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        REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   8944        OF 2013 (Arising out of S.L.P. (C) No.20716 of 2011)

M/s Kulja Industries Limited …Appellant

Versus

Chief Gen. Manager W.T. Proj.  BSNL & Ors. …Respondents

J U D G M E N T

T.S. THAKUR, J.

1. Leave granted.

2. The short question that falls for determination in this  

appeal  is  whether  the  respondent-Bharat  Sanchar  Nigam  

Limited  (for  short  ‘BSNL’)  could  have  blacklisted  the  

appellant  for  allotment of future contracts for  all  times to  

come.  High Court of Judicature at Bombay before whom the  

blacklisting order was assailed by the appellant has answered  

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that question in the affirmative and dismissed Writ Petition  

No.2289 of  2011 filed by the  appellant  giving rise  to  the  

present appeal.

3. Two tender notices for supply of Permanent Lubricated  

HDPE Pipe (Telecom Ducts) and Installation of  O.F.  Cable  

through Blowing Technique were issued by BSNL in the year  

2004 and 2005.  It  is  common ground that  the  appellant-

company emerged successful in regard to both the tender  

notices. It is also not in dispute that several orders for supply  

of  the  material  were  placed  with  the  appellant-company  

during the years 2004-2006 and that goods were supplied to  

various consignee units of BSNL pursuant to the same. The  

appellant’s case is that a “receipt certificate” was issued in its  

favour after delivery of the goods and that bills for payment  

of the price of the goods were raised in triplicate to the Chief  

Controller  of  Accounts,  WTP  BSNL,  Mumbai  from time  to  

time. The appellant’s further case is that a single account to  

receive 95% of the payment due from BSNL was maintained  

by it and since the amounts received from the respondent-

BSNL  by  cheques  did  not  carry  any  particulars  of  the  

consignment  for  which  such  payment  was  being  made  it  

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could, in no way, discover excess payment, if any, released  

by BSNL against the bills sent by the appellant.  

4. The  appellant’s  further  case  is  that  on  gaining  

knowledge  about  the  excess  payments  received  by  it,  an  

offer for reconciliation of the accounts was made to the BSNL  

and since any such reconciliation was likely to take 30 to 45  

days,  the  appellant  offered  to  adjust  the  excess  amount  

credited to its account towards the outstanding bills on an ad  

hoc basis. A letter dated 10th May, 2006 was, according to  

the  appellant,  addressed  to  the  respondent-BSNL  in  that  

regard.   

5. The respondent-BSNL on the other hand has a different  

story to tell.  According to it four of its officers had abused  

their  official  position  and  fraudulently  generated  'voucher  

numbers'  on the duplicate and triplicate copies of the bills  

submitted by the appellant to facilitate payments as if the  

said bills were genuine thereby causing wrongful loss to the  

respondent-BSNL and a corresponding gain to the appellant.  

There  was  in  this  process  an  excess  payment  of  Rs.7.98  

crores made and credited to the account of the appellant by  

the accounts officer of respondent-BSNL.  

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6. Taking note of the fraudulent payments made to the  

appellant,  the  BSNL lodged an FIR with CBI ACB Mumbai  

against one of its Senior Accounts Officers and a Director of  

the  appellant-company  alleging  commission  of  offences  

punishable under Section 120B read with Section 420 Indian  

Penal Code and Section 13(2) read with Section 13(1)(d) of  

Prevention  of  Corruption  Act,  1988.  Investigation  that  

followed has culminated in a charge-sheet filed before the  

Special Judge for CBI cases, Bombay in which four officials of  

the  BSNL  including  D.  Tripathi-Senior  Accounts  Officer,  

Laxman  Dixit-Assistant  Accounts  Officer,  Krishnakumari  

Patnaik-Junior  Accounts  Officer,  Poolchand  Yadav-Cashier  

and Lalit Gupta-Director and Bhavani Sharma-Consultant of  

the  appellant-company  have  been  arraigned  as  accused  

persons.

