{"id":332957,"date":"2024-10-14T12:00:10","date_gmt":"2024-10-14T06:30:10","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=332957"},"modified":"2024-10-17T09:22:31","modified_gmt":"2024-10-17T03:52:31","slug":"bomhc-upholds-bpcls-order-banning-dealings-with-mukand-poly-products-due-to-supplying-products-with-altered-local-content","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2024\/10\/14\/bomhc-upholds-bpcls-order-banning-dealings-with-mukand-poly-products-due-to-supplying-products-with-altered-local-content\/","title":{"rendered":"\u2018Supplying products with altered local content amounts to breach of contract\u2019; Bombay HC upholds BPCL\u2019s order banning dealings with Mukand Poly Products"},"content":{"rendered":"
\n

Bombay High Court:<\/span> The present petition was filed under Article 226<\/a> of the Constitution<\/a> challenging the validity of an order dated 08-12-2023 passed by Respondent 1, BPCL whereby Respondent 1 decided to ban business dealings with petitioner, Mukand Poly Products, and its allied agencies and further debarred petitioner from entering into the contracts with Respondent 1 for a period of one year. Further, it was prayed that by an appropriate writ or direction, Respondent 1 might be restrained from taking any action\/coercive steps against petitioner pursuant to the show cause notice dated 21-07-2023 and the impugned order of debarring dated 08-12-2023.<\/p>\n

The Division Bench of Devendra Kumar Upadhyaya, CJ.*<\/span>, and Amit Borkar, J., stated that once petitioner expressed its inability to supply the pipes with 82.36% Local Content and that it would cater the supplies pursuant to the procurement order with its product having 51.45% Local Content, it would amount to abandoning the contract and subsequent offer to supply with the altered Local Content in its product and petitioner’s inability to make supplies with Local Content of 82.36% amounted to breach of contract. The Court stated that even if the doctrine of proportionality was applied, it could not be said that the impugned order, in any manner, was disproportionate to the default at the end of petitioner as Clause 4.2.1 prescribed the period of Holiday Listing in case of breach of contract or abandonment of contract to be 3 years, whereas petitioner had been debarred only for a period of one year. Thus, the impugned order dated 08-12-2023 did not suffer from any illegality.<\/p>\n

Background<\/h3>\n

Petitioner 1 was a partnership firm, registered under the Partnership Act, 1932<\/a> and was also an MSME industry dealing in Polyethylene pipes having its manufacturing unit at Guwahati. Petitioner was one of the partners of Petitioner 1. Respondent 1 issued notice inviting tender (tender document) for procurement of Polyethylene (MDPE) pipe for BPCL\/BGRL CGD Projects. The bid due date for the tender was 16-08-2022 and the document specifically provided that the policy to Purchase Preference linked with Local Content (‘PPLC’) circulated by the Ministry of Petroleum and Natural Gas, Government of India, vide its circular dated 23-02-2022 shall be applicable to the subject tender.<\/p>\n

Petitioner submitted its bid with a declaration of Local Content to be 82.36% by means of a certificate dated 10-09-2022 from a Chartered Accountant and qualified in the said tender and a letter of acceptance was issued by Respondent 1 vide letter dated 23-01-2023 informing petitioner that its offer was accepted on the terms and conditions of the tender document. Pursuant to acceptance of petitioner’s bid, a call of order for procurement of Polyethylene pipes was issued by Respondent 1 on 24-01-2023 whereby Petitioner 1 was required to supply 602 pipes in number, of different diameters.<\/p>\n

Petitioner, after receiving the Procurement Order -1, made supplies of certain polyethylene pipes, however, an email communication dated 22-02-2023 was sent by the Project Management Consultant, Tractebel, to petitioner requiring it to submit all the required documents to justify meeting the Local Content of 82.36% against the dispatched quantity. Thereafter, 09-03-2023, the Project Management Consultant asked petitioner to hold all dispatches till further advice. Further, a communication was made wherein it was stated that raw material procured by petitioner from domestic Polythene pipe manufacturer was sourced from outside India, i.e., UAE and it could not be considered as Part Local Content. The Project Management Consultant also informed petitioner that a recommendation was made to Respondent 1 that the declaration of meeting the Local Content of 82.36% by petitioner against the PPLC policy was not in line with Procurement Guidelines issued by the Government of India in the Ministry of Petroleum and Natural Gas.<\/p>\n

A show cause notice was issued by Respondent 1 calling upon petitioner to submit its reply\/explanation as to why petitioner might not be placed on Holiday Listing and might not be barred from entering into any contract with the BPCL. The notice stated that petitioner had participated in the tender with a declaration of 82.36% Local Content in the offered product and accordingly, it had claimed purchase preference for being Class-I local supplier. The show cause notice also stated that petitioner had earlier submitted that declaration of 82.36% Local Content was not executable, and the product delivered by petitioner had Local Content 51.45%. The show cause notice informed petitioner that such an act on its part was tantamount to committing breach of contract, having abandoned the contract. The impugned order dated 08-12-2023 banning the business dealings with petitioner and debarring it from entering into the contracts was passed, which was challenged by petitioner in the present petition.<\/p>\n

