Blacklisting Is Civil Death, Cannot Be Imposed For Clerical Lapses: Calcutta High Court Quashes Eastern Railway's Debarment Of Leaseholder

The Calcutta High Court has set aside the Eastern Railway's decision cancelling a parcel leaseholder's registration, terminating his contracts, forfeiting deposits and debarring him for five years, holding that preparation of separate manifests for two unloading terminals does not amount to a “false declaration” or fraud in the absence of proof of mens rea or loss to the Railways. The Court observed that blacklisting has drastic civil consequences and cannot be imposed mechanically for operational or clerical discrepancies.

Justice Smita Das De quashed the Railway authorities' orders cancelling the petitioner's registration and terminating his parcel van leasing contracts, holding that the punitive action was legally unsustainable, disproportionate and contrary to principles of natural justice. The Court directed refund of the registration fee and security deposit within eight weeks.

The petitioner, a sole proprietor engaged in transporting goods through leased railway parcel vans, had been operating a leased compartment on the Sealdah–New Delhi route with permitted loading/unloading at Kanpur. During a vigilance check in 2019, railway officials alleged that the petitioner prepared two manifests from the same loading point—one for New Delhi and another splitting packages between Kanpur and New Delhi—and that there was excess weight. Treating this as a violation of contractual clauses and a “false declaration”, the Railways cancelled his registration, forfeited Rs. 50,000 registration fee and security deposit, terminated all contracts and debarred him from fresh registration for five years.

Though the appellate authority later reconsidered the matter pursuant to an earlier High Court direction, it again upheld the punitive action, prompting the present writ petition. The petitioner argued that separate manifests were prepared purely for logistical convenience to enable unloading at two terminals, that the total weight remained within permissible limits, and that there was no suppression, fraud, or loss of freight. He further contended that the show-cause notice never warned of blacklisting or debarment, rendering the action violative of natural justice and Supreme Court precedents.

Examining the contractual clauses and the Comprehensive Parcel Leasing Policy, the Court held that provisions relating to cancellation for “false declaration” applied only where misrepresentation was made at the stage of registration or tender, and not for operational issues during performance of contract. The Court found that the Railways failed to establish any materially false declaration, concealment of goods, or intent to defraud.

Significantly, the Court observed that “mere presenting separate manifests for separate terminals under a single loading point does not per se amount to be a false declaration unless there is evidence of weight or commodity concealment,” and emphasised that allegations of fraud require a high standard of proof. It noted that the total freight had been paid and the respondents could not demonstrate any financial loss.

Reiterating settled law on blacklisting, the Court relied on Erusian Equipment, Gorkha Security Services, and Kulja Industries, observing that blacklisting amounts to “civil death” and carries stigmatic consequences. Therefore, it must be preceded by a clear, specific show-cause notice and must satisfy proportionality. The Court held that the punishment imposed was “shockingly disproportionate” and confiscatory in nature.

The Bench further underlined that penal consequences under the Railways Act require proof of deliberate falsification and mens rea. In the absence of intentional wrongdoing, administrative authorities cannot invoke drastic measures such as cancellation, forfeiture and debarment.

Holding that the authorities had acted mechanically and without proper application of mind, the Court quashed the cancellation of registration, termination of contracts and the appellate order, and directed the Railways not to debar the petitioner from existing or future contracts. It also ordered refund of the registration fee and security deposit with interest in case of delay.

Accordingly, the writ petition was allowed.

Case: Ram Babu Yadav Vs. Union of India & Ors.

Case No: W.P.A. No. 5673 of 2024

Click here to read order