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Blacklisting of entity by state open to judicial review: SC

Any decision taken by the government or its instrumentalities to ‘blacklist’ a business entity is subject to judicial review, the Supreme Court has said while stressing that the party affected should be given a fair hearing.

The court observed that ‘blacklisting’ signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach and as such it should be open to scrutiny and debarment should be for a time frame.

‘Any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities.

This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality,’ said a bench of justices T S Thakur and Vikramajit Sen.

‘A fair hearing to the party being blacklisted thus becomes an essential pre-condition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. The order itself being reasonable, fair and proportionate to the gravity of the offence is similarly examinable by a writ court,’ the bench said.

The court made the observations while hearing a petition filed by Kulja Industries Limited which was blacklisted by BSNL for causing it a loss of Rs 7.98 crore by overcharging it for supply of telecom ducts and optical fibre cable.

The court also referred to the legal position governing blacklisting of suppliers in the US and the UK, Wales and Northern Ireland to point out that debarment of deviant contractors is never permanent and would invariably depend upon the nature of offence committed by them.

While affirming the order of blacklisting, the bench said the competent authority should determine the time period for it on the basis of guidelines which it may formulate.
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