The government cannot blacklist a contractor arbitrarily without providing a proper opportunity to be heard and without any objective basis for the decision.

( 1 ) PETITIONER was a contractor who submitted a tender for a certain contruction. It was to remain open for 60 days from 19. 9. 78. His tender was lowest but was not accepted. Instead he was asked to extend validity till 19. 12. 78 which he agreed. But then on 30. 11. 78, he found steep rise of cost of materials and withdrew the offer. On 2. 12. 78, Govt. informed the Xen Incharge that petitioner s offer was accepted. Petitioner had deposited earnest money from which Govt. could deduct 10% for any default of petitioner. This 10% was deducted and the rest was refunded. After 6 months on 20. 6. 79, a memo. was issued to the petitioner that by his withdrawal he had acted in a un-business like manner and he should show-cause why his name should not be removed from the approved list. He gave a detailed reply adding that the fact of acceptance of his tender was never communicated to him The Govt. then passed an order of black-listing him for 2 years. He challanged this order by petition U/art. 226. Judgment para 11, on words is :

( 2 ) IT is now settled law that before a person can be black-listed he is entitled to be heard. The leading authority on this point is the case of M/s. Eursian Equipment and Chemicals Ltd. v. State AIR 1975 Supreme Court 266. It was, inter alia, observed by the Supreme Court in that case as under : "blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the revelant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist. "

( 3 ) IT follows from the reading of the aforesaid passage that the satisfaction of the relevant authority has to be objective and not subjective. In that very case it has also been observed that "the order of black-listing has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality". It has no doubt been held that the State is free to choose any person with whom it wishes to enter into contract. No person has a fundamental right for insisting that the State must enter into a contract with him. Never the less a person has a right to claim equal treatment to enter into a contract.

( 4 ) THE aforesaid right of equal treatment cannot be taken away by the State acting in an arbitrary manner. By arbitrarily blacklisting a contractor, the effect would be that he is deprived of an equal opportunity of being able to compete with other tenderers. It is true that the order of black-listing has been passed after giving an opportunity to show cause to the petitioner. A mere formal compliance with the requirement of law of giving an opportunity cannot offer real justice to the petitioner if the order which is passed is arbitrary. It has been held by the Supreme Court in the case of Ramana Dayaram Shetty. v. International Airport Authority, (1979) 3 Supreme Court Cases 489 that the action of the Executive Government must be informed with reason and should be free from arbitrainess. It was observed by the Supreme Court as under :

"it is indeed unthinkable that in a democracy governed by a rule of law the executive Government or any of its officers should possess arbitrary power over the interests of the individual. Every action of the executive Government must be by informed reason and should be free from arbitratiness. That is the very essence of the rule of law and its