SUMAN K SHRIVASTAVA
Ranchi, April 2: The Supreme Court has set aside the blacklisting of M/s A.K.G. Construction and Developers Pvt. Ltd. in a Jharkhand case, while upholding the termination of its contract over a collapsed water reservoir project.
The ruling clarifies that blacklisting cannot automatically follow contract termination and must comply with principles of natural justice.
Case linked to water tower collapse
The contractor was awarded a project in March 2023 to build an Elevated Service Reservoir (ESR) in Jharkhand. In June 2024, the structure’s top dome collapsed.
While the firm blamed a cyclone and offered to rebuild the structure, multiple inquiries—including expert inputs—found negligence and poor-quality construction.
Based on these findings, the state terminated the contract and blacklisted the company for five years.
SC: Blacklisting process legally flawed
A bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe upheld the termination but struck down the blacklisting, citing procedural lapses.
The Court noted:
- No specific show-cause notice for blacklisting
- Lack of application of the mind
- Violation of natural justice principles
It observed that blacklisting is a “stigmatic and exclusionary” action and cannot be imposed mechanically.
Not an automatic consequence
The Court emphasised that termination and blacklisting operate in different domains:
- Termination affects existing contracts
- Blacklisting impacts future business opportunities
Therefore, authorities must take an independent and reasoned decision before blacklisting any contractor.
Considering the time already elapsed, the Court ruled that the blacklisting order will cease with immediate effect, instead of directing a fresh process.