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 independent application of mind by the authority, as it affects future business prospects and violates natural justice if imposed without a dedicated opportunity to respond.

J U D G M E N T

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 Signature Not Verified the consequences of such actions, have differing gravity.

Jayant Kumar Arora Date: 2026.04.02 Reason:

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 collapse of the under-construction water tower proves that quality was not taken care of in the construction of the water tower.

Due to your not doing quality work as per the agreement in the construction of the water tower, the water tower collapsed due to which the image of the department got tarnished.

Therefore, it is directed by attaching a copy of the letter describing tire incident that why action should not be taken against you as per rules for negligence shown by you and not doing quality construction and, ensure to submit your explanation within 03 (three) days. In case of not re