the decision of the NHAI which is final, therefore, once COS has been disapproved by the NHAI which has expressed its opinion vide letter dated 18.07.2024, therefore, in that context, acceptance has been communicated which could not be taken as an admission of the deficiencies referred.

31. By the letter dated 12.07.2024 the Authority Engineer submitted a proposal for change of scope to the tune of Rs.64.13 crores (excluding GST and after tender discount) i.e. Rs.18.94% of the bid project cost Rs.3385792.000 and recommended the same for approval under Article 13 of the Contract. This was a modification from the earlier recommendation dated 30.05.2024 wherein, according to the opposite parties, there was a hint that no change of scope was required and also from the subsequent recommendation dated 26.02.2023.

32. Having heard learned counsel for the parties and having perused the records what comes out is that the allegations against the petitioners can be categorized in at least in two parts, one is with regard to the delay and change in the recommendation dated 12.07.2024 vis-a-vis earlier recommendations dated 22.06.2023 and 30.05.2024 regarding change of scope pertaining to COS-I (Part-1) and the other is with regard to improper recommendation of change of scope in this regard. Page No. 15

33. From what has been narrated hereinabove it is evident that the COS was submitted by EPC Contractor on 26.04.2023 and the petitioners submitted its recommendations on 31.05.2023. These were composite recommendations. Thereafter, COS was changed into two parts as per meeting dated 08.06.2023 as communicated to the petitioners vide letter of Project Director, Barielly dated 09.06.2023. In response to which, as regards Part -I, the petitioners submitted the recommendation on 19.06.2023 which was ratified on 23.12.2023. This of course is not in dispute. In respect of COS-I (Part-2) the petitioner submitted recommendation on 22.06.2023. In this regard the COS itself was split in two parts on 08.06.2023. Accordingly, the recommendation relating to Part- 2 was submitted on 22.06.2023 i.e. within the period of 15 days. This letter as already observed, was subject to opinion being sought from the Authority, a fact which is clearly mentioned in the letter dated 22.06.2023 and in the annexures to it. This was not responded by NHAI Officials till 28.05.2024 and there is nothing on record to show that factual position is otherwise. This was responded only on

28.05.2024 i.e. after 11 months. The delay in this regard was clearly on the part of the Officials of the NHAI and as soon as the letter dated

28.05.2024 was received, disapproving the aforesaid proposal dated

22.06.2023 and asking the petitioner to submit a fresh proposal, as already discussed in the earlier part of the judgment, the same was initially submitted on 30.05.2024, however, it was withdrawn on the same day and this aspect has not been successfully denied. Thereafter, a meeting of Project Review Committee took place on 02.06.2024. then, a fresh proposal was submitted by the EPC Contractor 05.06.2024 and on

12.07.2024 the petitioners submitted the recommendation regarding Part-2 of COS-I.

34. The question is what was the time line within which petitioners were required to submit their opinion. No provision has been referred in the impugned order. Moreover, in the circumstances narrated above, how Page No. 16 the delay was attributable to the petitioners has also not been discussed or explained.

35. As regards change of opinion on 12.07.2024 vis-a-vis earlier opinion dated 22.06.2023 and 30.05.2024, according to the opposite parties, in this proposal/ recommendation dated 22.06.2023, the Authority Engineer hinted that there was no need/requirement of change of scope in the work but in the subsequent letter dated 12.07.2024 a change was reconsidered. However, learned Senior Counsel appearing for the petitioners invited our attention to internal Page 3 of the document wherein it was intimated by the Authority Engineer to the Project Director, Project Implementation Unit (hereinafter referred to as 'PIU'), Bareilly in the light of discussion held during meeting which took place at NHAI HQ on 08.06.2023 under the Chairmanship of Chief General Manager (Tech), U.P., according to which opinion of the Authority was solicited on interpretation of relevant contract clauses to decide the admissibility of claims; so as to enable the AE to process the claims for in-principle approval of the Competent Authority. Prior to mentioning these last lines in the letter dated 22.06.2023, the Authority Engineer had submitted its recommendation/proposal regarding change of scope, however, with the caveat aforesaid. In the document annexed with the said letter also it was mentioned that the modified amount mentioned therein was subject to opinion of the Authority was solicited on interpretation of relevant contract clauses. Letter dated 22.06.2023 was a tentative opinion subject to guidance which had been requested but this guidance was never provided. In fact the letter dated 22.06.2023 was responded to by opposite parties only only 28.05.2024, after 11 months. As regards opinion dated 30.05.2024 it had already been withdrawn on the same day. In the pleadings the petitioners have submitted that the said letter dated 30.05.2024 was a communication error, as, in oral discussion with the officials of the NHAI they were of the opinion that it had been sent hurriedly. Accordingly, it was Page No. 17 withdrawn. The averments in this regard have been made in Paragraph 16 and 17 of the writ petition and in response to it, in Para 20 of the counter affidavit, receipt of the two mails sent, one at 04.22 p.m. and the other at 07.59 p.m. has not been denied specifically nor is there any appropriate reply to the averments made in Para 16 and 17. A bald and vague denial is no denial in the eyes of law. These document have been made the basis for the impugned order. Thus, irrelevant and non-existent material has been taken into consideration while passing the impugned orders. Only a cryptic observation is contained in the letter dated

28.05.2024 that recommendation dated 22.06.2023 was disapproved, that too, after 11 months.

