Under Article 298 of the Constitution, the Union and State have executive power to conduct business, including the right to refuse contracts and blacklist entities for perceived unethical actions. Blacklisting can result in severe consequences such as loss of business, reputation, and legal challenges, especially affecting opportunities for state contracts.

“The government can blacklist companies for unethical behavior, but must do so fairly, giving them a chance to respond. Decisions must follow principles of fairness and can be reviewed by courts to ensure they’re not arbitrary or unjust.”

A company can be blacklisted for reasons such as bribery, fraud, corruption, unauthorized use of government materials, security concerns, misbehavior, bid rigging, failure to meet goals, non-compliance with quality standards, breach of contract terms, and submitting falsified documents. The government’s power to blacklist must be exercised fairly and without arbitrariness to ensure fairness and equality.

Government undertakings must follow specific steps before blacklisting a contractor to protect their rights, as mandated by the Supreme Court:

1. Natural Justice and Audi Alteram Partem:

Contractors must be given a “show cause” letter and an opportunity to be heard. This principle ensures fairness and is rooted in Articles 14 and 21 of the Indian Constitution. The reasons for blacklisting must be clearly stated, and if the contractor isn’t given a chance to present their case, it violates natural justice.

1. Doctrine of Proportionality:

The blacklisting process and the punishment must be proportional and not arbitrary, in accordance with Article 14, ensuring fairness and just actions by the state.

The Supreme Court mandates blacklisting decisions to follow natural justice and proportionality principles, ensuring they are fair and not arbitrary. Debarment must be for a specified period. The state must avoid discrimination and ensure equal treatment in public contracts.

Before blacklisting, a fair hearing must be provided to ensure proper use of power. A writ court can review the order for fairness and proportionality. The Punjab and Haryana High Court allows blacklisting issues to be taken to arbitration, requiring parties to await arbitration outcomes.

 

Judicial Review of Blacklisting: The Supreme Court has said that any choice made by the government or its agents to “blacklist” a business is subject to judicial review. They have also said that the person or group affected should be given a fair hearing. When the power of court review is used to look into bids or the awarding of contracts, there are some things that should be kept in mind. As a result, a court should ask itself the following questions before getting involved in issues of bids or contracts as part of its judicial review power:

Whether the way the government did things or the decision they made was bad or meant to help someone;

OR

If the process or decision was so random and illogical that the court can say, “the decision is such that no responsible authority acting reasonably and in accordance with the relevant law could have reached,” If the public interest is changed.

Declaration of Blacklisted for Bid

To,

The Procurement Officer,
[Name of the Procuring Organization],
[Address of the Procuring Organization],
[City, State, PIN Code].

Subject: Non-Blacklisting and Non-Debarred Declaration for Bid Number [Bid Number]

Dear Sir/Madam,

We, [Your Company Name], having our registered office at [Your Company Address], hereby provide this declaration concerning our status with respect to blacklisting and debarment for Bid Number [Bid Number].

Declaration

1. Non-Blacklisting: We affirm that neither [Your Company Name] nor any of its affiliates, directors, or officers have been blacklisted or debarred by any government or quasi-government agency, public sector undertaking, or any other competent authority in India or abroad. We further confirm that no action is currently pending that could lead to such blacklisting or debarment.
2. Non-Debarred: We confirm that [Your Company Name] is not debarred from participating in any government tenders or contracts and has not been subjected to any suspension of business activities or other penalties that would affect its eligibility to participate in the tender process.
3. Legal Compliance: We declare that we comply with all legal requirements and regulations relevant to our business operations. We have not been convicted of any criminal offense or been subject to any legal proceedings that could impact our ability to fulfill contractual obligations.

We understand that any false information provided in this declaration may result in disqualification from the bidding process and legal action as per the applicable laws and regulations.

This declaration is executed on a stamp paper of ₹100/- and is duly notarized to attest to its authenticity and accuracy.

For any further information or clarification, please feel free to contact us at [Contact Information].

Thank you for considering our bid. We look forward to the opportunity to serve you.

Yours faithfully,

[Signature]
[Name of the Authorized Signatory]
[Designation]
[Your Company Name]
[Contact Number]
[Email Address]

Conclusion

The state is responsible for its people. The State sometimes puts certain contractors on a “blacklist” in the public interest to protect the bigger public interest and make sure they don’t get any more public work. But it shouldn’t make choices that are unfair or based on whim. It is best for them to follow the Doctrine of Proportionality and the rule of Audi Alteram Partem. Also, the Supreme Court has said that Natural Justice Principles must be followed even if they aren’t written in the State’s rules. As being on a blacklist will always make your job look bad, the government should follow these rules and not use blacklisting as a way to get back at someone politically.