SC Quashes Notice, Reaffirms Strict Standards for Blacklisting

The Hon’ble Supreme Court of India, in the case of M/s Techno Prints v. Chhattisgarh Textbook Corporation & Anr., (2025 INSC 236), dated February 12, 2025, quashed a show cause notice issued to the extent that it proposed blacklisting of a contractor and held that blacklisting cannot be imposed merely for a breach of contract unless the contractor’s conduct is so deviant or egregious as to warrant such punitive action.

The appellant, a registered printing firm, having been declared L-1, was awarded multiple work orders for printing textbooks but failed to complete the work within the stipulated timeframe, citing disruptions caused by the COVID-19 pandemic. However, due to the delay, the respondent issued a show cause notice, requiring the appellant to show cause as to why it should not be subjected to blacklisting for a period of three years and why the forfeiture of its Earnest Money Deposit (EMD) should not be effected. Aggrieved by this action, the appellant challenged the notice before the Hon’ble High Court of Chhattisgarh, wherein a Single Judge dismissed the writ petition, holding that the issuance of the notice was within the respondent’s authority. This decision was also upheld by the Division Bench of the High Court. Aggrieved by the decisions, the appellant preferred an appeal before the Hon’ble Supreme Court of India.

The Hon’ble Supreme Court observed that while authorities possess the inherent power to blacklist contractors, such power must be exercised reasonably and proportionately. The Hon’ble Court relied on the case of Erusian Equipment & Chemicals Ltd. Vs. State of W.B., [(1975) 1 SCC 70], dated November 11, 1974, and reiterated that blacklisting is a stigmatic action that effectively puts an end to a contractor’s business and should not be imposed arbitrarily. Further, it relied on the case of Blue Dreamz Advertising Pvt. Ltd. & Anr. v. Kolkata Municipal Corp. & Ors. reported in (2024 INSC 589), dated December 23, 2016, and emphasised that blacklisting should only be imposed to safeguard public interest from dishonest contractors.

The Hon’ble Court further criticised the routine issuance of show cause notices for blacklisting, observing that such notices are often issued as a mere formality, with authorities having already made up their minds to blacklist the contractor. It stressed that the principles governing blacklisting must be adhered to even at the stage of issuing a show cause notice, rather than only when a final order is passed. The Hon’ble Court further noted that indiscriminate blacklisting notices lead to unnecessary litigation, overburdening the judiciary with cases that could be resolved through contractual remedies such as forfeiture of EMD or damages. The Hon’ble Court referred to the case of Kulja Industries Limited v. Chief General Manager Western Telecom Project BSNL & Ors, (AIR 2014 SC 9), dated October 4, 2013, and identified three specific grounds where blacklisting may be justified: (i) habitual failure to supply, (ii) substandard performance, and (iii) refusal to honor contractual obligations without sufficient justification.

In this case however, the Hon’ble Court found that the appellant’s alleged breach, which occurred during the pandemic, did not meet the threshold for blacklisting, as there was no evidence of fraudulent intent or habitual default. It held that requiring the appellant to respond to the show cause notice, only to face an inevitable adverse order, would be an empty formality. Accordingly, the Apex Court quashed the notice to the extent it proposed blacklisting while permitting the respondent to forfeit the EMD.

This judgment reaffirms that blacklisting is a last-resort measure and must be exercised with caution and in accordance with established legal principles.