7. What is important  for the present is that  by a letter  

dated  21st April,  2010,  BSNL  blacklisted  the  appellant  

permanently on the ground that the appellant had committed  

gross  misconduct  and  irregularities  by  receiving  excessive  

payments amounting to Rs.7,98,55,508/- from BSNL thereby  

wrongfully causing loss to the said company. The appellant  

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denied  these  allegations,  inter  alia,  contending  that  BSNL  

Policy/Manual  did  not  provide  for  punitive  action  in  the  

nature of blacklisting and that excess payment at best was  

an  irregularity  which  had  been  cured  by  refund  of  the  

amount  in  question.  The  appellant  also  alleged  that  

reconciliation  of  accounts  revealed  that  the  appellant  was  

entitled to an amount, far in excess of the payments received  

by it. That assertion was repeated in a legal notice sent by  

the  appellant-company but  since  BSNL took no  corrective  

action in terms of the reconciliation, W.P. No.4536 of 2010  

was filed before the High Court of Judicature at Bombay in  

which  it  assailed  the  blacklisting  order.  The  High  Court  

allowed the petition on the short ground that the appellant  

had not been afforded any opportunity of being heard before  

the blacklisting order was issued by the respondent.   The  

High Court  did not  go into  the  merits  of  the  dispute  but  

reserved liberty to the appellant to raise all such contentions  

as were open to it if and when BSNL issued a show cause  

notice for blacklisting it again. The BSNL was left free to pass  

a fresh order and take a final decision in the matter within six  

weeks from the date of the issue of the show cause notice.

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8. A show cause notice was accordingly issued by BSNL on  

4th November, 2010 to which the appellant filed a reply. The  

appellant was also called for a personal hearing in support of  

its reply to the show cause notice as directed by the High  

Court.  By  an  order  dated  15th January,  2011  BSNL  once  

again directed  the  blacklisting of  the  appellant,  inter  alia,  

holding  that  the  appellant  had  defrauded  BSNL  by  using  

duplicate and triplicate copies of the bills that stood already  

cleared  for  payment.  These  bogus  and  fraudulent  claims  

made under bogus and fabricated bills were then processed  

by some of the officers of the BSNL for payment resulting in  

double and at times triple payment in favour of the appellant.  

The  relevant  portion  of  the  blacklisting  order  is  to  the  

following effect:       

 “Hence, the supplier with a clear intention to   defraud  BSNL,  WTP,  Mumbai,  have  prepared  duplicate  and  triplicate  copies  of  bills  already   processed for payment and have again put up the   same for payment with BSNL. Thus, in short these   were bogus and/or fraudulent  claims made on the   basis  of  forged  and/or  fabricated  bills/documents.   Thereafter, by joining hands with some of the erring   officers  of  BSNL,  the  supplier  has  got  the  afore   mentioned  duplicate  and  triplicate  copies  of  bills   processed  for  payment  and  have  fraudulently   received  double/triple  payment(s)  for  supplying   material only once.

Therefore,  by  not  only  claiming  but  also   receiving double and/or triple payment on the basis   

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of forged/fabricated/duplicate and triplicate copies of   same bills, the supplier has committed gross fraud   on the public exchequer.  The fraudulent act on the   part of supplier got completed by not only claiming   such  bogus  payments  but  also  by  receiving  the   same  from  BSNL.  Moreover,  by  letter  dated  10th  

May, 2006, the supplier has not only acknowledged  but have also accepted the fact of claiming as also   accepting aforesaid bogus payments and hence the   supplier had agreed for reconciliation of same after   deducting  such  bogus  payments.  If  the  accounts   would not have reconciled, the supplier would have   caused huge losses to the public exchequer.

Hence, there is every apprehension that if the   supplier is allowed to deal in any manner with the   BSNL  in  future,  the  supplier  will  venture  into   committing  same  and/or  similar  fraud  (s)  on  the   public exchequer and therefore, it is not at all in the   interest  of  public  exchequer  that  the  supplier   continues to be authorised supplier of BSNL.

