Holding

A blacklisting order that is not preceded by a specific, reasoned show‑cause notice and fails to demonstrate application of mind is illegal, arbitrary and must be set aside, whereas a termination order based on clear findings of negligence is valid.

Summary

M/s A.K.G. Construction and Developers Pvt. Ltd was contracted by the Jharkhand Water and Sanitation Department to build an elevated service reservoir. The reservoir's top dome collapsed on 1 June 2024, prompting a show‑cause notice alleging negligence and poor quality. The department subsequently issued a combined termination and blacklisting order on 23 August 2024, blacklisting the contractor for five years. The contractor challenged both orders; the High Court upheld them, but the Supreme Court found the termination justified while holding that the blacklisting order violated natural‑justice principles because it lacked a specific show‑cause notice and application of mind. The Court set aside the blacklisting order, directing that it cease to operate immediately, and dismissed the appeals concerning termination.

Issues considered

Whether the department’s blacklisting order is valid in view of the requirements of natural justice and the Contractor Registration Rules, 2012.
Whether the termination of the contract was lawful under the General Conditions of Contract.
Whether a show‑cause notice specific to blacklisting is mandatory before imposing a blacklisting order.

Legislation cited

Contractor Registration Rules, 2012

Headnote

Issue for Consideration Whether the black listing order, in the instant case, suffers from patent infirmities; whether the blacklisting, being stigmatic and exclusionary in nature, can be imposed mechanistically. Headnotes† Contract – Termination – Blacklisting – contractor with the Water and Sanitation Department was contracted for construction of an Elevated Service Reservoir (ESR) by issuance of a Letter of Acceptance (LOA) on 06.03.2023 – During the subsistence of the contract, on 01.06.2024, the top dome of the reservoir collapsed –

Subjects

ContractTerminationBlacklistingAudi alteram partemNegligencePrinciples of natural justiceShow-cause noticeNon-application of mindReasonableness

Judgment

[2026] 4 S.C.R. 331 : 2026 INSC 312

M/s A.K.G. Construction and Developers Pvt. Ltd
v.
State of Jharkhand & Ors.
(Civil Appeal No. 4152 of 2026)
02 April 2026
[Pamidighantam Sri Narasimha and Alok Aradhe, JJ.]

Issue for Consideration
Whether the black listing order, in the instant case, suffers from
patent infirmities; whether the blacklisting, being stigmatic and
exclusionary in nature, can be imposed mechanistically.

Headnotes†
Contract – Termination – Blacklisting – The appellant,
a registered contractor with the Water and Sanitation
Department was contracted for construction of an Elevated
Service Reservoir (ESR) by issuance of a Letter of
Acceptance (LOA) on 06.03.2023 – During the subsistence
of the contract, on 01.06.2024, the top dome of the reservoir
collapsed – Department issued a show cause notice dated
04.06.2024 seeking explanation as to why action should not
be taken for the negligence and bad quality of work – Upon
receiving concurrent reports indicating negligence on part
of appellant, respondent no. 3, Chief Engineer, Drinking
Water and Sanitation Department, passed the termination
cum blacklisting order dated 23.08.2024 – Aggrieved, the
appellant filed an appeal, which was dismissed by the
Appellate Authority – Appellant filed writ petition, which was
also dismissed – Correctness:
Held: In view of the clear findings of negligence as articulated in the
order of termination, this Court will not interfere with the decision
of termination – In so far as the order relating to blacklisting is
concerned, the blacklisting order suffers from patent infirmities: it
evinces no application of mind, disregards the mandatory precept of
audi alteram partem, and fails to precede with a show-cause notice
requiring the contractor to demonstrate why such drastic action
should not be taken – Blacklisting, being stigmatic and exclusionary
332 [2026] 4 S.C.R.

