Blacklisting Can Be Simultaneously Done With Termination Of Contract Provided Separate Show-Cause Notice Is Issued: Madhya Pradesh HC
The Madhya Pradesh High Court held that blacklisting or suspension can be simultaneously done with the termination of a contract, but a separate show-cause notice must be issued or an opportunity for a hearing must be granted.
The Court quashed the impugned order suspending the registration of the petitioner with the M.P. Public Works Department (Department) who was working as a contractor. After the termination of the petitioner’s contract, the Department suspended the petitioner’s registration for two years because of non-completion of the work in question within a period of 12 months.
A Division Bench of Justice Vivek Rusia and Justice Binod Kumar Dwivedi observed, “It is also correct that reasons for termination and suspension of registration are same. The petitioner was served with a show-cause notice before issuing the order of termination of contract which he duly replied, but the petitioner was not given any opportunity of hearing. The petitioner was given a show-cause notice under Clause - 27 of the agreement which only mandates termination of contract, not suspension of registration.”
Advocate Siddhartha Kumar Jain appeared for the petitioner, while Additional Advocate General Vishwajit Josh represented the respondents.
The petitioner assailed the impugned order of the Additional Project Director who suspended the registration of the petitioner for two years only because of non-completion of the work in question within a period of 12 months. He submitted that he was not provided the opportunity to be heard before the impugned order was passed.
The respondents filed a reply submitting that the reasons for the termination of contract and suspension of registration were the same. The petitioner was given a show-cause notice and a reply was obtained. Since the reply was not found satisfactory, therefore, the contract was terminated as well and registration was suspended for two years. Hence, they argued that it cannot be said that no opportunity for a hearing was given to the petitioner.
The High Court, noting that the matter regarding the validity of the termination of contract was already sub judice before the competent authority, stated that the petitioner “shall have a remedy to approach M.P. Arbitration Tribunal by way of reference.”
The Bench pointed out that the competent authority could take a decision for suspension of registration or placing the name on the blacklist of contractor considering the seriousness of the conduct. “Therefore, whether the contractor falls under any of the conditions from 1 to 9 for blacklisting or suspension and the same is serious in nature, an opportunity of hearing ought to have been given by issuing a show-cause notice to him in order to submit explanation or suitable reply,” it remarked.
The Court referred to the Apex Court’s decision in The Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corporation wherein it was held that in “ordinary breach of contract and the explanation offered by the person concerned raises a bona fide dispute, blacklisting/debarment as a penalty ought not to be resorted to. Debarring a person albeit for a certain number of years tantamounts to civil death inasmuch as the said person is commercially ostracized resulting in serious consequences for the person and those who are employed by him.”
Consequently, the Court held, “Taking note of the law laid down by the Apex Court in the aforesaid case, the impugned order suspending the registration of the petitioner is unsustainable and the same is hereby quashed.”
Accordingly, the High Court allowed the writ petition.
Cause Title: Devendra Kumar Patel v. The State Of Madhya Pradesh & Ors. (Neutral Citation: 2024:MPHC-IND:29355)