Gujarat High Court
S.A. Infracom Through Sanjay Lalda ... vs Jetpur-Navagadh Nagarpalika Through ... on 6 November, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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C/SCA/15143/2024 JUDGMENT DATED: 06/11/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 15143 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE L. S. PIRZADA
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Approved for Reporting Yes No
✔
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S.A. INFRACOM THROUGH SANJAY LALDA PATEL
Versus
JETPUR-NAVAGADH NAGARPALIKA THROUGH CHIEF OFFICER
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Appearance:
MUNJAAL M BHATT(8283) for the Petitioner(s) No. 1
MR BHAVESH P TRIVEDI(2731) for the Respondent(s) No. 1
MR RR TRIVEDI(941) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE L. S. PIRZADA
Date : 06/11/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1 Heard learned advocate Mr. Munjaal M. Bhatt for the
petitioner and learned advocate Mr. Bhavesh P. Trivedi for
the respondent.
2 Having regard to the controversy in narrow compass with the
consent of the learned advocates appearing on behalf of
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respective parties, the matter is taken up for the final
hearing.
3 Rule returnable forthwith. Learned advocate Mr. Bhavesh P.
Trivedi waives service of notice of Rule on behalf of the
respondent.
4 By this petition under article 226 of the Constitution of India,
the petitioner has prayed for the following reliefs:
a) This Hon'ble Court may be pleased to issue
an appropriate writ of mandamus or any other
writ, order or direction quashing and setting
aside the impugned order dated 14.03.2024,
received on 11.10.2024, passed by the
Respondent (Annexure-M);
aa) This Hon'ble Court may be pleased to issue
an appropriate writ of mandamus or any other
writ, order or direction quashing and setting
aside the impugned order dated 28.02.2025,
passed by the Respondent (Annexure A-1);
b) Pending hearing and final disposal of the
present Special Civil Application, this Hon'ble
Court may be pleased to stay the operation,
implementation and execution of the impugned
order dated 14.03.2024, received on 11.10.2024,
passed by the Respondent (Annexure-M);
bb) Pending hearing and final disposal of the
present Special Civil Application, this Hon'ble
Court may be pleased to stay the operation,
implementation and execution of the impugned
order dated 28.02.2025, passed by the
Respondent (Annexure A-1);
c) Pending hearing and final disposal of the
present Special Civil Application and considering
that the Bank Guarantee stands invoked by the
Respondent, this Hon'ble Court may be pleased
to mark lien on the amount invoked by the
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Respondent under the Bank Guarantee
amounting to Rs.6,55,000/-;
5 The brief facts of the case are as under:
5.1 The Respondent Jetpur - Navagadh Nagarpalika floated
a tender for "Supply, Installation, Testing and Commissioning
of CCMS Box and Street Light with Pole and Its Related
Accessories." The contract value was estimated at
Rs.2,18,24,758/- and the completion time was stipulated for 6
months from the date of site handover by the respondent.
5.2 The Defect Liability Period was set at one year from the
completion date. The petitioner was declared as L1 for a total
contract value of Rs.2,01,31,156.77/-. The petitioner also
furnished a Bank Guarantee of Rs.6,55,000/- in compliance of
the letter dated 14.10.2022 issued by the respondent on
20.10.2022.
5.3 Thereafter, a contract agreement was entered into
between the petitioner and the respondent on 01.11.2022. On
entering the contract agreement, work order was issued by
the respondent. The petitioner completed the work as per the
work order. However, there was a dispute with regard to
dismantling of existing electric poles and its incidental work
to be carried out by the petitioner. According to the
petitioner, such work was not within the scope of the
contract agreement and it was an extra item as no such item
was referred to in bill of quantities or the tender description.
The petitioner therefore, did not carry out the work of
dismantling the existing pole and the incidental work as
directed by the respondent.
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5.4 The respondent thereafter, issued the notices to the
petitioner dated 04.09.2023, 22.09.2023 and 09.01.2024 and
separate replies were filed by the petitioner dated
17.01.2024 and 19.02.2024 contending that the petitioner
shall carry out the work of dismantling of the old electric
poles and incidental work after the respondent approves the
same as extra work.