Supreme Court Reports

in nature, cannot be imposed mechanistically but must comport with
principles of natural justice and reasonableness – The final order
of blacklisting, dated 23.08.2024, does not list the reasons as to
why an order of blacklisting has become necessary – A blacklisting
order assumes that the contractor is an incorrigible entity, at least
for some time to come, in this case such an assumption was
intended to operate for five years – For giving effect to such a
premise, there has to be sufficient evidence, clear application of
mind and stronger adherence to principles of natural justice – The
blacklisting order dated 23.08.2004 falls short of this requirement
and is liable to be set aside – Thus, the decision of blacklisting of
the appellant is illegal, arbitrary and unreasonable – The declaration
of blacklisting is set aside. [Paras 15, 16, 3, 23, 25]

Contract – Termination – Blacklisting:
Held: The contractual conditions governing termination on the one
hand and those that relate to blacklisting on the other are distinct
and will be exercised independently – A decision of blacklisting
is not automatic and certainly not a logical consequence of a
decision of termination – Even after the Department decides
to terminate the contract, there is still a choice of exercising
the power of blacklisting – These decisions operate in two
dimensions-past and subsisting for termination and future for
blacklisting – In other words, an order of blacklisting transcends
the existing contract and debars the contractor from contracts that
could probably be executed in the next five years – In view of
the serious consequences, it is necessary for the Department to
issue a specific notice proposing blacklisting of a contractor and
call for an explanation as to why an order of blacklisting should
not be passed. [Para 18]

Case Law Cited
Erusian Equipment & Chemicals Ltd. v. State of West Bengal,
[1975] 2 SCR 674 : (1975) 1 SCC 70; UMC Technologies Pvt
Ltd v. Food Corporation of India [2020] 13 SCR 1175 : (2021) 2
SCC 551; M/s Techno Prints v. Chhattisgarh Textbook Corporation
& Anr., 2025 INSC 236 : [2025] 3 SCR 208 – relied on.
Raghunath Thakur v. State of Bihar, [1988] 3 Supp. SCR 867 :
(1989) 1 SCC 229; Gorkha Security Services v. Govt. (NCT of Delhi)
[2026] 4 S.C.R. 333

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

[2014] 13 SCR 617 : (2014) 9 SCC 105; Kulja Industries Ltd. v.
Chief General Manager, Western Telecom Project BSNL [2013]
14 SCR 430 : (2014) 14 SCC 731; The Blue Dreamz Advertising
Pvt Ltd. & Anr. v. Kolkata Municipal Corporation & Ors., 2024
INSC 589 : [2024] 8 SCR 189 – referred to.

List of Acts
Contractor Registration Rules, 2012.

List of Keywords
Contract; Termination; Blacklisting; Audi alteram partem; Negligence;
Principles of natural justice; Show-cause notice; Non-application
of mind; Reasonableness.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4152 of 2026
From the Judgment and Order dated 07.02.2025 of the High Court
of Jharkhand at Ranchi in WPC No. 6886 of 2024.
With
Civil Appeal No. 4153 of 2026.

Appearances for Parties
Advs. for the Appellant(s):
M.S. Ganesh, Sr.Adv., R. Ayyam Perumal, Ms. Archana Sharma,
Rao Raj Bahadur Singh, A. Sai Kumar.
Advs. for the Respondent(s):
Kumar Anurag Singh, Jayant Mohan, Ms. Meenakshi Chatterjee,
Zain A. Khan, Ms. Adya Shree Dutta, Ms. Dorjee Ongmu Lachungpa,
Priyanshu Teotia, Dev Aaryan, Mohd. Abran Khan.

Judgment / Order of the Supreme Court

Judgment

1. Leave granted.
2. While exercising judicial review over administrative actions of the State
and its instrumentalities in relation to contracts provisioning clauses
334 [2026] 4 S.C.R.

Supreme Court Reports

and rules relating to termination and/or blacklisting, Courts must apply
distinct standards of legality, rationality and proportionality. Such an
approach is compelling as conditions for imposing such measures,
as also the consequences of such actions, have differing gravity.
3. Upon careful consideration of the impugned State action, which
terminates the contract and blacklists the appellant without meaningful
distinction, we hold that the termination order is substantiated and
justified. However, the blacklisting order suffers from patent infirmities:
it evinces no application of mind, disregards the mandatory precept of
audi alteram partem, and fails to precede with a show-cause notice
requiring the contractor to demonstrate why such drastic action
should not be taken. Blacklisting, being stigmatic and exclusionary
in nature, cannot be imposed mechanistically but must comport with
principles of natural justice and reasonableness.
4. For the reasons detailed hereafter, we uphold the order of termination
and the impugned judgement and review order affirming the same,
but set aside the decision to blacklist the appellant.
5. Having upheld the order of termination, we were of the opinion
that the assumed logical consequence of blacklisting is neither
supported by application of mind nor followed by a clear notice
proposing blacklisting. For the reasons to follow, we set aside the
order of blacklisting. However, in the facts and circumstances of the
case, due to passage of time, we have suitably moulded the relief
and directed that the order of blacklisting shall not continue for five
years as directed by the Department but will cease to operate from
the date of our judgment.

