Debarment and Bid Security Forfeiture for Fraudulent Misrepresentation in Public Procurement are Legally Sustainable

The appellant, MP24, a proprietary concern, formed a consortium with RCCL to bid for a road development project valued at ₹762.86 crores

KRDCL discovered that MP24 had submitted a forged work-experience certificate purportedly from the Andhra Pradesh Water Resources Department

MP24 admitted the document was uploaded by an employee but claimed it was a "mistake" and that they qualified even without it

The State Level Debarment Committee (SLDC) conducted an inquiry, which MP24 failed to attend despite multiple notices

The State issued an order on 13.08.2025 debarring MP24 for three years and RCCL for two years, forfeiting their Earnest Money Deposit (EMD) of ₹7.63 crores, and directing an FIR

MP24 challenged the debarment and forfeiture in writ petitions, which were dismissed by a Single Judge

1. Whether the debarment order violated the principles of natural justice due to the absence of a specific show-cause notice regarding blacklisting

2. Whether the debarment of three years was disproportionate to the alleged misconduct

3. Whether the State Government was required to hold a de novo hearing after the SLDC’s recommendation

4. Whether the forfeiture of the EMD was illegal in the absence of proven loss to the procuring entity

Section 14A of the KTPP Act, 1999, which permits debarment for up to three years for fraudulent practices

Rules 26-A, 26-B, and 26-C of the KTPP Rules, 2000, governing the procedure for SLDC recommendations and post-debarment measures

The "Doctrine of Proportionality" and the "Wednesbury Principle" as discussed in Om Kumar v. Union of India and Punjab and Sind Bank v. Sh. Raj Kumar

Gorkha Security Services v. Govt. of NCT of Delhi, holding that the intent to blacklist must be inferable from the notice

National Highways Authority of India v. Ganga Enterprises and Kailash Nath Associates v. DDA, distinguishing between pre-contractual security and post-contractual damages

The Court found that while the notices did not use the specific word "blacklisting," the context of an inquiry by the State Level Debarment Committee regarding "fake documents" made the potential consequence of debarment clear and inferable, satisfying natural justice requirements

MP24’s repeated requests for adjournments for personal/religious reasons were viewed as a deliberate attempt to avoid the inquiry

On the issue of proportionality, the Court held that submitting a forged certificate to gain a public contract is a grave fraudulent act, and a three-year debarment (the statutory maximum) does not shock the conscience of the Court or violate the "least restrictive" test given the severity of fraud in public procurement

Procedurally, the Court interpreted Rule 26-B(6) of the KTPP Rules as mandatory, meaning the Government "shall" debar based on SLDC recommendations, precluding the need for a second hearing by the State

The Court upheld the EMD forfeiture, noting that Section 74 of the Contract Act does not apply to pre-agreement bid securities which are intended to ensure only genuine bidders participate

Natural justice was substantially complied with as the appellant had knowledge of the charges and chose not to participate

Fraud vitiates the tender process and results in vicarious liability for the acts of employees

The holding confirmed that the L2 bidder (BVEPL) could be considered L1 once the original L1 was disqualified for fraud

The Court directed KRDCL to verify the authenticity of BVEPL’s certificates following the appellant's cross-allegations