"Blacklisted Without Warning? A Contractor's Legal Battle Against Bihar Government"

 


Introduction

This case revolves around Chhotiya Constructions Pvt. Ltd., a Bihar-based construction company, which was debarred from future contracts by the state government without prior notice. The company challenged the order in the Patna High Court, arguing that the decision violated the Principles of Natural Justice. The court’s ruling addressed critical legal questions about due process, contractor rights, and government authority.

Background of the Case

Chhotiya Constructions Pvt. Ltd. is a Class-I contractor engaged in civil and construction works. In 2019-20, the company participated in a government tender for renovating an irrigation system in Gaya, Bihar, and was awarded the contract. However, soon after work began, administrative complications arose:

  1. September 24, 2020: The company received the work allotment letter.

  2. October 5, 2020: The Chief Engineer canceled the contract due to complaints against the company.

  3. December 11, 2020: The same Chief Engineer revoked the cancellation, finding the complaints baseless, and reinstated the contract.

Despite these hurdles, the project faced delays. The government repeatedly warned the company to complete the work but eventually debarred it from future contracts, leading to the present legal challenge.

The Legal Issue

Chhotiya Constructions Pvt. Ltd. filed a writ petition (CWJC No. 4585 of 2022) in the Patna High Court, arguing that:

  • The debarment order was issued without a show cause notice, violating the right to defend itself.

  • Only the Engineer-in-Chief had the authority to issue a debarment order, but in this case, it was issued by an Executive Engineer, making it legally invalid.

  • The company was unfairly punished for delays beyond its control, and the decision to blacklist was arbitrary.

Arguments Presented

Petitioner’s (Chhotiya Constructions) Arguments:

  1. The blacklisting violated due process because no formal notice or opportunity for defense was given.

  2. The Executive Engineer lacked authority to issue the debarment order; only the Engineer-in-Chief could do so.

  3. The work delays were not entirely their fault due to administrative and external challenges.

  4. Precedents from the Supreme Court and High Courts require a fair hearing before blacklisting.

Government’s Arguments:

  1. The company failed to complete the irrigation project despite multiple warnings.

  2. As per Clause 4.8 of the Standard Bidding Document, contractors with poor performance can be debarred.

  3. A state government order from 2020 allows departments to blacklist contractors for delays until the pending work is finished.

  4. The decision was necessary to prevent further project disruptions and ensure timely infrastructure completion.

Court’s Analysis & Decision

The Patna High Court ruled in favor of Chhotiya Constructions Pvt. Ltd., citing fundamental legal principles:

  1. Lack of Due Process:

    • The government failed to issue a formal notice, violating Natural Justice.

    • Contractors must be given an opportunity to explain delays before being penalized.

  2. Authority of the Issuing Officer:

    • The Executive Engineer who issued the debarment order did not have the required authority.

    • The order should have come from the Engineer-in-Chief.

  3. Precedents in Law:

    • The Supreme Court has ruled in multiple cases (e.g., Gorkha Security Services vs. Govt. of NCT Delhi, Patel Engineering Ltd. vs. Union of India) that blacklisting requires prior notice and explanation.

  4. Final Ruling:

    • The debarment order was quashed.

    • The government was allowed to reissue a fresh notice, following proper legal procedures.

Conclusion

The case of Chhotiya Constructions Pvt. Ltd. vs. Bihar Government underscores the importance of transparency and due process in government contracting. While contractors must meet deadlines, they are also entitled to a fair hearing before facing penalties. This ruling serves as a reminder to government agencies that procedural fairness cannot be ignored, even in matters of public infrastructure and governance.

Read the full judgement Below;

https://patnahighcourt.gov.in/viewjudgment/MTUjNDU4NSMyMDIyIzEjTg==-RrKhoI2LKM0=