Facts
6. The appellant, a registered contractor with the Water and Sanitation
Department was contracted for construction of an Elevated Service
Reservoir (ESR) by issuance of a Letter of Acceptance (LOA) on
06.03.2023. During the subsistence of the contract, on 01.06.2024,
the top dome of the reservoir collapsed. Though it was justified as
being a result of an unexpected cyclone, the appellant offered to
reconstruct it at own expense. However, the Department issued a
show cause notice dated 04.06.2024, seeking explanation as to why
action should not be taken for the negligence and bad quality of work.
The contents of the show cause notice are as follows -
[2026] 4 S.C.R. 335

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

“(PURPOTED SHOW CAUSE)
GOVERNMENT OF JHARKHAND
DRINKING WATER & SANITATION DEPARTMENT
Letter No. 4/A.V.-01-1019/2024-1311
From,
Navneet Kumar
Under Secretary to the Government.
To,
M/s. A.K.G. Construction & Developers
Pvt. Ltd. Ranchi.
Ranchi, Date- 4/6/24
Subject: Regarding submitting clarification.
Context: Letter No. 727 of Executive Engineer, Drinking
Water and Sanitation Division, Jhumritilaiya, dated
01.06.2024.
Sir,
As per the directions, the department received information
about collapse of the under-construction water tower in
Neemadhi village under Koderma-Demchonch Jaynagar
Mega Rural Water Supply Scheme through the relevant
letter on the above subject.
The collapse of the under-construction water tower proves
that quality was not taken care of in the construction of
the water tower.
Due to your not doing quality work as per the agreement
in the construction of the water tower, the water tower
collapsed due to which the image of the department got
tarnished.
Therefore, it is directed by attaching a copy of the letter
describing tire incident that why action should not be taken
against you as per rules for negligence shown by you and
not doing quality construction and, ensure to submit your
explanation within 03 (three) days. In case of not receiving
the explanation on time, it will be considered that you have
336 [2026] 4 S.C.R.

Supreme Court Reports

nothing to say regarding the allegation and the department
will be free to take unilateral action.
Translation- As Aforesaid
Yours sincerely,
Sd./-Illegible
04/06/2024
(Navneet Kumar)
Under Secretary to the Government.”
7. Following the show cause notice, multi-level enquiries were
conducted. Initially, a three-member committee gave its report on
06.06.2024. Thereafter, the Superintending Engineer also examined
the matter in detail. These enquiries drew inputs from Birsa Institute
of Technology, Sindri and also IITs of Delhi, Madras and Bombay.
Upon receiving concurrent reports indicating negligence on part of
the appellant, respondent no. 3, Chief Engineer, Drinking Water and
Sanitation Department, passed the termination cum blacklisting order
dated 23.08.2024. The order containing the reasons for termination
and blacklisting is reproduced below for ready reference;
“GOVERNMENT OF JHARKHAND
DRINKING WATER & SANITATION DEPARTMENT
Order No.-4/A.V.-01-102l/2024-20(CDO), Ranchi,
Date- 23/08/2024
ORDER
It was informed by letter no. 727 dated 01.06.2024 of
Executive Engineer, Drinking Water and Sanitation Division,
Jhumritilaiya that the water tower under construction in
Neemadhi village under the work of Koderma-Domchonch
Jaynagar Large Rural Water Supply Scheme, which is
allotteed to the contractor M/s A.K.G. Construction &
Developers Pvt. Ltd., Ranchi, collapsed on 01.06.2024.
In the light of the above, the contractor was asked
for clarification by departmental letter no. 1311 dated
04.06.2024, in the light of which the contractor submitted
clarification through letter no. AKG/24-25/26 dated
06.06.2024 in which the contractor has reported that no
laxity has been shown in the construction of the under-
construction water tower and the under-construction water
[2026] 4 S.C.R. 337

