Patna High Court Quashes Blacklisting of Contractor Due to Delay Caused by Government Inaction

Patna High Court Quashes Blacklisting of Contractor Due to Delay Caused by Government Inaction

Simplified Explanation of the Judgment

In a recent case, the Patna High Court ruled in favor of a construction company that was blacklisted and had its security deposit forfeited by the Bihar State Hydroelectric Power Corporation (the Corporation). The court found the actions of the Corporation unjustified due to its own inaction and delays.

The case began when the Corporation issued a tender in March 2019 for completing remaining work at various hydroelectric projects. The petitioner company was awarded work for the Amethi Mini Hydel Project (1×500 kW) at a contract value of approximately ₹5.33 crore. An agreement was signed on October 14, 2019, with a project deadline of 12 months.

However, due to site flooding and significant changes in site conditions after the water receded, the petitioner requested the Corporation to dewater the site and revise the work rates. Despite several written representations in 2020 and 2021, no proper response came from the Corporation.

The petitioner eventually moved the High Court in an earlier writ case (CWJC No. 371 of 2023), which resulted in a direction to the Corporation to pass a reasoned order on the pending representations. In response, the Corporation issued an order on March 1, 2024, terminating the agreement, blacklisting the contractor for three financial years, and forfeiting its security deposit.

The High Court examined this order and found that the delay in executing the work was not solely due to the petitioner’s fault. The Corporation failed to hand over the work site in proper condition for over a year. It also delayed in providing revised quantities and price schedules—waiting over four years after the agreement before issuing them. Therefore, the court held that the contractor could not be blamed entirely for non-performance.

The court noted that blacklisting a contractor is a serious punishment with long-term consequences. Such a decision requires procedural fairness, including notice and reasoned justification. In this case, the contractor was not given a proper show-cause notice or opportunity to explain its side before being blacklisted. Moreover, the contractual clauses cited by the Corporation did not justify the punitive action in light of the circumstances.

Hence, the court quashed the order blacklisting the petitioner and forfeiting its security deposit, ruling that the contractor could not be held solely accountable when the Corporation failed to meet its own obligations.

Significance or Implication of the Judgment

This judgment reinforces the principle that government authorities must act fairly and in accordance with contract terms. Contractors cannot be penalized for delays caused by the government’s own failure to provide a workable site or respond in time. It also emphasizes that blacklisting must follow due process, including issuing a show-cause notice and considering representations.

The ruling is significant for contractors working on public infrastructure projects in Bihar, as it limits arbitrary actions by government agencies. It sends a clear message that administrative lapses by government entities cannot be shifted onto private contractors unfairly.

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

  • Whether the blacklisting and forfeiture of security deposit were valid
    ➤ No. The actions were held to be arbitrary and without proper justification.
  • Whether the petitioner was solely responsible for the delay
    ➤ No. The court held that delays were largely due to the Corporation’s failure to hand over the work site and issue necessary documents in time.
  • Was due process followed before blacklisting?
    ➤ No. There was no show-cause notice or opportunity to respond.
  • Whether contractual clauses (Clause 1.2.21 and Clause 1.1.12(iii)) justified the action
    ➤ No. The conditions for invoking these clauses were not fulfilled in the facts of the case.

Case Title
D.B.S. Constructions Pvt. Ltd. vs. The State of Bihar & Ors.

Case Number
Civil Writ Jurisdiction Case No. 10478 of 2024

Coram and Names of Judges
Hon’ble Mr. Justice Ashutosh Kumar (Acting Chief Justice)
Hon’ble Mr. Justice Partha Sarthy

Names of Advocates and who they appeared for
Mr. Prabhat Ranjan, Advocate — for the petitioner
Mr. Mritunjay Kumar, Advocate — for the respondent Corporation

Link to Judgment
https://www.patnahighcourt.gov.in/ShowPdf/web/viewer.html?file=../../TEMP/3ac57933-7c5b-4209-80c1-7a710db96918.pdf&search=Blacklisting

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.

Aditya Kumar

Aditya Kumar is a dedicated and detail-oriented legal intern with a strong academic foundation in law and a growing interest in legal research and writing. He is currently pursuing his legal education with a focus on litigation, policy, and public law. Aditya has interned with reputed law offices and assisted in drafting legal documents, conducting research, and understanding court procedures, particularly in the High Court of Patna. Known for his clarity of thought and commitment to learning, Aditya contributes to Samvida Law Associates by simplifying complex legal topics for public understanding through well-researched blog posts.

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