Blacklisting Not Necessary Consequence Of Every Termination, Notice & Hearing Must Before Blacklisting From Future Contracts: Kerala HC

The Kerala High Court has held that notice and opportunity of hearing must be provided to persons before debarring or blacklisting them from future contracts. Justice C.S. Dias further stated that debarring or blacklisting is a matter of serious concern and should not automatically follow every termination.The bench added that termination of contract of a person is different from debarring or backlisting him since it disqualifies him from future contracts. “It is well settled in a host of judicial pronouncements that debarring or blacklisting a person from future contracts is a serious matter. The termination of the contract may be a mode of ending an existing contractual relationship, but blacklisting a bidder is a mode of pre- emptively disqualifying him from participating in any future contractual relationship. The two terminologies are separate and distinct and cannot be rolled into one. To enforce the two courses, there should be independent grounds and its rationale, after putting the affected party to notice and affording an opportunity to be heard, which is a rudimentary principle of natural justice. In any case, blacklisting cannot be a necessary concomitant of every termination.”In the facts of the case, the petitioner firm was awarded contract for operation a catering stall at the Railway Station. As per the Letter of Award (LOA) entered between the parties, petitioner had to deposit license fee and security deposit within 15 days from the date of the LOA. The Central Government Counsel for Railways submitted that tender notification does not require issuing a show cause notice or hearing the petitioner before terminating the contract. The Court noted that Railway cancelled the contract given to the petitioner firm and also debarred him from participating in all the upcoming tenders of the Railways for five years. The Court noted that debarment was done without giving show cause notice or termination notice to petitioner. It further pointed out that the Railways failed to consider the petitioner's representation and did not issue a show cause notice or offer an opportunity for a hearing before debarring him. The Court stated that debarring or blacklisting is a serious matter, which is different from termination of a contract. The Court stated that termination only ends present contract, but debarring disqualifies a person from participating from future contracts. Relying upon Apex Court decisions, the Court pointed out that blacklisting has serious consequences and hence principles of natural justice must be followed mandatorily. As such, the Court quashed the order issued to the petitioner to the extent of debarring him from future contracts. It stated that Railways must issue notice and afford him hearing opportunity if they propose to debar him. Counsel for Petitioner: Advocates Sreenath Vijayaraghavan, Akhila C., Vishnu SatheesanCounsel for Respondents: DSGI Advocate Krishna T C Case Title: M/S. P S Enterprises Represented By Syed Najmuddin v The Union of IndiaCase No: WP(C) NO.34512 OF 2024Citation: 2025 LiveLaw (Ker) 65Click here to Read/Download Order

Blacklisting Not Necessary Consequence Of Every Termination, Notice & Hearing Must Before Blacklisting From Future Contracts: Kerala HC

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