The main legal point established in the judgment is that a black-listing order has adverse civil consequences and requires principles of fair play and natural justice to be followed. Additionally, the conditions for taking action against defaulting parties must be in respect of failure to honor commitments emerging out of the rate contract.

J.S. Khehar, J. - M/s Manjit Sales Corporation (hereinafter referred to as the Corporation) is admittedly a sole proprietorship firm owned by Manjit Singh. The Corporation claims to the have been supplying high class furniture to schools, hospitals, etc. from 1975. It claim a turn-over of more than rupees one crore for the financial year ending on 31.03.2000.

2. The present grievance of the Corporation commences from the issuance of an advertisement dated 15.07.1998 by the Controller of Stores, Punjab inviting tenders for supply of steel file racks and steel side racks. As per the aforesaid advertisement, tenders were to be submitted by 1.00 P.M. on 06.08.1998. In pursuance of the aforesaid advertisement, the Corporation submitted its quotations within the stipulated time. Along with the quotations, it also sent a sample, besides, earnest money of Rs. 500/-.

3. In response to the quotations submitted by the Corporation, the Controller of Stores, Punjab addressed a letter dated 02.06.1999 to the Corporation requiring it to confirm the rates expressed in the said letter (dated 02.06.1999) within a period of ten days. The Corporation complied with the requirement of the aforesaid communication vide its letter dated 09.06.1999.. The Corporation received two more letters dated 19.07.1999 and 06.10.1999 vide which it was called upon to submit the rate contract duly signed within a period of ten days, failing which, penal action would be taken against it. In fact, the aforesaid two communications referred to condition No. 7 of the rate contract and condition No. 17(ii) of Schedule B attached thereto for taking penal action against the petitioner. The aforesaid conditions are extracted hereunder :-

"Condition No. 7. :- Failure to execute agreements, deposit prescribed security and to effect supplies within the stipulated period or repeatedly offering supply liable for rejection or making supply without prior inspection by this department, unsatisfactory performance of the contract or breach of any terms and conditions of the rate contract may render your earnest money/Security liable to forfeiture and cancellation of this acceptance letter and also debarring blacklisting your firm. Besides other penal actions as permissible under the terms of contract will also be taken.

X X X

Condition No. 17(ii). :- In the event of the contractor failing duly and properly to fulfil or committing breach of any of the terms and conditions of this contract or repeatedly supplying goods liable to rejection hereunder or failing, declining, neglecting/or delaying to comply with any demand or requisition or otherwise not executing the same in accordance with the terms of this contract, or if the contractor or his agents or servants being guilty of fraud in respect of the contract or any other contract entered into by the Contractor or any or his partners or representatives thereof; with Government directing, giving, promising or offering any bribes, gratuity, gift, loan, perquisite reward, or advantage pecuniary or otherwise to any person in the employment of government in any way relating to such officers or person or persons office or employment or if the contractor or any of his partners become insolvent or apply for relief as insolvent debtor or commence any insolvency proceedings or make any composition with his their creditors or attempts to do so then without prejudice to Governments rights and remedies otherwise, Government shall be entitled to terminate this contract forthwith and to blacklist the contractor and purchase or procure or arrange from Governments stocks or otherwise at the contractors risk and at the absolute discretion of the Controller of Stores, Punjab as regards the manner, place or time of such purchases such supplies have not been supplied or have been rejected under this agreement or are required subsequently by Government thereunder and in cases where issues in replacement are made from Governments stocks or supplies, th