Sumitra Sethy Vs the Indian Railways, New Delhi

For Petitioner : Mr. Shanti Prakash Mohanty Advocate For Opposite : Mr.Prasanna Kumar Parhi, Parties Deputy Solicitor General of India along with Mr.Satya Sindhu Kasyap, Senior Panel Counsel

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CORAM:

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HON’ BLE THE CHIEF JUSTICE AND

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HON’BLE MR. JUSTICE MURAHARI SRI RAMAN

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J U D G M E N T

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Date of hearing : 06.05.2026 : Date of Judgment: 06.05.2026

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W.P.(C) No.6182 of 2025 Page 1 of 12

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HARISH TANDON, CJ.-

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1. Often the question arises in the spate of litigations poured into the docket of this Court as to whether the issuance of show cause notice before the authorities proceeded to blacklist or debar the person is mandatory, even if there is no specific provisions contained in the contract or the statutory document in this regard.

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2. The instant case is one of such example where the tender floated by the opposite party-authorities does not contain any specific provisions for a show cause notice to be issued before the authorities embarked its journey of imposing the blacklisting order based upon a false affidavit or disclosure of wrong information.

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3. Several pleas have been taken on the factual aspects by the rival parties touching upon the conduct of the petitioner attributable to the participation in the tender process and the submission of an affidavit but we need not delve upon the same as the legal issues involved in the instant writ petition is whether

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the show cause notice is imperative before the authorities

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proceed to inflict the order of debarment/blacklisting in absence of any express provisions in the tender call notice or the others binding documents between the parties.

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4. To complete the sequel of the facts the reliance is heavily placed upon by the petitioner to the Freight Marketing Circular No.11 of 2022 issued by the competent authority containing the exhaustive provision relating to barring of the firms. According to the petitioner, the said policy or the standard conditions of the contract for the commercial earning is ratified and vetted by a letter dated 13.06.2022 issued by the Ministry of Railways, and, therefore, the authorities cannot depart from adhering the said Freight Marketing Circular No.11 of 2022.

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5. Mr.Prasanna Kumar Parhi, learned Deputy Solicitor General of India took a stand that the clause pertaining to the barring of the firm has its restricted applicability to a situation and/or the incidences given therein and any other circumstances warranting the passing of a blacklisting order cannot be impliedly included therein, and, therefore, such Freight

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Marketing Circular has no manner of application in the instant case.

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6. Be that as it may, whether the said Freight Marketing Circular has any applicability or not may not be a sole determinant factor as we find that even if there is no provision for issuance of the show cause, whether the imposition of the order of blacklisting can be sustained on the anvil of the principles of natural justice.

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7. It is no gainsaying that the blacklisting or debarment has

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an effect of eliminating a person from participating in any contract with the Government nor will have any such privilege and advantage of entering into the contract with the Government agencies. It is, in effect, deprived a person from having any commercial relationship with the Government or its agencies and has an impact on the right to trade or profession as provided under Article 19(1)(g) of the Constitution of India. Such fundamental right is always subject to the established procedure of law and in the event it is found that the person has committed

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a gross error or violated the terms and conditions of the contract,

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there is no fetter in debarring such person to participate in any tender, nor will be entitled to establish a contractual relationship with the public authority. In such sense, it is time and again regarded as a “civil death” and therefore, it is a paramount duty of the authorities to adhere the principles of natural justice before it proceeds to inflict an order of debarment and/or blacklisting on the person.

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8. The aforesaid concept/notion is further fortified in the judgment rendered by the Apex Court in case of Raghunath Thakur vs. State of Bihar; (1989) 1 SCC 229 in the following :-

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“4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of

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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. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law. In the premises, that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness or otherwise of the allegations made against the appellant. The appeal is thus disposed of.”

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W.P.(C) No.6182 of 2025 Page 6 of 12

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9. In Gorkha Security Services vs. Government (NCT of Delhi) and others ; (2014) 9 SCC 105 , the Apex Court highlighted the importance of a show cause notice to be preceded before the order of blacklisting/debarment is issued in the following:

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“16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as “civil death” of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in Government Tenders which means precluding him from the award of Government contracts.”

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10. It is manifest from the ratio of law enunciated in the

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above report that the order of blacklisting and/or debarment not only prevents and/or excludes a person from participating in any contractual relationship with the Government or its agencies but

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is also deprived of his livelihood as a stigma would be attached to him which cannot be inflicted without giving ample opportunity to defend. Even if the terms and conditions embodied in the tender document does not contain an express provision relating to issuance of a show cause preceding the order of blacklisting, yet the rule of natural justice being paramount cannot be abridged and/or whittled down which is one of the ethos of the constitutional rights guaranteed in the Constitution of India. The maxim audi alteram partem is ingrained and inhered into the legal system and even a person cannot be penalised and/or condemned without giving an opportunity of hearing. As indicated hereinabove the debarment/blacklisting has the blend of a civil death, such order cannot be passed without affording an opportunity to defend and for such reason the issuance of show cause becomes inevitable.

