Blacklisting is valid when supported by objective material and preceded by adequate natural justice.

The petitioner, Pipal Tree Ventures Private Limited, entered into an agreement/Memorandum of Understanding with the Bihar Rural Livelihood Promotion Society for implementing a placement-linked skill-development programme under the DDU-GKY Scheme in Muzaffarpur, Sitamarhi and Madhubani districts.

The training target was subsequently revised and reduced in accordance with later guidelines.

The Society issued successive show-cause notices alleging discrepancies and fabrication in documents submitted to establish candidate placements, including mismatched bank details, forged bank statements and irregularities in ECR records.

The petitioner submitted replies and participated in personal hearings.

By order dated 9 December 2025, the Society terminated the project, directed recovery of the first instalment with 10% interest, initiated proposed certificate proceedings under the Bihar and Orissa Public Demands Recovery Act, 1914, and blacklisted the petitioner for three years.

The petitioner challenged the order on the grounds of violation of natural justice, non-consideration of its replies, non-supply of relied-upon material, and failure to follow the contractual dispute-resolution procedure.

The respondents maintained that the action was based on repeated desk, field and bank verifications establishing fabricated and unreliable placement records, and that adequate opportunities had been granted.

1. Whether the respondents were justified in terminating the project, blacklisting the petitioner for three years and directing recovery of the advance amount with interest.

2. Whether the impugned order was vitiated by violation of natural justice because the petitioner’s replies were allegedly not considered and the relied-upon material was not supplied.

3. Whether the respondents acted contrary to the contractual procedure under the MOU, including the prescribed mechanisms for notice, settlement, reference to the Project Approval Committee and arbitration.

4. Whether the findings against the petitioner were based on objective material rather than mere suspicion, and whether the penalty of blacklisting was arbitrary or disproportionate.

The Court applied the principles of natural justice, particularly audi alteram partem, holding that blacklisting, because of its serious civil consequences, requires a reasonable opportunity to represent before the order is passed, as established in Erusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70.

It further applied the rule that judicial review in contractual and tender-related matters is concerned principally with the legality and fairness of the decision-making process, not substitution of the court’s assessment for that of the contractual authority.

Under Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd., (2016) 16 SCC 818, the employer is ordinarily the best judge of contractual requirements, subject to review for mala fides, perversity or irrationality.

NG Projects Ltd. v. Vinod Kumar Jain, (2022) 6 SCC 127, was relied upon for the principle that courts should not interfere in technical contractual matters absent total arbitrariness, mala fides or procedural illegality.

The Court also applied the contractual obligations under the MOU, including the petitioner’s responsibility to maintain and furnish genuine, authentic and verifiable records under Clause 1.9.1, together with the applicable DDU-GKY Guidelines and Standard Operating Procedures.

Blacklisting was treated as legally permissible where founded on objective material, preceded by natural justice and proportionate to the established misconduct.

The Court found that the respondents had issued multiple show-cause notices from 2020 onwards, considered the petitioner’s replies, granted repeated opportunities to produce supporting documents and conducted personal hearings.

It therefore rejected the allegation that the impugned order was non-speaking or violative of natural justice.

The findings were not based merely on suspicion: ICICI Bank verification, scrutiny of ECR records and field verification of beneficiaries allegedly disclosed fabricated bank statements, invalid account numbers, mismatched records and denial of placements by beneficiaries.

The petitioner’s explanation that it had merely collected documents from candidates was rejected because the MOU placed responsibility for maintaining and furnishing genuine and verifiable records upon the Project Implementing Agency; submission of fabricated documents constituted a breach of Clause 1.9.1.

Applying the limited scope of judicial review, the Court held that no procedural irregularity, mala fide conduct, perversity or irrationality had been demonstrated.

It also held that the three-year blacklisting was not disproportionate in view of the established discrepancies, the petitioner’s previous performance, earlier warnings, prior minor penalty and repeated opportunities for rectification.

It held that the impugned order was supported by objective verification material, complied with natural justice and was neither arbitrary, mala fide nor disproportionate.

The writ petition was accordingly dismissed as devoid of merit, and any pending interlocutory applications were also disposed of.