The Karnataka High Court has reaffirmed that administrative actions grounded on a judicially set-aside blacklisting are legally unsustainable. In a significant ruling, the Court clarified that once a blacklisting order is quashed, it cannot serve as a basis for excluding a bidder from future tenders, reinforcing the principle that procedural fairness must prevail over bureaucratic expediency.
Background & Facts
The Dispute
The petitioner, M/s. Koushalya Security and Non-Clinical Services, a security services provider based in Kalaburagi, participated in a government tender for security services issued under Tender Notification No. RD/AJSK/03/2023-24 dated 07.08.2023. The respondent authorities, including the Director of Atalaji Janasnehi Directorate and the Deputy Commissioner of Kalaburagi, rejected the petitioner’s bid on the ground that it had been blacklisted. The tender was subsequently awarded to Respondent No. 4, Rajnet Infotech (M/s Basava Tours and Travels), with an endorsement dated 26.12.2023 (Annexure-Q) and a work order and agreement executed on 22.12.2023 (Annexure-S).
Key Facts
- The petitioner had previously participated in multiple government tenders for security services since 2018.
- On 23.06.2018, the respondent issued a notice alleging non-payment of EPF and ESI by the petitioner.
- The petitioner was declared the successful bidder in the 2019-2020 tender and paid a demand draft of Rs. 2,21,170 on 09.04.2020.
- On 12.12.2020, Brahmpur Police Station issued a notice to the petitioner regarding alleged non-payment of PF/ESI.
- The petitioner submitted a reply on 14.12.2020.
- On 17.05.2021, the respondent issued an order blacklisting the petitioner, citing registration of a criminal case by Brahmpur Police Station.
- The petitioner challenged the 17.05.2021 blacklisting order in Writ Petition No. 202170/2021.
- On 05.01.2022, the Karnataka High Court quashed the 17.05.2021 blacklisting order, holding that no prior notice or opportunity of hearing had been afforded, in violation of natural justice and the Supreme Court’s ruling in UMC Technologies Private Limited v. Food Corporation of India.
- The 05.01.2022 order became final and binding.
- Despite this, the respondents rejected the petitioner’s bid in the 2023 tender on the same ground of blacklisting.
- The tender was awarded to Respondent No. 4 on 26.12.2023.
- The work under the tender was completed by Respondent No. 4 before the filing of the present petition.
Procedural History
- 23.06.2018: First notice issued by respondent regarding EPF/ESI non-compliance
- 09.04.2020: Petitioner paid Rs. 2,21,170 as demand draft for 2019-2020 tender
- 12.12.2020: Brahmpur Police Station issued notice on PF/ESI non-payment
- 14.12.2020: Petitioner submitted reply to police notice
- 17.05.2021: Respondent issued blacklisting order
- 05.01.2022: Karnataka High Court quashed blacklisting order in WP No. 202170/2021
- 07.08.2023: New tender notification issued (Annexure-F)
- 29.11.2023: Notice issued to proceed with work (Annexure-R)
- 22.12.2023: Work order and agreement executed in favor of Respondent No. 4 (Annexure-S)
- 26.12.2023: Endorsement rejecting petitioner’s bid issued (Annexure-Q)
- 20.06.2024: Present writ petition filed (WP No. 200198/2024)
- 01.06.2026: Judgment delivered
The Parties' Positions
Relief Sought
The petitioner sought:
- Quashing of the endorsement dated 26.12.2023 (Annexure-Q)
- Quashing of the notice dated 29.11.2023 (Annexure-R) and the work order/agreement dated 22.12.2023 (Annexure-S)
- A writ of mandamus directing Respondent No. 2 to consider the petitioner’s financial bid
- Any further relief, including costs
The Legal Issue
The central question was whether a tender rejection based on a blacklisting order that had already been judicially quashed and set aside by this Court can legally stand, and whether the petitioner’s right to participate in future tenders is extinguished by such an invalid basis.
Arguments Presented
For the Petitioner
Learned counsel relied on the final and binding order dated 05.01.2022 in WP No. 202170/2021, which had explicitly quashed the blacklisting on grounds of violation of natural justice and non-compliance with UMC Technologies v. FCI. He argued that the 26.12.2023 endorsement was factually and legally unsustainable, as it relied on a non-existent legal disability. He further contended that the continued reliance on the quashed order prejudiced the petitioner’s right to fair competition in future tenders.
For the Respondent
The Additional Government Advocate conceded that the 2021 blacklisting had been quashed but argued that since no interim stay was obtained in the present petition, the tender work had been completed by Respondent No. 4 and the tender period had expired. He submitted that the petition was therefore infructuous and should be dismissed on grounds of laches and lack of practical relief.
The Court's Analysis
The Court examined the finality and binding effect of its own order dated 05.01.2022 in WP No. 202170/2021. It observed that the quashing of the blacklisting order was not merely procedural but substantive, grounded in the violation of the fundamental principle of audi alteram partem. The Court cited UMC Technologies v. FCI to reinforce that blacklisting without prior notice is illegal per se.
"The order dated 17.05.2021 passed by the respondent is hereby set aside... the respondent is at liberty to issue notice... after affording an opportunity of hearing."
The Court held that once an order is set aside by a competent court, it ceases to have any legal existence. The endorsement dated 26.12.2023, which relied on the quashed blacklisting, was therefore legally void ab initio. The Court rejected the argument that completion of work by Respondent No. 4 rendered the petition infructuous, noting that the petitioner’s legitimate interest in future participation remained unaddressed.
The Court emphasized that administrative bodies cannot rely on defunct legal grounds to exclude bidders, especially when such grounds have been judicially invalidated. The petitioner’s exclusion from the 2023 tender on the basis of a non-existent blacklisting constituted an abuse of power and a violation of Article 14 of the Constitution.
The Verdict
The writ petition was disposed of with the following directions: The endorsement dated 26.12.2023 (Annexure-Q), the notice dated 29.11.2023 (Annexure-R), and the work order/agreement dated 22.12.2023 (Annexure-S) shall not operate to disqualify the petitioner from participating in any future tenders issued by the State of Karnataka or its agencies. The petitioner is hereby declared to have never been blacklisted in any manner whatsoever, and all records must be updated accordingly. Costs of Rs. 10,000 are awarded to the petitioner.
What This Means For Similar Cases
Blacklisting Must Be Lawful and Current
- Practitioners must challenge tender rejections based on outdated or quashed blacklisting orders as violations of natural justice and Article 14
- Administrative authorities cannot rely on judicially nullified orders to justify exclusion from procurement processes
- Any blacklisting must be based on a valid, subsisting order with due process compliance
Judicial Quashing Has Retroactive Legal Effect
- A quashed order is legally non-existent from the date of its issuance, not merely from the date of quashing
- Bidders are entitled to be treated as if the illegal order never existed
- Public agencies must proactively update their databases to reflect judicial outcomes
No Practical Futility Doctrine for Procedural Rights
- Completion of a tendered work does not extinguish the right to seek declaratory relief regarding future eligibility
- Courts will grant clarificatory relief even when monetary or operational remedies are no longer feasible
- The right to fair competition in public procurement is a continuing right, not confined to a single tender cycle
