While observing that blacklisting has the effect of preventing a person from privilege and advantage of entering into a lawful relationship with the Government for purposes of gains and that a disability is created by the order of blacklisting, the Kerala High Court ruled that the relevant authority is to have an objective satisfaction and therefore fundamental of fair play requires that the person concerned should be allowed to represent his case before he is put on the blacklist.

A Single Judge Bench of Justice Viju Abraham, therefore, stated that a fair hearing to the party being blacklisted is an essential pre-condition for a proper exercise of the power and a valid order of blacklisting made thereto.

Advocate Abdul Raoof Pallipath appeared for the Petitioner, whereas Government Pleader Bimal K. Nath appeared for the Respondent.

The brief facts of the case are that the petitioner (a contractor) as per agreement No.SE(K)/186/2017-18, executed the road works of improvements to Padiyotchal- Kodamuttu Road KM0/000 to 7/400 in Kannur district. The construction was duly completed within the extended period granted by the department. Having satisfied that the work is perfectly executed and no defects whatsoever occurred, the respondents approved the release of Treasury security deposits of Rs.9,43,550/- and bank guarantee of Rs.9,43,550/- lying with South Indian Bank, Panaji Branch. While so, the PWD roads wing initiated a surprise inspection of works throughout Kerala as per the order of the Chief Engineer (fifth respondent) named "Operation Saral Rasta". Accordingly, the Vigilance and Anti-Corruption Bureau (VACB) Kannur Unit forwarded a report alleging that the work executed by the petitioner is suffering from a shortfall of quality for which the petitioner, as well as the Assistant Executive Engineer, were held vicariously liable. The report also recommended blacklisting and other penal actions against the petitioner. Even though the petitioner submitted contentions in response to the allegations, however, without conducting a correct probe into the matter and without appraising such other reasons that contributed to the damage of completed work on account of natural calamities, the first respondent removed the petitioner from the approved list of contractors and inflicted a punishment of blacklisting. Hence, the petitioner approached the High Court.

After considering the submission, the Bench observed that blacklisting a contractor is a serious action which entails civil consequences and is punitive.

However, finding that the show cause notice only states that the Vigilance and Anti-Corruption Bureau has after an inspection recommended to blacklist the petitioner, the Bench stated that there was no mention as to whether a copy of the report submitted by the Director of Vigilance and Anti-Corruption Bureau has been served on the petitioner nor any of the defects pointed out by the Vigilance and Anti-Corruption Bureau has been mentioned therein.

“A perusal of Ext.P9 show cause notice would reveal that the blacklisting of the petitioner is proposed to be taken based on the recommendation of the Director of Vigilance and Anti-Corruption Bureau (VACB). Ext.P9 show cause notice does not contain a copy of the report of the VACB or the details of the allegations found out against the petitioner in an inspection conducted by the VACB”, added the Bench.

Stating that the blacklisting of the petitioner entails civil consequences, the High Court observed that it can be done only after affording a reasonable opportunity to the petitioner to submit a proper reply to the defects/reasons that are pointed out by the department to blacklist the petitioner.

Since the show cause notice does not contain the allegations against the petitioner based on which they proposed to blacklist the petitioner, the High Court clarified that same cannot be treated as a valid show cause notice in the eye of the law.

Therefore, the High Court directed the first respondent to reconsider the matter after issuing a proper show cause notice to the petitioner containing all the details of the allegations raised against them and after serving a copy of the report submitted by the Vigilance and Anti-Corruption Bureau (VACB), to enable the petitioner to give a proper reply in answer to the allegations raised therein.

Cause Title: M/S ABCON ENGINEERING v. SUPERINTEND OF ENGINEER, PWD ROAD SECTION and Ors.

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Kerala High CourtJustice Viju Abraham

Pankaj Bajpai