Hence, in view of the all the above facts and   circumstances and the entire record and proceedings   of  this  case,  it  is  possible  for  this  organisation  to   take  a  view  to  permanent  banning  and  impose  penalty  upon  the  supplier  so  as  to  prevent  the   supplier from dealing with entire BSNL, throughout   the country in any manner, consequently  stopping   all  the future business transactions of entire BSNL   with the supplier.  

Hereby  M/s.  Kulja  Industries  Ltd.,  Solan  (Himachal  Pradesh)  is  permanently  banned  and is   consequently  prevented  from having  any  business   dealing with entire BSNL through the country.

This  is  issued  with  the  approval  of  the   competent authority.

Sd/-

AGM (MM) 15.1.2011

           O/o CGM, WTP, Mumbai-54”

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9. Aggrieved by the above order the appellant once again  

approached the High Court in W.P. No. 2289 of 2011 which  

was heard and dismissed by a Division Bench of the High  

Court  in terms of the order  impugned in this appeal.  The  

High  Court  was  of  the  opinion  that  reconciliation  of  the  

account had proved that the appellant had received payment  

twice  over  for  the  supplies  made  by  it  and  that  merely  

because  the  excess  payment  received  had  been  

subsequently refunded by the appellant did not obliterate the  

act of misconduct and fraud.  The High Court observed:

“In  the  order  impugned,  the  Authority  has   stated that on the reconciliation of the account,  it   was found as a fact that the Petitioner has received   payment twice for the supply of the same material,   because  the  supply  was  ongoing  and  the  amount   was found to be payable to the Petitioner, that was   paid to him. Mere payment of the amount does not   wipe out the fact that the Petitioner had submitted   the Bills claiming double payment.  In our opinion,   in view of this finding, no interference is called for in   the  order  impugned.  The  Petition  is  rejected.  No  costs.”   

10. The present appeal calls in question the correctness of  

the above order of the High Court as noticed earlier.              

11. Appearing  for  the  appellant-company,  Mr.  Mukul  

Rohatgi,  strenuously  argued  that  debarring  the  appellant  

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permanently and for all times to come was wholly arbitrary  

and unjustified.  It was contended that the blacklisting order  

had  serious  civil  consequences  for  the  person  blacklisted  

making it obligatory for the Authority passing the order to act  

fairly  and  reasonably.  Inasmuch  as  respondent-BSNL  had  

blacklisted  the  appellant  permanently,  the  decision  was  

neither  fair  nor  reasonable.  Paras  31  and  32  of  the  bid  

document also, according to the learned counsel, provides  

for blacklisting only for a “suitable period”.  This implies that  

blacklisting had to be for  a definite period and not for all  

times  to  come.  Since  the  products  manufactured  by  the  

appellant  were  mostly,  if  not  entirely,  supplied  for  

consumption  to  the  respondent-BSNL,  any  order  

permanently  blacklisting  the  appellant  from  entering  into  

contracts making supplies was tantamount to rendering the  

appellant jobless and economically defunct.  No such order of  

blacklisting could, therefore, be sustained as the punishment  

implicit in such an order was totally disproportionate to the  

gravity of the offence allegedly committed by the appellant.  

12. On behalf of the respondent-BSNL, it was argued by Mr.  

Bansal that the blacklisting order under challenge was not  

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relatable to paras 31 and 32 of the bid document. The order  

simply  declared  the  petitioner-company  ineligible  for  

allotment of any contract in future in terms of para 2.3 of the  

tender  document,  the relevant portion wherefore reads as  

under:

“2.3  Disqualification  Clause:   The  supplier/   Manufacturers  in  the  following  category  are  not   eligible to bid in the said tender.

i ....

ii.   Firms  against  whom  investigation  cases  are   registered  with  the  CBI  or  other  statutory   investigations agencies of State/Central Govt.

iii  ....”

13. It was further contended by the learned counsel that  

even if the order was held to be referable to paras 31 and 32  

of the bid document, an order permanently blacklisting the  

appellant was also justified having regard to the nature of  

the fraud committed by it in collusion with the officers of the  

respondent-corporation  and  involving  a  huge  amount  of  

nearly eight crores.   

