2025:JHHC:20593-DB IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P. (C) No. 5734 of 2024 Pawan Kumar Gupta, aged 46 years, son of Late Bajrang Sahu, resident of Karra Road, P.O. and P.S. Khunti, District-Khunti. ... Petitioner Versus 1. The State of Jharkhand. 2. The Deputy Commissioner-cum-District Magistrate (Social Security Cell), Khunti, P.O. and P.S. Khunti, District-Khunti. 3. Incharge Officer, District General Branch, Khunti, P.O. and P.S. Khunti, District-Khunti. 4. District Supply Officer, Khunti, P.O. and P.S. Khunti, District- Khunti. ... Respondents --------- CORAM: HON’BLE THE CHIEF JUSTICE HON’BLE MR. JUSTICE SUJIT NARAYAN PRASAD --------- For the Petitioner: Mr. Nilesh Kumar, Advocate Ms. Sonal Sodhani, Advocate For the Respondents: Mr. Baibhaw Gahlaut, A.C. to A.A.G.-V --------- 05/Dated: 24.07.2025 Tarlok Singh Chauhan, C.J.(Oral) 1. The instant petition has been filed for the following reliefs:- “For issuance of an appropriate writ/order/direction from this Hon’ble Court for setting aside order dated 10.6.2024 (Annexure-2) passed by Deputy Commissioner, Khunti by which the petitioner has been blacklisted for an indefinite period from participating in government Tender.” 2. The respondent no.3 wrote a letter dated 30th April, 2024 based upon which a First Information Report came to be lodged against the petitioner with the allegation that he had submitted Character Certificate bearing No.44 dated 06.04.2023 in the office of the District 2025:JHHC:20593-DB Supply Officer, Khunti for tender application which was placed before the Social Security Cell. Both the Offices attempted to verify the Character Certificate provided by the petitioner and it was ultimately found that the said Character Certificate was forged. 3. After registration of the F.I.R. against the petitioner, an order was issued by the Deputy Commissioner, Khunti on 10.06.2024 vide Memo No.99 stating therein that the petitioner had got a tender vide Memo dated 08.11.2023 for supply of blankets in the financial year 2023-24 on the basis of a forged document which suggested that the petitioner intended to cheat the Department. Accordingly, the petitioner was blacklisted from applying in all government tenders. 4. It is not in dispute that the order of blacklisting was passed without issuing any show-cause notice to the petitioner. It is further not in dispute that even the duration of blacklisting has not been mentioned in the aforesaid order dated 10.06.2024. 5. In Gorkha Security Services v. Government (NCT of Delhi) and Others, (2014) 9 SCC 105, the Hon’ble Supreme Court observed that it was incumbent upon the petitioner to issue show-cause notice and also afford an opportunity of hearing to the petitioner prior to taking debarment action. The relevant paragraphs are reproduced hereunder- "16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of 2025:JHHC:20593-DB blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as “civil death” of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts. 17. Way back in the year 1975, this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B., highlighted the necessity of giving an opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person. This is clear from the reading of paras 12 and 20 of the said judgment. Necessitating this requirement, the Court observed thus: (SCC pp. 74-75) “12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The 2025:JHHC:20593-DB order of blacklisting 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. * * * 20. 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 relevant 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.” 18. Again, in Raghunath Thakur v. State of Bihar the aforesaid principle was reiterated in the following manner: (SCC p. 230, para 4) “4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. 2025:JHHC:20593-DB But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of.” 2025:JHHC:20593-DB 19. Recently, in Patel Engg. Ltd. v. Union of India speaking through one of us (Jasti Chelameswar, J.) this Court emphatically reiterated the principle by explaining the same in the following manner: (SCC pp. 262-63, paras 13-15) “13. The concept of ‘blacklisting’ is explained by this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. as under: (SCC p. 75, para 20) ‘20. 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.’ 14. The nature of the authority of the State to blacklist the persons was considered by this Court in the abovementioned case and took note of the constitutional provision (Article 298), which authorises both the Union of India and the States to make contracts for any purpose and to carry on any trade or business. It also authorises the acquisition, holding and disposal of property. This Court also took note of the fact that the right to make a contract includes the right not to make a contract. By definition, the said right is inherent in every person capable of entering into a contract. However, such a right either to enter or not to enter into a contract with any person is subject to a constitutional obligation to obey the command of Article 14. Though nobody has any right to compel the State to enter into a contract, everybody has a right to be treated equally when the State seeks to establish contractual relationships. The effect of excluding a person from entering into a 2025:JHHC:20593-DB contractual relationship with the State would be to deprive such person to be treated equally with those, who are also engaged in similar activity. 