Allahabad High Court

years, giving rise to the writ petition.

5. Shri Shashi Nandan, learned Senior Advocate appearing for the petitioner company precisely argued that while passing the impugned order, the respondent no.3 had not considered the objection, which has been filed by the petitioner in detail and as such, the impugned order is hit by principle of natural justice. In support of his submission, he has placed reliance upon the judgement of Apex Court in Raghunath Thakur vs. State of Bihar & others, (1989) 1 SCC 229.

6. Only in this backdrop, we had adjourned the matter on 03.09.2025 to enable Shri Vibhu Rai, learned counsel for the respondent nos.2 and 3 to seek instructions in the matter and the matter was directed to put up today i.e. 04.09.2025 at 2 PM as fresh.

7. Today, when the matter is taken up, Shri Vibhu Rai, learned counsel for the respondent nos.2 and 3 states that various notices were issued to the petitioner company to answer the charges, which were levelled against it. He submits that the first part of the last notice dated 05.09.2024 contains statement of imputations regarding alleged breaches and default committed 3 WRIC No. 29537 of 2025 by the petitioner company with specific details having been given so as to enable the petitioner to precisely know the exact cause or allegations levelled against it in order to enable it to give a reply to the allegations. The second part of the said notice indicates the punishment, which is proposed, in case the replies submitted by the petitioner are held to be not satisfactory, and also the quantum of punishment, which the respondent authority proposes to impose on the petitioner. He submits that the respondent authority has issued the show cause notice with an open mind calling upon the petitioner to submit its reply to the allegations, which have been levelled against it and it is only after reply of the petitioner is submitted that the authority would take a decision whether to drop the show cause notice or to pass an order with regard to blacklisting of the petitioner company. He further submits that the petitioner company had not filed its objection within the stipulated time and consequently, the impugned order has been passed. He lastly submits that later on, some objection had been sent by the petitioner company by e-mail/registered post. There is no illegality in the impugned order passed by the authority and the writ petition is liable to be dismissed.

8. What we find from the record is that the petitioner company was issued the show cause notice dated 05.09.2024, as to why it should not be blacklisted for a period of two years. While giving the said notice, one week's time was stipulated to furnish the reply but after expiry of the said period, the petitioner company had furnished its reply/objections on

08.10.2024 alongwith requisite annexures and report of the project, which contained 375 pages. While passing the impugned order, the respondent no.2 has not considered the reply of the petitioner company, which was material consideration before blacklisting it. Till date even the contract of the petitioner company has not been terminated. It is apparent from the record that the show cause notice dated 05.09.2024 was issued for blacklisting the petitioner company. No doubt, with some delay the objections/reply had been filed by the petitioner company but while passing the order impugned the respondent authority has only taken an objection that no reply had been filed by the petitioner.

9. An ex parte adverse adjudication without notice and opportunity of being heard and putting the petitioner on the blacklist and debarring him from work by way of punishment was held to be against all notions on fairness in 4 WRIC No. 29537 of 2025 a democratic country and in this regard the observations made by Frankfurter, J. in Joint Anti Fascist Refugee Com. Vs. McGrath (1951) 341 US 123, which were referred to are being extracted below:- "That a conclusion satisfies one's private conscience does not attest its reliability. The validity and moral authority of a conclusion largely depend on the mode by which it was reached. Secrecy is not congenial to truth-seeking and self-righteousness gives too slender an assurance of lightness. No better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss, notice of the case against him and opportunity to meet it. Nor has a better way been found for generating the feeling, so important to a popular Government, that justice has been done."

