M/S Commercial Food Services vs Government Of Nct Of Delhi on 29 July, 2021
Delhi High Court – Orders
M/S Commercial Food Services vs Government Of Nct Of Delhi on 29 July, 2021
$~35
* IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 7232/2021
M/S COMMERCIAL FOOD SERVICES ..
Through Mr. Akshat Bajpai, Ms. Is
Sharma, Ms. Shreya Gupta, Advs. versus
GOVERNMENT OF NCT OF DELHI ….. Respondent
Through Mr. Satyakam Advocate ASC (GNCTD)
CORAM:
HON’BLE MS. JUSTICE REKHA PALLI
ORDER
% 29.07.2021 CM APPL. 22784/2021 (Exemption)
- Exemption allowed, subject to all just exceptions.
- The application stands disposed of.
W.P.(C) 7232/2021 & CM APPL. 22785/2021 (interim order)
- The petitioner herein is a sole proprietorship concern engaged in the business of providing healthcare kitchen and dietary services. It has filed the present petition assailing the order dated 12.07.2021 passed by the respondent whereby the contract awarded to the petitioner on 24.03.2021 for providing healthcare, kitchen and dietary services in Shri Dada Dev Matri and Sheeshu Chikitshyalaya has been cancelled and the petitioners have been blacklisted for a period of two years.
- The facts leading to the present case are that on 06.03.2021, the Signature Not Verified Signed By:GARIMA MADAN Location:
Signing Date:30.07.2021 15:28:03 respondent floated a tender seeking a supplier of healthcare kitchen and dietary services at the Shri Dada Dev Matri Avum Shishu Chikitsalaya, New Delhi, a Hospital providing healthcare services for mothers and children. The petitioner submitted its bid through GeM and quoted a daily amount of Rs. 105/unit per patient. The tender required the petitioner to furnish its GST number, which was duly furnished. However, it transpires that the petitioner’s GST had already been cancelled on 18.01.2021 by the GST Department, pursuant to the issuance of showcause notices dated 17.12.2020 and 07.01.2021 which noted that the petitioner had not filed returns for a continuous period of six months. It is the petitioner’s case that the showcause notice, as well as the notice for cancellation of GST registration had been sent to its former Chartered Accountant, who did not bother informing the petitioner of the same and that the second
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M/S Commercial Food Services vs Government Of Nct Of Delhi on 29 July, 2021
wave of COVID-19 in Delhi in March-April 2021 had affected the sole proprietor of the petitioner company and his family members, which rendered him unable to carry out any correspondences in respect of this matter. The petitioner, thus, claims that being unaware that its GST registration stood cancelled, it proceeded to submitted its bid to the respondent Hospital with the cancelled GST registration number. The petitioner’s bid was accepted on 24.03.2021, and the parties executed a year-long contract beginning w.e.f. 01.04.2021 and ending on 31.03.2022.
5. Upon coming to know that the petitioner had submitted its bid with a GST registration number that was cancelled by the authorities, the respondent issued a Notice to the petitioner on 19.06.2021, asking it to show cause as to why its contract with the respondent should not be forthwith terminated and the petitioner be blacklisted for a period of two years, for Signature Not Verified Signed By:GARIMA MADAN Location:
Signing Date:30.07.2021 15:28:03 providing false information to the petitioner at the time of bid submission and for failing to submit the requisite Performance Bank Guarantee under the contract. After considering the petitioner’s reply dated 01.07.2021 to the show cause notice, the respondent passed the impugned order on 12.07.2021.
- In the meanwhile, on being issued the show cause notice on 19.06.2021, the petitioner hastened to redeem itself and approached the Appellate Authority of the GST Department to place forth its explanation in respect of its defaults committed by it and seek reactivation of its GST Number. The learned Appellate Authority found in favour of the petitioner and allowed the appeal by directing that its GST registration number be restored w.e.f. 30.06.2021. However, given that the respondent subsequently terminated the contract and blacklisted the petitioner for two years, on the ground that the petitioner had illegally furnished a cancelled GST number and thereby committed statutory violations, the present petition has come to be filed.
- Assailing the impugned order, Mr Bajpai, learned counsel for the petitioner submits that the petitioner was never aware that its GST number stood cancelled and had acted with bonafide while providing the same to the respondent at the time of bid submission in March 2021. He submits that the petitioner’s intention was never to deceive or defraud the respondent, and that the error had occurred on account of lack of information since both the show cause notices and the cancellation notice had been sent to a former Chartered Accountant who was not in touch with the petitioner anymore. He further submits that, without prejudice to the aforesaid, the petitioner had never defaulted in paying dues until December 2020, which had only Signature Not Verified Signed By:GARIMA MADAN Location:
Signing Date:30.07.2021 15:28:03 occurred on account of the havoc wreaked by COVID-19 pandemic on the economy and its business, leading to a devastating financial crunch. He contends that against this financial background, the petitioner’s clients had stopped making payments, which had adversely affected its cash flow. This fact was also noted by the learned Appellate Authority later on when it was scrutinising the matter. It was found that the GST Department already had extra amounts that had been submitted by the petitioner and that the petitioner had not committed any default; the entire issue with the Department had been resolved by making necessary adjustments of
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M/S Commercial Food Services vs Government Of Nct Of Delhi on 29 July, 2021
previously paid extra amounts towards returns against the dues purportedly owed by the petitioner. He further contends that the entire act of terminating and blacklisting the petitioner after the dispute with the Department had stood resolved, was entirely unjustified and baseless.
