Supreme Court Quashes Show-Cause Notice Seeking Blacklisting; Allows Forfeiture of EMD

A bench of Justices J.B. Pardiwala and R. Mahadevan heard an appeal by M/s Techno Prints challenging a show‑cause notice issued by the Chhattisgarh Textbook Corporation that called upon the firm to explain why it should not be blacklisted for three years and why its EMD of Rs. 5,00,000 should not be forfeited. The appeal arose from a writ petition dismissed by the Chhattisgarh High Court which had earlier set aside an earlier blacklisting order but had not precluded the Corporation from issuing further proceedings.

The Court held that the portion of the show‑cause notice which sought to blacklist the contractor was unsustainable in the facts of the case and was quashed, while leaving open the Corporation's power to forfeit the EMD. The Court noted that blacklisting was a "drastic step" and that issuing a show‑cause notice would be unreasonable where, on the face of the material, the notice amounted to an "empty formality" adopted with a pre‑determined mind. The Court observed that "the power to blacklist cannot be resorted to when the grounds for the same are only breach or violation of a term or condition of a particular contract and when legal redress is available to both parties." The Court, in its reasoning, observed: "Plainly, if a contractor is to be visited with the punitive measure of blacklisting on account of an allegation that he has committed a breach of a contract, the nature of his conduct must be so deviant or aberrant so as to warrant such a punitive measure. A mere allegation of breach of contractual obligations without anything more, per se, does not invite any such punitive action." The Court further clarified: "We clarify that it shall be open for the respondent Corporation to forfeit the EMD of Rs. 5,00,000/-. However, the show cause notice calling upon the appellant as to why it should not be blacklisted is quashed and set aside."

Background The dispute arose from printing contracts awarded by the Chhattisgarh Textbook Corporation to M/s Techno Prints in 2020. The Corporation alleged breach of tender clauses (notably clauses 13.3, 16.1, 16.3 and 16.9) including delay in supply, inadequate progress and non‑compliance with provisioning of positives/CDs and bank guarantee conditions, and issued a show‑cause notice dated 14.12.2022 calling for blacklisting and forfeiture of EMD. Techno Prints challenged the fresh show‑cause notice by way of writ petition; an earlier writ petition had resulted in quashing of a prior blacklisting order on the ground that the order exceeded the grounds in the show‑cause notice. The High Court dismissed the fresh writ appeal, holding that quashing of the earlier blacklisting did not preclude the Corporation from initiating fresh proceedings based on detailed allegations in the new notice. This Court had earlier granted interim stay of further proceedings pursuant to the show‑cause notice.

On appeal, the Supreme Court reviewed precedents including State of Uttar Pradesh v. Brahm Datt Sharma, Secretary, Ministry of Defence v. Prabhash Chandra Mirdha, Kulja Industries Ltd. v. BSNL, and The Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corporation, and reiterated that courts should not ordinarily interfere with show‑cause notices unless issued without jurisdiction or tainted by mala fides. Noting the exceptional and "stigmatic" nature of blacklisting, the Court held that an authority must have "strong, independent and overwhelming materials" before resorting to blacklisting and must consider whether blacklisting was necessary to protect public interest or whether ordinary contractual remedies would suffice. Applying those principles to the record, the Court concluded that, in the peculiar facts of the case and given the impact of the COVID‑19 pandemic on performance, calling for blacklisting amounted to an empty formality and could not be sustained. The appeal was disposed of by quashing the blacklisting limb of the show‑cause notice while leaving the rest of the notice intact and permitting the Corporation to forfeit the EMD; pending applications were disposed of and interim stay already granted was in place until the decision.

Case No.: Civil Appeal No. of 2025 (Arising out of SLP(C) No.10042/2023) Case Title: M/s Techno Prints v. Chhattisgarh Textbook Corporation & Anr. Appearances: For the Petitioner(s): Mr. Gaurav Agarwal (Senior Counsel) For the Respondent(s): Mr. Ankit Mishra (Counsel); Mr. Priyank Upadhyay (Advocate on Record)