5.5 It appears that the respondent after considering the
replies of the petitioner, passed a resolution dated
14.03.2024 whereby, it was resolved to put the petitioner in
blacklist, to confiscate the deposits, invoke the bank
guarantee and to carry out the work of dismantling and other
work through the other agency.
5.6 The respondent thereafter, invoked the bank guarantee
and the petitioner was informed by its bank about the same
and at that point of time, the petitioner was made aware
about the resolution passed by the respondent for
blacklisting and invocation of the bank guarantee.
5.7 The petitioner therefore, preferred this petition. During
the pendency of this petition, by order dated 05.02.2025,
direction was issued to the respondent to reconsider his
decision for blacklisting the petitioner on permanent basis.
5.8 In view of such direction, the respondent - Nagar Palika
passed an order dated 28.02.2025 for blacklisting the
petitioner for 2 years on reconsidering its earlier decision
dated 14.03.2024 in view of the legal advice received by the
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respondent.
5.9 The petitioner therefore, amended the petition by
challenging the order of blacklisting for 2 years passed by
the respondent - Nagarbalika on 28.02.2025.
5.10 Learned advocate Mr. Munjaal M. Bhatt for the
petitioner submitted that the respondent - Nagar Palika could
not have resorted to the drastic measure of blacklisting the
petitioner resulting into the civil death in view of the dispute
raised by the petitioner regarding the tender conditions.
5.11 Learned advocate Mr. Bhatt invited the attention of the
Court to the Clause no.3 of contract agreement dated
01.11.2022 which provides that if there is an extra work
undertaken by the petitioner, the same shall be duly
reimbursed after ascertaining the lowest of the three rates
mentioned in the contract and Clause-4 which provides that
the petitioner is duty bound to take care of all the materials
belonging to the respondent and there shall be no extra
payment made for taking care or removing the material of
the respondent. Reference was also made to Clause-5 which
requires that a LED lights to be installed should have one
year warranty and clause-15 referring to the forfeiture of the
security deposit by the respondent to recover the money
provided there is loss caused to the respondent.
5.12 Learned advocate Mr. Bhatt also referred to Clause 28
which provides the petitioner to follow all the tender terms
and conditions and in case of the breach, the respondent was
required to give a notice explaining the breach and thereafter
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only, the respondent can invoke the power of blacklisting and
or get the remaining work completed at the cost and risk of
the petition. It was therefore submitted that when there is a
dispute with regard to the interpretation of the terms of the
tender between the parties, the respondent could not have
resorted to the blacklisting the petitioner.
5.13 In support of his submissions, reliance was placed on
the following decisions:
(1) M/s. Erusian Equipment & Chemicals Ltd. Vs. State
Of West Bengal & Anr. reported in 1975 (1) SCC 70;
(2) Kulja Industries Ltd. Vs. Western Telecom Project
BSNL reported in 2014 (14) SCC 731.
5.14 It was submitted that both the above decisions were
referred and applied by the Hon'ble Apex Court in the latest
decision in case of Blue Dreamz Advertising Pvt. Ltd. and
Another Vs. Kolkata Municipal Corporation and Others
reported in 2024 SCC OnLine SC 1896 wherein, the
Hon'ble Apex Court has observed as under:
"26. In other words, where the case is of an
ordinary breach of contract and the explanation
offered by the person concerned raises a bona fide
dispute, blacklisting/debarment as a penalty ought
not to be resorted to. Debarring a person albeit for
a certain number of years tantamounts to civil
death inasmuch as the said person is commercially
ostracized resulting in serious consequences for the
person and those who are employed by him.
27. Too readily invoking the debarment for ordinary
cases of breach of contract where there is a bona
fide dispute, is not permissible. Each case, no
doubt, would turn on the facts and circumstances
thereto."
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6 It was submitted that in the facts of the case also, the
respondent could not have resorted to the blacklisting of the
petitioner as a penalty because debarring the petitioner for 2
years tantamounts to civil death and the petitioner is
commercially ostracized resulting in serious consequences as
such action of the respondent would be a stigma in the
business of the petitioner so as to get other contracts from
Government Agencies. It was therefore, submitted that the
impugned order of blacklisting may be quashed and set
aside.
7 Per Contra, learned advocate Mr. Trivedi appearing for the
respondent Nagar Palika submitted that the petitioner has
remained adamant in not complying with the directions
issued by the respondent - Nagar Palika and has not even
replied to various notices issued by the respondent for
dismantling of old electric poles and its related work and only
insisted upon to consider the same as extra item.
