Blacklisting petitioner

In Kulja Industries Limited v. Chief Gen. Manager W.T. Proj. BSNL and Ors1 the Supreme Court of India (“Supreme
Court”) ruled on the power of an authority to blacklist a company on the basis of the terms of the underlying contract
(“Ruling”). The Appellant, Kulja Industries (“Contractor”) was blacklisted by Bharat Sanchar Nigam Limited
(“Authority”) due to fraudulent payments which were obtained by Contractor from Authority. The Supreme Court set
aside the order of blacklisting issued by the Authority as it had the effect of permanently affecting the business of the
Contractor. The Ruling clearly identifies the limits of powers of statutory authorities to take coercive actions against
companies. The Supreme Court has ensured that principles of reasonableness are incorporated in every action and
decision of statutory authorities. the Supreme Court held that the principle of fair hearings was imperative while
considering a blacklisting order

any order permanently blacklisting the Contractor from entering into contracts with the Authority would effectively
close the business of the Contractor.

, the Blacklisting Order was totally disproportionate to the gravity of the offence allegedly committed by the
Contractor.

they were violative of the principles of natural justice and doctrine of proportionality. 5

the Authority did not have any guidelines on exercising the power of blacklisting and consequently,

n permanent debarment from future contracts for all times to come would be too harsh and heavy

In the landmark judgment of Eurasian Equipment & Chemicals Ltd. vs State of West Bengal
The Court held that the Government being a Government of laws and not of men is bound to act
in conformity with the principles of natural justice when interacting with members of the public.
An order of blacklisting creates a disability for the concerned person. 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.

 Supreme Court in B.C. BIYANI PROJECTS PVT. LTD. VS. STATE OF MADHYA
PRADESH AND OTHERS has held that order for blacklisting a company
permanently is impermissible in law....

The Apex Court referred to its earlier decision in Kulja Industries Limited Vs.
Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited
and Others [(2014) 14 SCC 731wherein it was held that“debarment” cannot be
permanent and the period of “debarment” would invariably depend upon the
nature of the offence committed by the erring contractor....

The Court observed: “Since the appellant was blacklisted by an order dated
14th March, 2013 and since more than three years have goneby during which
period the appellant has suffered blacklisting and also taking into consideration
the fact that three... years have goneby during which period the appellant has
suffered blacklisting and also taking into consideration the fact that three out of
six contracts have been completed by the appellant, we are of opinion that the
period of blacklisting already ... undergone by the appellant is sufficient to meet
the ends of justice.”...

Basic Pillars of Principles of Natural Justice

 Audi alteram partem - Hear the other party, or the rule of fair hearing, or the rule that no
one should be condemned unheard.
 Nemo in propria causa judex, esse debet - No one should be made a judge in his own
case, or the rule against bias.
