Holding

An order that blacklists a person for future contracts is void unless the person is given prior notice and an opportunity to be heard, though the cancellation of the bid for non‑payment may stand.

Summary

Raghu Nath Thakur, the highest bidder for a Benl Country liquor shop in Samastipur, failed to deposit the bid money. The Collector cancelled his bid and, without giving any notice, placed him on a blacklist for future contracts. Thakur challenged the order in the High Court, which upheld it, and then obtained special leave to appeal before the Supreme Court. The Court held that any order having civil consequences, such as blacklisting, must comply with the principles of natural justice and give the affected person a prior opportunity to be heard. Consequently, the portion of the Collector's order that blacklisted Thakur was set aside, while the cancellation of his bid remained unaffected. The appeal was disposed of, emphasizing that future blacklisting must follow due‑process requirements.

Issues considered

Whether a government order that blacklists a person for future contracts violates the principles of natural justice if no prior notice and hearing are given.
Whether the cancellation of the bid for failure to deposit money can be upheld independently of the blacklisting.

Subjects

administrative lawnatural justiceright to be heardblacklistingauctioncivil consequencesdue process

Judgment

RAGHUNATH THAKUR
A
v.
STATE OF BIHAR & ORS.

NOVEMBER 8, 1988

[SABYASACHI MUKHARJI ANDS. RANGANATHAN, JJ.] B

Administrative Law: Black listing-Right to be heard-Making
representation against the order-Necessity for.

The appellant has bid in an auction of Benl Country Liquor Shop
in the District of Samastipur and was given the shop being the highest C
bidder but he failed to deposit the bid money in time.

The Collector, Samastipur by an order cancelled the bid and
black listed the appellant. He then moved the High Court against the' .
order of the Collector. The High Court upheld the order of the
Collector. D

The appellant appealed to this Court by special leave.

Disposing of the appeal, the Court,
•' HELD: 1. It is an Implied principle of the rule of law that any E
order having civil consequences should be passed only after following
the principles of natural justice. Black-listing any person in respect of
business ventures has civil consequences for the future business, of the
person concerned in any event. [868H; 869A]

r. Even if the rules do .not express so, it is an elementary principle F
of natural justice that parties affected by any order should have right ofi
....J being heard and making representations against the order. [869B]

In the Instant case, that portion of the order· directing that th .e
appellant be placed lo the black-list in respect of future contracts undt.r
the Collector is set aside. So far as the cancellation of the bid of tl. .e G
appellant is concerned, that is not affected. [869B-CJ

CIVIL APPELLA'IE JURISDICTION: Civil Appeal No. 4031
of 1988.

From the Judgment and Order dated 14.4.1988 of the Patna High H
867
868 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

A CourtinC.W.J.C.No.1923of1988.
R.K. Jain, R.P. Singh and Y .D. Chandrachud for the Appellant.

U.S. Prasad for the Respondents.

B The Judgment of the Court was delivered by

SABYASACHI MU.KHARJI, J. Special leave granted.

. The order dated 25th March, 1988 of the Collector is under
challenge in thi~ appeal. The same reads as follows:

"Shri Raghu Nath Thakur S/o Late Gorakh Thakur,
Village Repura, P .S. Puksha, District Samastipur had bid
for Rs.11,900 (Rupees eleven thousands only) per month
Dak in an auction .of Beni Country liquor shop held on
27 .3.88 and he as given the shop of Beni..Coui:ttry liquor but
D after .signing in BandoliastfRegister he did not deposit dak
amount.

The name of Shri Raghu Nath Thakur S/o Late

E
Gorakh Nath Village Repura, P.S. Pusa, Distt. Samastipur
is therefore placed in the black list for future under the
orders passed by the Collector, Samastipur."
.
This order was passed pursuant to the order of the Collector.
The letter dated 25th March, 1988, states as follows:

"The Collector of the district after perusal of the said office
F note passed order on 25.3.88 which is produced in verbatim
below: ·

Ist bidder chunki defaulter hai atah security prapt kar lea
tatha bhavishya ke liae Black list karen."

9 Indisputably, no notice had been given to the appellant of the
proposal of black-listing the appellant. It was contended on behalf of
the Sta\e Government .that there was no requirement in the rule of
giving any prior notice before black-listing any person. In so far as the
contention th.at there is no requirement specifically of giving any
notice is concerned, the respondent is right. But it is an implied princi-
H pie. of the rule of law that any order having civil consequence should be
_, <\<

RAGHUNATH v. STAIB OF BIHAR [MUKHARJI, J.J 869

passed 'only after following the principles of.natural justice. It has to be A
realised that black-listing any person in respect of business ventures
has civil consequence for the future business of the person concerned
in any event. Even if tlie rules do not express so, it is an elementary
pr1ndple of natural justice that parties affected by any order should
have right of being heard and making representations against the B
In
orcler. that view of the matter, the last portion of the order in so far
as it directs black-listing of the appellant in respect of future contracts,
cannot be sustained in law. In the premises, that portion of the order
directing that the appellant be placed in the black-list in respect of
future contracts under the Collector is set aside. So far as the cancella-
tion of the bid of the appellant is concerned, that is. not affected. This
order will, however, not prevent the State Government or the C
appropriate authorities from taking any future steps for black-listing
the appellant if the Government is so entitled to do so in accordance
wi.th law, I.e. giving the appellant due notice and an opportunitY' of
making representation. After hearing the appellant, the State Govern-
ment will be at liberty to pass any order in accordance with law indicat- I)
i!lg the reasons therefor. We, however, make· it quite clear that we are
not expressing any opinion on the correctness or otherwise of the
allegations made against the11ppellant. The appeal is thus disposed of.

S.K.A. Appeal disposed of.