14. We may at the outset deal with the contention whether  

paras 31 and 32 of the bid document to which Mr. Rohtagi  

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has  made  reference  is  the  only  source  of  the  power  to  

blacklist a defaulting contractor.  These paras are as under:

“31.  Purchaser reserves the right to disqualify  the   supplier for a suitable period who habitually failed to   supply  the  equipment  in  time.   Further,  the   suppliers  whose  equipment  do  not  perform  satisfactory  in  the  field  in  accordance  with  the   specifications may also be disqualified for a suitable   period as decided by the purchaser.

32. Purchaser reserves the right to blacklist a bidder   for a suitable period in case he fails to honour his   bid without sufficient grounds.”

15. A plain reading of the above would show that BSNL, the  

purchaser has reserved the right to disqualify any supplier  

who  

(a) habitually fails to supply the equipment in time or (b)  

the equipment supplied by the supplier does not perform  

satisfactory  in  the  field  in  accordance  with  the  

specifications or  

(c) fails to honour his bid without sufficient grounds.  

16. A literal construction of the provisions of paras 31 and  

32 extracted above would mean that the power to disqualify  

or blacklist a supplier is available to the purchaser only in the  

three  situations  enumerated  in  paras  31  and  32  and  no  

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other. Any such interpretation would, however, give rise to  

anomalous  results.  We  say  so  because  in  cases  where  a  

supplier is found guilty of much graver offences, failures or  

violations,  resulting  in  much  heavier  losses  and  greater  

detriment to the purchasers in terms of money, reputation or  

prejudice  to  public  interest  may  go  unpunished  simply  

because all such acts of fraud, misrepresentation or the like  

have  not  been  specifically  enumerated  as  grounds  for  

blacklisting of the supplier in paras 31 and 32 of the tender  

document.  That  could  in  our  opinion  never  be  the  true  

intention of the purchaser when it stipulated paras 31 and 32  

as conditions of the tender document by which the purchaser  

has  reserved  to  itself  the  right  to  disqualify  or  blacklist  

bidders  for  breach  or  violation  committed  by  them.   If  

bidders who commit a breach of a lesser degree could be  

punished by an order of blacklisting there is no reason why a  

breach of a more serious nature should go unpunished, be  

ignored or  rendered  inconsequential  by reason  only of  an  

omission of such breach or violation in the text of paras 31  

and 32 of the tender document.  Paras 31 and 32 cannot, in  

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that  view,  be  said to  be  exhaustive;  nor  is  the  power  to  

blacklist limited to situations mentioned therein.

17. That apart the power to blacklist a contractor whether  

the contract be for supply of material or equipment or for the  

execution of  any other  work whatsoever  is in our  opinion  

inherent in the party allotting the contract. There is no need  

for any such power being specifically conferred by statute or  

reserved by contractor. That is because ‘blacklisting’ simply  

signifies a business decision by which the party affected by  

the  breach  decides  not  to  enter  into  any  contractual  

relationship with the party committing the breach. Between  

two private  parties  the  right  to  take any such decision is  

absolute and untrammelled by any constraints whatsoever.  

The freedom to contract or not to contract is unqualified in  

the case of private parties.  But any such decision is subject  

to judicial review when the same is taken by the State or any  

of its instrumentalities. This implies that any such decision  

will be open to scrutiny not only on the touchstone of the  

principles  of  natural  justice  but  also  on  the  doctrine  of  

proportionality. A fair hearing to the party being blacklisted  

thus  becomes  an  essential  pre-condition  for  a  proper  

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exercise of the power and a valid order of blacklisting made  

pursuant thereto. The order itself being reasonable, fair and  

proportionate  to  the  gravity  of  the  offence  is  similarly  

examinable by a writ Court. The legal position on the subject  

is settled by a long line of decisions rendered by this Court  

starting  with  Erusian  Equipment  &  Chemicals  Ltd.  v.   

State of West Bengal and Anr. (1975) 1 SCC 70 where  

this  Court  declared  that  blacklisting  has  the  effect  of  

preventing a  person  from entering  into  lawful  relationship  

with  the  Government  for  purposes  of  gains  and  that  the  

Authority passing any such order was required to give a fair  

hearing before passing an order blacklisting a certain entity.  

