Blacklisting cannot rest solely on an FIR, chargesheet or cognizance order; independent assessment is mandatory, Gauhati High Court rules

The Petitioner, United Drilling Tools Limited, had been supplying equipment to Oil India Limited (“OIL”) for approximately 35 years.

OIL awarded it a contract on 3 March 2025 for supplying and commissioning two truck-mounted hydraulic wire-line winches.

On 3 May 2025, the CBI registered an FIR against an OIL officer, two officials of the Petitioner, and subsequently the Petitioner-company, alleging offences under Section 61(2) of the Bharatiya Nyaya Sanhita, 2023 and Sections 7, 9, 10 and 12 of the Prevention of Corruption Act, 1988.

OIL issued a show-cause notice dated 29 July 2025 proposing blacklisting and suspended the Petitioner.

The Petitioner submitted a preliminary reply on 13 August 2025 and sought documents relied upon by OIL, but OIL declined to provide certain internal documents and granted further time for reply.

During connected writ proceedings, the High Court permitted the Petitioner to file its reply within seven days from 24 September 2025; the Petitioner filed its final reply on 3 October 2025.

OIL nevertheless did not consider that reply on the ground that it was filed after the seven-day period.

On 10 October 2025, OIL placed the Petitioner and its allied firms on its Holiday List for two years with effect from 29 July 2025.

The Petitioner’s appeal was dismissed on 15 December 2025.

A supplementary charge-sheet dated 22 December 2025 recorded that no irregularity was found in the allotment of tenders to the Petitioner, that materials had been received and recorded, and that no evidence showed involvement of other Petitioner employees in bribery concerning other contracts.

Whether OIL’s banning/blacklisting order was vitiated by violation of natural justice because the Petitioner’s final reply dated 3 October 2025 was not considered before the decision was taken.

Whether an FIR, charge-sheet and order taking cognizance, without an independent assessment by the competent authority, could constitute a lawful basis for blacklisting/debarring the Petitioner.

Whether the OIL Banning Policy, 2023 and Rule 175 of the General Financial Rules, 2017 permitted debarment merely upon a prima facie satisfaction, or required an objective conclusion that the Code of Integrity had been violated.

Whether the banning and appellate orders should be set aside and the matter remanded for fresh consideration.

The Court applied the principles of natural justice, particularly the requirement that a reply to a show-cause notice must be meaningfully considered before adverse action is taken.

It relied on Erusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70, and B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd., (2006) 11 SCC 548, for the proposition that blacklisting is a drastic measure having potentially devastating civil and commercial consequences and therefore requires objective satisfaction.

It also relied on Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corporation, (2024) 15 SCC 264, which recognises debarment as a serious measure justified by protection of public interest against contractors lacking integrity or reliability.

Under Rule 151 of the GFR, debarment is contemplated upon conviction for specified offences, while Rule 175(2) requires the competent authority, after a reasonable opportunity of hearing, to reach a conclusion that the bidder or prospective bidder contravened the Code of Integrity before taking appropriate measures.

OIL’s Banning Policy, 2023, particularly paragraphs 4.1 and 5.1, was interpreted as requiring determination or conclusion of the relevant irregularity, followed by due process, before banning/debarment in an ongoing contract.

An FIR is not substantive evidence, and a charge-sheet or cognizance order cannot, by themselves, establish the alleged misconduct.

The Court held that the Petitioner had submitted its final reply before OIL’s Final Committee made its recommendation on 8 October 2025 and before the banning order was passed on 10 October 2025.

Although the reply was filed two days beyond the seven-day period, 2 October was a holiday and no decision had yet been taken.

Given the grave consequences of blacklisting, OIL acted unreasonably in refusing even to take the reply on record; issuance of a show-cause notice alone did not satisfy natural justice.

On the merits, the Court found that OIL’s decision rested substantially on the FIR, charge-sheet, cognizance order and its reluctance to continue business with a company facing a bribery trial.

Those materials could justify initiation of proceedings or a prima facie administrative inquiry, but they did not amount to an independent determination that the Petitioner had breached the Integrity Pact or Rule 175 of the GFR.

The Court clarified that debarment proceedings are independent of the criminal trial and may proceed on the basis of preponderance of probabilities; however, the competent authority must independently assess the available material, follow natural justice, act rationally and proportionately, and reach an objective conclusion rather than rely solely on the pendency of criminal proceedings.

The supplementary charge-sheet further weakened the basis of OIL’s generalized reliance on alleged irregularities in the Petitioner’s other contracts.

The question of debarment was remanded to OIL’s competent authority for fresh determination on the basis of the preliminary reply dated 13 August 2025, final reply dated 3 October 2025, representations dated 25 February 2026 and 29 April 2026, after granting the Petitioner a personal hearing.

OIL was directed to decide the matter within 60 days from service of the certified judgment; until then, the suspension imposed on 29 July 2025 was to continue.

The Petitioner was granted liberty to initiate separate proceedings challenging cancellation of the contract, forfeiture of performance security and consequential actions, and no order as to costs was made.