Contractor Suppressing Prior Blacklisting Bars Equitable Relief, But Payment For Executed Work May Still Be Granted: Kerala High Court

The Court further clarified that public authorities may still be directed to release payments for work already executed, subject to contractual recoveries and claims of secured creditors.

A Division Bench comprising Chief Justice Soumen Sen and Justice Syam Kumar V M was delivering judgment in an appeal against a Single Judge's order.

The dispute arose from a contract awarded by the Kerala State Electricity Board Ltd. (KSEB) under the Soura Project subsidy scheme in Kerala. The contractor, Soura Natural Energy Solutions Pvt. Ltd., had been awarded the work in December 2021 and completed 1,745 installations across the State.

Subsequently, KSEB discovered that the company had been blacklisted by the Jharkhand Renewable Energy Development Agency (JREDA) in October 2019, a fact allegedly not disclosed during the tender process. KSEB issued a show-cause notice and later terminated the contract and blacklisted the firm.

While the contractor accepted the termination and blacklisting, it approached the High Court seeking release of pending payments, including Central Financial Assistance (CFA) subsidies under the MNRE rooftop solar scheme.

A Single Judge directed release of the pending amounts, prompting KSEB to file a writ appeal.

The Court observed that the contractor participated in the tender while a blacklisting order from JREDA was in force, and failed to disclose that fact. The Bench observed that the writ court's equitable jurisdiction cannot be invoked by a party that has suppressed material facts.

“The writ court is a court of equity. If a person has invoked the writ jurisdiction with unclean hands and suppressed the material facts, the writ court will nip such proceeding at the bud as fairness requires that a writ petitioner must state the full and true facts.” Court noted.

The Court noted that the JREDA blacklisting order dated 30 October 2019 remained operative when the contractor participated in the KSEB tender. The contractor challenged the blacklisting only in 2023, after termination proceedings began. The Jharkhand High Court subsequently upheld the blacklisting order.

The Court observed that in such circumstances the writ petition could have been dismissed outright on the ground of suppression.

The Bench also accepted KSEB's argument that the contractor's conduct could attract penalty provisions under the tender conditions, including forfeiture of security deposits and other contractual recoveries.

However, the Court noted that the original termination order limited the penalty to blacklisting, without imposing additional financial penalties.

Despite the suppression, the Court considered the fact that 1,745 solar installations had been completed and accepted by KSEB. The Court further observed that the Central Government subsidy amount had already been sanctioned for the project.

The Court thus held that equitable considerations required limited relief, particularly because banks had initiated garnishee proceedings against the contractor for loan defaults.

The Court hence modified the Single Judge's order and directed that KSEB may deduct contractual recoveries amounting to ₹1,93,11,741 crore including performance guarantee forfeiture and statutory deductions and the balance amount of ₹3,36,45,721 crore from the subsidy funds shall be paid directly to the contractor's secured creditor banks in compliance with garnishee notices.

Case Title: State Nodal Officer and Ors. v Manoj MS and Ors.

Case No: WA 382/ 2026

Citation: 2026 LiveLaw (Ker) 143

Counsel for Appellant: Sr. Thushara James, Noel Jacob, M S Amal Dharsan

Counsel for Respondent: Raajesh S Subramainan, Santhosh Mathew 9Sr.)