This Court observed:

“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. Subsequent decisions of this Court in  M/s Southern  

Painters v. Fertilizers & Chemicals Travancore Ltd. and  

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Anr. AIR 1994 SC 1277;  Patel Engineering Ltd. Union  

of India (2012) 11 SCC 257; B.S.N. Joshi & Sons Ltd. v.   

Nair  Coal  Services  Ltd.  &  Ors. (2006)  11  SCC  548;  

Joseph Vilangandan v. The Executive Engineer, (PWD)  

Ernakulam & Ors. (1978) 3 SCC 36 among others have  

followed the ratio of that decision and applied the principle of  

audi  alteram  partem to  the  process  that  may  eventually  

culminate in the blacklisting of a contractor.

19. Even  the  second  facet  of  the  scrutiny  which  the  

blacklisting order must suffer is no longer  res integra.  The  

decisions of this Court in Radha krishna Agarwal and Ors.  

v.  State  of  Bihar  &  Ors. (1977)  3  SCC  457;  E.P.  

Royappa v. State of Tamil Nadu and Anr. (1974) 4 SCC  

3; Maneka Gandhi v. Union of India and Anr. (1978) 1  

SCC  248;  Ajay  Hasia  and  Ors.  v.  Khalid  Mujib  

Sehravardi and Ors., (1981) 1 SCC 722; R.D. Shetty v.  

International  Airport  Authority  of  India  and  Ors.,  

(1979) 3 SCC 489 and Dwarkadas Marfatia and sons v.   

Board of Trustees of the Port of Bombay (1989) 3 SCC  

751 have ruled against arbitrariness and discrimination in  

every matter that is subject to judicial review before a Writ  

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Court exercising powers under Article 226 or Article 32 of the  

Constitution.   It  is also well settled that  even though the  

right of the writ petitioner is in the nature of a contractual  

right, the manner, the method and the motive behind the  

decision  of  the  authority  whether  or  not  to  enter  into  a  

contract is subject to judicial review on the touchstone of  

fairness,  relevance,  natural  justice,  non-discrimination,  

equality and proportionality. All these considerations that go  

to determine whether the action is sustainable in law have  

been sanctified by judicial pronouncements of this Court and  

are of seminal importance in a system that is committed to  

the rule of law.  We do not consider it necessary to burden  

this judgment by a copious reference to the decisions on the  

subject.  A  reference  to  the  following  passage  from  the  

decision of this Court in M/s Mahabir Auto Stores & Ors.  

v.  Indian  Oil  Corporation  Ltd., (1990)  3  SCC  752  

should, in our view, suffice:

“11. It is well settled that every action of the State   or an instrumentality of the State in exercise of its   executive  power,  must  be informed by reason.  In   appropriate  cases,  actions  uninformed  by  reason   may be questioned as arbitrary in proceedings under   Article 226 or Article 32 of the Constitution. Reliance   in  this  connection  may  be  placed  on  the   observations  of  this  Court  in  Miss  Radha  Krishna   

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Agarwal and Ors. v. State of Bihar and Ors., [1977]   3 SCR 249 …... In case any right conferred on the   citizens which is sought to be interfered, such action   is subject to Article 14 of the Constitution, and must   be reasonable and can be taken only  upon lawful   and relevant grounds of public interest. Where there   is  arbitrariness  in  State  action  of  this  type  of   entering  or  not  entering  into  contracts,  Article  14   springs up and judicial review strikes such an action   down. Every action of the State executive authority   must be subject to rule of law and must be informed   by reason. So, whatever be the activity of the public   authority,  in  such  monopoly  or  semi-monopoly   dealings, it should meet the test of Article 14 of the   Constitution. If a Governmental action even in the   matters of entering or not entering into contracts,   fails to satisfy the test of reasonableness, the same   would be unreasonable……. It appears to us that rule   of  reason  and  rule  against  arbitrariness  and   discrimination, rules of fair play and natural justice   are part of the rule of law applicable in situation or   action  by  State  instrumentality  in  dealing  with   citizens  in  a  situation  like  the  present  one.  Even   though the rights of the citizens are in the nature of   contractual  rights,  the  manner,  the  method  and   motive of a decision of entering or not entering into   a  contract,  are  subject  to  judicial  review  on  the   touchstone  of  relevance  and  reasonableness,  fair   play, natural justice, equality and non-discrimination   in  the  type of  the transactions  and nature of  the   dealing as in the present case.”

