### Blacklisting Without Conclusive Finding of Intentional Fraud Is Arbitrary and Disproportionate Summary: The High Court of Chhattisgarh partially allowed a batch of writ petitions challenging the termination of contracts and a three-year blacklisting order. While the Court upheld the State’s authority to cancel contracts based on "doubtful" experience certificates to maintain tender sanctity, it quashed the blacklisting orders. The Court ruled that blacklisting—being a "civil death"—requires a definitive finding of *mens rea* or deliberate misrepresentation. In the absence of a conclusive determination that the petitioners knowingly submitted forged documents, the penalty was held to be disproportionate and legally unsustainable. Contractual disputes regarding payments and work valuation were relegated to the agreement's dispute resolution mechanism.

The petitioners were successful bidders for water supply projects under the Jal Jeevan Mission and executed agreements with the Public Health Engineering Department

Following a verification process, the respondent authorities alleged that technical experience certificates submitted by the petitioners (purportedly issued by the Municipal Council, Karad) were fake

After an initial round of litigation where the High Court quashed pre-determined show-cause notices

a fresh hearing was conducted by an Apex Committee on December 2, 2025

The Committee resolved to terminate the petitioners' contracts, invite fresh tenders at their "risk and cost," and blacklist the firms for three years

The petitioners challenged these decisions, asserting that the certificates were genuine and that substantial work (approx. 70%) had already been completed

1. Whether the termination of the contracts and the decision to re-tender at the petitioners' risk and cost were legally sustainable given the allegations of fraud

2. Whether the imposition of a three-year blacklisting period was proportionate and valid in the absence of a definitive finding of intentional fraud by the petitioners

3. Whether the High Court should adjudicate contractual disputes regarding payments and work measurements under Article 226

The court primarily applied the principles of administrative law regarding fairness and proportionality in government contracts.

It relied on Gorkha Security Services v. Government (NCT of Delhi) (2014) 9 SCC 105, which characterizes blacklisting as "civil death" requiring strict adherence to natural justice and reasoned decision-making

It further applied UMC Technologies Pvt. Ltd. v. Food Corporation of India (2021) 2 SCC 551, which emphasizes that blacklisting must be based on a particularized show-cause notice due to its stigmatic nature

The court also applied the doctrine that fraud vitiates the bidding process, justifying contract termination even if the work is ongoing

The Court observed that the respondents afforded the petitioners an opportunity for a personal hearing, thus satisfying procedural natural justice

On the merits of termination, the Court found that since the petitioners’ technical qualification was based on a certificate which the issuing authority (Municipal Council, Karad) denied issuing, the contract was voidable at the threshold; the employer was thus justified in neutralizing the advantage gained by misrepresentation

However, regarding blacklisting, the Court noted that the Apex Committee failed to record a specific finding of mens rea or intentional forgery by the petitioners, who claimed they relied on a third party (Respondent No. 6)

The Court reasoned that while termination was a protective measure for the tender's sanctity, a three-year debarment was a punitive measure that was disproportionate without a conclusive determination of deliberate fraud

It upheld the termination of the contracts and the respondents' right to re-tender the work at the risk and cost of the petitioners

However, it quashed and set aside the order blacklisting the petitioners for three years, holding it disproportionate in the absence of a definitive finding of conscious misrepresentation

Regarding claims for outstanding payments and work measurements, the Court declined to interfere under Article 226, granting the petitioners liberty to invoke the arbitration/dispute resolution mechanism provided in the agreement or approach a Civil Court