Simplified Explanation of the Judgment

In a decision reinforcing the principles of fair administrative procedure, the Patna High Court has set aside the unilateral adjustment of outstanding bills by the Bihar State Food and Civil Supplies Corporation (BSFCSC) against a blacklisted contractor without prior notice. The Court emphasized that even in cases involving alleged losses to the government, punitive financial actions cannot be taken without giving the concerned party an opportunity to respond.

In this case, the petitioner, a contractor engaged in transportation and storage services for the Corporation, had already been blacklisted for five years. This blacklisting, along with the forfeiture of bank guarantee and earnest money, was separately being challenged by the petitioner before the appropriate authorities.

However, the immediate issue before the Court in this writ petition was the Corporation’s action of adjusting pending bills payable to the petitioner against the alleged losses it had suffered due to the contractor’s faults. This adjustment was done without issuing a specific notice to the petitioner regarding the amount or the intended recovery.

The petitioner argued that:

• The show-cause notice served to him did not mention any proposed adjustment of dues.
• Therefore, he was denied the opportunity to explain or contest the loss assessment attributed to him.
• The Corporation merely listed storage faults and estimated a ballpark figure for the losses without conducting a precise quantification.
• Any such recovery should have followed a due process, including clear notice and opportunity to be heard.

The Court agreed with these submissions and ruled that this omission violated the principles of natural justice. It held that if the Corporation intended to adjust the petitioner’s bills against losses, it was mandatory to:

• Notify the petitioner of the proposed action,
• Provide a breakdown or quantification of the loss amount,
• Offer reasonable time for the petitioner to respond.

The Court, therefore, set aside the part of the order dated 27.03.2018 which authorized the adjustment of the contractor’s bills. However, it allowed the Corporation to initiate the process afresh by issuing proper notice.

The Court also laid down a clear timeline:

• If the Corporation issues a notice within four weeks,
• And the petitioner responds within two weeks of receipt,
• Then the Managing Director must issue a final, reasoned order within the next four weeks.

This decision ensures that monetary claims and deductions by public authorities must be carried out with transparency, fairness, and due regard for the affected party’s right to be heard.

Significance or Implication of the Judgment

This judgment has critical implications for government contractors and suppliers in Bihar. It reinforces the principle that even if a contractor is blacklisted, the government cannot deduct dues or adjust bills without following due process.

For state departments and public sector corporations, the ruling is a timely reminder that administrative actions affecting financial rights must:

• Be backed by formal communication,
• Clearly explain the reasons,
• And allow time for representation.

This decision enhances procedural safeguards for private entities in dealings with the state and promotes accountability in public financial administration.

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

• Was it lawful for the Corporation to adjust the petitioner’s bills without specific notice?
  • Decision: No
  • Reasoning: There was no mention of such proposed adjustment in the show-cause notice. This violated the petitioner’s right to respond to financial claims.
• Is a ballpark estimate of losses sufficient for financial deduction?
  • Decision: No
  • Reasoning: Losses must be specifically quantified and explained before deducting amounts from payable bills.
• Can the Corporation restart the process correctly?
  • Decision: Yes
  • Reasoning: The Corporation is permitted to issue fresh notice with quantification of losses and provide the petitioner a chance to reply.
• What timeline did the Court set for the process?
  • Decision:
    • Notice to be issued within 4 weeks
    • Petitioner to respond within 2 weeks
    • Final order to be passed within next 4 weeks

Case Title
M/s Raj Construction vs The State of Bihar & Others

Case Number
Civil Writ Jurisdiction Case No.8955 of 2018

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:
Mr. Bindhyachal Singh, Sr. Advocate
Mr. Ram Binod Singh, Advocate

For the State:
Mr. S. Raza Ahmad, AAG-5
Mr. Alok Ranjan, AC to AAG-5

For the Corporation (BSFCSC):
Mr. Anjani Kumar, Sr. Advocate
Mr. Shailendra Kumar Singh, Advocate

Link to Judgment
https://www.patnahighcourt.gov.in/ShowPdf/web/viewer.html?file=../../TEMP/4da69b59-5c87-4788-8b7a-ae2e6b8db8fd.pdf&search=Blacklisting

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