20. The legal position governing blacklisting of suppliers in  

USA and UK is  no different.  In  USA instead of  using the  

expression ‘Blacklisting’ the term “debarring” is used by the  

Statutes and the Courts. The Federal Government considers  

‘suspension and debarment’ as a powerful tool for protecting  

taxpayer  resources  and  maintaining  integrity  of  the  

processes for federal acquisitions. Comprehensive guidelines  

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are,  therefore,  issued  by  the  government  for  protecting  

public interest from those contractors and recipients who are  

non-responsible,  lack  business  integrity  or  engage  in  

dishonest  or  illegal  conduct  or  are  otherwise  unable  to  

perform  satisfactorily.  These  guidelines  prescribe  the  

following among other grounds for debarment:  

(a) Conviction of or civil judgment for --  

(1)  Commission  of  fraud  or  a  criminal  offense  in   connection with obtaining, attempting to obtain, or   performing  a  public  or  private  agreement  or  transaction;

(2)   Violation  of  Federal  or  State  antitrust  statutes,   including  those  proscribing  price  fixing  between   competitors,  allocation  of  customers  between   competitors, and bid rigging;

(3) Commission  of  embezzlement,  theft,  forgery,   bribery,  falsification  or  destruction  of  records,   making  false  statements,  tax  evasion,  receiving   stolen property, making false claims, or obstruction   of justice; or

(4) Commission of any other offense indicating a lack of   business integrity or business honesty that seriously   and directly affects your present responsibility;

(b)   Violation of the terms of a public agreement or   transaction so serious as to affect the integrity   of an agency program, such as—

(1) A willful  failure to perform in  accordance with  the   terms  of  one  or  more  public  agreements  or  transactions;

(2) A history of failure to perform or of unsatisfactory   performance of one or more public  agreements  or  transactions; or

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(3) A  willful  violation  of  a  statutory  or  regulatory   provision  or  requirement  applicable  to  a  public   agreement or transaction;

(c)  xxxx

(d) Any other cause of so serious or compelling a  nature  that  it  affects  your  present   responsibility.

21. The  guidelines  also  stipulate  the  factors  that  may  

influence the debarring official’s decision which include the  

following:       

(a) The actual or potential harm or impact that results   or may result from the wrongdoing.

(b) The  frequency  of  incidents  and/or  duration  of  the   wrongdoing.

(c) Whether  there  is  a  pattern  or  prior  history  of   wrongdoing.  

(d) Whether  contractor  has  been  excluded  or   disqualified by an agency of the Federal Government   or have not been allowed to participate in State or   local contracts or assistance agreements on a basis   of conduct similar to one or more of the causes for   debarment specified in this part.

(e) Whether and to what extent did the contractor plan,   initiate or carry out the wrongdoing.

(f) Whether  the contractor has accepted responsibility   for the wrongdoing and recognized the seriousness   of the misconduct.

(g) Whether the contractor has paid or agreed to pay all   criminal,  civil  and  administrative  liabilities  for  the   improper  activity,  including  any  investigative  or   administrative  costs  incurred  by  the  government,   and have made or agreed to make full restitution.

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((h) Whether  contractor  has  cooperated  fully  with  the   government  agencies  during  the  investigation  and   any court or administrative action.

 (i) Whether  the  wrongdoing was pervasive within  the   

contractor’s organization.

(j) The kind of positions held by the individuals involved   in the wrongdoing.

(k) Whether  the  contractor  has  taken  appropriate   corrective  action  or  remedial  measures,  such  as   establishing  ethics  training  and  implementing   programs to prevent recurrence.

