Debarment Or Blacklisting Of Contractor Can Never Be For Indefinite Period: Supreme Court Reiterates

The Supreme Court has reiterated that an order of debarment or blacklisting of a contractor can never be for an indefinite period.

The Appellant entered into an agreement for sawing of timber in the saw mill of Odisha Forest Development Corporation. However, the Appellant was debarred from participating in all future tenders on account of unsatisfactory performance.

The Bench of Justice P S Narasimha and Justice Atul S. Chandurkar observed, “Debarment has been recognised as a method of disciplining deviant suppliers. However, an order of debarment can never be for an indefinite period.”

Case Brief

The Appellant filed an SLP against the order of the Orissa High Court wherein the Writ Petition challenging the termination of the Appellant was dismissed by the High Court on the ground that alternative remedy was available.

The State of Orissa and the Appellant entered into an agreement in 2022 for sawing of timber in the saw mill of Odisha Forest Development Corporation. However, the services of the Appellant was terminated in 2023 on the ground that the performance of the Appellant was unsatisfactory. While terminating the services, the Odisha Forest Development Corporation stated that the Appellant was debarred from participating in future tenders.

Court’s Observation

The Supreme Court confined itself to the question of the legality and validity of the direction to debar the Appellant from participating “in future tenders in the division”.

The Court held that debarment has been recognised as a method of disciplining deviant suppliers. However, an order of debarment can never be for an indefinite period.

While referring to its decision in the case of Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project (2014), the Court highlighted that debarment was recognised and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted.

“In view of the above, we allow the appeal in part and modify the order in W.P. (C) No. 7840/2023 dated 20.03.2023 passed by the High Court and declare that the appellant shall no more be debarred for participating in tenders issued by the respondent”, the Court observed.

Accordingly, the appeal was partly allowed.

Cause Title: M/s Mar’s Developers and Suppliers V. The State of Odisha & Ors.

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