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

tower fell due to natural disaster/cyclonic storm. In the light
of the above, by letter no. 663 (CDO) dated 21.06.2024
of this office, the Superintending Engineer, Drinking Water
and Sanitation Zone, Hazaribagh was directed to review
the clarification received from the contractor point by point
and provide a report with his clear opinion. The opinion
was provided by letter no. 545 dated 21.06.2024 of the
Superintending Engineer, Drinking Water and Sanitation
Zone, Hazaribagh in which it is reported that the work
described has not been done as per the approved Design
& Drawing and the quality of the overall work has not been
taken care of.
In the matter described by the department, an inquiry was
conducted by a three-member inquiry committee. The
inquiry committee submitted the inquiry report through
departmental G.S.P. No.-283 dated 06.06.2024 in which
it is reported that negligence was shown in getting the
construction work of the water tower completed as per the
approved Design & Drawing and quality was not taken care
of, due to which the incident of collapse/demolition of the
water tower occurred. Thus, the contractor is responsible/
guilty for negligence and negligence in getting the quality
work done.
The contractor informed the concerned Executive Engineer
through his letter-AKG/24-25/23 dated-01.06.2024 that he
is ready to construct ESR again at his own expense in
place of the demolished ESR under construction. It was
never appropriate for him to construct ESR again without
departmental order. This act of his reflects an attempt to
hide his wrongdoings.
The department condemns this modus operandi of the
contractor.
It is clear from the above that the contractor got low
quality construction work done in the work of the scheme,
which tarnished the image of the department and created
obstacles in achieving the objectives of the department.
This is a clear violation of rule number-10.1.8 and 10.1.15
of the Contractor Registration Rules 2012. Therefore,
338 [2026] 4 S.C.R.

Supreme Court Reports

after review by the department, the explanation of the
contractor is rejected.
Therefore, after due consideration by the department in
the light of Rule No. 10.1.8 and 10.01.15 of Contractor
Registration Rules 2012, the contractor M/s A.K.G.
Construction & Developers Pvt. Ltd., Panna Enclave, Flat
No-202, Kadru, Ranchi-834002, e-mail: ketan.kumar007@
gmail.com is blacklisted for 5 (five) years with immediate
effect and in this context, the following order is given in the
light of Rule No. 10.3 and 10.4 of Contractor Registration
Rules 2012:-
2. It is decided to stop all the works being done by the
contractor from the date of issuance of the order and
to confiscate the security deposit of all the works. Also,
the concerned regional Chief Engineer/Superintending
Engineer/Executive Engineer will ensure to take appropriate
action as per the requirement to complete the remaining
work being done by the contractor.
3. The registration of the contractor in all categories in the
department is cancelled with immediate effect.
4. The proposal has received the approval of the Hon’ble
Departmental Minister.
(Prabhat Kumar Singh)
Chief Engineer, C.D.O
Date: 23/08/2024”
8. Aggrieved, the appellant filed an appeal, which came to be dismissed
vide order dated 05.12.2024 of the Appellate Authority cum Principal
Secretary, Drinking Water and Sanitation Department. The appellant
filed a writ petition challenging orders dated 23.08.2024 and
05.12.2024. By impugned judgement and order dated 07.02.2025,
the High Court dismissed the writ petition, while also imposing a cost
of Rs. 2 lakhs on the appellant. It was held that the corroborated
findings of the enquiries conducted, as also the appellant’s own
admission in the form of offering to reconstruct the entire ESR at
its own cost, leads to a logical inference of negligence in carrying
out the construction as per the approved design and drawings. It
was also held that the orders impugned were neither illegal nor
[2026] 4 S.C.R. 339

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

arbitrary as proper opportunity was given to the appellant at every
stage.
9. The appellant sought a review of the decision arrived by the High
Court on self-same grounds, which naturally came to be dismissed
by the High Court vide impugned order dated 04.08.2025. Thus, the
present appeals have been filed against the main judgement as well
as the review order.

Submissions
10. Mr. M.S. Ganesh, learned senior counsel appearing on behalf of the
appellant, would submit that the termination as well as the blacklisting
are illegal and arbitrary. He would submit that constitution of the three-
member committee, followed by its report and subsequent reports,
were without giving any opportunity to the appellant. He would also
submit that the arbitrariness is writ large as the decision to blacklist
had the effect of terminating all subsisting contracts.
11. Mr. Kumar Anurag Singh, learned counsel for the respondent
Department would submit that Clause 59 of the General Conditions
of Contract (GCC), dealing with termination of contract does not
provide for a prior notice. He would also rely on Rule 10 of the
Contractor Registration Rules, 2012, dealing with blacklisting, which
mandates issuance of a show cause notice before blacklisting a
contractor upon misconduct. He would submit that the show cause
notice 04.06.2024 was specifically for purpose of blacklisting the
appellant, which according to him, is further cemented by express
use of the phrase “why action should not be taken against it as
per the rules”. In view of the concurrent operation of GCC and
the 2012 Rules, he submits that the common order of termination
cum blacklisting is compliant of all conditions and therefore legal
and valid.

