Jharkhand High Court
M/S New Mandal Traders Through Its Sole ... vs The State Of Jharkhand Through ... on 20 November, 2025
Author: Rajesh Shankar
Bench: Rajesh Shankar
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 2822 of 2024
M/s New Mandal Traders through its sole proprietor Sikandar Mandal,
S/o Late Saheb Ram Mandal, aged about 66 years, R/o Shivpur, P.O.
,P.S. & District- Godda having its registered office at Shivpur Chotal
Ward No. 02 Godda, P.O., P.S. & District- Godda ... Petitioner
Versus
1. The State of Jharkhand through Secretary, Department of Food,
Public Distribution & Consumer Affairs, Officiating at Project
Bhawan, P.O., P.S. Dhurwa & District- Ranchi.
2. Deputy Commissioner, Godda, officiating at Collectorate Building,
P.O.,P.S. & District-Godda
3. District Supply Officer, Godda, officiating at Collectorate Building,
P.O., P.S. & District- Godda
4. IDBI Bank, through its branch head, Godda Branch, officiating at
Ward No. 3, Routara Chowk, Pirpainti Rd, P.O.,P.S. & District-
Godda ... ... Respondents
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CORAM: HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioner : Mrs. Aprajita Bhardwaj, Adv
Mr. Akash Ajit Kumar, Adv
Mrs. Khushi Mahendru, Adv
For the State: Mr. Piyush Chitresh, AC to AG
For the Resp. No. 4: Mr. P.A.S. Pati, Adv
Mr. Shivam Singh, Adv
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Reserved on: 17.11.2025 Pronounced on: 20 / 11 /2025
Tarlok Singh Chauhan, C.J.
1. Heard the parties.
2. The respondent no. 3 District Supply Officer, Godda invited a
tender vide tender reference no. 463 dated 19.04.2023 for providing
block-wise door-step delivery services to the fair price shops in urban
areas as well as all the blocks of Godda district of State of Jharkhand
for period of one year. The petitioner participated in the above tender
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and submitted its bid along with all required documents and was
declared as lowest bidder. Later on vide memo dated 27.07.2023 the
petitioner was directed by the respondent no. 3 to execute the
agreement but the petitioner filed representation dated 01.08.2023
mentioning therein that the petitioner is a MSME firm and as per
Clause 11 of the Jharkhand Procurement Policy 2014, the MSMEs
require only 10% security in the form of bank guarantee which was
allowed.
3. A formal agreement was entered into between the parties on
02.08.2023. According to the work order, the petitioner was to pick up
food grains from the warehouse and supply to the concerned PDS
Shops till March 2024. The petitioner accordingly started carrying out
the execution of the work.
4. It is the case of the respondents that it was brought to the
knowledge that the petitioner was not executing the work as per the
advertised tender and hence a show cause notice was issued dated
18.09.2023 but the petitioner failed to submit its reply till date.
Thereafter two show cause notices were issued against the petitioner
but he failed to file its reply. Later on the petitioner submitted an
explanation which was not found satisfactory and therefore, vide letter
dated 07.02.2024 the petitioner was debarred indefinitely from further
work and relieved from the concerned work and he along with his all
vehicles were black listed for the Supply Department vide order dated
08.02.2024, constraining him to file the instant writ for the following
reliefs:
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(A) For issuance of a writ in the nature of certiorari for
quashing the order dated 08.02.2024 (annexure - 12)
whereby and whereunder the respondent no. 3 without
communicating/informing the petitioner their intention to
impose the punishment of blacklisting as is evident from
the show cause notices issued to the petitioner, in a
complete arbitrary and whimsical manner debarred /black
listed the petitioner along with all of its vehicles from
participating in any future work in relation to DSD (Door
Step Delivery).
(B) For issuance of a writ in the nature of certiorari or any
other appropriate writ for quashing the order dated
19.04.2024 (annexure-18) whereby and whereunder the
respondents have issued direction for recovery from the
bank guarantee supplied by the petitioner to the respondent
which is also illegal as even for initiating the said recovery
action the petitioner was neither show caused nor afforded
an opportunity of hearing in respect to the disputed amount
which according to the petitioner is not at all in dispute and
for that very reason the amount was released and remitted
in the account of the petitioner.
(C) For issuance of a writ in the nature of certiorari or any
other appropriate writ for quashing the letter with CIN no.-
L65190MH2004GOI148838 (annexure-17) whereby and
whereunder the respondent no. 4 has taken a unilateral
decision to freeze the bank account of the petitioner on a
complete wrong surmise when no such direction was
issued to it by any other respondents including the bank
through which the bill amount of the petitioner was
remitted to the bank account of the petitioner.
(D) During the pendency of the instant writ petition the
petitioner prays for an interim relief to the extent of staying
the order dated 08.02.2024 (annexure-12 whereby and
whereunder the respondent no. 3 has debarred / black listed
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the petitioner along with all of its vehicles from
participating in any future work in relation to DSD (Door
Step Delivery).
