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Judgment
HARISH TANDON, CJ.
The challenge is made to the orders dated 12th June, 2026 issued by the Collector & District Magistrate, Angul and the HOD (Medical Services), Mahanadi Coalfields Limited (MCL), wherein the petitioner has been permanently banned and/or blacklisted from participating in any tender or outsourcing process within the jurisdiction of Angul District and for one (01) year from participating in future tenders of MCL after 30th June, 2026 respectively.
The seminal point involved in the instant writ petition is whether the authorities can blacklist or debar a person, either permanently or for a limited period, without affording an opportunity to defend and hearing. In other words, the point which assumes importance here is whether the authorities are obligated to issue a Show Cause Notice (SCN) upon a person before proceeding to impose an order of debarment and/or blacklisting in participating in the future tender process, either perpetually or for a limited period.
Admittedly, the aforesaid two orders were issued by the respective authorities without following the principles of audi alteram partem nor any show cause notice was issued upon the petitioner. Interestingly, the Collector and District Magistrate, Angul has, in fact, imposed the debarment and/or blacklisting to continue perpetually/permanently, though we can realize the sensible approach of the MCL when the blacklisting was restricted to one year.
The law enunciated by the Apex Court in a catena of decisions is uniform that an authority cannot debar and/or blacklist any person from entering into a public contract, unless he is afforded adequate opportunity to defend and/or hearing. In case of Isolators and Isolators, through its Proprietor Sandhya Mishra v. Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited, reported in (2023) 8 SCC 607, the Apex Court succinctly held that the requirement of issuing a show cause notice cannot be dispensed with as it has an effect of denying a person or an entity the privileged opportunity of entering into Government contracts. The Apex Court further held that the blacklisting has a larger civil consequence casting a slur and creates a barrier between the persons blacklisted and the Government in the matter of public procurement or the contract and proceeded to coin the expression akin to blacklist as “instruments of coercion”.
Having held so, the Apex Court in innumerable terms highlighted the importance of a show cause notice to be issued before a person is blacklisted and/or debarred from entering into future public contract as the civil consequence is akin to a civil death, in the following:-
“35.As regards the principles of law applicable to the case, we need not elaborate on various decisions cited at the Bar. Suffice it would be to take note of the decision in UMC Technologies [UMC Technologies (P) Ltd. v. Food Corpn. of India, (2021) 2 SCC 551] wherein, the substance of the other relevant decisions has also been duly noticed by this Court while explaining the principles governing such actions of debarment/blacklisting. Therein, this Court, inter alia, underscored the requirement of specific show-cause notice and referred to the settled principles in the following terms : (SCC pp. 558-61, paras 13-14 & 16-19)
“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 (Evacuee Property) [Nasir Ahmad v. Custodian (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.
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16.The severity of the effects of blacklisting and the resultant need for strict observance of the principles of natural justice before passing an order of blacklisting were highlighted by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. [Erusian Equipment & Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70] in the following terms : (SCC pp. 74-75, paras 12, 15 & 20)
„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.
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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”.
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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.‟
17.Similarly, this Court in Raghunath Thakur v. State of Bihar [Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229] struck down an order of blacklisting for future contracts on the ground of non-observance of the principles of natural justice. The relevant extract of the judgment in that case is as follows : (SCC p. 230, para 4)
„4. … [I]t is an implied principle of the rule of law that any order having civil consequences should be passed only after following the 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.‟
18.This Court in Gorkha Security Services v. State (NCT of Delhi) [Gorkha Security Services v. State (NCT of Delhi), (2014) 9 SCC 105] has described blacklisting as being equivalent to the civil death of a person because blacklisting is stigmatic in nature and debars a person from participating in government tenders thereby precluding him from the award of government contracts. It has been held thus: (SCC p. 115, para 16)
„16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as “civil death” of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts.‟
19.In light of the above decisions, it is clear that a prior show-cause notice granting a reasonable opportunity of being heard is an essential element of all administrative decision-making and particularly so in decisions pertaining to blacklisting which entail grave consequences for the entity being blacklisted. In these cases, furnishing of a valid show-cause notice is critical and a failure to do so would be fatal to any order of blacklisting pursuant thereto.”
In an earlier judgment rendered in case of UMC Technologies Private Limited v. Food Corporation of India, reported in (2021) 2 SCC 551, the Apex Court held that because of the serious civil consequence that would follow from the order of blacklisting and/or debarment, the strict adherence to the principles of natural justice is warranted and any decision without following the principles of natural justice tantamounts to denial of opportunity to defend and of hearing. This Court too, in the case of M/s. Panda Infraproject Limited v. State of Odisha [W.P.(C) No.26408 of 2017], held as follows:-
“25.In the considered view of the Court, the impugned order of blacklisting the Petitioner does not satisfy the requirements of law and in particular the bare necessity that an order blacklisting a contractor has to spell out the reasons in clear and unmistakable terms; must state that it has been passed after eliciting a reply from the contractor; spell out the reasons why the plea of the contractor was found unacceptable. In that sense, the impugned order is an unreasoned, non-speaking one.”
In view of the law enunciated in the above reports, there is no scintilla of doubt in our mind that blacklisting and/or debarment invites a serious civil consequence akin to a civil death, more particularly, when its operation expands perpetually. The Apex Court also highlighted that a person should not be permanently debarred from entering into the Government contracts as he will be deprived of entering into the same, which has a remote invasion on the fundamental rights guaranteed in relation to profession and trade under Article 19(1)(g) of the Constitution of India.
The order of debarment and/or blacklisting should also be tested on the anvil of the doctrine of proportionality and taking into account the misconduct or a thing of like nature, the period of debarment and/or blacklisting varies but a person cannot be blacklisted and/or debarred permanently. The enlightening observation in this regard can be gainfully taken into account from the judgment of the Apex Court rendered in case of Kulja Industries Limited v. Chief General Manager, Western Telecom Project, Bharat Sanchar Nigam Limited, reported in (2014) 14 SCC 731 in the following:-
“25.Suffice it to say that “debarment” is recognized and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the “debarment” is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor.”
In view of the law enunciated hereinabove and the undisputed fact that the impugned orders issued by different authorities suffer from vices as no opportunity to defend or hearing was afforded to the petitioner nor any show cause notice was ever issued upon it. Solely on the ground that the authorities have acted contrary to the law declared by the Apex Court in imposing the order of debarment and/or blacklisting, the impugned orders dated 12th June, 2026 are hereby quashed and set aside.
For abundant precaution, we hereby made it clear that we had no occasion to go into the merits and demerits of the stands taken by the authorities as the writ petition is decided on the solitary point of the necessity of issuing a show cause notice before the authorities imposed the blacklisting and/or debarment order and none of the observations would stand in the way, if the authorities proceeded to follow the mandate of law as indicated hereinabove in future. It is also open to the petitioner to take all the points available to it, in the event, any further action is taken in this regard and it is expected that the authorities would consider the same in a pragmatic manner and shall record proper reasons in accordance with law.
With these observations and directions, the instant writ petition is disposed of.
Further this Court clarifies that since the instant writ petition has been disposed of on the point of law, the reliefs claimed in the writ petition shall not stand in the way or create a bar in repleting in an appropriate proceeding.