36. If the letter dated 30.05.2024 could not have been taken into consideration and if the letter dated 22.06.2023 was only a tentative opinion, specifically mentioned as such, in view of the condition put therein, then, how an allegation could be leveled and found to have been proved that in the subsequent opinion dated 12.07.2024 there was a change, as, according to the petitioners, the only final opinion was the one given on 12.07.2024. These aspects have not been dealt with reasonably i.e. with due and proper application of mind to the facts of the case. Therefore, to the extent the order dated 18.07.2024 draws the conclusion, even if, prima facie, that there was delay/frequent change in proposal/recommendation by the petitioners it suffers from the vice of non consideration of relevant aspects in the correct prospective in keeping with the principles of natural justice, especially as, irrelevant material has been taken into consideration and the documents referred have not been read properly, especially, the letter dated 22.06.2023. Same error has crept in the order dated 24.10.2024. Had these aspects been taken into consideration the result may have been different, or the quantum of penal action, its proportionality, may have been different. Page No. 18

37. Further, when we see the order/ notice dated 18.07.2024, no doubt it is not a notice proposing debarment, nevertheless, it does contain allegations against the petitioners which ultimately not only led to disapproval of the recommendation/ opinion dated 12.07.2024 but also initiation of the proceeding for debarment vide letters dated 18.09.2024

20.09.2024 and culminated in the order of debarment, therefore, the letter dated 18.07.2024 had a relevance in the context of debarment, especially as, though, the show cause notices dated 18.09.2024 and

20.09.2024 do not mention in detail the allegations against the petitioners but they do refer letter dated 18.07.2024 and have been issued with reference thereto, therefore, the allegations contained in the letter dated 18.07.2024, which was in the knowledge of the petitioners and to which the petitioners had already responded by submitting a letter dated 23.07.2024, were in the knowledge of the petitioners and it is not acceptable that the petitioners did not have knowledge of the grounds or the allegations on which the proceedings for debarment had been initiated on 18.09.2024. The principles of natural justice can not be applied mechanically and on mere asking of the petitioners, especially in a contractual matter, as, a pedantic approach in this regards is to be avoided. There is no straight jacket formula for its application. It depends on the facts of a case. For all practical and legal purposes the petitioners were very well aware about the allegations against them as contained in letter dated 18.07.2024 by which its recommendation dated

12.07.2024 regarding change of scope etc. was disapproved and it was asked to show cause regarding change in opinion in respect of earlier submissions not following the procedure under Article 13 of the contract agreement for change of scope etc. No doubt, the letter dated 18.07.2024 did not mention debarment but it was the genesis of the entire proceedings leading to debarment. It is this letter which contained the allegations in detail along with comments of PIU and it is this letter which has been referred in the first show cause notice dated 18.09.2024 Page No. 19 for debarment and therefore, all the allegations mentioned in this letter dated 18.07.2024 had to be read into the notice dated 18.09.2024. In this view of the matter the decisions being relied upon by the petitioners' counsel, as referred earlier, are not applicable to the facts of this case.

38. In the notice dated 18.09.2024 it was mentioned that the reply dated 23.07.2024 was not found satisfactory and AE should show cause by 20.09.2024 as to why action should not be initiated against it for debarment with a further caution that in case of non receipts of reply/ your appearance in the subject matter on the prescribed ate/ time, it shall be presumed that you have nothing to say in the matter and action would be taken.

39. In this context we may be refer to Para 7 to 9 of Circular dated

18.01.2022 which reads as under:- "7. Before deciding an AE/IE/CSC/PMC as Non- performer or debarring/penalizing it, the concerned Technical division shall issue a notice to the AE/IE/CSC/PMC by giving 15 days' time to furnish its written reply and allow personal hearing if so desired by the AE/IE/CSC/PMC before member concerned. Such a notice shall not be issued without the approval of an officer not below the rank of the Chief General Manager (CGM). In case of projects where public safety is endangered by the behavior/conduct/action of the consultant the authority may temporarily suspend the consultant from participating in ongoing/ future bidding upto 1 month period during which the regular process of debarment shall be concluded.

8. The Competent Authority for approval of penal action as above will be the chairperson, NHAI. Page No. 20

9. The firm/individuals on which penal/deterrent action is taken may represent to the "Reviewing Authority" against the action/penalty imposed. The 'Reviewing Authority" shall be the Executive Committee (EC)."