5. We have heard the learned counsel for the parties and have gone
through the records. At the outset it is clarified by Sri Piyush Chitresh,
the learned A.C. to A.G. that in terms of Clause 31.2 of the Notice
Inviting Tender (NIT) dated 19.04.2023, the petitioner could have been
black-listed only for a maximum period of two years and, therefore, the
order of black-listing be treated to be operational only for two years.
6. The statement is taken on record.
7. The records reveal that the respondents have tried to justify the
claim of black-listing the petitioner only on account of it having not
replied to the show cause notice. However, the stand of the respondents
is clearly belied from the documents on record which reveal that
initially a show cause notice was issued on 18.09.2023 but thereafter
the so called second show cause notice dated 26.10.2023 is only a
reminder and as regards the third notice dated 18.11.2023 this in turn
refers to the explanation offered by the petitioner to the 1st show cause
notice dated 18.09.2023.
8. Be that as it may, admittedly the petitioner was not provided
adequate and meaningful opportunity by way of show cause notice
against the black listing and, therefore, such drastic decision on the part
of the respondents is not sustainable in the eyes of law.
9. It is more than settled that 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. Therefore, this
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not only requires the statement of imputations detailing out the alleged
breaches and defaults one has committed, so that he gets an opportunity
to rebut the same, but another requirement is the nature of the action,
which is proposed to be taken for such a breach, that has to be clearly
set out 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 satisfactory. When it comes to black listing, this requirement
becomes all the more imperative, having regard to the fact that it is
harshest possible action.
10. In Gorkha Security Services v. Government (NCT of Delhi)
and Others, (2014) 9 SCC 105, the Hon'ble Supreme Court observed
that it was incumbent upon the petitioner to issue show cause notice and
also afford an opportunity of hearing to the petitioner prior to taking
debarment action. The relevant paragraphs are reproduced hereunder-
"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
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in government tenders which means precluding him from the
award of government contracts.
17. Way back in the year 1975, this Court in Erusian Equipment
& Chemicals Ltd. v. State of W.B., highlighted the necessity of
giving an opportunity to such a person by serving a show-cause
notice thereby giving him opportunity to meet the allegations
which were in the mind of the authority contemplating
blacklisting of such a person. This is clear from the reading of
paras 12 and 20 of the said judgment. Necessitating this
requirement, the Court observed thus: (SCC pp. 74-75)
"12. Under Article 298 of the Constitution the executive
power of the Union and the State shall 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 blacklisting
has the effect of depriving a person of equality of
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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.
***
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."
11. Again, in Raghunath Thakur v. State of Bihar, (1989) 1 SCC 229
the aforesaid principle was reiterated in the following manner: (SCC p.
230, para 4)
"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
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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
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. In that view of the
matter, the last portion of the order insofar as it directs
blacklisting of the appellant in respect of future contracts,
cannot be sustained in law. In the premises, that portion of
the order directing that the appellant be placed in the
blacklist in respect of future contracts under the Collector is
set aside. So far as the cancellation of the bid of the
appellant is concerned, that is not affected. This order will,
however, not prevent the State Government or the
appropriate authorities from taking any future steps for
blacklisting the appellant if the Government is so entitled to
do in accordance with law i.e. after giving the appellant due
notice and an opportunity of making representation. After
hearing the appellant, the State Government will be at
liberty to pass any order in accordance with law indicating
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the reasons therefor. We, however, make it quite clear that
we are not expressing any opinion on the correctness or
otherwise of the allegations made against the appellant. The
appeal is thus disposed of."
12. Recently, in Patel Engg. Ltd. v. Union of India, (2012) 11
SCC 257 speaking through one of us (Jasti Chelameswar, J.) this Court
emphatically reiterated the principle by explaining the same in the
following manner: (SCC pp. 262-63, paras 13 15)
"13. The concept of 'blacklisting' is explained by this Court in
Erusian Equipment & Chemicals Ltd. v. State of W.B. as
under: (SCC p. 75, para 20)
'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.'
14. The nature of the authority of the State to blacklist the
persons was considered by this Court in the abovementioned
case and took note of the constitutional provision (Article
298), which authorises both the Union of India and the States
to make contracts for any purpose and to carry on any trade or
business. It also authorises the acquisition, holding and
disposal of property. This Court also took note of the fact that
the right to make a contract includes the right not to make a
contract. By definition, the said right is inherent in every
person capable of entering into a contract. However, such a
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right either to enter or not to enter into a contract with any
person is subject to a constitutional obligation to obey the
command of Article 14. Though nobody has any right to
compel the State to enter into a contract, everybody has a right
to be treated equally when the State seeks to establish
contractual relationships. The effect of excluding a person
from entering into a contractual relationship with the State
would be to deprive such person to be treated equally with
those, who are also engaged in similar activity.