10. In Gorkha Security Services vs. Government (NCT of Delhi) & others (2014) 9 SCC 105, the question pertaining to the form and content of a show cause notice, that is required to be served before deciding as to whether the noticee is to be blacklisted or not, was subject matter of consideration and the Apex Court has held that it is a mandatory requirement to give such a show cause notice to mention that action of blacklisting is proposed so as to provide adequate and meaningful opportunity to show cause against the same. Accordingly, it was observed that this would require the statement of imputations detailing out the alleged breaches and defaults so that the noticee gets an opportunity to rebut the same. The guidelines laid down as to the contents of show cause notice pursuant to which an order of blacklisting may be passed, in the aforesaid decision, are in the following terms:- "21. The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of show-cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 5 WRIC No. 29537 of 2025

22. The High Court has simply stated that the purpose of show-cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz: (i) The material/grounds to be stated which according to the department necessitates an action; (ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit. We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement."

11. The manner in which a show cause notice is to be issued to constitute a valid basis of a blacklisting order in the context of government contracts and tenders was subject matter of consideration in the case of UMC Technologies Private Ltd. Vs. Food Corporation of India and another (2021) 2 SCC 551 and after explaining the principles in regard to the same in detail, it was held that it is essential for the notice to specify the particular grounds on which an action is proposed to be taken so as to enable the noticee to answer the case against him and in the absence of the same a person cannot be said to be granted a reasonable opportunity of being heard. It was stated thus:- "13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Custodian 6 WRIC No. 29537 of 2025 General, Evacuee Property [Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1] has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.

14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show- cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person."

12. The adverse impact of an order of blacklisting and the need for strict observance of the principles of natural justice before passing of an order of blacklisting was emphasized in M/s Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal and another (1975) 1 SCC 70 and it was observed as follows:- "12...The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.

15...The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion". 7 WRIC No. 29537 of 2025

17...The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.

19. Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairly can be interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in its possession. Sometimes duty to act fairly can also be sustained without providing opportunity for an oral hearing. It will depend upon the nature of the interest to be affected, the circumstances in which a power is exercised and the nature of sanctions involved therein.

20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."

13. The aforementioned proposition that no order of blacklisting could be passed without affording opportunity of hearing to the affected party was reiterated in the case of Raghunath Thakur Vs. State of Bihar & Ors. (1989) 1 SCC 229 wherein it was stated as follows:- "4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the 8 WRIC No. 29537 of 2025 principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order..."

14. The requirement of grant of opportunity to show cause before blacklisting was considered in the case of Gronsons Pharmaceuticals (P) Ltd. & Anr. Vs. State of Uttar Pradesh & Ors. AIR 2001 SC 3707 and it was held that since the order blacklisting of an approved contractor results in civil consequences, the principle of audi alteram partem is required to be observed.

15. The power to blacklist a contractor was held to be inherent in the party allotting the contract and the freedom to contract or not to contract was held to be unqualified in the case of private parties; however when the party is State, the decision to blacklist would be open judicial review on touchstone of proportionality and the principles of natural justice. The relevant observations made in this regard in the case of M/s Kulja Industries Limited Vs. Chief General Manager, W.T. Project, BSNL & Ors. (2014) 14 SCC 731 are as under:- "17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because "blacklisting" simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court." 9 WRIC No. 29537 of 2025

16. An order of blacklisting has the effect of depriving a person of equality of opportunity in the manner of public contract and in a case where the State acts to the prejudice of a person it has to be supported by legality. The activities of the State having the public element quality must be imbued with fairness and equality.

17. The order of blacklisting involves civil consequences and has the effect of creating a disability by preventing a person from the privilege and advantage of entering into lawful relationship with the Government, therefore fundamentals of fair play would require that the concerned person should be given an opportunity to represent his case before he is put on the blacklist. A fair hearing to the party before being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto.

18. In order to ensure conformity with the principles of natural justice, a show cause notice is required to specify as to what would be the consequences if the noticee does not satisfactorily meet the grounds on which the action is proposed. The notice, apart from being adequate, is also required to state the grounds necessitating the action and the penalty proposed is also required to be mentioned specifically and unambiguously. A show cause notice, particularly in a case where it proposes to impose an order of blacklisting, is required to adhere to the principles of natural justice and for the said reason is to fulfill the twin requirements of stating in unambiguous terms the grounds which according to the department necessitates an action, and also the penalty which is proposed to be taken in case the noticee is unable to furnish an adequate response to the grounds stated in the notice.