40. Although, it is not in dispute that the grounds for debarment etc. as mentioned in the said circular, were not attracted in this case as was also accepted by learned counsel for the opposite parties, but, it was his submission that power to debar or blacklist is an inherent power which is not limited to the situations/ grounds mentioned in the aforesaid circular which in any case is in the nature of guidelines and is not restrictive in nature.

41. Nevertheless, the impugned order of debarment contained in Annexure No. 1 dated 24.10.2024 also refers to the guidelines, therefore, at least the procedure prescribed therein would apply.

42. The petitioners did not submit any written response to the show cause dated 18.09.2024 either on merits or regarding violation of Circular dated 18.01.2022 prescribing 15 days time for showing cause, though, their representative appeared before the concerned on

20.09.2024. Thereafter, another show cause notice dated 20.09.2024 was given to the petitioner also calling upon them to show cause on the same lines as the earlier notice dated 20.09.2024, by 26.09.2024. This second notice mentioned the fact that personal hearing was given on 20.09.2024 and petitioners had sought few days for presenting proper justification regarding the subject matter. In spite of this second notice no written justification/reply was submitted by the petitioners till 24.10.2024 when the order of debarment was passed i.e. during a period of more than a month. In these circumstances the petitioners can not allege that they were not granted 15 days notice as is stipulated in the Circular dated Page No. 21

18.01.2022, especially as, the allegations were contained in the letter dated 18.07.2024 to which the petitioners submitted a reply dated

23.07.2024 and it is those very allegations which were the basis for the show cause notice dated 18.09.2024 and 20.09.2024 which gave a further opportunity to the petitioner to submit a response so far as action of debarment is concerned which was taken only on 24.10.2024. Thus, petitioners did not respond in spite of sufficient time. Purely, on facts, sufficient notice/ opportunity was given to them but they did not avail it. This plea, therefore, is rejected.

43. There is another aspect of the matter which is with regard to improper recommendation of change of scope vide letter dated

12.07.2024. In this context reply dated 23.07.2024 is relevant. Paragraph Nos. 1,2, and 3 only narrate the sequence of events and of course the fact that the proposal dated 30.05.2024 was withdrawn on account of communication error as also the fact that vide letter dated 22.06.2023 opinion of the NHAI had been sought on interpretation of contract provision, meaning thereby, the recommendations in the said letter were not final and were subject to the opinion which had been sought. In paragraph 4 of reply dated 23.07.2024 an explanation was offered with regard to the recommendation contained in the letter dated 12.07.2024 based on a Project Review Meeting dated 02.06.2024 when it was asked to submit the opinion, as was submitted on 12.07.2024. No response was submitted on merits of the allegations, especially the PIU comments contained in the letter dated 18.07.2024. None of the said PIU comments were denied on merits but the petitioners explained their proposal dated

12.07.2024 by saying that they were asked to do so in the Project Review Meeting dated 02.06.2024. Although, they admitted the fact that no minutes of meeting in respect of alleged meeting dated 02.06.2024 could be received by them, yet, in line with the interpretation suggested by Regional Officer, U.P. (West) the recommendation was finally sent vide letter dated 12.07.2024. Para 4 of the reply dated 23.07.2024 in this regard is as under:- Page No. 22 "4. In the meantime, a project review meeting was held under the Chairmanship of RO UP (West) on

02.06.2024 at Bareilly, which was attended to by Shri B.P. Pathak (the then PD-Bareilly), Shri Manoj Rathi, CEO alongwith our other Senior Engineers, Team Leader and the EPC Contractor. In the aforesaid meeting the relevant contract provisions were reviewed in detail and AE was asked to review his recommendations. Although no MOM could be received in respect of the aforesaid meeting, yet in line with the interpretation suggested by RO UP (West), our recommendations were finally sent vide letter dated 12.07.2024."

44. Thus, the petitioners while responding to the letter dated

18.07.2024 took the plea submitted that the recommendation vide letter dated 12.07.2024 had been submitted on the asking of the Officials of the NHAI as per the discussions held in the Project Review Meeting under the Chairmanship of Regional Officer, U.P. (West) on 26.02.2024 at Bareilly which was attended by Shri V.P. Pathak (the then Project Director, Bareilly), Shri Manoj Rathi, Chief Executive Officer along with petitioners' senior leader Chief Engineer, EPC Contractor i.e. opposite party no. 7, meaning thereby, they only acted as per the request made to the Authority Engineer in the said meeting which was asked to review its recommendations.

45. In the final recommendation dated 12.07.2024 contained in Annexure No. 3 also, it had been stated - "as discussed during recent review meeting held under the Chairmanship of RO UP (West) on 2nd Page No. 23 June, 2024 at Bareilly, the COS proposal has been examined afresh in terms of the relevant contract provisions and then, the comments have been given."