15. It follows from the above judgment in Erusian Equipment
case that the decision of the State or its instrumentalities not to
deal with certain persons or class of persons on account of the
undesirability of entering into the contractual relationship with
such persons is called blacklisting. The State can decline to
enter into a contractual relationship with a person or a class of
persons for a legitimate purpose. The authority of the State to
blacklist a person is a necessary concomitant to the executive
power of the State to carry on the trade or the business and
making of contracts for any purpose, etc. There need not be
any statutory grant of such power. The only legal limitation
upon the exercise of such an authority is that the State is to act
fairly and rationally without in any way being arbitrary--
thereby such a decision can be taken for some legitimate
purpose. What is the legitimate purpose that is sought to be
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achieved by the State in a given case can vary depending upon
various factors."
13. Thus, there is no dispute about the requirement of serving show-
cause notice. We may also hasten to add that once the show-cause
notice is given and opportunity to reply to the show-cause notice is
afforded, it is not even necessary to give an oral hearing. The High
Court has rightly repudiated the appellant's attempt in finding foul with
the impugned order on this ground. Such a contention was specifically
repelled in Patel Engg."
14. Similar reiteration of law can be found in the judgment rendered
by the Hon'ble Supreme Court in Vetindia Pharmaceuticals Ltd. v.
State of Uttar Pradesh and Another, (2021) 1 SCC 804, wherein the
Hon'ble Supreme Court held that it was incumbent on the part of the
Department to state in the show cause notice that the competent
authority intended to impose such a penalty of blacklisting so as to
provide adequate and meaningful opportunity to the appellant to show
cause against the same. The Hon'ble Supreme Court held that there
must be a clear inference from show-cause notice that blacklisting
action is proposed.
15. Yet again, similar reiteration of law can be found in another
judgment of the Hon'ble Supreme Court in UMC Technologies (P)
Ltd. v. Food Corporation of India and Another, (2021) 2 SCC 551,
wherein the Hon'ble Supreme Court reiterated that for 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
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inferred therefrom that there is intention on the part of the issuer of the
notice to blacklist the noticee. The Hon'ble Supreme Court further held
that existence of a clause in the bid document, which mentions
blacklisting as a bar against eligibility, cannot satisfy the mandatory
requirement of a clear mention of the proposed action in the show-
cause notice. Lastly, it was held that requirement of a valid,
particularized and unambiguous show-cause notice is particularly
crucial due to the severe consequences of blacklisting and the
stigmatization that accrues to the person/entity being blacklisted.
16. Earlier to this, the Hon'ble Supreme Court in Daffodills
Pharmaceuticals Ltd. v. State of Uttar Pradesh and Another, (2020)
18 SCC 550, held that blacklisting has the effect of preventing a person
from privilege and advantage of entering into lawful relationship with
the Government for purposes of gain. 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 blacklist.
17. Merely because the Government has a right to enter into contract
with anyone of its choice does not give the Government the power to
arbitrarily blacklist a party without affording it a fair hearing as
blacklisting involves material damage of losing the prospect of entering
into contracts with the Government in future.
18. The effect of blacklisting, needless to observe, is quite drastic. It
prevents a person from the privilege and the advantage of entering into
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lawful relationship with the Government, PSUs for the purposes of
gain. Apart from reducing the person's prospects of making profits, it
leads to loss of credibility and goodwill, a decline in business, and
clients, besides causing financial hardship. It virtually acts as a libel to
the person if unjustifiably done.
19. This is precisely the reason why the courts of law have, time and
again, established certain principles before blacklisting a person which
include (a) Principles of natural justice and (b) Doctrine of
proportionality. The 'doctrine of proportionality' here would essentially
have to be understood as, maintaining a proper balance between the
adverse effects which the administrative order may have on the rights,
persons, keeping in mind the purpose for which they intend to serve.
20. Reverting back to the facts of the instant case, since the
petitioner has not been issued any show cause notice or afforded an
opportunity of personal hearing and straight way being black listed, the
action of black listing the petitioner cannot stand to judicial scrutiny
and is accordingly quashed and set aside.
21. Normally we would have granted permission to the respondents
to proceed with the black listing of the petitioner in accordance with
law, however taking into consideration the fact that the work is to
come to an end in February 2026, we refrain from granting such liberty
to the respondents.
22. As regards the prayer made by the petitioner for defreezing its
account and the recovery from the bank guarantee supplied by the
petitioner, we leave it open to the petitioner to agitate the matter with
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the respondents and make it clear that we have not expressed any
opinion on the matters of this issue and therefore, it is open for the
authorities to decide the question in accordance with law.
23. The petition is disposed of in the aforesaid terms leaving the
parties to bear the costs.
24. Pending interlocutory applications, if any, stand disposed of.
(Tarlok Singh Chauhan, C.J.)
(Rajesh Shankar, J.)
20 /11/2025
N.A.F.R.
Sharda/-