19. Having regard to the aforestated facts and circumstances, we are of the considered view that the respondent authority may revisit in the matter. Accordingly, the impugned order dated 20.03.2025 is set aside and the matter is relegated to the respondent authority to pass a fresh order strictly in accordance with law, after affording opportunity of hearing to the petitioner company and according due consideration to the defence set up by the petitioner company in the replies to the show cause notices. 10 WRIC No. 29537 of 2025

20. The writ petition stands disposed of accordingly. (Anish Kumar Gupta,J.) (Mahesh Chandra Tripathi,J.) September 4, 2025 RKP

years, giving rise to the writ petition.

5. Shri Shashi Nandan, learned Senior Advocate appearing for the petitioner company precisely argued that while passing the impugned order, the respondent no.3 had not considered the objection, which has been filed by the petitioner in detail and as such, the impugned order is hit by principle of natural justice. In support of his submission, he has placed reliance upon the judgement of Apex Court in Raghunath Thakur vs. State of Bihar & others, (1989) 1 SCC 229.

6. Only in this backdrop, we had adjourned the matter on 03.09.2025 to enable Shri Vibhu Rai, learned counsel for the respondent nos.2 and 3 to seek instructions in the matter and the matter was directed to put up today i.e. 04.09.2025 at 2 PM as fresh.

7. Today, when the matter is taken up, Shri Vibhu Rai, learned counsel for the respondent nos.2 and 3 states that various notices were issued to the petitioner company to answer the charges, which were levelled against it. He submits that the first part of the last notice dated 05.09.2024 contains statement of imputations regarding alleged breaches and default committed 3 WRIC No. 29537 of 2025 by the petitioner company with specific details having been given so as to enable the petitioner to precisely know the exact cause or allegations levelled against it in order to enable it to give a reply to the allegations. The second part of the said notice indicates the punishment, which is proposed, in case the replies submitted by the petitioner are held to be not satisfactory, and also the quantum of punishment, which the respondent authority proposes to impose on the petitioner. He submits that the respondent authority has issued the show cause notice with an open mind calling upon the petitioner to submit its reply to the allegations, which have been levelled against it and it is only after reply of the petitioner is submitted that the authority would take a decision whether to drop the show cause notice or to pass an order with regard to blacklisting of the petitioner company. He further submits that the petitioner company had not filed its objection within the stipulated time and consequently, the impugned order has been passed. He lastly submits that later on, some objection had been sent by the petitioner company by e-mail/registered post. There is no illegality in the impugned order passed by the authority and the writ petition is liable to be dismissed.

8. What we find from the record is that the petitioner company was issued the show cause notice dated 05.09.2024, as to why it should not be blacklisted for a period of two years. While giving the said notice, one week's time was stipulated to furnish the reply but after expiry of the said period, the petitioner company had furnished its reply/objections on

08.10.2024 alongwith requisite annexures and report of the project, which contained 375 pages. While passing the impugned order, the respondent no.2 has not considered the reply of the petitioner company, which was material consideration before blacklisting it. Till date even the contract of the petitioner company has not been terminated. It is apparent from the record that the show cause notice dated 05.09.2024 was issued for blacklisting the petitioner company. No doubt, with some delay the objections/reply had been filed by the petitioner company but while passing the order impugned the respondent authority has only taken an objection that no reply had been filed by the petitioner.

9. An ex parte adverse adjudication without notice and opportunity of being heard and putting the petitioner on the blacklist and debarring him from work by way of punishment was held to be against all notions on fairness in 4 WRIC No. 29537 of 2025 a democratic country and in this regard the observations made by Frankfurter, J. in Joint Anti Fascist Refugee Com. Vs. McGrath (1951) 341 US 123, which were referred to are being extracted below:- "That a conclusion satisfies one's private conscience does not attest its reliability. The validity and moral authority of a conclusion largely depend on the mode by which it was reached. Secrecy is not congenial to truth-seeking and self-righteousness gives too slender an assurance of lightness. No better instrument has been devised for arriving at truth than to give a person in jeopardy of serious loss, notice of the case against him and opportunity to meet it. Nor has a better way been found for generating the feeling, so important to a popular Government, that justice has been done."