46. The notices dated 18.09.2024 and 20.09.2024 nor the order dated

24.10.2024 take into consideration the reply of the petitioners dated

23.07.2024, especially, para 4 thereof, as, there is no discussion as to whether any such meeting dated 02.06.2024 took place or not. If it took place what transpired therein? Whether the recitals in Para 4 in the reply are correct or not. The statement of the concerned officials named in para 4 should have been recorded or their comments sought and thereafter, a decision should have been taken whether the petitioners are liable for debarment or not. Even if, no written reply was submitted by the petitioners to the notice dated 18.09.2024 and 20.09.2024 in spite of seeking time, the fact of the matter is that the impugned order dated

24.10.2024 or for that matter the order dated 18.07.2024 nowhere says as to whether any such suggestions were made in the meeting dated

02.06.2024 to the Authority Engineer (petitioners) which ultimately crystallized in the form of recommendation by the Authority Engineer vide letter dated 12.07.2024 as stated by the petitioners; whether this was permissible or the Authority Engineer was required to submit an independent opinion and not be persuaded by oral suggestions during the meeting dated 02.06.2024; are there any minutes of meeting dated

02.06.2024. Nothing has been brought on record nor is it mentioned in the impugned orders which could throw some light as to what transpired in the said meeting which was the minimal that principles of natural justice required required. All these factors apart from being relevant from the point of natural justice, would also have a bearing on the proportionality of the penal action, its duration, but, the same have not been taken into consideration. A cryptic rejection of the reply dated

23.7.2024 in the notice dated 18.09.2024 does not confirm to the requirements of natural justice. Page No. 24

47. In Paragraph 5 of the reply the petitioners had stated that as the change of scope recommended by them has been received unapproved as per the NHAI's final contract interpretation vide letter dated

18.07.2024 and it construed that the NHAI had gone by the petitioners' earlier interpretation vide letter dated 31.05.2023 and 22.06.2023 which had been referred to NHAI for expert opinion, therefore, the Authority Engineer (petitioners) agreed to the aforesaid final interpretation of Authority and rejection of the instant COS proposal. Great emphasis was laid by Shri Bhasin on this part of the reply dated 23.07.2024. We are of the opinion that this recital, may not necessarily imply an acceptance of follies pointed out in the letter dated 18.07.2024 by the petitioners, as, they have offered an explanation in Para 4 of its reply dated 23.07.2024 which has not been taken into consideration. Secondly, as per contractual provisions the opinion of the Authority Engineer is not final and it is the decision of the NHAI which is final, therefore, the contention of Shri Chandra that the last line of the letter dated

23.07.2024 is nothing but an acceptance of this fact and in this context it has been stated that it agrees to the final interpretation of the Authority and rejection of instant COS proposal, appears to be reasonable understanding of the statement.

48. We may in this context refer to the decisions of Hon'ble the Supreme Court reported in (2014) 14 SCC 731; Kulja INdustries Limited Vs. Chief General Manager, Wester Telecom Project Bharat Sanchar Nigam Limited and Ors. (Para 17). Not only the observance of principles of natural justice but proportionality in taking any penal action are grounds which are available for challenging such orders of debarment/ blacklisting, even in contractual matters. The observations of Hon'ble Supreme Court in the said decision as referred hereinabove have to be taken into account. Page No. 25

49. The observation in the order dated 24.10.2024 to the effect -"during the execution of work various deficiencies had been noticed on the part of Authority Engineer including but not limited to improper recommendation of change of scope" indicate that there were other deficiencies which had been taken into consideration for debarment as such there non mentioning specifically in the order is also against natural justice. Such vague recitals, lacking in clarity, can not form the basis of a penal action.

50. In view of the above discussion, even though, the plea of absence of 15 days show cause notice and absence of specific allegations in the notices dated 18.09.2024 and 20.09.2024 are not acceptable in the facts of this case, consideration of irrelevant and non existent material, non consideration of relevant facts, misreading of documents such as opinion dated 22.06.2023 and the withdrawal of opinion dated 30.05.2024, render the decision on the issue of delay in giving opinion and changes therein, vitiated on the anvil of Natural Justice and on account of lack of due and proper application of mind. As regards improper opinion having been given, the explanation offered in Para 4 of the reply dated

23.07.2024 has not been considered at all which again is a violation of Natural Justice.

51. We, accordingly, quash both the impugned orders/ notice dated

18.07.2024 and the order dated 24.10.2024, with liberty to the concerned opposite parties to proceed afresh against the petitioners and to pass fresh orders but keeping in mind the discussions made hereinabove.

52. The writ petition is allowed. (Brij Raj Singh,J.) (Rajan Roy,J.) Order Date :- 17.02.2025 R.K.P./Shanu/-