Analysis
12. The controversy revolves around a true and correct interpretation
of Clause 59 of GCC, relating to termination, and Rule 10 of 2012
Rules, relating to blacklisting. The Clause and the Rule is reproduced
herein for ready reference.
13. Clause 59 of GCC is as follows -
340 [2026] 4 S.C.R.

Supreme Court Reports

“59.Termination
59.1. The Employer or the Contractor may terminate the
Contract if the other party causes a fundamental breach
of the Contract.
59.2. Fundamental breaches of Contract include, but shall
not be limited to the following:
(a) The Contractor stops work for 28 days when no
stoppage of work is shown on the current Programme and
the stoppage has not been authorized by the Engineer;
(b) The Engineer instructs the Contractor to delay the
progress of the Works and the instruction is not withdrawn
within 28 days;
(c) The Employer or the Contractor is made bankrupt or
goes into liquidation other than for a reconstruction or
amalgamation.
(d) The Engineer gives Notice that failure to correct a
particular Defect is a fundamental breach of Contract and
the Contractor fails to correct it within a reasonable period
of time determined by the Engineer.
(e) The Contractor does not maintain a security which is
required;
(f) The Contractor has delayed the completion of works
by the number of days for which the maximum amount of
liquidated damages can be paid as defined in the Contract
data; and
(g) If the Contractor, in the judgment of the Employer has
engaged in corrupt or fraudulent practices in competing
for or in executing the Contract.
For the purpose of this paragraph: “corrupt practice” means
the offering, giving, receiving or soliciting of anything of
value to influence the action of a public official in the
procurement process or in contract execution. “Fraudulent
practice” means a misrepresentation of facts in order to
influence a procurement process or the execution of a
contract to the detriment of the Borrower, and includes
[2026] 4 S.C.R. 341

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

collusive practice among Bidders (prior to or after bid
submission) designed to establish bid prices at artificial
non-competitive levels and to deprive the Borrower of the
benefits of free and open competition.”
59.3. When either party to the Contract gives notice of a
breach of contract to the Engineer for a cause other than
those listed under Sub Clause 59.2. above, the Engineer
shall decide whether the breach is fundamental or not.
59.4. Notwithstanding the above, the Employer may
terminate the Contract for convenience.
59.5. If the Contract is terminated the Contractor shall
stop work immediately, make the Site safe and secure and
leave the Site as soon as reasonably possible”
14. Rule 10 of Contractor Registration Rules, 2012 is as follows -
“10. BLACKLISTING
10.1 A contractor in person or any partner of a registered
firm or any director of a private public limited company or
his technical staff or any of his authorized representatives,
registered in any of the above categories, may be
blacklisted for any of the following misconducts:
10.1.1 Creating law and order problem in Government
office while receiving tender documents, submitting tender
documents or doing any work related thereto.
10.1.2 Intimidating or assaulting concerned officer or
employee.
10.1.3 If the contractor is found selling or misusing
Government goods such as cement, steel and pipes etc..
10.1.4 If convicted in any criminal activity.
10.1.5 If wrong documents are submitted for registration
under these rules.
10.1.6 In case of being banned or blacklisted by any
department/undertaking of the Government of India or
any State Government.
10.1.7 In case of violation of Rule 6.2 of these rules.
342 [2026] 4 S.C.R.

Supreme Court Reports

10.1.8 Failure to execute the work as per the agreement
and prescribed specifications.
10.1.9 In case of the contractor handing over his work to
another contractor or any person without departmental
order (subletting).
10.1.10 No improvement is reflected in the conduct of the
suspended contractor.
10.1.11 Corrupting or attempting to corrupt the tender
process.
10.1.12 indulging in malpractices likes bribery, corruption
or fraud.
10.1.13 any such act which obstructs the achievement of
the objectives of the works department.
10.1.14 applying political pressure directly or indirectly.
10.1.15 doing work of poor quality.
10.1.16 directly or indirectly threatening or intimidating
departmental officers/employees.
10.1.17 not achieving physical targets in proportion to the
time elapsed.
10.2 The blacklisted contractor will be debarred from
working in any Government Department / Undertaking in
future and his registration will be cancelled with immediate
effect.
10.3 If a registered contractor is blacklisted in any one
category in the light of Rule 10.1, then the registration of
the said contractor in all other categories, if any, will also
be deemed to be cancelled with immediate effect.
10.4 All the works being carried out by the blacklisted
contractor in the Department of Drinking Water and
Sanitation, Jharkhand will be stopped from the date of
the order issued in the light of Rule 10.1, and the security
deposit of all the works will be forfeited and appropriate
action will be taken as per requirement to complete the
remaining works.
[2026] 4 S.C.R. 343

