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 contractual relationship with such persons is called blacklisting. The authority of the state, blacklisting any person, organisation, shall act fairly and without any arbitrariness. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gain, thus, it should be exercised with great caution. It is extremely significant that principles of natural justice are duly followed at the time of putting a person on the blacklist and that he is given an opportunity to represent his case.
EFFECTS OF BLACKLISTING DISCUSSED IN LIGHT OF JUDICIAL PRECEDENTS:
- The Hon'ble Supreme Court in the matter of Erusian Equipment and Chemicals Ltd. and Ors. vs. State of West Bengal and Ors1 has observed that, "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." Blacklisting not only affects the reputation of the person blacklisted but also affects the business and dealings with the Government as well as other private firms.
- The Hon'ble High Court of Bombay highlighted the effects of blacklisting in the matter of State Bank of India vs. Kalpaka Transport Company P. Ltd. and Ors2 , and stated that, "It seems to have been now firmly established, at least so far as where lists are kept by Government for dealing with the citizens in respect of certain businesses and trade that a blacklisting order leads to civil consequences and should not be passed without a reasonable opportunity of being heard. The principles of natural justice are thus attracted in case a party has any rights as such to enter into a contract, or the party has a reasonable expectation of making a gainful contract with the Government and the Government even while trading is under a constitutional obligation not to discriminate and treat citizens unfairly."
- The Hon'ble Supreme Court, while discussing the essence of principles of natural justice in the matter of Raghunath Thakur vs. State of Bihar and Ors3 , observed that, "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". Thus, it is essential that the person or the organisation who is going to be affected by the decision of blacklisting, should be given the opportunity of being heard to defend its goodwill and repute, since its business is dependent on it. The decisions of blacklisting shall be in line with the principles of natural justice.
- The Hon'ble High Court of Madras, in the matter of P.T. Sumber Mitra Jaya vs. The National Highways Authority of India (Ministry of Road Transport and Highways)4 ,observed that, "An action of blacklisting brings in with it the civil consequences apart from stigmatising the contractor, who is blacklisted". The authority blacklisting shall exercise the discretion of blacklisting carefully, since the person who is blacklisted is stigmatised and loses its repute and goodwill which is built over a period of time, and after being blacklisted others also refrain from doing business with them.
- The Hon'ble Supreme Court in the matter of B.S.N. Joshi and Sons Ltd. vs. Nair Coal Services Ltd. and Ors.5 has observed that, "When a contractor is black-listed by a department, he is debarred from obtaining a contract, but in terms of the notice inviting tender when a tenderer is declared to be a defaulter, he may not get any contract at all. It may have to wind up its business. The same would, thus, have a disastrous effect on him." From the aforesaid judicial pronouncements, it can be well ascertained that the action of blacklisting affects the concerned who is getting black listed and leads to the civil consequences, stigmatises the person or organisation getting blacklisted, affects its future business and maligns its image in the market. The order of black listing has the effect of depriving a person of equality of opportunity, especially in the matter of public contracts.
BLACKLISTING AMOUNTS TO INSTRUMENT OF COERCION UNLESS REASONABLE OPPORTUNITY IS PROVIDED TO THE PARTY GOING TO BE AFFECTED
It is the duty of the State not to act prejudicial to the interest of a person, in an arbitrary or unjustified manner and provide equal opportunity to all, especially in the matter of the public contracts. The judiciary has time and again highlighted how the blacklists issued by the authorities, state instrumentalities etc. have acted as instruments of economic coercion and has emphasized upon the need for the opportunity of hearing to be given before the name is put on the blacklist.
- The Hon'ble Supreme Court, in the matter of Erusian Equipment and Chemicals Ltd. and Ors. vs. State of West Bengal and Ors. has duly observed that, "The blacklisting order does not pertain to any particular contract. The blacklisting order involves civil consequences. It casts a slur. It creates a barrier between the persons blacklisted and the Government in the matter of transactions. The blacklists are instruments of coercion."
- The Hon'ble High Court of Patna (Ranchi Bench) in the matter of Gopal Nath Sharma and Ors. vs. The State of Bihar and Ors6 ., had directed that, "the authorities will give opportunity to the petitioners to represent their cases and they will hear the petitioners as to whether their names should be put on the blacklist or not". It is the duty of the State, its instrumentalities etc. to proceed with the blacklisting only after giving due regard to principles of natural justice and providing ample opportunity to the person to represent their case.
- The Hon'ble High Court of Calcutta in the matter of H.S. Kohli and Ors. vs. Union of India (UOI) and Ors. 7 , has also held that, "the person concerned should be given an opportunity to represent his case before he was put on the blacklist."
- Similarly, the Hon'ble High Court of Punjab and Haryana, in the matter of Punnu Tourist Service (P) Ltd. vs. The Home Secretary, Chandigarh Administration8 , stated that, "The matter must now be taken to be well settled that if the Government decides to blacklist any company or firm, the person concerned must be given an opportunity to represent against it before such an order is passed."
Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship. The publication of a blacklist may constitute a libel if it conveys a false meaning. Thus, the State and its authorities has to ensure that fundamentals of fair play, is not given a go-by and that the concerned person, organisation etc. who is being blacklisted is given an opportunity to represent his case before he is put on the blacklist.
The authority of 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 State is to act fairly and rationally without in any way being arbitrary, thereby such a decision can be taken for some legitimate purpose.9
2 1980() BomLR318
7 AIR 1978 Cal 513
9 Patel Engineering Limited vs. Union of India (UOI) and Ors. (AIR2012SC2342)
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