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Judgment
Chittaranjan Dash, J.
By means of this application, the Petitioner, M/s. Konark Ayurvedic Pharmacy, Khurda, has called in question the action of the Opposite Parties in refusing to extend the delivery period for supply of Ayurvedic drugs under the tender in question and, during pendency of the writ petition, the consequential order dated 23.06.2026 whereby the Petitioner has been debarred and blacklisted from participating in the tender process for the financial years 2026-27 and 2027-28 in respect of Mahamasha Taila and Trikatu Churna. The Petitioner also seeks consequential relief against the imposition of liquidated damages and penalty.
The brief facts necessary for adjudication of the present writ petition are that the Petitioner, a registered MSME unit engaged in the manufacture of Ayurvedic drugs, was declared L1 in the tender floated by the Directorate of AYUSH for the year 2025-26. Pursuant to the Letter of Intent dated 26.08.2025 and Purchase Order dated 11.09.2025, the quantities required to be supplied were substantially enhanced beyond those stipulated in the tender. The Petitioner, relying upon Clause 6.25.7 of the tender conditions, sought equitable extension of the delivery schedule, but the request was rejected by the Opposite Parties by relying upon the outer limit of 120 days prescribed under the tender conditions. During the pendency of the writ petition, the Director, AYUSH passed the order dated 23.06.2026 debarring and blacklisting the Petitioner for the aforesaid two financial years.
Learned counsel for the Petitioner submits that the action of the Opposite Parties is contrary to the very terms of the tender, inasmuch as the substantial enhancement in the quantity of supply constituted a modification of the contract attracting Clause 6.25.7, which contemplated an equitable adjustment of the delivery schedule. It is contended that the request for extension was rejected by placing exclusive reliance upon the stipulation relating to the maximum delivery period, while ignoring the provision for equitable adjustment and the circumstances placed by the Petitioner in support of its request. It is further submitted that the order dated 23.06.2026 of debarment and blacklisting is ex facie unsustainable, having been passed without issuance of any show-cause notice or affording an opportunity of hearing.
Per contra, learned Additional Government Advocate, on the other hand, submits that the delivery period was governed by the express terms of the tender and that the maximum permissible period was 120 days, beyond which no extension could be granted; it is also submitted that the action of debarment has been taken under the contractual stipulation empowering the authority to proceed against a defaulting supplier.
At the outset, it would be apposite to refer to the judgment of this Court in Artatran Bhuyan vs. State of Odisha and Ors. in W.P.(C) No.37383 of 2021, decided on 24.07.2025, wherein one of us (Hon’ble the Chief Justice Harish Tandon, J.) was a member of the Bench and, while dealing with an order of blacklisting, this Court emphasised that a person likely to suffer civil consequences must be afforded an adequate opportunity to defend himself, this Court held as follows:
“14.Blacklisting of a contractor has an impact on the privilege and advantage of entering into a lawful relationship with the Government or its instrumentality for his livelihood in the form of a gain. It is an ardent duty of the Government to ensure a fair, transparent and reasonable action by giving a person an adequate opportunity to represent its case. It is a solemn duty of the Government while making a public procurement for constructing a social and economic infrastructure for a systematic growth at all levels and, therefore, a person, who is found to have indulged in unethical practices or done some misdeeds, tantamounting to a misconduct, the blacklisting is one of the effective tools to eliminate such defiant bidders from the selection process. It further ensures to inculcate a sense of discipline by putting a sanction on the firms from trading and entering into the public contracts. Although such powers are in here and ingrained into the Government or its officials, it also brings a greater responsibility in adhering to the principle of fair play, providing an equal opportunity to defend and above all, maintain the proportionality in awarding the tenure of debarment in commensurate with the misdeed/misconduct of the contractor.
15.On the doctrine of proportionality, the judgment of the apex Court in case of Coimbatore District Central Cooperative Bank vs. Coimbatore District Central Cooperative Bank Employees Association reported in (2007) 4 SCC 669 can be gainfully applied wherein it is held that though the doctrine of proportionality is a principle of the administrative law, but that does not give unhindered power to the authorities to use a ‘sledge-hammer to crack a nut’. It is further highlighted that the punishment should not be too extreme than the gravity of crime as the writ court seldom interferes with the imposition of penalty in the form of blacklisting provided the method or a manner in which a decision-maker has ordered his priorities in reaching a conclusion or arriving at a decision.