8. Mr Bajpai then submits that the respondent, being the State, was required to act in a fair and reasonable manner, yet it decided to terminate its contract with the petitioner and blacklist it, in a move that can only be described as excessive and arbitrary considering that the entire basis for these actions was a curable issue and stood resolved earlier. He then submits that the very act of blacklisting has enormous civil consequences for a small-scale sole proprietorship like the petitioner, causing it stigma and eroding its hard earned reputation in the market. He contends that the respondent had been duly made aware that the issue as regards the petitioner’s GST return defaults stood resolved with the Department, yet the same did not appear to quell its concerns. He submits that in any event, the tender did not require the petitioner to upload documents in respect of the GST registration and, therefore, the petitioner who had submitted the GST Signature Not Verified Signed By:GARIMA MADAN Location:
Signing Date:30.07.2021 15:28:03 number under a bonafide belief that all was well with it, cannot now be penalised by the respondent with such a harsh, long lasting sentence of contract termination and blacklisting. He, therefore, prays, that the impugned order for termination and blacklisting be set aside.
- Opposing the petitioner’s case, Mr. Satyakam, who appears on advance notice on behalf of the respondent, submits that the petitioner had knowingly furnished wrong information to the respondent and provided a cancelled GST number in March, 2021 despite being fully aware of its cancelled status. He submits that in fact, the petitioner had been cautioned by the respondent with criminal consequences, for engaging in such falsehood. By drawing my attention to the contract that was executed by the parties on 24.03.2021, he submits that an obvious and crucial aspect of their commercial relationship was the validity and existence of the GST registration number provided by the vendor, the petitioner herein. Therefore, any claim of the petitioner that the GST number was not a primary facet of their transaction is completely erroneous and deserves to be rejected at the outset. He contends that the entire decision to blacklist the petitioner was a consequence of the petitioner indulging in falsehood when transacting with the respondent Hospital, a State, and that the same could not be dealt with any leniently than it was since that would set a terrible precedent for other vendors such as the petitioner. He, therefore, prays that the writ petition be dismissed.
- I have considered the submissions made by the parties. Given the facts of the case, the explanation advanced by the petitioner for being unaware that its GST registration had been cancelled, does not inspire confidence. In these circumstances, keeping in view the manner in which the Signature Not Verified Signed By:GARIMA MADAN Location:
Signing Date:30.07.2021 15:28:03 petitioner secured the contract with the respondent, while I see absolutely no infirmity in the respondent’s decision to terminate its contract with the petitioner, I find the respondent’s decision to blacklist the petitioner for a period of two years wholly unwarranted. For one, it is a well-known fact that the economy has suffered a major setback ever
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M/S Commercial Food Services vs Government Of Nct Of Delhi on 29 July, 2021
since the onset of the COVID-19 pandemic and small business, such as the petitioner, are bearing the brunt of this. I, therefore, do not see any reason to doubt the petitioner’s explanation for the financial difficulties that occasioned the default in paying returns and eventually led to the suspension and cancellation of its GST registration. It appears that the learned Appellate Authority at the GST Department was of similar mind when it accepted the petitioner’s explanation for its defaults, forgave the same and directed restoration of its GST number. While I agree that the petitioner’s actions may not have been completely above the board and invite suspicion, the respondent’s decision to terminate the contract in question and then blacklist the petitioner for a period of two years does appear to be quite excessive, disproportionate and unnecessary given the circumstances. Small proprietorships, such as the petitioner’s, are already flailing in this economy and finding it hard to survive and the respondent, being a State, cannot be blind to this reality. Permitting a punitive action of this nature to continue would deal a greater blow to the survival of small businesses such as the petitioner. After all, as the petitioner has rightly contended, at the time when the impugned order was passed, the entire basis for the respondent’s grievance with the petitioner – that the GST Department had cancelled its registration – stood resolved under the directions of the learned Appellate Authority.
11. In these circumstances, I am of the view that the respondent ought to Signature Not Verified Signed By:GARIMA MADAN Location:
Signing Date:30.07.2021 15:28:03 re-consider the decision to blacklist the petitioner and, while doing so, duly take into account the significant fact that the GST Department has itself adopted a compassionate view towards the prevailing circumstances and the strata to which the petitioner and its sole proprietor belong. Accordingly, the impugned order is set aside to the extent that it blacklists the petitioner for a period of two years. The respondent shall reconsider this aspect, by taking into consideration the observations made by this Court today, and pass an appropriate order thereon within a period of two weeks. Needless to say, in case the petitioner continues to be aggrieved by the decision of the respondent, it will be upon for it to take legal recourse as per law.
12. The petition is disposed of in the aforesaid terms.
REKHA PALLI, J JULY 29, 2021 acm Signature Not Verified Signed By:GARIMA MADAN Location: Signing Date:30.07.2021 15:28:03
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