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

10.5. Before blacklisting a contractor of a particular
category, it will be necessary to issue a show cause notice.
10.6 The order of blacklisting can be passed by the
registration officer of the concerned category or the officer
under who’s supervision/under whose supervision the
registration officer is working.
10.7 Against the penalty imposed, the contractor may
file an appeal before the departmental secretary within
thirty days.
10.8 After approval by the government, the blacklisting
order will be issued by the concerned registration officer.”
15. Before we proceed to consider the Rules relating to blacklisting and
its adverse consequences, we may state that it was made clear to
Mr. M.S. Ganesh, learned senior counsel for the appellant, that in
view of the clear findings of negligence as articulated in the order
of termination, we will not interfere with the decision of termination.
As regards the submission of Mr. M.S. Ganesh that the appellant
did not have sufficient opportunity to defend himself, notwithstanding
the submission of Mr. Kumar Anurag Singh that termination does
not require prior notice, we are of the opinion that the appellant had
sufficient opportunity at the common hearing for termination and
blacklisting. Further, the appellant argued the entire case before the
Appellate Authority. Appellant also raised and contested the case
on merits before the Division Bench. Having examined the contest
and its due consideration all through, we are of the opinion that the
decision as regards termination is unimpeachable, on merits as well
as on the grounds of due process.
16. In so far as the order relating to blacklisting is concerned, we are
of the opinion that this issue requires close scrutiny and that will be
undertaken by reference to Rule 10 of the 2012 Rules.
17. A cursory reading of Rule 10 makes it evident that an order of
blacklisting has serious consequences, effecting not only the existing
contracts but also bars future business transactions for some years.
Under Rule 10.3, if a registered contractor is blacklisted for any one
category as per Rule 10.1, then the registration of the said contractor
in all other categories, if any, will be deemed to be cancelled with
immediate effect. Upon such cancellation, under Rule 10.4, all the
344 [2026] 4 S.C.R.

Supreme Court Reports

works carried out by the blacklisted contractor in the department will
be stopped from the date of issuance of order under Rule 10.1. It also
provides that the security deposit for all the works will be forfeited.
18. The contractual conditions governing termination on the one hand
and those that relate to blacklisting on the other are distinct and will
be exercised independently. A decision of blacklisting is not automatic
and certainly not a logical consequence of a decision of termination.
Even after the Department decides to terminate the contract, there is
still a choice of exercising the power of blacklisting. These decisions
operate in two dimensions - past and subsisting for termination
and future for blacklisting. In other words, an order of blacklisting
transcends the existing contract and debars the contractor from
contracts that could probably be executed in the next five years. In
view of the serious consequences, it is necessary for the Department
to issue a specific notice proposing blacklisting of a contractor and
call for an explanation as to why an order of blacklisting should not
be passed. This is exactly the purpose and object behind Rule 10.5.
19. The requirement under Clause 10.5 is a clear case of legislative (in
this case subordinate legislation) incorporation of principles of natural
justice. This Court has time and again emphasised the need to adhere
to principles of natural justice while passing blacklisting orders,
given the grave consequences that follow. In Erusian Equipment &
Chemicals Ltd. v. State of West Bengal1, it was observed that –
“15. The blacklisting order does not pertain to any
particular contract. The blacklisting order involves civil
consequences. It casts a slur. It creates a barrier between
the persons blacklisted and the Government in the matter
of transactions. The blacklists are “instruments of
coercion”.
20. Blacklisting has the effect of preventing a person
from the privilege and advantage of entering into lawful
relationship with the Government for purposes of gains.
The fact that a disability is created by the order of
blacklisting indicates that the relevant authority is