8 It was further submitted that the petitioner was required to
carry out the work as directed by the respondent - Nagar
Palika as per the terms and condition of the contract. It was
submitted that as per Clause-28 of the tender conditions,
respondent - Nagar Palika was authorized to take action of
blacklisting the petitioner in case of breach of the terms and
conditions of the tender conditions.
9 It was therefore, submitted that in the interest of the
respondent Nagar Palika, the resolution dated 14.03.2024
was passed to blacklist the petitioner and to invoke the Bank
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Guarantee.
10 It was further submitted by learned advocate Mr. Trivedi that
in view of the order passed by this Court and as per the legal
advice, the order dated 28.02.2025 was passed by the
respondent - Nagar Palika to restrict the blacklisting period
up to 2 years.
11 It was submitted that both the resolution dated 14.03.2024
and order dated 28.02.2025 can be challenged by the
petitioner before the Regional Commissioner of
Municipalities under Section 258 of Gujarat Municipalities
Act, 1963.
12 It was submitted the petitioner has thus, an alternative
efficacious remedy and therefore, this petition may not be
entertained by the Court while exercising the extraordinary
jurisdiction under Article 226 of the Constitution of India.
13 Having heard the learned advocates for the respective parties
and considering the submissions made before this Court as
well as the documents placed on record, it appears that there
is no allegation against the petitioner made by the
respondent - Nagar Palika with regard to any fraud or
malpractice or misrepresentation and or any other
irregularities except the fact that the petitioner has not
carried out the work as per the direction of the respondent -
Nagar Palika by not dismantling the old electric poles and its
related work or not doing the earthing as required by the
respondent - Nagar Palika as per the various notices issued
by it.
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14 As against the say of the respondent - Nagar Palika, the
petitioner has also, by submitting the reply, stuck to his
position with regard to not dismantling the electric poles
considering the same as extra items and which is to be
approved by the respondent - Nagar Palika as per the tender
terms and conditions. Thus, there is a dispute between the
parties regarding the terms and conditions of the tender
agreement. In such circumstances, the Hon'ble Apex Court in
case of Blue Dreamz Advertising Pvt. Ltd. (Supra), has held
as under:
"26. In other words, where the case is of an
ordinary breach of contract and the explanation
offered by the person concerned raises a bona
fide dispute, blacklisting/debarment as a penalty
ought not to be resorted to. Debarring a person
albeit for a certain number of years tantamounts
to civil death inasmuch as the said person is
commercially ostracized resulting in serious
consequences for the person and those who are
employed by him.
27. Too readily invoking the debarment for
ordinary cases of breach of contract where there
is a bona fide dispute, is not permissible. Each
case, no doubt, would turn on the facts and
circumstances thereto.
28. Examining the facts of this case from that
perspective, we find that the appellant, after the
award of the tender, has admittedly paid an
amount of Rs. 3,71,96,265/-, though, according to
the Corporation, the outstanding amount as on
the date of the debarment was Rs. 14,63,24,727/-.
However, as would be clear from the facts
discussed hereinabove, right from the inception
there have been issues between the appellant and
the Corporation with regard to the fulfilment of
the reciprocal obligations in the bid document.
There has been exchange of correspondence
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between the parties with each side blaming the
other for not performing the reciprocal
obligations. While the appellant had a case with
regard to the non-issuance of work orders; non-
receipt of formal format of bank guarantee;
refusal of No Objection Certificate for obtaining
connection from the Calcutta Electric Supply
Corporation Ltd.; existence of only 200 out of 250
allotted street hoardings and so on demonstrating
breach of obligations by the Corporation, the
Corporation had a case that Bank Guarantee was
not the mode of payment and as such there was
no reason to insist on Bank Guarantee; that in the
joint inspection the appellant's men failed to
cover all the areas and thereafter when appellant
was asked to submit a list of allotted location, the
appellant failed to furnish the same and further
there was huge default on the part of the
appellant.
