Simplified Explanation of the Judgment
In a judgment delivered on September 2, 2021, the Patna High Court quashed the blacklisting and contract cancellation of a joint venture firm by the Bihar Urban Infrastructure Development Corporation Ltd. (BUIDCO). The Court found that the actions were taken without proper notice, without considering the company’s explanations, and in violation of principles of natural justice.
The case concerned a contract awarded to the petitioner company by BUIDCO for the renovation, rehabilitation, and conservation of Motijheel in Motihari, along with one year of maintenance. However, BUIDCO later issued an order cancelling the contract, blacklisting the company from future contracts, and threatening to encash the performance bank guarantee.
The petitioner, represented by a senior counsel, argued that:
- The blacklisting and debarment were imposed without any prior notice.
- The show-cause reply submitted regarding contract-related issues was never properly considered.
- The project design, which was to be supplied by BUIDCO, was never provided.
- Instead, the petitioner was unexpectedly asked to develop a model for lake cleaning, which was outside the agreed scope.
- The dredging machine could not be commissioned due to valid reasons, yet this was ignored.
- A short time frame was given for reply, and the adverse decision was taken the very same day.
On the other hand, BUIDCO’s counsel admitted that no notice had been issued specifically regarding blacklisting or debarment. However, he defended the contract cancellation, claiming that the petitioner failed to take steps to execute the project despite reminders.
After hearing both sides, the High Court made the following observations:
- Blacklisting and debarment are serious penalties with civil consequences. These cannot be imposed without giving a fair opportunity to respond.
- In this case, no separate notice was issued for blacklisting or debarment, hence the order is legally unsustainable.
- The explanation offered by the company in relation to contract execution was not adequately considered.
- The cancellation order appeared to be passed in undue haste.
The Court, therefore, quashed the orders of blacklisting, debarment, and contract cancellation. It remanded the matter back to BUIDCO with directions to:
- Issue a fresh reasoned order regarding the contract after considering the petitioner’s explanation.
- If BUIDCO still wants to blacklist the firm, it must issue a proper notice and follow due procedure.
- The petitioner may file any supplementary response within one week.
- BUIDCO must pass the fresh order within four weeks.
Significance or Implication of the Judgment
This judgment is a strong reminder that government agencies must follow due process before penalizing contractors. It reinforces the idea that:
- Blacklisting cannot be done casually or without notice.
- Administrative decisions that affect future business rights must comply with natural justice.
- Even contract cancellation must be preceded by proper consideration of the contractor’s explanation.
This decision protects the interests of private contractors and ensures fair play in public procurement. It prevents arbitrary punishments that can ruin the professional reputation of a firm.
Legal Issue(s) Decided and the Court’s Decision with Reasoning
- Can a contractor be blacklisted or debarred without prior notice?
❌ No. The Court held that since no notice was given, the blacklisting and debarment orders were invalid. - Was the show-cause reply considered before cancellation of the contract?
❌ No. The Court found that the reply was not discussed, and the order was passed in undue haste. - Did the lack of design input from BUIDCO justify the delay in project execution?
✔ Yes. The Court noted that the responsibility for design was with BUIDCO and the petitioner’s difficulties were not addressed. - What remedy was granted by the Court?
✔ The High Court quashed the blacklisting, debarment, and cancellation orders. It directed BUIDCO to issue a fresh order after proper hearing.
Case Title
M/s Charith – Pawan Kumar (JV) v. State of Bihar & Ors.
Case Number
CWJC No. 25332 of 2019
Coram and Names of Judges
Hon’ble Mr. Justice Ashutosh Kumar
Names of Advocates and who they appeared for
- For the Petitioner:
Mr. Y.V. Giri, Sr. Advocate
Mr. Pranav Kumar, Advocate
Ms. Shristhi Singh, Advocate - For the Respondents (BUIDCO):
Mr. Lalit Kishore, Sr. Advocate
Mr. Rabindra Kumar Priyadarshi, Advocate
Link to Judgment
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