1 (1975) 1 SCC 70. The principle in Eurasian Equipment has been reiterated by this Court in many
subsequent judgements such as Raghunath Thakur v. State of Bihar (1989) 1 SCC 229, Gorkha Security
Services v. Govt. (NCT of Delhi), (2014) 9 SCC 105, etc.
[2026] 4 S.C.R. 345

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

to have an objective satisfaction. Fundamentals of fair
play require that the person concerned should be given
an opportunity to represent his case before he is put on
the blacklist.”
20. In order to emphasise the requirement of a show cause notice
preceding an order of blacklisting, this Court in UMC Technologies
Pvt Ltd v. Food Corporation of India2 held that –
“13. At the outset, it must be noted that it is the first
principle of civilised jurisprudence that a person against
whom any action is sought to be taken or whose right or
interests are being affected should be given a reasonable
opportunity to defend himself. The basic principle of
natural justice is that before adjudication starts,
the authority concerned should give to the affected
party a notice of the case against him so that he can
defend himself. Such notice should be adequate and
the grounds necessitating action and the penalty/
action proposed should be mentioned specifically and
unambiguously. An order travelling beyond the bounds
of notice is impermissible and without jurisdiction to that
extent. This Court in Nasir Ahmad v. Custodian General,
Evacuee Property3 has held that it is essential for the notice
to specify the particular grounds on the basis of which an
action is proposed to be taken so as to enable the noticee
to answer the case against him. If these conditions are not
satisfied, the person cannot be said to have been granted
any reasonable opportunity of being heard.
14. Specifically, in the context of blacklisting of a
person or an entity by the State or a State Corporation,
the requirement of a valid, particularised and
unambiguous show-cause notice is particularly crucial
due to the severe consequences of blacklisting and
the stigmatisation that accrues to the person/entity
being blacklisted. Here, it may be gainful to describe
the concept of blacklisting and the graveness of the

2 (2021) 2 SCC 551.
3 Nasir Ahmad v. Custodian General, Evacuee Property, (1980) 3 SCC 1.
346 [2026] 4 S.C.R.

Supreme Court Reports

consequences occasioned by it. Blacklisting has the
effect of denying a person or an entity the privileged
opportunity of entering into government contracts.
This privilege arises because it is the State who is the
counterparty in government contracts and as such, every
eligible person is to be afforded an equal opportunity
to participate in such contracts, without arbitrariness
and discrimination. Not only does blacklisting take
away this privilege, it also tarnishes the blacklisted
person’s reputation and brings the person’s character
into question. Blacklisting also has long-lasting civil
consequences for the future business prospects of
the blacklisted person.
21. Thus, from the above discussion, a clear legal position
emerges that for a show-cause notice to constitute the
valid basis of a blacklisting order, such notice must
spell out clearly, or its contents be such that it can
be clearly inferred therefrom, that there is intention
on the part of the issuer of the notice to blacklist the
noticee. Such a clear notice is essential for ensuring
that the person against whom the penalty of blacklisting
is intended to be imposed, has an adequate, informed
and meaningful opportunity to show cause against his
possible blacklisting.”
21. The judgment in M/S Techno Prints v. Chhattisgarh Textbook
Corporation & Anr.4 underscored the need for a detailed consideration
of the consequences of blacklisting right at the outset, that is,
from the stage of issuing of show cause notice. The Court held as
follows –
“29. However, what is important for us to say is that
when there are guiding principles explained by
this Court as to when & in what circumstances a
blacklisting order can be passed then, in our opinion
such principles should also be borne in mind by the
Authority at the time of issuing a show cause notice.
We say so because in the facts of a given case like the

4 2025 INSC 236.
[2026] 4 S.C.R. 347

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

one on hand, on the face of which it could be said that
there was no good reason for the Authority to issue a show
cause notice calling upon the contractor why he should
not be blacklisted. Why ask the contractor to face the
proceedings when applying the aforesaid principles, the
issue of show cause notice would be an empty formality.
We are saying all this keeping in mind the peculiar facts
of this case.
30. Therefore, the Authority is expected to be very careful
before issuing a show cause notice. It is expected to
understand the facts well and try to ascertain what sort of
violation is said to have been committed by the contractor.
As noted above, there is always an inherent power in
the Authority to blacklist a contractor. But possessing
such inherent power and exercising such power are
two different situations and connotations. There may
be a power but there should be reasonable ground to
exercise such power.
31. To put it by way of an illustration, the Police has the
power to arrest but it is not necessary that in all cases
arrest must be effected. The Police should know whether
at all arrest is necessary.
32. We may put it in a slightly different way. Take for
instance, the show cause notice in the present case
is the final order of blacklisting. The final order in any
case cannot travel beyond the show cause notice.
Therefore, we take the show cause notice as the final
order. Whether it makes out a case for blacklisting?
This should be the test to determine whether it is a
genuine case to blacklist a contractor or visit him
with any other penalty like forfeiture of EMD, recovery
of damages etc. We say so because once an order
of blacklisting is passed the same would put an
end to the business of the person concerned. It is
a drastic step. Once the final order blacklisting the
Contractor is passed then the Contractor is left with
no other option but to go to the High Court invoking
writ jurisdiction under Article 226 of the Constitution
348 [2026] 4 S.C.R.