Analysis, Law, and Decision<\/h3>\n

The petitioner had declared that the pipes offered to be supplied by it contain 82.36% Local Content and that the pipes supplied by petitioner pursuant to the procurement order issued by Respondent 1 did not contain Local Content to the extent of 82.36%; rather, it contained only 51.45% Local Content which was apparent from the certificate issued by the Chartered Accountant. The Court opined that instead of abiding by supplying the pipes offered by petitioner with 82.36% Local Content at the time of submission of bid, petitioner submitted a revised declaration of the Local Content of its product which was impermissible and it was not open for petitioner to have altered the percentage of Local Content in its product, as it not only contravened the provisions of the tender document but also the provisions of the PPLC policy.<\/p>\n

The Court stated that if there was any ambiguity in petitioner’s mind as to how the Local Content in its product had to be determined, such clarification ought to have been sought by it before the tender process was finalized and not thereafter. The Court agreed with petitioner’s contention that if the product offered by petitioner Contained 50% or more than 50% Local Content in the product offered by it, it still qualified as Class-I supplier under the policy, however, the Court opined that this would not be sufficient for petitioner to contend that it had not contravened the contract.<\/p>\n

The Court stated that once petitioner expressed its inability to supply the pipes with 82.36% Local Content and that it would cater the supplies pursuant to the procurement order with its product having 51.45% Local Content, it would amount to abandoning the contract and subsequent offer to supply with the altered Local Content in its product and petitioner’s inability to make supplies with Local Content of 82.36% amounted to breach of contract. The tender was awarded to petitioner based on the declaration which depicted that the offered product by petitioner contained 82.36% Local Content and not 51.45%.<\/p>\n

The Court noted that Clause 4.1.1 of the General Purchase Conditions provided that if the agency, in the context of its dealing with Respondent 1, committed breach of contract or had abandoned the contract, such an act on the part of the agency shall result in the agency being placed on the Holiday List. Further, Clause 4.2.12 prescribed that if any agency was found to have committed breach of contract or to have abandoned the contract, the agency could be placed on the Holiday List for a period of 3 years. The Court noted that Clause 9.2 of PPLC policy provided various forms of sanctions to be imposed by the procuring companies which included blacklisting as well, therefore, petitioner’s contention that at the most, it was a violation of PPLC policy which entailed financial penalty only and not blacklisting, was untenable.<\/p>\n

The Court stated that supply, as per the contract, could be made only with the product containing 82.36% Local Content which petitioner stated to be not executable. Thus, petitioner had committed breach of contract by abandoning the contract as petitioner itself stated that the procurement order with 82.36% Local Content was not executable, therefore, Clause 4.1.1 of the policy for Holiday Listing of petitioner was clearly attracted.<\/p>\n

The Court stated that an administrative action as the one in the present case did not attract application of doctrine of proportionality, however, Clause 4.2.1 prescribed the period of Holiday Listing in case of breach of contract or abandonment of contract to be 3 years, whereas petitioner had been debarred only for a period of one year. Thus, even if the doctrine of proportionality was applied, it could not be said that the impugned order, in any manner, was disproportionate to the default at the end of petitioner.<\/p>\n

The Court noted that the impugned order noticed the admission made by petitioner that at the time of bidding, petitioner was very sure, based on its interpretation, about the Local Content in the product offered to be 82.36%, however, subsequently, petitioner realized that the Local Content clause of the policy was capable of another interpretation that was different to what it had declared at the time of submitting its bid. The impugned order, thus, noticed that due to such facts, petitioner was not able to supply the material as against the procurement order which amounted to breach\/abandonment of the contract. Thus, the rejected petitioner’s contention that the impugned order was not based on the grounds disclosed in the show cause notice.<\/p>\n

The Court dismissed the petition and held that the impugned order dated 08-12-2023 did not suffer from any illegality, to call for any interference by this Court in exercise of its extraordinary jurisdiction under Article 226<\/a> of the Constitution<\/a>.<\/p>\n

[Mukand Poly Products v. BPCL, 2024 SCC OnLine Bom 3226<\/a>, decided on 08-10-2024<\/span>]<\/p>\n

*Judgment authored by: Chief Justice Devendra Kumar Upadhyaya<\/span><\/strong><\/p>\n\n

Advocates who appeared in this case :<\/p>\n

For the Petitioners:<\/span> Pranjit Bhattacharya a\/w. Avdhoot Prabhu i\/b. Lex Services<\/p>\n

For the Respondents:<\/span> Pankaj Sawant, Senior Advocate a\/w. Rutu Pawar i\/b. Pragnya Legal<\/p>\n

Buy Constitution of India  HERE<\/a><\/h3>\n

\"Constitution<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Once petitioner-Mukand Poly Products expressed its inability to supply pipes with 82.36% Local Content and that it will cater the supplies pursuant to the procurement order with its product having 51.45% Local Content, it will amount to abandoning the contract.<\/p>\n","protected":false},"author":1,"featured_media":314919,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,10],"tags":[49008,74016,2857,2569,59942,27704,67299,71002,74017],"class_list":["post-332957","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-highcourts","tag-abandonment-of-contract","tag-altered-local-content","tag-Ban","tag-Bombay_High_Court","tag-bpcl","tag-breach-of-contract","tag-chief-justice-devendra-kumar-upadhyaya","tag-justice-amit-borkar","tag-mukand-poly-products"],"yoast_head":"\n\u2018Supplying products with altered local content amounts to breach of contract\u2019; 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