Telangana High Court

D. Venkata Krishna Reddy vs The State Of Telangana on 17 March, 2021

Bench: A.Abhishek Reddy

          THE HON'BLE SRI JUSTICE A.ABHISHEK REDDY

                  WRIT PETITION No. 23316 of 2019
ORDER:

The case of the petitioner is that he being Class-III Civil

Contractor had participated in the e-tender Notification with tender

ID No. 138226, vide tender Notice No. MCA/E/21/4/2019-20 for

the repair works to underground drainage Sewer pipelines and

manholes in Ameenpur Municipality. In all, three bidders,

including the petitioner, were qualified in tender for approval to

open price bid and they had also submitted the relevant hard

copies. But, the respondent No. 3, the Ameenpur Municipality,

with an erroneous observation that the tenderers had not

submitted the hard copies, proceeded to recall the tender.

However, in the process of making the entries in the computer

record, instead of making the entries as 'recalling the tender', it is

entered as the 'L1 bidder is blacklisted'. Thus, having noticed the

mistake committed by the respondent No. 3 in blacklisting the

petitioner's name, a request was made to the authorities to rectify

the said mistake. As a result, the respondent No. 3 addressed a

letter in Lr.No. E1/Digitalkey/2019-20, dated 11.10.2019 to the

respondent No. 2, the Principal Secretary, Information Technology,

Electronics and Communications Department with a request to

delete the name of the petitioner from the blacklist and activate the

petitioner's Digitalkey number and user ID. Complaining that no

action has been taken so far, the present writ petition is filed by

the petitioner.

Heard the learned counsel for the petitioner, the learned

Government Pleader for Municipal Administration and Urban

Development for respondent Nos. 1 and 2, and Sri N.Praveen

Kumar, the learned Standing Counsel for respondent No. 3.

Perused the material available on record.

As seen from the record, the municipal officials themselves

have withdrawn the tenders due to some technical defect. Due to

the mistake committed by a technical staff, a wrong entry has been

made and the respondent No. 3 has also addressed a letter to that

effect. Even though the letter is addressed to the respondent No. 2

on 11.10.2019, still no action has been taken. This Court, time

and again, has held that blacklisting of a contractor cannot be

done at the drop of a hat, but it should be the last resort for

punishing any contractor/tenderer.

The law with regard to blacklisting of any firm is well

established by a catena of decisions. The Hon'ble Supreme Court

in Erusian Equipment & Chemicals Ltd. v. State of West

Bengal1, at para Nos. 12, 15 and 20, has held as under:

"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.

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 black lists are instruments of coercion.

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."

1 AIR 1975 SC 266

Similarly, the Apex Court in Raghunath Thakur v. State of

Bihar2 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:

"4. ... It 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."

In Gorkha Security Services v. Government (NCT of

Delhi)3, the Hon'ble Supreme Court 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 observed thus:

"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."

In the case on hand, as observed above, absolutely no

reason, to blacklist the name of the petitioner, has been pointed

out by the respondents. In fact, in the letter, dated 11.10.2019,

addressed to the respondent No. 2, the respondent No. 3 clearly

stated as under:-

"The tender is participated by their agencies. All their agencies are qualified in tender hence take approval to open price

2 1989 (1) SCC 229

(2014) 9 SCC 105

bid, and price bid is also named. Hard copies are not submitted by the agencies. So, we want to recall the tender by respecting the L1-Bidder. But in the place of recall the bidder went to block list.

Hence, we are requesting you to remove the concerned Agency from block list & activate the tenderer digital key No. AFSPD8834J, User ID:darpally."

(Verbatim reproduced)

Thus, in the said letter, the municipal authorities have clearly

admitted of their mistake while making the entries in the computer

record. Having regard to the fact that the municipal authorities

themselves have written a letter to the Government to the effect

that the tenders were already withdrawn due to the technical glitch

that has occurred, blacklisting the name of the petitioner, which is

admittedly due to the erroneous feeding in the computer record,

cannot be continued. In that view of the matter, if necessary

changes are not carried out by the respondent No. 2, it will not

only damage the reputation of the petitioner, but will also cause