Safiya Malik

The High Court of Jharkhand Division Bench of Chief Justice M.S. Ramachandra Rao and Justice Rajesh Shankar held that an indefinite blacklisting order against a private entity could not be sustained in the absence of conclusive evidence or a completed investigation. The Court quashed the blacklisting order passed by a public authority and directed the release of pending dues and performance guarantees with applicable interest. Further, the Court instructed the authority to pay compensation to the affected party for its arbitrary action.

The Division Bench allowed the writ petition filed by the aggrieved party, who had earlier been engaged by a governmental recruitment body to conduct a competitive examination. Following allegations of question paper leakage and a police investigation, the entity was blacklisted indefinitely without being made an accused or charge-sheeted in the criminal case. The Court found such penal action disproportionate, lacking due process, and contrary to established legal precedents.

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Accordingly, the Court set aside the impugned order and issued binding directions to the concerned authorities to process pending financial obligations and return guarantees within a stipulated timeframe.

The petitioner, a private limited company registered under the Indian Companies Act, 1956, was empanelled by a governmental body to conduct recruitment examinations. A tender dated 16 November 2021 had invited agencies for the conduct and processing of various examinations. The petitioner participated by submitting the requisite fees and was empanelled through a general agreement dated 3 January 2022 for a period of three years. Subsequently, the petitioner was declared the L-1 bidder and awarded a Work Order dated 12 April 2022 to conduct the Jharkhand Diploma Level Combined Competitive Examination 2021 using OMR-based methods.

The examination was conducted on 3 July 2022 across 83 centres in Jharkhand. An FIR was registered on 14 July 2022, citing allegations of question paper leakage. The FIR included offences under Sections 467, 468, 420, 120-B of the Indian Penal Code, Section 66 of the Information Technology Act, and Section 10 of the Bihar Conduct of Examinations Act, 1981. A show-cause notice-cum-suspension letter was issued to the petitioner on 25 July 2022. It referenced the FIR and immediately suspended the petitioner’s empanelment. The petitioner was asked to show cause by 1 August 2022 why it should not be blacklisted.

In its response, the petitioner denied any involvement in the alleged paper leak. It stated that all confidential examination materials had been handled and delivered as per the instructions of the recruitment commission and that subsequent activities were under the control of the District Administration and commission officials. The petitioner asserted that its involvement was limited to support functions like CCTV, biometric verification, and frisking. It further contended that no evidence implicated it or its employees and stated that the police had not named them as accused nor charge-sheeted them.

Despite these claims, the commission issued an order on 2 August 2023, blacklisting the petitioner indefinitely. The order cited the petitioner’s alleged unsatisfactory explanation and mentioned a letter from the Senior Superintendent of Police, Ranchi, dated 13 October 2022, which alleged links between the petitioner’s directors and an individual accused in the FIR. The petitioner argued that this was insufficient to attribute liability, especially in the absence of a formal charge or conviction.

The petitioner further stated that it continued to assist the commission post-suspension by providing data and documentation as required, as shown in multiple email correspondences. It also contended that performance guarantees submitted in the form of fixed deposit receipts (FDRs) were not returned. As per clause 10.2 of the Service Agreement dated 12 January 2022, the petitioner would only be liable if a leak occurred solely due to its actions or those of its employees. It asserted that no such sole attribution had been established.

The commission, in its counter-affidavit dated 7 December 2024, relied on the police letter to justify the blacklisting and cancellation of the work order. However, it admitted that the police investigation was still incomplete at the time of the blacklisting.

The Court examined the arguments and relevant legal precedents. It referred to the Supreme Court’s decision in Erusian Equipment & Chemicals Ltd. v. State of West Bengal, observing that "blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for the purposes of gains" and that such an act creates a disability that must be justified by objective satisfaction.

It cited B.S.N. Joshi & Sons Ltd. v. Nair Coal Services Ltd, stating that "if a contractor is blacklisted on the ground that he was a defaulter, he may not get any contract at all and he may have to wind up its business" and that mere disputes must be resolved before such declarations are made.

In reference to Kulja Industries Limited v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited, the Court reiterated that "blacklisting a contractor is a business decision, it is subject to judicial review when the same is taken by the State or any of its instrumentalities". The Court added that a fair hearing is an essential precondition and that any blacklisting must be "reasonable, fair and proportionate to the gravity of the offence". The Court also quoted that "debarment is never permanent and the period of debarment would invariably depend upon the nature of the offence".

Further, in Blue Dreamz Advertising Pvt. Ltd. and Another v. Kolkata Municipal Corporation and Others, the Supreme Court held that "blacklisting has always been viewed as a drastic remedy" and that "debarment for ordinary cases of breach of contract where there is a bona fide dispute, is not permissible". It concluded that "debarment, albeit for a certain number of years, tantamounts to civil death" and therefore must pass rigorous judicial scrutiny.

Applying these principles, the High Court stated: "it is not permissible for the 3rd respondent to debar the petitioner/blacklist the petitioner indefinitely, as has been clearly held in paragraph 25 of the judgment of Kulja Industries Limited". It also noted: "there is a serious bona fide dispute as to whether the petitioner or its employees are involved in the alleged paper leak". Referring to the petitioner’s response to the show-cause notice, the Court found that "the petitioner has emphatically denied any responsibility".

The Court stated: "Merely on the basis of letter of the Senior Superintendent of Police, Ranchi dt. 13.10.2022 and though the petitioner or its employees have not been charge-sheeted till date by the police in the F.I.R. registered by them, the petitioner cannot be presumed to be guilty of the offence of leaking of question paper". It reiterated the principle of presumption of innocence and held that the respondents "cannot, on the basis of the letter dt. 13.10.2022, presume the guilt of the petitioner and blacklist the petitioner for an indefinite period of time".

The High Court quashed the blacklisting order dated 2 August 2023 issued by Respondent 4. It directed the respondents to release payment of pending bills and invoices totalling Rs.2,90,00,176/- to the petitioner along with interest at the rate of 7% per annum. The interest is to be calculated from the date of the dues until the date of actual payment.

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The Court further directed that the fixed deposit receipts (FDRs) amounting to Rs.31,84,800/- and Rs.9,85,805/- submitted by the petitioner towards performance guarantees be released within four weeks if not already invoked. If these guarantees had been encashed, the respondents were instructed to refund the equivalent amount with interest at 7% per annum from the dates of invocation to the date of refund.

Additionally, the Court ordered Respondent 3 to pay Rs.2,00,000/- as costs to the petitioner due to the arbitrary nature of the blacklisting.

The writ petition was accordingly allowed.

Advocates Representing the Parties:

For the Petitioner: Mr. Ajit Kumar, Senior Advocate; Mr. Vikalp Gupta, Advocate

For the Respondents: Mrs. Sunita Kumari, A.C. to Sr. S.C.-II; Mr. Sanjoy Piprawall, Advocate

Case Title: M/s Binsys Technologies Private Limited v. The State of Jharkhand & Others

Neutral Citation: 2025: JHHC:16969-DB

Case Number: W.P. (C) No. 1545 of 2024

Bench: Chief Justice M.S. Ramachandra Rao and Justice Rajesh Shankar