Fair hearing to party being blacklisted is essential pre-condition for valid order of blacklisting and Doctrine of Proportionality is to be considered: Orissa HC

Read Judgment: M/s Ram Kumar Agarwal Engineers Pvt Ltd. vs. State of Odisha 

Pankaj Bajpai

Cuttack, March 7, 2022: While concluding that the decision of the State of Odisha to blacklist the petitioner was done in a hush hush manner without giving a proper hearing, and the application of the doctrine of proportionality was not kept in mind in proper perspective while awarding a punitive measure, the Orissa High Court (Cuttack Bench) held that where valuable rights are sought to be taken away by the Government in depriving of a person dealing with it through blacklisting, the Writ Courts cannot act as mere spectator and shall intervene to do justice to the aggrieved party. 

A Division Bench of Justice B.R Sarangi and Justice S.K Panigrahi observed that a fair hearing to the party being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting. 

Going by the background of the case, a public tender was invited by Engineer-in-Chief, Rural Works, Bhubaneswar (third opposite party) for various roads and bridges in terms of an item rate tender. Ram Kumar (Petitioner) participated in the tender process and got selected. Accordingly, an agreement was signed for construction of H.L. Bridge over River Suktel on Tamla-Mudassir Road in the district of Bolangir under “Biju Setu Yojana” and an estimated cost of Rs.6,99,97,278/- was provided with a stipulated date of completion of work fixed for February 25, 2016. The said work was completed before time and the final bill was also cleared by the department.

After the expiry of about four and half years from handing over the bridge for the purpose of transportation by public, some horizontal cracks appeared to have developed. In the meantime, the third opposite party requested the Government to allow the Executive Engineer to take up the work of dismantling and related construction would be undertaken by the petitioner after diversion of the traffic. He further informed that such diversion of traffic, dismantling and related construction would be done by the petitioner at his own cost. 

Though the petitioner took up the dismantling work of the said span without having any permission of the authority and without taking any precaution to ensure safety of the labourers by making any arrangement for centering and shuttering prior to dismantling of the slab, which led to collapse of the distressed slab causing death of two persons on the spot, apart from causing injuries sustained by other persons. This triggered the punitive action of blacklisting of the petitioner.

After considering the submissions, the High Court noted that the right to enter into a contract forms an essential part of private laws which enables an individual or partners or company to enter into a contract that governs the business relations. 

Similarly, Article 298 of the Constitution of India, empowers the Government to enter into a contract for trade or business and frames laws that give effect to such contracts, and it allows the executive to frame laws governing such Government contracts, added the Court.

The High Court observed that no employer would normally severe legal relationship unless so compelled by circumstances as it also involves its reputation, and ‘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, but, in the instant case, the employer is Government and the importance of procedural fairness cannot be undermined, added the Court. 

The High Court further observed that Government or instrumentalities of State are under a constitutional obligation not to discriminate, and if the State unfairly puts a party on blacklist, it will amount to denial of an equal opportunity of being able to compete with his adversaries.

Hence, the order of blacklisting the petitioner deserves a revisiting by the State authority, added the Court.