Suspension of Contractor's Registration Without Opportunity of Hearing is Unlawful: Madhya Pradesh High Court

Suspension of Registration Requires Separate Show-Cause Notice and Opportunity of Hearing - Madhya Pradesh High Court, in Writ Petition No. 4318 of 2022, quashed the suspension of a contractor's registration with the Madhya Pradesh Public Works Department (MPPWD) due to non-completion of a construction project. The Division Bench, comprising Justice Vivek Rusia and Justice Binod Kumar Dwivedi, held that suspending the petitioner’s registration without giving an opportunity to be heard was unlawful. The court emphasized that procedural safeguards must be adhered to in cases of suspension or blacklisting.

The petitioner, Devendra Kumar Patel, a registered contractor with the MPPWD, was awarded a contract for constructing an archery ground at Girls Krida Parisar, Jhabua. Despite delays caused by issues like late approval of working drawings, the contract was terminated by the department. Subsequently, the petitioner's registration as a contractor was suspended for two years without any prior opportunity of hearing, leading him to file this writ petition under Article 226 of the Constitution.

I. Violation of Procedural Safeguards in Suspension of Registration

The main contention of the petitioner was that his registration was suspended without being given a chance to explain the reasons for the delay. The court held that such suspension must follow a proper procedure:

"The suspension of registration for non-completion of work requires a separate show-cause notice and an opportunity of hearing. The impugned suspension order is unsustainable as these procedural safeguards were not followed." [Paras 8-12].

II. MPPWD Guidelines and the Requirement of Show-Cause Notice

The court referred to the Circular dated 24/03/2015 of the MPPWD, which mandates the issuance of a show-cause notice before suspending or blacklisting a contractor. The circular also requires consideration of the seriousness of the alleged conduct:

"The competent authority must issue a show-cause notice and assess the seriousness of the contractor’s conduct before suspension or blacklisting. In the present case, the absence of such notice renders the suspension void." [Paras 9-12].

III. Blacklisting and Suspension: Impact on Contractor’s Rights and Public Interest

The court highlighted the severe consequences of blacklisting or suspension, emphasizing that such measures should only be invoked in serious cases affecting public interest. Citing The Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corporation (2024), the court stated:

"Blacklisting or suspension should not be readily imposed for ordinary breaches of contract, especially where there is a bona fide dispute. Such actions result in significant harm to the contractor’s ability to engage in future contracts and can lead to ‘civil death’ for the contractor." [Paras 10-11].

The Madhya Pradesh High Court quashed the suspension order dated February 3, 2022, ruling that the MPPWD failed to follow due process by not providing the petitioner with an opportunity to be heard. The court allowed the petition but did not award any costs.

Date of Decision: October 14, 2024