Simplified Explanation of the Judgment
On 13 May 2025, the Patna High Court delivered an important ruling in a writ petition filed by a contractor challenging their blacklisting by the Indian Oil Corporation Limited (IOCL). The petitioner, a proprietorship firm based in Gaya, Bihar, had been placed on IOCL’s “holiday list” (effectively a ban from new contracts) for two years. The reason cited was the petitioner’s alleged failure to inspect a canopy at a Guwahati petrol outlet that was damaged during a thunderstorm in April 2024.
The petitioner contended that it was never responsible for either inspecting or erecting the canopy at the site. According to them, the erection had been carried out by another company, and the petitioner was never instructed to conduct any inspection of canopy fabrication. Despite this, IOCL issued a notice in May 2024 and, subsequently, an order in August 2024 blacklisting the firm.
The petitioner argued that the order was arbitrary, unsupported by facts, and reflected complete non-application of mind. It also submitted that the show cause notice and order were served at its office in Gaya, Bihar, thereby conferring jurisdiction upon the Patna High Court to hear the case.
IOCL raised an objection, arguing that the case should not be heard in Bihar since the incident occurred in Assam. However, the Court relied on established precedents including Kusum Ingots & Alloys Ltd. v. Union of India (2004) 6 SCC 254 and Nawal Kishore Sharma v. Union of India (2014) 9 SCC 329 to hold that if part of the cause of action arises within a High Court’s jurisdiction, the writ is maintainable. Since the notice and blacklisting order were served in Gaya, the Court ruled that the petition was maintainable in Bihar.
On merits, the Court noted multiple lapses in IOCL’s decision-making. There was ambiguity about whether the petitioner had been assigned responsibility for erection or inspection of the canopy. IOCL failed to produce any record assigning the inspection duty to the petitioner. Furthermore, the corporation did not properly consider the petitioner’s explanation in response to the notice. Every allegation against the petitioner remained doubtful.
Consequently, the Court quashed the blacklisting order dated 22 August 2024. However, it allowed IOCL to issue a fresh notice if it so desired, directing the General Manager (Engineering), IOCL, Guwahati to serve such a notice, consider the petitioner’s reply, and pass a fresh reasoned order within 90 days. The Court mandated that any new order must be communicated to the petitioner promptly.
Significance or Implication of the Judgment
This judgment carries significant implications for contractors and government corporations:
- For contractors and firms: It reinforces that blacklisting orders must be based on clear evidence and reasoned findings. Vague allegations and unclear responsibilities cannot form the basis for punitive action.
- For government corporations like IOCL: The ruling reminds them of the need to act fairly, apply their mind to facts, and follow due process before imposing punitive sanctions such as blacklisting.
- For judicial review: The decision strengthens the doctrine that arbitrary or poorly reasoned administrative actions can be quashed by High Courts.
- For businesses in Bihar: The ruling establishes that even if a dispute originates outside the state, service of notices within Bihar is sufficient for invoking jurisdiction of the Patna High Court.
This case underscores the principle that fairness, clarity, and adherence to natural justice are indispensable when imposing severe consequences like blacklisting.
Legal Issue(s) Decided and the Court’s Decision with reasoning
- Whether the Patna High Court had jurisdiction over the case despite the incident occurring in Assam?
- Decision: Yes.
- Reasoning: Since notices and orders were served in Bihar, part of the cause of action arose within Bihar’s jurisdiction. Rulings like Kusum Ingots and Nawal Kishore Sharma supported this conclusion.
- Whether IOCL’s order placing the petitioner on the holiday list was valid?
- Decision: No.
- Reasoning: IOCL failed to clarify the petitioner’s role in canopy erection or inspection, and did not properly consider the petitioner’s explanation. The order showed non-application of mind.
- What was the remedy ordered by the Court?
- Decision: The blacklisting order was quashed. IOCL was allowed to issue a fresh notice and pass a new order within 90 days after hearing the petitioner.
Judgments Referred by Parties
- Kusum Ingots & Alloys Ltd. v. Union of India, (2004) 6 SCC 254
- New India Assurance Co. Ltd. v. Union of India, AIR 2010 Delhi 43 (FB)
- Sterling Agro Industries Ltd. v. Union of India, ILR (2011) VI Delhi 729
- Vishnu Security Services v. RPFC, 2012 (129) DRJ 661 (DB)
- Nawal Kishore Sharma v. Union of India, (2014) 9 SCC 329
Judgments Relied Upon or Cited by Court
- Same as above (used by the Court to interpret jurisdictional issues)
Case Title
M/s ARD Associates v. Union of India & Ors.
Case Number
Civil Writ Jurisdiction Case No. 273 of 2025
Coram and Names of Judges
- Hon’ble the Acting Chief Justice Ashutosh Kumar
- Hon’ble Mr. Justice Partha Sarthy
Names of Advocates and who they appeared for
- For the Petitioner: Ms. Riya Giri, Mr. Shashank Shekhar Dubey
- For the Respondents: Mr. Ankit Katriar, Mr. Arjun Kumar (CGC)
Link to Judgment
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