Blacklisting and security forfeiture imposed without prior notice and hearing are legally unsustainable.

The petitioner was awarded three public works under Agreement Nos. SBD 869/2019-20, 870/2019-20 and 871/2019-20, all dated 27 February 2020, and claimed to have completed them satisfactorily.

Operation and Maintenance Certificates were issued on 6 March 2021, followed by Work Experience Certificates dated 16 March 2023 recording satisfactory performance.

On 18 January 2024, the Executive Engineer directed the petitioner to rectify alleged defects and submit daily progress reports.

Subsequently, Memo No. 2381 dated 12 November 2024 rescinded the agreements, forfeited the security deposit and recommended blacklisting the petitioner’s firm for five years.

The petitioner asserted that it first learned through the said memo of an earlier debarment order dated 1 July 2022, contained in Memo No. 1275/Office Order No. 131, which had allegedly been passed without notice or communication.

Although the petitioner made a representation against the 2024 action, the authorities later issued a show-cause notice dated 30 December 2024 proposing blacklisting; the petitioner submitted its reply on 1 January 2025.

The writ petition challenged both the 2024 memo and the alleged 2022 debarment, and also sought payment of outstanding operation and maintenance dues.

1. Whether Memo No. 2381 dated 12 November 2024, rescinding the agreements, forfeiting the security deposit and recommending blacklisting, could be sustained in the absence of prior notice and a reasonable opportunity of hearing?

2. Whether Memo No. 1275 dated 1 July 2022, by which the petitioner was allegedly debarred, was liable to be quashed because it was passed without adherence to natural justice and was never communicated to the petitioner?

The Court applied the principles of audi alteram partem and procedural fairness to administrative and contractual actions having civil consequences.

Relying on Erusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70, it held that blacklisting or debarment, which deprives a person of the opportunity to enter into government contracts, cannot be imposed without an opportunity to represent one’s case.

Under Gorkha Security Services v. Government (NCT of Delhi), (2014) 9 SCC 105, a show-cause notice must specify both the grounds for action and the particular penalty proposed, including blacklisting where applicable.

UMC Technologies Pvt. Ltd. v. Food Corporation of India, (2021) 2 SCC 551, further establishes that a valid, specific and unambiguous notice is indispensable where blacklisting carries serious civil, reputational and commercial consequences.

The Court also relied on State of Punjab v. Amar Singh Harika, 1966 SCC OnLine SC 48, for the principle that an adverse administrative order does not become operative against the affected person unless it is duly communicated.

The respondents were unable to produce any material showing that a show-cause notice or hearing preceded Memo No. 2381 dated 12 November 2024, despite being given an opportunity to do so.

Since rescission, forfeiture and blacklisting recommendation carried serious civil consequences, the absence of prior notice and hearing violated natural justice.

The subsequent show-cause notice dated 30 December 2024, which concerned the proposed future action of blacklisting, could not retrospectively cure the defect in the earlier order.

With respect to the 2022 debarment, the respondents also failed to establish either that a prior show-cause notice had been issued or that the debarment order had been communicated to the petitioner.

Applying the rule in Amar Singh Harika, the Court held that an uncommunicated adverse order could not operate to the petitioner’s prejudice or serve as the foundation for subsequent punitive action.

The Court expressly left the merits of the allegations open for fresh consideration by the competent authority.

It set aside Order No. 131 read with Memo No. 1275 dated 1 July 2022 for violation of natural justice and absence of proof of communication.

The matter was remitted to the competent authority to proceed afresh, if so advised, by issuing a proper show-cause notice, granting an adequate hearing and passing a reasoned and speaking order.

As regards Memo No. 2381 dated 12 November 2024, interference with the rescission of the agreements was held to be academic because a fresh tender had already been issued during the proceedings.

Nevertheless, the memo was set aside insofar as it forfeited the security deposit and recommended blacklisting.

The Court expressed no opinion on the merits of the allegations and disposed of the writ petition, along with any pending applications.