29. Even in the order dated 02.03.2016 by which
the appellant was debarred for a period of five
years, the reason given is that the tender notice
had clearly stated that the street hoardings in the
annexures would be allotted on 'as is where is'
basis; that the company having understood the
scope and effect of the terms and conditions of
the notice accepted the award; that, 'No
Objection Certificate', is not required in respect of
the existing hoardings; that there was no
document to show that the company had applied
to the Calcutta Electric Supply Corporation Ltd.
for connection and that it appeared to the
Corporation that the company did not have the
financial capacity to pay and as such the company
was creating problems on one pretext or the other
since obtaining the allotment of sites. The order
also stated that the appellant had set up a bad
example to others having interest to enjoy the
advertisement rights.
30. All these reasons fall far short of rendering
the conduct of the appellant in the present case,
so abhorrent as to justify the invocation of the
drastic remedy of blacklisting/debarment. The
appellant very clearly has been subjected to a
disproportionate penalty. The Corporation has
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lifted a sledgehammer to crack a nut. We
disapprove of the said course of action on the
facts of this case.
37. The Division Bench having noticed the fact
that any decision to blacklist will be open to
scrutiny on the anvil of the doctrine of
proportionality has failed to apply the principle to
the facts of the case in the correct perspective.
The Division Bench has also failed to correctly
appreciate the ratio of the decision in B.S.N. Joshi
(supra)."
15 The Hon'ble Apex Court, while considering the facts of the
case before it, has also considered the decision in case of
M/s. Patel Engineering Limited Vs. Union of India
reported in (2012) 11 SCC 257 wherein, the Hon'ble Apex
Court has found the Laxmanrekha to be breached by the
party blacklisted as under:
"33. From the impugned order it appears that the
second respondent came to the conclusion that: (1) the
petitioner is not reliable and trustworthy in the context
of a commercial transaction; (2) by virtue of the
dereliction of the petitioner, the second respondent
suffered a huge financial loss; and (3) the dereliction on
the part of the petitioner warrants exemplary action to
"curb any practice of 'pooling' and 'mala fide' in future".
34. We do not find any illegality or irrationality in the
conclusion reached by the second respondent that the
petitioner is not (commercially) reliable and trustworthy
in the light of its conduct in the context of the
transaction in question. We cannot find fault with the
second respondent's conclusion because the petitioner
chose to go back on its offer of paying a premium of Rs
190.53 crores per annum, after realising that the next
bidder quoted a much lower amount. Whether the
decision of the petitioner is bona fide or mala fide,
requires a further probe into the matter, but, the
explanation offered by the petitioner does not appear to
be a rational explanation.
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36. .... The dereliction, such as the one indulged in by
the petitioner, if not handled firmly, is likely to result in
recurrence of such activity not only on the part of the
petitioner, but others also, who deal with public bodies,
such as the second respondent giving scope for
unwholesome practices....."
16 The Hon'ble Apex Court in Blue Dreamz Advertising Pvt.
Ltd. and Another (Supra) while considering the decision of
the Kulja Industries (Supra) where the party blacklisted,
was alleged to have fraudulently withdrawn a huge amount of
money which was not due to it in collusion and conspiracy
with officials of the respondent - Corporation and compared
with the facts of the M/s. Patel Engineering to bring out a
contrast between the cases that Ilk and Others like the case
in the question observed as under:
"41. Patel Engineering (supra) and Kulja Industries
(supra) bring out the contrast between cases of
that ilk and others, like the case in question. It is
this distinction the Division Bench has grossly
overlooked which, however, the learned Single
Judge had rightly brought to the fore."
17 Applying the above decisions of the Hon'ble Apex Court to
the facts of the case and as observed by the Hon'ble Apex
Court in case of M/S. Erusian Equipment & Chemicals
Ltd. (Supra), we are of the opinion that the respondent -
Nagar Palika could not have resorted to the drastic measure
of blacklisting the petitioner resulting into civil death.
18 Hon'ble Apex Court in M/S. Erusian Equipment &
Chemicals Ltd. (Supra) observed as under:
"12. Under Article 298 of the Constitution the
Executive power of the Union and the State shall
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extend to the carrying on of any trade and to the
acquisition, holding and disposal of property and the
making of contracts for any purpose. The State can
carry on executive function by making a law or
without making a law. The exercise of such powers
and functions in trade by the State is subject to Part
III of the Constitution. Article 14 speaks of equality
before the law and equal, protection of the laws.