10. In Gorkha Security Services vs. Government (NCT of Delhi) & others (2014) 9 SCC 105, the question pertaining to the form and content of a show cause notice, that is required to be served before deciding as to whether the noticee is to be blacklisted or not, was subject matter of consideration and the Apex Court has held that it is a mandatory requirement to give such a show cause notice to mention that action of blacklisting is proposed so as to provide adequate and meaningful opportunity to show cause against the same. Accordingly, it was observed that this would require the statement of imputations detailing out the alleged breaches and defaults so that the noticee gets an opportunity to rebut the same. The guidelines laid down as to the contents of show cause notice pursuant to which an order of blacklisting may be passed, in the aforesaid decision, are in the following terms:- "21. The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of show-cause notice is to make the noticee understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action. 5 WRIC No. 29537 of 2025

22. The High Court has simply stated that the purpose of show-cause notice is primarily to enable the noticee to meet the grounds on which the action is proposed against him. No doubt, the High Court is justified to this extent. However, it is equally important to mention as to what would be the consequence if the noticee does not satisfactorily meet the grounds on which an action is proposed. To put it otherwise, we are of the opinion that in order to fulfil the requirements of principles of natural justice, a show-cause notice should meet the following two requirements viz: (i) The material/grounds to be stated which according to the department necessitates an action; (ii) Particular penalty/action which is proposed to be taken. It is this second requirement which the High Court has failed to omit. We may hasten to add that even if it is not specifically mentioned in the show-cause notice but it can clearly and safely be discerned from the reading thereof, that would be sufficient to meet this requirement."

11. The manner in which a show cause notice is to be issued to constitute a valid basis of a blacklisting order in the context of government contracts and tenders was subject matter of consideration in the case of UMC Technologies Private Ltd. Vs. Food Corporation of India and another (2021) 2 SCC 551 and after explaining the principles in regard to the same in detail, it was held that it is essential for the notice to specify the particular grounds on which an action is proposed to be taken so as to enable the noticee to answer the case against him and in the absence of the same a person cannot be said to be granted a reasonable opportunity of being heard. It was stated thus:- "13. At the outset, it must be noted that it is the first principle of civilised jurisprudence that a person against whom any action is sought to be taken or whose right or interests are being affected should be given a reasonable opportunity to defend himself. The basic principle of natural justice is that before adjudication starts, the authority concerned should give to the affected party a notice of the case against him so that he can defend himself. Such notice should be adequate and the grounds necessitating action and the penalty/action proposed should be mentioned specifically and unambiguously. An order travelling beyond the bounds of notice is impermissible and without jurisdiction to that extent. This Court in Nasir Ahmad v. Custodian 6 WRIC No. 29537 of 2025 General, Evacuee Property [Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1] has held that it is essential for the notice to specify the particular grounds on the basis of which an action is proposed to be taken so as to enable the noticee to answer the case against him. If these conditions are not satisfied, the person cannot be said to have been granted any reasonable opportunity of being heard.

14. Specifically, in the context of blacklisting of a person or an entity by the State or a State Corporation, the requirement of a valid, particularised and unambiguous show- cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatisation that accrues to the person/entity being blacklisted. Here, it may be gainful to describe the concept of blacklisting and the graveness of the consequences occasioned by it. Blacklisting has the effect of denying a person or an entity the privileged opportunity of entering into government contracts. This privilege arises because it is the State who is the counterparty in government contracts and as such, every eligible person is to be afforded an equal opportunity to participate in such contracts, without arbitrariness and discrimination. Not only does blacklisting take away this privilege, it also tarnishes the blacklisted person's reputation and brings the person's character into question. Blacklisting also has long-lasting civil consequences for the future business prospects of the blacklisted person."

