Two-Day Delay Can’t Invite Civil Death: Orissa High Court Quashes Blacklisting of Contractor for Minor Lapse in APS Deposit

“Blacklisting must not be used as a sledgehammer to crack a nut” — In a powerful reaffirmation of constitutional safeguards in the realm of public procurement, the Orissa High Court struck down the three-year blacklisting and portal blocking of a Class-C contractor, Smt. Rinabala Sethi, imposed by the State authorities for a two-day delay in depositing Additional Performance Security (APS) and Initial Security Deposit (ISD) under a government tender. In doing so, the Court held that such disproportionate penal actions, taken without adhering to the principles of natural justice, not only violated statutory procedure but also infringed fundamental rights under Articles 14, 19(1)(g), and 21 of the Constitution.

Division Bench comprising Chief Justice Harish Tandon and Justice Murahari Sri Raman ruled that “blacklisting has the effect of economic and social civil death” and that “such action must be preceded by a clear and specific show cause notice and supported by adequate reasons.” In the present case, the Court found that neither condition was met, rendering the entire blacklisting process arbitrary, illegal, and void.

“Blacklisting cannot be a mechanical response to minor contractual delay” — Court insists on proportionality in government action

The petitioner had participated in a tender floated by the Executive Engineer, Drainage Division, Cuttack, for flood preparedness work in Banki and Damapada blocks. She was declared the lowest (L1) bidder and issued a Letter of Acceptance on July 15, 2024, requiring her to deposit APS of ₹1,16,000 and ISD of ₹4,450 by July 22, 2024. Due to illness, the petitioner deposited the amount on July 24, 2024, enclosing a medical certificate dated July 15, 2024, as an explanation.

Despite the minor delay, the authorities cancelled the bid, blocked her online portal registration, and subsequently issued a blacklisting order on December 11, 2024, barring her from participating in any tender for three years.

The Court rejected this punitive approach as unsustainable. Observing that “there was no whisper of mala fide intent or dishonest conduct on the part of the petitioner,” the Bench held:

“To blacklist a contractor for a two-day delay caused by illness, without issuing a proper show cause notice or considering the explanation, is not just harsh – it is unconstitutional.”

“No opportunity, no reasons, no inquiry – and yet, civil death?” — High Court criticises State for breach of OPWD Code and constitutional due process

The Bench drew attention to Clause 23.3 of the Odisha Public Works Department (OPWD) Code, which mandates that before any contractor’s portal registration is blocked, the tender inviting authority must conduct a due inquiry and issue a specific show cause notice. In the petitioner’s case, the portal was blocked on August 16, 2024, even before any blacklisting notice was issued.

The Court held:

“When the authority took action of blacklisting/debarment for a period of three years, the show cause notice had not fulfilled the requirements of the OPWD Code... the entire proceeding stands vitiated.”

It also noted that the medical certificate explaining the delay was never considered. Relying on Nareshbhai Bhagubhai v. Union of India, (2019) 15 SCC 1, the Court emphasized that reasons are the “heartbeat of decision-making,” and a “rubber-stamp reason cannot substitute valid justification.”

“The authority has neither rejected the explanation of illness nor provided any justification for imposing such extreme punishment. This non-application of mind is fatal.”

“The punishment should not be too extreme than the gravity of the crime” — Doctrine of Proportionality reasserted

Referring to the Supreme Court's consistent jurisprudence on blacklisting as a last resort, including State of Odisha v. Panda Infraproject Ltd., (2022) 4 SCC 393, and UMC Technologies Pvt. Ltd. v. FCI, (2020) 13 SCR 1175, the Bench reiterated that blacklisting cannot be imposed for trivial infractions.

Quoting from its earlier ruling in Shr. Artatran Bhuyan v. State of Odisha, 2025 (II) ILR-CUT 1042, the Court observed:

“The punishment should not be too extreme than the gravity of the crime... authorities must not use a sledgehammer to crack a nut.”

“Show cause notice must spell out the intended consequence” — Vague notices cannot result in blacklisting

The Court also held that the initial show cause notice issued to the petitioner, which merely stated that “appropriate action” may be taken, was hopelessly vague and defective. Citing Gorkha Security Services v. Government of NCT of Delhi, (2014) 9 SCC 105, and Vetindia Pharmaceuticals v. State of U.P., (2021) 1 SCC 804, it observed:

“Unless the contractor is put to clear notice that blacklisting is being contemplated, no such penalty can be lawfully imposed.”

In this case, the petitioner was left in the dark about the nature of punishment and was never given an opportunity to respond to the possibility of blacklisting or debarment.

“Blocking the portal before issuing show cause is illegal” — High Court questions reversal of due process

The judgment also noted with concern that the State authorities reversed the order of procedure by blocking the petitioner’s portal access first, and only later initiating blacklisting proceedings. The Bench held:

“There is no provision under the OPWD Code to block the portal before issuing a show cause or before blacklisting is ordered. Such inversion of procedure is wholly unsustainable.”

Blacklisting, portal blocking struck down – Refund ordered

Holding that the petitioner’s rights under Articles 14 and 21 were violated, the High Court declared the blacklisting and blocking orders as null and void. Though it declined to reinstate the tender since the work had already been completed, it granted relief in the following terms:

“The decision of the opposite parties to blacklist and debar the petitioner for three years for two days’ delay in deposit of APS and ISD after blocking the portal registration cannot be sustained.”

The Court further directed the restoration of portal registration and ordered the State to refund ₹10,000, which the petitioner had paid as a processing fee for attempting to restore her registration. The directions are to be complied with within ten days

This ruling reinforces a crucial constitutional principle – that contractors dealing with the State are not at the mercy of bureaucratic whim, and any deviation from procedural fairness, proportionality, and transparency will be met with strict judicial scrutiny.

Date of Decision: 22 December 2025