Supreme Court Reports

and challenge the same. If he succeeds before the
Single Judge then it is well and good otherwise he
may have to prefer a writ appeal or LPA as the case
may be. This again would lead to unnecessary litigation
in the High Courts. The endeavour should be to curtail
the litigation and not to overburden the High Courts with
litigations of the present type more particularly when
the law by and large is very well settled and there is no
further scope of any debate.”
22. Returning to the facts of the present case, at the outset, it is
apparent that the show cause notice dated 04.06.2024 does not
purport to be a show cause notice for blacklisting at all. It perhaps
expects the contractor to assume that it is for termination as
well as for blacklisting. Even if we accept the submissions of Mr.
Kumar Anurag Singh that, as there is no provision for prior notice
before termination, this show cause notice must be taken to be
for blacklisting, we are of the opinion that it still falls short of the
requirement of a proper show cause notice for blacklisting. This is
for the reason that as the decision to blacklist is independent of the
decision to terminate, the Department must demonstrate application
of mind before it takes the next step of blacklisting the contractor,
over an order of termination. Upon taking such a decision, it must
also issue a show cause notice calling upon the contractor to explain
why a consequential order of blacklisting should also not be passed.
The letter must be indicative of the proposed decision to blacklist
and the requirement of the contractor to respond to it. The show
cause notice dated 04.06.2024 falls short of these requirements.
Similarly, the final order of blacklisting, dated 23.08.2024, also
does not list the reasons as to why an order of blacklisting has
become necessary.
23. The contractual relationship between the parties is governed by two
legal regimes. While GCC governs termination, the 2012 Rules govern
blacklisting. Proceedings for termination should not be conflated with
proceedings for blacklisting. In the latter action, what is at stake is
the future of the contractor. A blacklisting order assumes that the
contractor is an incorrigible entity, at least for some time to come, in
this case such an assumption was intended to operate for five years.
For giving effect to such a premise, there has to be sufficient evidence,
clear application of mind and stronger adherence to principles of
[2026] 4 S.C.R. 349

M/s A.K.G. Construction and Developers Pvt. Ltd v.
State of Jharkhand & Ors.

natural justice5. The blacklisting order dated 23.08.2004 falls short
of this requirement and is liable to be set aside.
24. As a consequence of our decision to set aside the blacklisting order,
we would have required the Department to issue a fresh show
cause notice indicative of the reasons as to why a blacklisting order
is felt necessary and to thereby call upon the contractor to show
cause. However, in view of the fact that the order of termination cum
blacklisting was passed on 23.08.2024, and since then almost more
than one and a half year has already passed, without there being
a stay of the said order in the meantime, we are of the opinion that
the relief to be granted can suitably be moulded by directing that
the order of blacklisting will cease to operate with immediate effect.
This order will benefit the appellant more than the Department,
because directing issuance of a fresh show cause notice will only
lead to further litigation.
25. Having considered the matter in detail and taking into account the
unimpeachable material about the negligence of the appellant leading
to collapse of the top dome of the ESR, we are of the opinion that the
order of termination of all contracts is legal and valid. Civil Appeals
to this extent are dismissed. However, the decision of blacklisting of
the appellant is illegal, arbitrary and unreasonable. The declaration of
blacklisting is set aside, and shall cease to operate with immediate
effect.

Result of the case: Appeals disposed of.

†
Headnotes prepared by: Ankit Gyan

5 Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL, (2014) 14 SCC 731; The
Blue Dreamz Advertising Pvt Ltd. & Anr. v. Kolkata Municipal Corporation & Ors, 2024 INSC 589, M/s
Techno Prints (supra).