Calcutta High Court Criticizes "Indefinite" Ban On Bidder Pending Criminal Trial

The Calcutta High Court on Monday allowed a writ petition for the lifting of a ban imposed on Auroma Coke Ltd (“petitioners”) from taking part in the Non-regulated Sector (“NRS”) Linkage auctions organised by Coal India Limited (“CIL”).

The petitioners were blacklisted by CIL in the year 2011 upon a communication by the Central Bureau of Investigation (“CBI”) regarding alleged mis-utilisation of coal carried out by the petitioners. The CBI had since filed a chargesheet in the matter in 2012 and an ongoing criminal trial had since ensued before a sessions court in Dhanbad.

Upon purposively constructing the “Scheme Document of November 2022”, released by CIL, in order to interpret the sections on blacklisting in NRS Linkage auctions, a single-judge Bench of Justice Sabyasachi Bhattacharya held that the tender document itself stipulated a maximum blacklisting period of 5 years, even if there existed an ongoing criminal investigation or order of conviction against the petitioner. It was held:

“Thus, on an appropriate reading of the said sub-clause, we find that if a unit is convicted in a criminal proceeding, the banning will continue for five years, the commencement of which would be the date of commencement of last suspension or the date of conviction, whichever is earlier. There are two possible interpretations of sub-clause 1(ii)(a). The first is that, in case the charge-sheet is filed, the unit would not be eligible to participate in any auction till acquittal/clearance, which would be the literal construction of the said sub-clause. However, such an interpretation would be absurd, since it would necessarily imply that the period of banning in case of an undertrial unit may then exceed the period of ban suffered by a company which is finally convicted. Such an interpretation, being absurd, ought to be abhorred.

Thus, the only possible reasonable interpretation of the relevant provisions is that, even in case of participation under NRS linkage auction at the behest of investigating agencies like the CBI, in case the reason of suspension/banning is not completely mitigated because of reasons like pendency of trial, the suspension can, at the most, stand extended till the time of acquittal or maximum period of banning, whichever is earlier. Going by such standard, the maximum period of banning, which is 5 years, has long expired. Since the last suspension of the petitioner no.1 was in 2011 and the maximum period of five years has expired twice over since then, it cannot be said that the petitioners are still under suspension/banning.”

Facts of the case

It was argued by the petitioners that they were blacklisted from the NRS auction process in the year 2011, due to communication by the CBI regarding wrongful utilisation/misutilisation of coal by them. It was submitted that notwithstanding the outcome of the aforesaid investigation, under the new Scheme document of November 2022, (“tender document”) the maximum period for blacklisting applicable to the petitioners had already expired.

The petitioners further submitted that they had preferred an earlier writ petition (WP No.11349 (W) of 2019) challenging the tender process on the grounds that the eligibility conditions were arbitrarily set. During the course of that hearing before a co-ordinate Bench, it was recorded that there was no impediment in the petitioners submitting their bid in terms of the tender process.

The petitioners however alleged that when they submitted their bids, on September 7, 2020, they were informed that they had flouted certain conditions mentioned under the Eligibility Clause of the tender document and would be liable for criminal action. It was alleged that even the bid security submitted by the petitioners had to be forfeited.

It was argued by the respondent-authorities that the bid submitted by the petitioners in 2020 had fallen afoul of Clause IV(a) of the tender document. It was submitted:

“The petitioners flouted the basic eligibility condition stipulated in Clause 4(a) of the tender, which provided that no legal proceedings are pending against the bidder in any court of law for wrongful utilization/misutilization/diversion of coal. Such case was pending in the Dhanbad local court at the behest of the CBI.”

Findings of the Court

In interpreting clause IV(a) of the tender document, the Bench held that the maximum time stipulated within the tender document for the banning of an organisation for misutilisation or wrongful utilisation of coal, would be for a period of five years, from the date of conviction, or the date of banning, whichever would’ve been earlier.

It was held that, in the present case, the ban having been imposed in the year 2011, would have run its course in the year 2016, regardless of the outcome of the criminal case in the matter, which had been filed by the CBI. It was concluded:

“The fact that, in the present case, the charge-sheet itself was filed in the year 2012 and the criminal case is pending over eleven years till date, even in the absence of any stay order by a superior forum, speaks volumes about the pace of progress of the said criminal case, which does not inspire confidence that the same would be over any time soon. Hence, the ratio laid down by the Supreme Court applies all the same, since the petitioners cannot wait indefinitely for disposal of the criminal case, being restrained in the meantime from participation in any tender floated by the CIL or its subsidiaries, which operates adversely against the goodwill and the business of the petitioners. Hence, there is no scope of sustaining the operation of the ban/suspension against the petitioners…the ban/suspension, imposed against the petitioner no.1 in the year 2011 has already spent its force. The respondent-authorities shall allow the petitioner no.1 to participate in its tenders, irrespective of and undeterred by the said ban of the year 2011, deeming the petitioner to be an otherwise eligible candidate for participation in the tenders floated by the CIL, of course, subject to the petitioner complying with other tender conditions criteria apart from the ban of 2011.”

Coram: Justice Sabyasachi Bhattacharya

Case: Auroma Coke Limited v Coal India Limited and others

Citation: 2023 LiveLaw (Cal) 192

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