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SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, ALOK ARADHE, JJ.
M/s A.K.G. Construction And Developers Pvt. Ltd – Appellants
Versus
State of Jharkhand & Ors. – Respondents
Civil Appeal No(s). 4152 of 2026 Arising out of SLP (C) No. 23858 of 2025 With Civil Appeal No(s). 4153 of 2026 Arising out of SLP (C) No. 22669 of 2025
Decided On : 02-04-2026
| Table of Content |
|---|
| 1. court emphasizes standards for administrative actions. (Para 2 , 3) |
| 2. court affirms termination order, sets aside blacklisting. (Para 4 , 5) |
| 3. factual background of the construction contract and collapse. (Para 6 , 7 , 8) |
| 4. arguments regarding legality and procedure of termination and blacklisting. (Para 10 , 11) |
| 5. independence of termination and blacklisting processes. (Para 17 , 18) |
| 6. importance of notice and principles of natural justice in blacklisting. (Para 19 , 20 , 21) |
| 7. requirement for proper reasoning and due process in blacklisting. (Para 22 , 23) |
| 8. final conclusions on legality of termination and blacklisting. (Para 24 , 25) |
JUDGMENT :
1. Leave granted.
2. While exercising judicial review over administrative actions of the State and its instrumentalities in relation to contracts provisioning clauses and rules relating to termination and/or blacklisting, Courts must apply distinct standards of legality, rationality and proportionately. Such an approach is compelling as conditions for imposing such measures, as also the consequences of such actions, have differing gravity.
3. Upon careful consideration of the impugned State action, which terminates the contract and blacklists the appellant without meaningful distinction, we hold that the termination order is substantiated and justified. However, the blacklisting order suffers from patent infirmities: it evinces no application of mind, disregards the mandatory precept of audi alteram partem, and fails to precede with a show-cause notice requiring the contractor to demonstrate why such drastic action should not be taken. Blacklisting, being stigmatic and exclusionary in nature, cannot be imposed mechanistically but must comport with principles of natural justice and reasonableness.
4. For the reasons detailed hereafter, we uphold the order of termination and the impugned judgement and review order affirming the same, but set aside the decision to blacklist the appellant.
5. Having upheld the order of termination, we were of the opinion that the assumed logical consequence of blacklisting is neither supported by application of mind nor followed by a clear notice proposing blacklisting. For the reasons to follow, we set aside the order of blacklisting. However, in the facts and circumstances of the case, due to passage of time, we have suitably moulded the relief and directed that the order of blacklisting shall not continue for five years as directed by the Department but will cease to operate from the date of our judgment.
Facts
6. The appellant, a registered contractor with the Water and Sanitation Department was contracted for construction of an Elevated Service Reservoir (ESR) by issuance of a Letter of Acceptance (LOA) on 06.03.2023. During the subsistence of the contract, on 01.06.2024, the top dome of the reservoir collapsed. Though it was justified as being a result of an unexpected cyclone, the appellant offered to reconstruct it at own expense. However, the Department issued a show cause notice dated 04.06.2024, seeking explanation as to why action should not be taken for the negligence and bad quality of work. The contents of the show cause notice are as follows -
| “(PURPOTED SHOW CAUSE) GOVERNMENT OF JHARKHAND DRINKING WATER & SANITATION DEPARTMENT Letter No. 4/A.V.-01-1019/2024- 1311 From, Navneet Kumar Under Secretary to the Government. To, M/s. A.K.G. Construction & Developers Pvt. Ltd. Ranchi. Ranchi, Date- 4/6/24 Subject: Regarding submitting clarification. Context: Letter No. 727 of Executive Engineer, Drinking Water and Sanitation Division, Jhumritilaiya, dated 01.06.2024. Sir, As per the directions, the department received information about collapse of the under-construction water tower in Neemadhi village under Koderma-Demchonch Jaynagar Mega Rural Water Supply Scheme through the relevant letter on the above subject. The collaps |
A blacklisting order requires a specific show-cause notice to uphold principles of natural justice; its absence renders the blacklisting illegal and arbitrary.
Blacklisting is a distinct administrative action from contract termination, carrying severe stigmatic and exclusionary consequences. It requires a specific, unambiguous show-cause notice and an indep....
The impugned actions of issuing the show cause notice and blacklisting the petitioner were arbitrary, unconstitutional, and violated principles of natural justice. The court emphasized the requiremen....
The main legal point established in the judgment is the importance of following due procedure and considering the gravity of the offense in determining the period of blacklisting.
Blacklisting without notice constitutes a violation of the principles of natural justice, requiring fair opportunity for the affected party to present their case.
The Petitioner's suppression of a material fact and approach to the Court with unclean hands led to the dismissal of the Petition.
Point of Law : Blacklisting is an 'instrument of coercion' which has the effect of creating a disability. Usually, when participating in a tender, the bidder is required to furnish a statement undert....
The principles of natural justice, including the right to a fair hearing and the prohibition of arbitrary actions, are essential in administrative decisions affecting contractual rights, and any puni....
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