Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(AP) 940

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
SUBBA REDDY SATTI, J.
Shirdi Sai Baba Constructions, Rep By Its Managing Partner, T. Chiranjeeva Reddy, S/o. Ramanarayana Reddy – Petitioner
Versus
The State Of Andhra Pradesh, Rep. By Its Principal Secretary, Department Of Panchayat Raj And Rural Development – Respondent
Writ Petition No. 29586 of 2023
Decided On : 16-04-2026

Advocates Appeared:
For the Petitioner: Koti Reddy Idamakanti
For the Respondents: GP For Panchayat Raj Rural Dev

Blacklisting a government contractor without providing a prior show-cause notice and an opportunity to be heard is procedurally improper, arbitrary, and violates the principles of natural justice.

Headnote:(A) Constitution of India - Article 226 - Blacklisting of contractor - Principles of natural justice - Necessity of show-cause notice - Procurement of civil works - Absence of notice prior to blacklisting renders the administrative action illegal, arbitrary and violative of fair play - Recovery of cost for alleged substandard work post-defect liability period - Absence of material evidence regarding inspection conduct and liability - Orders set aside. (Paras 12, 13, 15, 16, 20)

Facts of the case:
The petitioner, a construction firm, executed a road work contract under a government scheme. Following a vigilance report submitted seven years after the work completion, the authorities issued an order to blacklist the firm and recover costs for alleged substandard work. The petitioner challenged these orders on grounds that no opportunity for hearing was provided, the inspection was conducted without notice, and the claim initiated beyond the contractual defect liability period.

Findings of Court:
The Court held that blacklisting is a serious administrative action that requires adherence to natural justice, specifically the issuance of a prior show-cause notice. As the respondent failed to provide such an opportunity, the blacklisting order was unsustainable. Furthermore, there was no evidence that the alleged inspection occurred within the contractual defect liability period, rendering the recovery claims unenforceable.

Issues: Whether the unilateral blacklisting of a contractor and the issuance of recovery notices for alleged substandard work without prior notice or opportunity to be heard are legally sustainable.

Ratio Decidendi: Administrative decisions involving civil consequences, such as blacklisting, necessitate prior notice and an opportunity to represent one's case; failure to comply with these principles of natural justice renders the order arbitrary and illegal.

Result: Writ petition allowed.

Table of Content
1. overview of the blacklisting dispute and procedural background. (Para 1 , 2 , 3 , 4 , 5 , 6 , 7)
2. requirement of show-cause notice before blacklisting contractors. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17)
3. limitations on recovery notices beyond defect liability period. (Para 18 , 19 , 20 , 21)

ORDER :

SUBBA REDDY SATTI, J.

Heard Sri K.Ashok, learned counsel representing Sri I.Koti Reddy, learned counsel for the petitioner and Sri P.Rajesh Kumar, learned Assistant Government Pleader for Panchayat Raj & Rural Development for the respondents.

2. Impugning the Memo No.1929135/Vig.II/2022, dated 25.03.2023 (Ex.P1) issued by the 1st respondent, directing the 4th respondent (a) to recover an amount of Rs.37,074/- from the petitioner towards deficiency observed in the strength of M-15 Grade concrete of protection wall and (b) to relay the rejected components of the work at the cost and risk of the contractor or to recover an amount of Rs.43,71,676/- from the contractor towards costs of the rejected components of work and further requested the 4th respondent to blacklist the petitioner as per G.O.Ms.No.94, dated 01.07.2003, the petitioner filed the above writ petition.

3. The 4th respondent, in pursuance of Ex.P1 memo, blacklisted the petitioner vide proceedings No.AEE(R)/DEE-T/Regn/Shridi Saibaba/FC/2016, dated 01.06.2023. Initially, the blacklisting proceedings were not challenged. Thereafter, the petitioner filed I.A.No.3 of 2023 and the same was ordered on 27.12.2023.

4. Averments, in brief, as set out in the affidavit, are as follows :

(a) The 1st respondent sanctioned the work of “Package No.AP021406 providing BT surface to the road from MRL25-Yadiki to Chandana with an estimated contract value of Rs.2,57,20,292/- under the scheme of Pradhana Mantri Gramina Sadak Yojana (PMGSY-II)”. A tender notification was flouted and the petitioner stood as L1 by quoting an excess of 4.95% over the estimated contract value. An agreement No.54/2014-2015 dated 18.12.2014 (Ex.P4) was executed by the proprietor of the petitioner and the 2nd respondent. As per Clause No.16 of the agreement, the date fixed for completion of work is 12 months. While executing the work, the 3rd respondent inspected and submitted the information to the state quality monitor for inspection of ongoing/completed work on 28.01.2015 and 29.04.2015. The work was completed. The authorities verified the work and recorded the M-Books dated 13.12.2015. The total bill amount was paid, withholding 5%, which would be paid after 5 years.

(b) Be that as it may, the 1st respondent issued a memo dated 25.03.2023 (Ex.P1). Acting upon the said memo, the respondents 2 and 3 issued Exs.P2 and P3. The 1st respondent issued Ex.P1 memo based on the vigilance report dated 17.12.2022. No vigilance inspection was made in the presence of the petitioner's representative. The Vigilance and Enforcement Wing submitted the report in November, 2022, after a lapse of 7 years since the completion of work. The work was completed in December, 2015. In fact, there are no damages to the road.

5. An interim order was granted on 07.12.2023 suspending the blacklisting proceedings dated 01.06.2023, as also Exs.P2 and P3.

6. a) A counter affidavit was filed on behalf of the 4th respondent. It was contended, inter alia, that as per the agreement, the defect liability period is 5 years i.e. 17.12.2020. The contractor has to maintain the road till completion of the defect liability period. The petitioner completed the work within the stipulated time, and the final payment was made after inspection by the state quality monitor of PMGSY on 31.05.2015.

b) The information was given to the Assistant Engineer by the Executive Engineer, PR PIU Division, Ananthapuramu, regarding Vigilance & Enforcement Department inspection, and the representative of the contractor attended the work site during the inspection. The work was inspected by the Vigilance & Enforcement Department within the defect liability

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2026 Supreme(AP) 940

Blacklisting a government contractor without providing a prior show-cause notice and an opportunity to be heard is procedurally improper, arbitrary, and violates the principles of natural justice.

Cases Referred (2)