Simplified Explanation of the Judgment

In this case, the Patna High Court dealt with a dispute between a road construction company (petitioner) and the Bihar Road Construction Department (respondents). The petitioner company had won a government contract for repairing National Highway (NH-101) in the year 2016–17, worth about ₹5.41 crores. The work began in January 2017 and was completed on time in June 2017.

During execution, the company had to procure bitumen (a key material for road construction) from Mathura Refinery instead of Barauni Refinery because of scarcity, and this was initially approved by the authorities. Soon after, the road stretch was submerged in floodwaters and some damage occurred. The company repaired it, and the repairs were certified by the Assistant Engineer.

Later, the department raised objections about potholes and alleged that several challans (transportation receipts) of bitumen procurement were fake. The petitioner produced bank statements showing actual payments made to Mathura Refinery and argued that objections were only meant to delay final bill payments. Despite this, the Engineer-in-Chief blacklisted the petitioner company for 10 years in December 2018 under the Bihar Contractor Registration Rules, 2007.

The company challenged the blacklisting in the Patna High Court, arguing it was arbitrary, vindictive, and against natural justice.

Petitioner’s Arguments:

• Blacklisting was based on an unverified report by Patna IOCL, which had no authority to question challans issued by Mathura Refinery.
• Payments to Mathura Refinery were proved through bank records.
• No dispute was raised at the time of work completion; objections came much later.
• A 10-year blacklisting is excessive and disproportionate.

Respondent’s Arguments:

• The petition was delayed by 20 months without explanation.
• An alternative statutory appeal was available, but the petitioner bypassed it.
• Some challans were indeed found to be suspicious.
• An FIR had been lodged for alleged offences under IPC Sections 420, 467, 468, and 471.

Court’s Analysis:

Justice Ashutosh Kumar relied on several Supreme Court precedents like Erusian Equipment (1975), Kulja Industries (2014), and UMC Technologies (2020), which stress that:

• Blacklisting has serious civil consequences, damaging reputation and livelihood.
• It must follow fair procedure, including notice, opportunity to reply, and reasoned decision.
• The period of blacklisting should be proportionate, usually not exceeding 3–5 years unless extraordinary circumstances exist.

The Court noted:

• The 10-year blacklisting was harsh and vindictive.
• No proper reasoning was given for rejecting the petitioner’s bank statement proof.
• The IOCL Patna office’s opinion on Mathura Refinery challans had no real basis.

However, instead of directly quashing the order (since an FIR was pending), the Court directed the petitioner to file an appeal before the Appellate Authority (Principal Secretary, Road Construction Department). The appellate authority was ordered to give a personal hearing, consider all circumstances, and decide within two months, without rejecting the appeal on grounds of delay.

Thus, the writ was disposed of with liberty to appeal.

Significance or Implication of the Judgment

This ruling is important for both contractors and government departments:

• For Contractors: It reinforces the principle that blacklisting must follow fairness, proportionality, and natural justice. Excessive penalties without reasoning can be challenged. Even if allegations exist, contractors must be given a fair chance to defend themselves.
• For Government: The judgment warns against arbitrary punishment. Departments must create clear guidelines for blacklisting, specifying different periods of debarment depending on the severity of misconduct.

For the public, the judgment highlights that road construction disputes often arise due to procurement and quality issues, but punishment of contractors must be just, fair, and legally sustainable.

Legal Issue(s) Decided and Court’s Reasoning

• Whether 10-year blacklisting was valid?
  → Court held it was excessive, disproportionate, and arbitrary.
• Whether Patna IOCL’s report could be relied upon?
  → Court noted it had no authority over Mathura Refinery challans; rejection of bank proof was unjustified.
• Whether natural justice was followed?
  → No proper reasoning or objective assessment was made; hence, principles of fairness were violated.
• What is the proper remedy?
  → Instead of quashing, the Court directed petitioner to appeal, ensuring hearing and decision within two months.

Judgments Relied Upon or Cited by Court

• Erusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70
• Patel Engineering Ltd. v. Union of India, (2012) 11 SCC 257
• Kulja Industries Ltd. v. BSNL, (2014) 14 SCC 731
• Southern Painters v. Fertilizers and Chemicals Travancore Ltd., 1994 Supp (2) SCC 699
• B.S.N. Joshi & Sons v. Nair Coal Services Ltd., (2006) 11 SCC 548
• Daffodils Pharmaceuticals Ltd. v. State of U.P., 2019 (12) JT 283
• UMC Technologies Pvt. Ltd. v. Food Corporation of India, Civil Appeal No. 3687 of 2020
• Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229
• Gorkha Securities Services v. NCT of Delhi, (2014) 9 SCC 105
• Vetindia Pharmaceuticals Ltd. v. State of U.P., Civil Appeal No. 3647 of 2020

Case Title

Espan Infrastructure (I) Ltd. v. State of Bihar & Ors.

Case Number

Civil Writ Jurisdiction Case No. 7712 of 2020

Citation(s)

2021(1)PLJR 421

Coram and Names of Judges

Hon’ble Mr. Justice Ashutosh Kumar

Names of Advocates and Appearance

• Mr. Alok Kumar Agrawal — for the petitioner
• Mr. Ravi Bharadwaj — for the respondents

Link to Judgment

https://patnahighcourt.gov.in/viewjudgment/MTUjNzcxMiMyMDIwIzEjTg==-W1N7UI54aHk=

If you found this explanation helpful and wish to stay informed about how legal developments may affect your rights in Bihar, you may consider following Samvida Law Associates for more updates.