(l) Whether  the  contractor  fully  investigated  the   circumstances surrounding the cause for debarment   and,  if  so,  made  the  result  of  the  investigation   available to the debarring official.”

22. As regards the period for which the order of debarment  

will  remain  effective,  the  guidelines  state  that  the  same  

would depend upon the seriousness of the case leading to  

such debarment.  

23. Similarly in England, Wales and Northern Ireland, there  

are  statutory  provisions  that  make  operators  ineligible  on  

several  grounds  including  fraud,  fraudulent  trading  or  

conspiracy to defraud, bribery etc.

24. Suffice  it  to  say  that  ‘debarment’ is  recognised  and  

often  used as  an  effective  method for  disciplining deviant  

suppliers/contractors  who  may  have  committed  acts  of  

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omission  and  commission  or  frauds  including  

misrepresentations,  falsification  of  records  and  other  

breaches of the regulations under which such contracts were  

allotted.  What  is  notable  is  that  the  ‘debarment’  is  never  

permanent  and  the  period  of  debarment  would  invariably  

depend upon the nature of the offence committed by the  

erring contractor.   

25. In the case at hand according to the respondent-BSNL,  

the appellant had fraudulently withdrawn a huge amount of  

money which was not due to it in collusion and conspiracy  

with  the  officials  of  the  respondent-corporation.  Even  so  

permanent debarment from future contracts for all times to  

come may sound too harsh and heavy a punishment to be  

considered reasonable especially when  (a) the appellant is  

supplying  bulk  of  its  manufactured  products  to  the  

respondent-BSNL and (b) The excess amount received by it  

has already been paid back.   

26. The next question then is whether this Court ought to  

itself  determine  the  time  period  for  which  the  appellant  

should  be  blacklisted  or  remit  the  matter  back  to  the  

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authority to do so having regard to the attendant facts and  

circumstances.  A remand back to the competent authority  

has appealed to us to be a more appropriate option than an  

order by which we may ourselves determine the period for  

which the appellant would remain blacklisted.  We say so for  

two precise  reasons.  Firstly, because  blacklisting is  in  the  

nature of penalty the quantum whereof is a matter that rests  

primarily with the authority competent to impose the same.  

In the realm of service jurisprudence this Court has no doubt  

cut short the agony of a delinquent employee in exceptional  

circumstances  to  prevent  delay  and  further  litigation  by  

modifying  the  quantum  of  punishment  but  such  

considerations  do  not  apply  to  a  company  engaged  in  a  

lucrative business like supply of optical fibre/HDPE pipes to  

BSNL. Secondly, because while determining the period for  

which  the  blacklisting should  be  effective  the  respondent-

Corporation may for the sake of objectivity and transparency  

formulate  broad  guidelines  to  be  followed  in  such  cases.  

Different periods of debarment depending upon the gravity of  

the offences, violations and breaches may be prescribed by  

such guidelines. While, it may not be possible to exhaustively  

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enumerate all types of offences and acts of misdemeanour,  

or violations of contractual obligations by a contractor, the  

respondent-Corporation  may  do  so  as  far  as  possible  to  

reduce if not totally eliminate arbitrariness in the exercise of  

the power vested in it and inspire confidence in the fairness  

of the order which the competent authority may pass against  

a defaulting contractor.

27. In the result, we allow this appeal, set aside the order  

passed by the High Court and allow writ petition No.2289 of  

2011 filed by the appellant but only to the extent that while  

the order blacklisting the appellant shall stand affirmed, the  

period  for  which  such  order  remains  operative  shall  be  

determined afresh by the competent authority on the basis  

of guidelines which the Corporation may formulate for that  

purpose.  The  needful  shall  be  done  by  the  Corporation  

and/or the competent authority expeditiously but not later  

than six months from today.  The parties are left to bear  

their own costs.   

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.………………….……….…..…J.         (T.S. THAKUR)

    ………..…………………..…..…J.              (VIKRAMAJIT SEN)

New Delhi October 4, 2013

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