16.It is to be borne in mind that the order of blacklisting not only causes prejudice to the commercial person in praesenti but have a dent to carry for all time to come having a resultant effect of a civil death.”
The aforesaid principle finds further elucidation in the judgment of the Hon’ble Supreme Court in UMC Technologies Pvt Ltd. vs. Food Corporation of India, reported in (2021) 2 SCC 551, with the relevant paragraphs reproduced hereinbelow:
“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 General, Evacuee Property1 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.
…
21.Thus, from the above discussion, a clear legal position emerges that for a show-cause notice to constitute the valid basis of a blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom, that there is intention on the part of the issuer of the notice to blacklist the noticee. Such a clear notice is essential for ensuring that the person against whom the penalty of blacklisting is intended to be imposed, has an adequate, informed and meaningful opportunity to show cause against his possible blacklisting.”
The aforesaid principles assume particular significance in the facts of the present case. The order dated 23.06.2026 passed by the Director, AYUSH, Odisha, proceeds on the basis that the Petitioner was a defaulting supplier on account of non-performance/non-supply of the ordered items and, on that basis, invokes Clause 6.38 of the tender conditions to debar and blacklist the Petitioner for the financial years 2026-27 and 2027-28 in respect of Mahamasha Taila and Trikatu Churna. However, the record does not disclose that, prior to passing the said order, any show-cause notice was issued to the Petitioner proposing such action or that the Petitioner was afforded any opportunity to explain why it should not be debarred or blacklisted. The Petitioner has specifically pleaded that the order was passed without notice and opportunity of hearing, and the said aspect is not shown to have been controverted by the Opposite Parties.
The requirement of such notice assumes greater significance in the present case because the Petitioner had, prior to the impugned order, been consistently seeking extension of the delivery period, relying upon the increase in the quantity of drugs required to be supplied and the circumstances which, according to it, had affected timely performance. Its request for extension had been rejected by the authority by treating 120 days as the maximum permissible period and consequential action by way of liquidated damages and penalty had thereafter been initiated.
Thus, before visiting the Petitioner with the distinct and more serious consequence of debarment/blacklisting, the authority was required to put the proposed action specifically to the Petitioner and afford it an opportunity to explain its position. UMC Technologies (supra) makes it clear that the notice must not only disclose the grounds for the proposed action but must also make it clear that blacklisting itself is contemplated, so as to enable the affected party to make a meaningful representation against that consequence. That elementary requirement having admittedly not been followed, the impugned order of debarment and blacklisting cannot be sustained.
In view of the aforesaid position, the order dated 23.06.2026, insofar as it debars and blacklists the Petitioner from participating in the tender process for the financial years 2026-27 and 2027-28, cannot be sustained in law. The same is accordingly quashed. Consequently, the Petitioner shall not be treated as debarred or blacklisted on the basis of the said order.
So far as the Petitioner’s grievance regarding refusal of extension of the delivery period is concerned, we find that the authority, while rejecting the Petitioner’s request, proceeded on the premise that the period of 120 days prescribed under the tender conditions constituted an absolute outer limit. The Petitioner, however, had specifically relied upon Clause 6.25.7 and had sought equitable adjustment of the delivery schedule on account of the enhanced quantity of supply. The impugned communication does not disclose consideration of the said provision or of the circumstances placed by the Petitioner in support of its request.
In the circumstances, the letter dated 13.03.2026 is also set aside. The matter is remitted to the competent authority to consider afresh the Petitioner’s request for extension of the delivery period, keeping in view the relevant provisions of the tender conditions, including Clause 6.25.7, and the representations submitted by the Petitioner, and to take a reasoned decision thereon in accordance with law. Until such decision is taken, the consequential action founded solely upon the rejection of the Petitioner’s request for extension shall remain inoperative.
The writ petition is, accordingly, allowed in the aforesaid terms.
Footnotes
- 1.Nasir Ahmad v. Custodian General, Evacuee Property,