Tender Eligibility Dispute Can't Be Treated As Fraud To Blacklist Contractor: Madras High Court

Justice Mohammed Shaffiq held that a misconception about the tender conditions cannot be inferred as a fraudulent practice, necessitating debarring or blacklisting. The court observed that black listing and debarring result in serious adverse consequences and must be resorted to sparingly and applied strictly.

“Black-listing / debarring has the effect of preventing a person from the privilege and advantage of entering into a lawful relationship with the Government for purposes of gain. Black-listing results in serious adverse consequences and is a very drastic measure thus ought to be resorted to sparingly and applied strictly. Debarring the person albeit for certain number of years i.e., three years may well tantamount to civil death inasmuch as the person is commercially ostracised resulting in serious consequences for the petitioner and those employed by him,” the court observed.

The court was hearing a petition filed by Eco Protection Engineers Pvt Ltd. The company had participated in a tender issued by the Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) for providing a Ring Main System in Chennai City, including operation and maintenance for 10 years. Though the company was the lowest bidder, its bid was declared non-responsive. Later, an order was issued blacklisting the company for 3 years from future CMWSSB tenders.

The blacklisting order was issued alleging that the company did not comply with two eligibility conditions, which was in violation to the tender clause and amounted to fraudulent practice. The first condition was that the company should have engaged in similar size and nature of contract exceeding Rs 690 crore. The second condition required the company to have laid similar pipes of a minimum span/length of 100 meters for a total length of at least 300 meters.

The petitioner company argued that it had fulfilled the conditions. On the other hand, the State argued that the company had executed similar work only to the extent of Rs 560 crore, which was short of the requirement of Rs 690 crore. The State also argued that the total pipe laid by the party was not till the required length. Arguing that the non-compliance came to light only upon verification and it amounted to fraudulent practice, the State justified the passing of debar/blacklisting order.

The court noted that even if the allegations of the State were taken to be true, it would not amount to fraudulent practice but only a misconception of tender clause. The court noted that the petitioner company had participated in a contract with a total value of Rs 698 crore, which was in excess of Rs 690 crore stated by the State.

When the State argued that the condition required the party to have completed, the value of work executed by the tendering party should have been more than Rs 690 crore on the date of the tender, the court said that the condition was a matter of interpretation and the State could not impose motive to the company.

“It appears to me that in any view this again at the highest would be a matter of interpretation. If so, it is difficult to conceive/ comprehend as to how a matter which could be the subject matter of different interpretation can be construed as constituting fraudulent practice,” the court said.

The court thus set aside the debarring order.

Counsel for Petitioner: Mr. M. Suresh Kumar Assisted by Mr. Rahul Aditya and Mr. A. P. Balaji for Mr. R. Nalliyappan

Counsel for Respondent: Mr. Krishna Ravindran, Mr. A. M. Amutha Ganesh Government Advocate

Case Title: Eco Protection Engineers Pvt. Ltd v The State of Tamil Nadu and Others

Citation: 2026 LiveLaw (Mad) 464

Case No: WP No 16595 of 2026