Even In Absence Of Express Provision In Notice Inviting Tender, State Retains Inherent Power To Blacklist Contractor: Patna HC

The Patna High Court has upheld an order passed by the South Bihar Power Distribution Company Limited (SBPDCL) blacklisting a contractor for three years and terminating contracts relating to construction of power substations, holding that the State and its instrumentalities possess inherent executive power to blacklist contractors even in absence of an express contractual provision.A Division Bench of Justice Sudhir Singh and Justice Shailendra Singh was hearing a writ petition filed by Gupta Power Infrastructure Limited challenging Letter No. 2311 dated 31.12.2024 issued by SBPDCL, whereby the works allotted to the petitioner pursuant to NIT No. 42/PR/SBPDCL/2019 and Letters of Award dated 19.09.2019 were cancelled, performance bank guarantees were invoked, and the petitioner was blacklisted for three years.The petitioner-company had participated in a tender floated by SBPDCL for construction of five 2×5 MVA, 33/11 KV power substations along with associated 33 KV and 11 KV lines on turnkey basis in Nalanda and Patna districts.Pursuant to the tender process, contracts were awarded to the petitioner for supply of materials and equipment as well as erection, installation, testing and commissioning works concerning substations at Kosiyawan, Jaitipur and Kaladiyara. The Court noted that while the works at Kosiyawan and Jaitipur were completed and the substations made operational, the work at Kaladiyara remained partly incomplete.Subsequently, notices dated 13.11.2024 and 21.11.2024 were issued to the petitioner seeking explanation regarding non-completion of the work. Thereafter, by order dated 31.12.2024, the respondents terminated the contracts, invoked the performance bank guarantee and blacklisted the petitioner for a specified period.The petitioner argued that the impugned order was arbitrary and violative of principles of natural justice. It was contended that although replies had been submitted to the show cause notices, the same were not properly considered. The petitioner further argued that the respondent authorities lacked jurisdiction to blacklist the petitioner in absence of any enabling clause in the Notice Inviting Tender, Letters of Award, or agreements executed between the parties.Opposing the plea, the respondents submitted that repeated notices had been issued to the petitioner under Clause 39 of the NIT specifically indicating proposed actions including termination and blacklisting, and that the petitioner's replies were duly considered before passing the impugned order.The respondents further contended that the State and its instrumentalities possess inherent executive power to blacklist contractors even in absence of express contractual stipulations, relying upon the Supreme Court decisions in Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL and Patel Engineering Ltd. v. Union of India.The Court framed the principal issue as:“Whether, in absence of any express provision or specific clause in the Notice Inviting Tender (NIT), Letters of Award or Agreements executed between the parties authorizing blacklisting, the respondent-State or its instrumentalities can nevertheless exercise the power to blacklist the petitioner.”Answering the issue against the petitioner, the Court held:“The aforesaid issue is no longer res integra. Even in absence of an express provision in the Notice Inviting Tender (NIT) or the contract, the respondent, being a State instrumentality, retains the inherent power to blacklist a contractor in exercise of its executive authority.”The Bench, however, clarified:“However, such power is not unfettered and must be exercised in a fair, reasonable and non-arbitrary manner, strictly in compliance with the principles of natural justice.”The Court further observed:“The decision to blacklist must be preceded by a clear and specific show cause notice, disclosure of grounds and a meaningful opportunity of hearing.”On the issue of natural justice, the Court found that repeated notices had been issued to the petitioner over a considerable period and sufficient opportunity had been granted to improve the progress of work.The Court noted that the proposed actions including blacklisting had been specifically disclosed in the notices and that the petitioner had been given opportunity to submit explanations which were duly considered before passing the final order.The Bench observed that the impugned order recorded adequate reasons and could not be termed cryptic or non-speaking.Holding that the requirements of natural justice had been adequately satisfied, the Court declined to interfere with the impugned order in exercise of jurisdiction under Article 226 of the Constitution and dismissed the writ petition. Case Title: Gupta Power Infrastructure Limited v. The South Bihar Power Distribution Company Limited (SBPDCL), Patna.Case Number: Civil Writ Jurisdiction Case No. 2966 of 2025.Appearance: Mr. Anjani Kumar Jha for the Petitioner. Mr. Anand Kr. Ojha, Senior...

Even In Absence Of Express Provision In Notice Inviting Tender, State Retains Inherent Power To Blacklist Contractor: Patna HC

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Even In Absence Of Express Provision In Notice Inviting Tender, State Retains Inherent Power To Blacklist Contractor: Patna HC

Rushil Batra

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