Case Note & Summary
The petitioner, Harsha Infra Power Pvt. Ltd., a company engaged in laying and maintenance of water pipelines, was awarded a contract by Bharat Petroleum Corporation Ltd. (BPCL) for laying pipelines in Ahmednagar and Aurangabad. A Letter of Acceptance was issued on 13 March 2023. Within six weeks, the Project Management Consultant issued a show cause notice for not mobilizing labour. Despite extensions and meetings, BPCL terminated the contract on 24 July 2023, before the extended deadline of 31 October 2023. Subsequently, on 11 September 2023, BPCL issued a notice for termination and blacklisting under Clause 10(b) of the General Conditions of Contract. On 29 December 2023, BPCL passed an order blacklisting the petitioner for three years, the maximum period under Clause 4.2.12 of its Policy for Holiday Listing. The petitioner's appeal was dismissed on 29 March 2024. The petitioner challenged the validity of Clauses 4.1.1(g)-(h) of the Policy and the blacklisting orders. The court examined the legal principles regarding blacklisting, noting that it is stigmatic and has civil consequences, requiring strict adherence to natural justice. The court found that no show cause notice as mandated under Clauses 4.2.1 and 4.2.5 read with Annexure-I was issued. Relying on Supreme Court decisions in Erusian Equipment & Chemicals Ltd. v. State of W.B., Blue Dreamz Advertising (P) Ltd. v. Kolkata Municipal Corpn., and M/s. Techno Prints v. Chhattisgarh Textbook Corporation, the court held that blacklisting cannot be imposed for mere breach of contract without deviant or aberrant conduct. The impugned clauses allowing blacklisting for ordinary contractual breaches were struck down as arbitrary and violative of Article 14. The court quashed the blacklisting orders and directed that the petitioner be removed from the holiday list.
Headnote
A) Administrative Law - Blacklisting - Natural Justice - Clause 4.2.1 and 4.2.5 of BPCL's Policy for Holiday Listing - Show cause notice must be issued before blacklisting - The court held that the petitioner was not issued a show cause notice as mandated under the Policy, and the impugned order was passed in violation of principles of natural justice (Paras 7, 15-16). B) Contract Law - Blacklisting - Breach of Contract - Clause 4.1.1(g)-(h) of BPCL's Policy for Holiday Listing - Blacklisting cannot be imposed for mere breach of contract without deviant or aberrant conduct - The court struck down the impugned clauses as arbitrary and violative of Article 14, following M/s. Techno Prints (supra) (Paras 8, 13-14, 17-18). C) Constitutional Law - Proportionality - Article 14 - Blacklisting period of three years (maximum) held disproportionate - The court held that the punishment of blacklisting for three years was excessive and not proportionate to the alleged breach (Paras 7, 18).
Issue of Consideration
Whether the impugned clauses of the Policy and the orders blacklisting the petitioner are valid and whether blacklisting can be imposed for mere breach of contract.
Final Decision
The court allowed the petition, quashed the impugned orders dated 29 December 2023 and 29 March 2024, and struck down Clauses 4.1.1(g)-(h) of the Policy for Holiday Listing as arbitrary and violative of Article 14. The petitioner was directed to be removed from the holiday list.
Law Points
- Blacklisting is stigmatic and requires strict compliance with natural justice
- Blacklisting cannot be imposed for mere breach of contract without deviant or aberrant conduct
- Proportionality must be observed in imposing blacklisting period
- Clause permitting blacklisting for ordinary contractual breaches is arbitrary and violative of Article 14