12. The adverse impact of an order of blacklisting and the need for strict observance of the principles of natural justice before passing of an order of blacklisting was emphasized in M/s Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal and another (1975) 1 SCC 70 and it was observed as follows:- "12...The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality.

15...The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are "instruments of coercion". 7 WRIC No. 29537 of 2025

17...The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with any one but if it does so, it must do so fairly without discrimination and without unfair procedure. Reputation is a part of a person's character and personality. Blacklisting tarnishes one's reputation.

19. Where the State is dealing with individuals in transactions of sales and purchase of goods, the two important factors are that an individual is entitled to trade with the Government and an individual is entitled to a fair and equal treatment with others. A duty to act fairly can be interpreted as meaning a duty to observe certain aspects of rules of natural justice. A body may be under a duty to give fair consideration to the facts and to consider the representations but not to disclose to those persons details of information in its possession. Sometimes duty to act fairly can also be sustained without providing opportunity for an oral hearing. It will depend upon the nature of the interest to be affected, the circumstances in which a power is exercised and the nature of sanctions involved therein.

20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist."

13. The aforementioned proposition that no order of blacklisting could be passed without affording opportunity of hearing to the affected party was reiterated in the case of Raghunath Thakur Vs. State of Bihar & Ors. (1989) 1 SCC 229 wherein it was stated as follows:- "4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the 8 WRIC No. 29537 of 2025 principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order..."

14. The requirement of grant of opportunity to show cause before blacklisting was considered in the case of Gronsons Pharmaceuticals (P) Ltd. & Anr. Vs. State of Uttar Pradesh & Ors. AIR 2001 SC 3707 and it was held that since the order blacklisting of an approved contractor results in civil consequences, the principle of audi alteram partem is required to be observed.

15. The power to blacklist a contractor was held to be inherent in the party allotting the contract and the freedom to contract or not to contract was held to be unqualified in the case of private parties; however when the party is State, the decision to blacklist would be open judicial review on touchstone of proportionality and the principles of natural justice. The relevant observations made in this regard in the case of M/s Kulja Industries Limited Vs. Chief General Manager, W.T. Project, BSNL & Ors. (2014) 14 SCC 731 are as under:- "17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because "blacklisting" simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court." 9 WRIC No. 29537 of 2025

16. An order of blacklisting has the effect of depriving a person of equality of opportunity in the manner of public contract and in a case where the State acts to the prejudice of a person it has to be supported by legality. The activities of the State having the public element quality must be imbued with fairness and equality.

17. The order of blacklisting involves civil consequences and has the effect of creating a disability by preventing a person from the privilege and advantage of entering into lawful relationship with the Government, therefore fundamentals of fair play would require that the concerned person should be given an opportunity to represent his case before he is put on the blacklist. A fair hearing to the party before being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto.

18. In order to ensure conformity with the principles of natural justice, a show cause notice is required to specify as to what would be the consequences if the noticee does not satisfactorily meet the grounds on which the action is proposed. The notice, apart from being adequate, is also required to state the grounds necessitating the action and the penalty proposed is also required to be mentioned specifically and unambiguously. A show cause notice, particularly in a case where it proposes to impose an order of blacklisting, is required to adhere to the principles of natural justice and for the said reason is to fulfill the twin requirements of stating in unambiguous terms the grounds which according to the department necessitates an action, and also the penalty which is proposed to be taken in case the noticee is unable to furnish an adequate response to the grounds stated in the notice.

19. Having regard to the aforestated facts and circumstances, we are of the considered view that the respondent authority may revisit in the matter. Accordingly, the impugned order dated 20.03.2025 is set aside and the matter is relegated to the respondent authority to pass a fresh order strictly in accordance with law, after affording opportunity of hearing to the petitioner company and according due consideration to the defence set up by the petitioner company in the replies to the show cause notices. 10 WRIC No. 29537 of 2025

20. The writ petition stands disposed of accordingly. (Anish Kumar Gupta,J.) (Mahesh Chandra Tripathi,J.) September 4, 2025 RKP