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11. In a recent judgment rendered by the Hon’ble Supreme Court in M/s. A.K.G Construction and Developers Pvt. Ltd. Vs. State of Jharkhand and others; (2026) 4 SCR 331 , the Apex Court was considering a case where a show cause notice was

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issued to the contractor with regard to the termination of a contract for the reasons reflected in the said show cause notice but the authorities while terminating the contract proceeded to pass an order of blacklisting and/or debarment. The Apex Court did not interfere with the order of termination of a contract but set aside the order of the debarment as both the circumstances relating to a termination of a contract and imposition of a blacklisting and/or debarment are distinct, different and separate.

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It is held that the show cause notice which was restricted to a termination of contract cannot be stretched to mean that it is also for the debarment in the following:-

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“3. Upon careful consideration of the impugned State action, which terminates the contract and blacklists the appellant without meaningful distinction, we hold that the termination order is substantiated and justified. However, the blacklisting order suffers from patent infirmities: it evinces no application of mind, disregards the mandatory precept of audi alteram partem, and fails to preceede with a show-cause notice requiring the contractor to demonstrate why such drastic action should not be taken. Blacklisting, being stigmatic and exclusionary in nature, cannot be

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imposed mechanistically but must comport with principles of natural justice and reasonableness.

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***

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22. Returning to the facts of the present case, at the outset, it is apparent that the show cause notice dated 04.06.2024 does not purport to be a show cause notice for blacklisting at all. It perhaps expects the contractor to assume that it is for termination as well as for blacklisting. Even if we accept the submissions of Mr. Kumar Anurag Singh that, as there is no provision for prior notice before termination, this show cause notice must be taken to be for blacklisting, we are of the opinion that it still falls short of the requirement of a proper show cause notice for blacklisting. This is for the reason that as the decision to blacklist is independent of the decision to terminate, the Department must demonstrate application of mind before it takes the next step of blacklisting the contractor, over an order of termination. Upon taking such a decision, it must also issue a show cause notice calling upon the contractor to explain why a consequential order of blacklisting should also not be passed. The letter must be indicative of the proposed decision to blacklist and the requirement of the contractor to respond to it. The show cause notice dated 04.06.2024 falls short of these requirements. Similarly, the final order of blacklisting, dated

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23.08.2024, also does not list the reasons as to why an order of blacklisting has become necessary.” 12. We would not have dilated further as admittedly no

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show cause notice was issued by the authority before passing an order of blacklisting and/or debarment and simpliciter quashing and/or setting aside the order of debarment would be the relief which the petitioner is entitled to but our attention is drawn to the paragraph-22 of the judgment rendered in M/s. A.K.G Construction and Developers Pvt. Ltd. (supra), where in an identical situation, the Apex Court did not consider it proper to direct the authorities to issue a show cause notice and proceed to decide as to whether the order of blacklisting and/or debarment is an inevitable consequence as the order of debarment completed the journey of more than half of the period and such direction would simpliciter invite a future litigation. Though the said relief is moulded in exercise of power under Article 142 of the Constitution of India, but in the parity of the facts the equitable principles may also apply and the Court may restrict the tenure of blacklisting.

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13. In the instant case, the petitioner has already suffered an order of debarment for more than one and half years and the said order of debarment was imposed for a period of three years. The petitioner has already suffered, and, therefore, we do not think that the justice requires a further initiation of the proceedings against the petitioner. The order of debarment having issued in violation of the principles of natural justice is hereby quashed and set aside so far as it relates to an order of debarment and/or blacklisting is concerned.

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14. The petitioner shall not be entitled to claim any reliefs against the rejection of the bid proceeding at this stage but shall be entitled to participate in the future tender.

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15. Accordingly, the writ petition is disposed of.

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(Harish Tandon)

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Chief Justice

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(M.S. Raman) Judge

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Bichi/Aswini

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Signature Not Verified

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Digitally Signed Signed by: ASWINI KUMAR SETHY Designation: PERSONAL ASSISTANT (SECY I/C) Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 12-May-2026 19:28:52

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W.P.(C) No.6182 of 2025 Page 12 of 12

Sumitra Sethy v. the Indian Railways, New Delhi

Case brief

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Sumitra Sethy v. the Indian Railways, New Delhi

Case brief

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