Contract – Termination – Blacklisting – The appellant, a registered contractor with the Water and Sanitation Department was contracted for construction of an Elevated Service Reservoir (ESR) by issuance of a Letter of Acceptance (LOA) on 06.03.2023 – During the subsistence of the contract, on 01.06.2024, the top dome of the reservoir collapsed – Department issued a show cause notice dated 04.06.2024 seeking explanation as to why action should not be taken for the negligence and bad quality of work – Upon receiving concurrent reports indicating negligence on part of appellant, respondent no. 3, Chief Engineer, Drinking Water and Sanitation Department, passed the termination cum blacklisting order dated 23.08.2024 – Aggrieved, the appellant filed an appeal, which was dismissed by the Appellate Authority – Appellant filed writ petition, which was also dismissed – Correctness:
Held: In view of the clear findings of negligence as articulated in the order of termination, this Court will not interfere with the decision of termination – In so far as the order relating to blacklisting is concerned, the blacklisting order suffers from patent infirmities: it evinces no application of mind, disregards the mandatory precept of audi alteram partem, and fails to precede with a show-cause notice requiring the contractor to demonstrate why such drastic action should not be taken – Blacklisting, being stigmatic and exclusionary in nature, cannot be imposed mechanistically but must comport with principles of natural justice and reasonableness – The final order of blacklisting, dated 23.08.2024, does not list the reasons as to why an order of blacklisting has become necessary – A blacklisting order assumes that the contractor is an incorrigible entity, at least for some time to come, in this case such an assumption was intended to operate for five years – For giving effect to such a premise, there has to be sufficient evidence, clear application of mind and stronger adherence to principles of natural justice – The blacklisting order dated 23.08.2004 falls short of this requirement and is liable to be set aside – Thus, the decision of blacklisting of the appellant is illegal, arbitrary and unreasonable – The declaration of blacklisting is set aside. [Paras 15, 16, 3, 23, 25] Contract – Termination – Blacklisting:
Held: The contractual conditions governing termination on the one hand and those that relate to blacklisting on the other are distinct and will be exercised independently – A decision of blacklisting is not automatic and certainly not a logical consequence of a decision of termination – Even after the Department decides to terminate the contract, there is still a choice of exercising the power of blacklisting – These decisions operate in two dimensions-past and subsisting for termination and future for blacklisting – In other words, an order of blacklisting transcends the existing contract and debars the contractor from contracts that could probably be executed in the next five years – In view of the serious consequences, it is necessary for the Department to issue a specific notice proposing blacklisting of a contractor and call for an explanation as to why an order of blacklisting should not be passed. [Para 18]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Ankit Gyan Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL, (2014) 14 SCC 731; The Blue Dreamz Advertising Pvt Ltd. & Anr. v. Kolkata Municipal Corporation & Ors, 2024 INSC 589, M/s Techno Prints (supra). Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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