Simplified Explanation of the Judgment

This case involved a construction company (the “petitioner”) that had been blacklisted by the Bihar Road Construction Department for ten years and directed to refund alleged excess payments. The petitioner challenged the order dated 27 January 2020 before the Patna High Court.

The petitioner was a Class-I contractor who had secured a contract for road widening and strengthening in 2017–18. A Flying Squad reportedly found major irregularities in the execution of the work. Based on this, a show-cause notice was issued in August 2019, but the petitioner complained that:

1. The Flying Squad report—the key basis of allegations—was never supplied, despite requests.
2. The notice did not mention that blacklisting was a possible consequence.
3. The reply filed by the company was not properly considered.
4. The ten-year blacklisting period was disproportionately harsh and stigmatic.
5. The recovery direction was vague, without clear quantification of the alleged excess payment.

The State argued that:

• The contractor had received payments without executing work, and irregularities were confirmed by a Special Technical Committee.
• The company even took illegal payments for extra carriage without supporting vouchers.
• The blacklisting was justified under the Bihar Contractors Registration Rules, 2007.
• The petitioner had the alternative remedy of filing an appeal.

The High Court carefully reviewed the record and made several key findings:

• Incomplete Notice: The show-cause notice failed to specify the proposed action of blacklisting. This violated principles of natural justice, as held in Gorkha Security Services v. Government (NCT of Delhi), (2014) 9 SCC 105, where the Supreme Court stressed that a notice must clearly state both (i) the grounds and (ii) the proposed penalty.
• Non-supply of Report: The Flying Squad report, crucial for defense, was not provided to the petitioner, depriving it of a fair opportunity.
• Lack of Reasoned Order: The order did not explain why such a long blacklisting period of ten years was necessary. Courts have repeatedly held that blacklisting is an extreme penalty with serious consequences, and any such decision must be well-reasoned and proportionate.
• Disproportionality: Relying on Vetindia Pharmaceutical Ltd. v. State of U.P., 2020 SCC OnLine SC 912, Kulja Industries Ltd. v. BSNL, (2014) 14 SCC 731, and Daffodils Pharmaceuticals Ltd. v. State of U.P., (2019) 17 Scale 758, the Court reiterated that blacklisting for a very long duration is often disproportionate and unfair.

Accordingly, the Court quashed the blacklisting order and directed the Department to:

• Issue a fresh, complete show-cause notice clearly mentioning the proposed action.
• Provide the petitioner with all documents relied upon, including the Flying Squad report.
• Allow the petitioner four weeks to reply, and then take a reasoned final decision within another four weeks.

This ensured a balance: the Department retained power to act against irregularities, but the contractor received full due process rights.

Significance or Implication of the Judgment

• Natural justice reinforced: Authorities must issue show-cause notices that clearly state proposed penalties and supply all relied-upon documents.
• Limits on blacklisting: Courts view long-term blacklisting (like ten years) as extreme and often disproportionate.
• Protection for contractors: Ensures fair hearing before imposing penalties that can end a contractor’s business.
• Administrative discipline: Departments must follow transparent procedures, or risk having their actions quashed.

Legal Issue(s) Decided and the Court’s Decision with Reasoning

• Whether a show-cause notice without mention of proposed blacklisting is valid?
  – Decision: No. Such a notice is incomplete and violates natural justice.
• Whether non-supply of critical documents (Flying Squad report) invalidates proceedings?
  – Decision: Yes. It deprived the petitioner of effective defense.
• Whether blacklisting for ten years is proportionate?
  – Decision: No. Such a long duration is disproportionate and stigmatic.
• Final Relief: Blacklisting order quashed. Fresh notice and reconsideration directed, with strict timelines.

Judgments Referred by Parties

• Gorkha Security Services v. Govt. of NCT of Delhi, (2014) 9 SCC 105
• Erusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70
• Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229
• Patel Engineering Ltd. v. Union of India, (2012) 11 SCC 257

Judgments Relied Upon or Cited by Court

• Gorkha Security Services v. Govt. of NCT of Delhi, (2014) 9 SCC 105
• Vetindia Pharmaceutical Ltd. v. State of U.P., 2020 SCC OnLine SC 912
• Kulja Industries Ltd. v. BSNL, (2014) 14 SCC 731
• Daffodils Pharmaceuticals Ltd. v. State of U.P., (2019) 17 Scale 758

Case Title

Rishi Builders India Pvt. Ltd. v. State of Bihar & Ors.

Case Number

Civil Writ Jurisdiction Case No. 3601 of 2020

Citation(s)

2021(1) PLJR 632

Coram and Names of Judges

Hon’ble Mr. Justice Ashutosh Kumar

Names of Advocates and who they appeared for

• For the petitioner: Mr. Ashish Giri, Advocate
• For the respondents (State): Mr. Narendra Kumar Singh, Advocate

Link to Judgment

https://patnahighcourt.gov.in/viewjudgment/MTUjMzYwMSMyMDIwIzEjTg==-MPyojfOpII4=

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