Read Order: Michigan Engineers Pvt. Ltd v. Maharashtra Rail Infrastructure Development Corporation Limited 

Tulip Kanth

Mumbai, May 12, 2022: Permitting the petitioner-contractor to avail period of 6 months plus a period of 45 days to complete the balance work, the Bombay High Court has opined that it would be permissible for the respondent to take steps to blacklist the petitioners only by following procedure as known to law in case the petitioner fails to complete the work within the stipulated period.

Referring to the judgments of this Court in Erusian Equipments and Chemicals Ltd. v. State of West Bengal, Southern Painters vs. Fertilizers and Chemicals Travancore Ltd., Gorkha Security Services Vs. Government (NCT of Delhi) and BVG India vs. State of Maharashtra and Ors, the Bench of Justice G.S.Kulkarni said, “In my opinion, inclusion of such deemed blacklisting may not be appropriate as it would be contrary to the well settled principle of law which mandate that a procedure by adherence to the principles of natural justice needs to be followed to blacklist a contractor, as any action of blacklisting entails civil consequences.”

This petition was essentially filed under Section 9 of the Arbitration and Conciliation Act, 1996 which was heard on April 12, 2022, when the contractor made an offer to the respondent that it will complete the contractual work within a period of six months, as also the petitioner would enhance the bank guarantee to make it 10%. In the order, it was mentioned that same would be in public interest to reduce further escalated expenditure to be incurred to complete the balance work. Now, a prejudice offer had been made on behalf of the respondent to the petitioner under the respondent’s letter wherein the provision of blacklisting was included.

Considering the various aspects involving blacklisting, the Bench held that, in the event, if the petitioner fails to complete the work within the stipulated period it would be permissible for the respondent to take steps to blacklist the petitioners only by following procedure as known to law. It was also ordered that the respondent shall issue a necessary clarificatory letter to the petitioner to enable the petitioner to approach its bankers, so that the petitioner can avail the bank guarantee on the footing that the contract subsists for completion of the balance work. Thus, the petition was disposed of with these observations.

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