15. It follows from the above judgment in Erusian Equipment case that the decision of the State or its instrumentalities not to deal with certain persons or class of persons on account of the undesirability of entering into the contractual relationship with such persons is called blacklisting. The State can decline to enter into a contractual relationship with a person or a class of persons for a legitimate purpose. The authority of the State to blacklist a person is a necessary concomitant to the executive power of the State to carry on the trade or the business and making of contracts for any purpose, etc. There need not be any statutory grant of such power. The only legal limitation upon the exercise of such an authority is that the State is to act fairly and rationally without in any way being arbitrary—thereby such a decision can be taken for some legitimate purpose. What is the legitimate purpose that is sought to be achieved by the State in a given case can vary depending upon various factors.” 20. Thus, there is no dispute about the requirement of serving show-cause notice. We may also hasten to add that once the show-cause notice is given and opportunity to reply to the show- cause notice is afforded, it is not even necessary to give an oral hearing. The High Court has rightly repudiated the appellant’s attempt in finding foul with the impugned order on this ground. Such a contention was specifically repelled in Patel Engg.” 2025:JHHC:20593-DB 6. Similar reiteration of law can be found in the judgment rendered by the Hon’ble Supreme Court in Vetindia Pharmaceuticals Ltd. v. State of Uttar Pradesh and Another, (2021) 1 SCC 804, wherein the Hon’ble Supreme Court held that it was incumbent on the part of the Department to state in the show-cause notice that the competent authority intended to impose such a penalty of blacklisting so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. The Hon’ble Supreme Court held that there must be a clear inference from show-cause notice that blacklisting action is proposed. 7. Yet again, similar reiteration of law can be found in another judgment of the Hon’ble Supreme Court in UMC Technologies (P) Ltd. v. Food Corporation of India and Another, (2021) 2 SCC 551, wherein the Hon’ble Supreme Court reiterated that for show-cause notice to constitute the valid basis of a blacklisting order, such notice must spell out clearly, or its contents be such that it can be clearly inferred therefrom that there is intention on the part of the issuer of the notice to blacklist the noticee. The Hon’ble Supreme Court further held that existence of a clause in the bid document, which mentions blacklisting as a bar against eligibility, cannot satisfy the mandatory requirement of a clear mention of the proposed action in the show- cause notice. Lastly, it was held that requirement of a valid, particularized and unambiguous show-cause notice is particularly crucial due to the severe consequences of blacklisting and the stigmatization that accrues to the person/entity being blacklisted. 2025:JHHC:20593-DB 8. Earlier to this, the Hon’ble Supreme Court in Daffodills Pharmaceuticals Ltd. v. State of Uttar Pradesh and Another, (2020) 18 SCC 550, held that blacklisting has the effect of preventing a person from privilege and advantage of entering into lawful relationship with the Government for purposes of gain. The fact that a disability is created by the order of blacklisting indicates that the relevant 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 blacklist. 9. Merely because the Government has a right to enter into contract with anyone of its choice does not give the Government the power to arbitrarily blacklist a party without affording a fair hearing as blacklisting involves material damage of losing the prospect of entering into contracts with the Government in future. 10. The effect of blacklisting, needless to observe, are quite drastic. It prevents a person from the privilege and the advantage of entering into lawful relationship with the Government, PSUs for the purposes of gain. Apart from reducing the person’s prospects of making profits, it leads to loss of credibility and goodwill, a decline in business, and clients, besides causing financial hardship. It virtually acts as a libel to the person if unjustifiably done. 11. This is precisely the reason why the courts of law have, time and again, established certain principles before blacklisting a person which include (a) Principles of natural justice and (b) Doctrine of proportionality. The ‘doctrine of proportionality’ here would essentially 2025:JHHC:20593-DB have to be understood as, maintaining a proper balance between the adverse effects which the administrative order may have on the rights, persons, keeping in mind the purpose for which they intend to serve. 12. Reverting back to the facts of instant case, since the petitioner has not been issued any show-cause notice or afforded an opportunity of personal hearing and has straightway been blacklisted, the action of blacklisting vide impugned letter dated 10.06.2024 cannot withstand the judicial scrutiny and the said order is accordingly quashed and set aside. The writ petition is, accordingly, allowed. However, this order shall not come in the way of the respondents in case they choose to further proceed in the matter by issuing a show-cause notice to the petitioner if they still intend to blacklist the petitioner, and thereafter proceed in accordance with law affording an opportunity of hearing to the petitioner. (Tarlok Singh Chauhan, C.J.) (Sujit Narayan Prasad, J.) Manoj/Cp.2