The Patna High Court recently quashed a debarment order issued against a contractor by the Bihar State Building Construction Corporation Ltd. (BSBCCL), holding that such an action lacked legal authority under the applicable contractor registration rules. This judgment sheds light on the rights of contractors, especially when facing punitive actions by government agencies without due process.

Simplified Explanation of the Judgment

In this case, the petitioner—a registered Class-I contractor—had entered into contracts with the BSBCCL for the construction of 200-bedded shelter homes at two sites in Bihar. The original agreements were signed in October 2021 and February 2022, with the condition that the work must be completed within 18 months.

While the work was underway, the Corporation directed the contractor to undertake additional construction tasks such as roads, fencing, and enhanced boundary walls at both sites. These additional works were formally approved and included in supplementary agreements. However, despite this expansion of scope, the Corporation failed to grant any extension of time for completion.

The contractor alleged that nearly 90% of the work had been completed and that delays were caused by the Corporation itself. These included delays in approving soil-filling, non-availability of funds, pending construction drawings, and environmental factors like rain. Nonetheless, the Corporation suddenly issued show-cause notices and, subsequently, passed orders on 15.12.2023 debarring the contractor from participating in any future tenders until the ongoing work was completed.

The contractor challenged the debarment orders, arguing that:

• The contract was never terminated.
• There was no clause under the applicable 2007 Bihar Contractor Registration Rules that empowered the Corporation to issue such debarment.
• The show-cause notices were vague and lacked proper reasoning.
• Debarment orders violated the principle of natural justice, especially when the contractor was not at fault for the delay.

The respondent-Corporation contended that the contractor failed to submit work plans despite repeated requests, and that the debarment was limited in effect—only preventing participation in other tenders until completion of the existing projects.

After evaluating arguments from both sides, the Hon’ble Patna High Court found merit in the petitioner’s claims. The Court noted that while the Corporation claimed inefficiency and non-compliance, it failed to clarify the exact quantum of incomplete work. Furthermore, there was no formal termination of the contract, which remained in effect.

Most importantly, the Court ruled that the Bihar Contractor Registration Rules, 2007, do not authorize the kind of debarment imposed by the Corporation. Relying on precedents and constitutional provisions (particularly Article 19(1)(g) and Article 14), the Court emphasized that such punitive actions must have statutory backing and meet the standard of reasonableness.

Significance or Implication of the Judgment

This judgment serves as a critical precedent for contractors and government agencies alike. It underscores that:

• Government bodies must act within the bounds of statutory authority.
• Debarment or blacklisting, being a stigmatic and career-altering measure, cannot be done casually.
• Contractors facing delays due to the government’s own inefficiencies have the right to seek judicial intervention.
• Procedural fairness and adherence to principles of natural justice are essential even in administrative or contractual matters.

For government departments, this ruling acts as a cautionary reminder to ensure their actions align with applicable laws and that no executive overreach occurs. For contractors, it reinforces the availability of constitutional remedies when unfairly penalized.

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

• Whether the Corporation had legal authority to debar the contractor under the Rules, 2007?
  • No. The Court held that the Bihar Contractor Registration Rules, 2007 do not authorize the imposition of debarment merely due to delays without contract termination.
• Was the principle of natural justice violated?
  • Yes. The contractor was not properly heard, and the debarment was imposed without due consideration of his responses or the reasons for delay.
• Was the contractor entitled to writ relief despite availability of alternative remedy?
  • Yes. The Court clarified that where executive action lacks legal authority or violates fundamental rights, writ jurisdiction is maintainable even if alternative remedies exist.
• Was the debarment order arbitrary and unreasonable?
  • Yes. Since the contract was still in force and work had largely been completed, the punitive order of debarment was disproportionate and unsupported by law.

Judgments Referred by Parties

• Gorkha Security Services v. Government (NCT of Delhi), (2014) 9 SCC 105 — Regarding the requirement of proper show-cause notices before blacklisting or debarment.

Judgments Relied Upon or Cited by Court

• Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1 — On maintainability of writ petition despite alternative remedies.

Case Title
M/s Kundan Kumar (Civil and Electrical Contractor) v. The State of Bihar & Others

Case Number
CWJC No. 5028 of 2024 and CWJC No. 5127 of 2024

Coram and Names of Judges
Hon’ble The Chief Justice
Hon’ble Mr. Justice Harish Kumar

Names of Advocates and Who They Appeared For

• For Petitioner: Mr. Anurag Saurav, Mr. Abhinav Alok, Mr. Abhishek Kumar, Ms. Prity Kumari, Mr. Sharda Raje Singh
• For Respondents: Mr. Anirban Kundu (SC-24), Mr. Abhimanyu Pratap (BSBCCL), Ms. Rana Neha Kumari, Mr. Standing Counsel 25

Link to Judgment
https://www.patnahighcourt.gov.in/ShowPdf/web/viewer.html?file=../../TEMP/f533c4e5-14e7-4f29-b2ae-d288b7df4ee8.pdf&search=Blacklisting

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