Equality of opportunity should apply to matters of
public contracts. The State has the right to trade.
The State has there the duty to observe equality. An
ordinary individual can choose not to deal with any
person. The Government cannot choose to exclude
persons by discrimination. The order of black-
listing, 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 black- listing. 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.
13. But for the order of blacklisting, the
petitioner would have been entitled to participate in
the purchase of cinchona. Similarly the respondent
in the appeal would also have been entitled but for
the order of blacklisting to tender competitive rates.
14. The State can enter into contract with any
person it chooses. No person has a fundamental
right to insist that the Government must enter into a
contract with him. A citizen has a right to earn
livelihood and to pursue any trade. A citizen has a
right to claim equal treatment to enter into a
contract which may be proper, necessary and
essential to his lawful calling.
15. The blacklisting order does not pertain to any
particular contract. 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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16. In passing an order of blacklisting the
Government department acts under what is
described as a standardised Code. This is a Code for
internal instruction. The Government departments
make regular purchases. They maintain list of
approved suppliers after takings into account the
financial standard of the firm, their capacity and
their past performance. The removal from the list is
made for various reasons. The grounds on which
blacklisting may be ordered are if the proprietor of
the firm is convicted by court of law or security
considerations so warrant or if there is strong
justification for believing that the proprietor or
employee of the firm, has been guilty of
malpractices such as bribery, corruption, fraud. or if
the firm continuously refuses to return Government
dues or if the firm employs a Government servant,
dismissed or removed on account of corruption in a
position where he could corrupt Government
servant. The petitioner was blacklisted on the
ground of justification for believing that the firm has
been guilty of malpractices such as bribery,
corruption, fraud. The petitioners were blacklisted
on the ground that there were proceedings pending
against the petitioners for alleged violation of
provisions under the Foreign Exchange Regulations
Act.
17. The Government is a government of laws and
not of men. It is true that neither the petitioner nor
the respondent has any right to enter into a contract
but they are entitled to equal treatment with others
who offer tender or quotations for the purchase of
the goods. This privilege arises because it is the
Government which is trading with the public and
the democratic form of Government demands
equality and absence of arbitrariness and
discrimination in such transactions. Hohfeld treats
privileges as a form of liberty as opposed to a duty.
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 as fairly
without discrimination and without unfair
procedure. Reputation is a part of person's
character and personality. Blacklisting tarnishes
one's reputation.
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18. Exclusion of. a member of the public from
dealing with a State in sales transactions has the
effect of preventing him from purchasing and doing
a lawful trade in the goods by discriminating against
him in favour of other people. The State can impose
reasonable conditions regarding rejection and
acceptance of bids or qualifications of bidders. Just
as exclusion of the lowest tender will be arbitrary
similarly exclusion of a person who offers the
highest price from participating at a public auction
would also have, the same aspect of arbitrariness.
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 win
depend upon the nature of the interest to be
affected, the circumstances in which a power is
exercised 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.
21. With regard to the case of the petitioners, it
is made clear that the authorities will give an
opportunity to the petitioners to represent their
case, and the authorities will hear the petitioners as
to whether their name should be put on the blacklist
or not. This is made clear that the decision on this
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question will not have any effect on the proceedings
pending in Calcutta High Court where the peti-
tioner has challenged the adjudication proceedings
under the Foreign Exchange Regulations Act. Any
decision of the authorities on the blacklisting will
have no effect on the correctness of any of the facts
involved in those proceedings."
19 In view of the above settled legal positions and the
conspectus of the law, the impugned order of blacklisting
passed by the respondent - Nagar Palika, cannot be sustained
as the petitioner clearly has been subjected to
disproportionate penalty by the respondent - Nagar Palika by
using the sledgehammer to crack a nut. Such action of the
respondent - Nagar Palika cannot be approved in the facts of
the case.
20 Therefore, the impugned resolution dated 14.03.2024 and the
subsequent order dated 28.02.2025 passed by the respondent
- Nagar Palika qua blacklisting is hereby quashed and set
aside. However, it would be open for both the parties to take
appropriate action in accordance with law to resolve the
disputes between them regarding the terms and conditions of
the tender.
21 The rule is made absolute to the aforesaid extent. No order as
to costs.
(BHARGAV D. KARIA, J)
(L. S. PIRZADA, J)
Jaimin
