Blacklisting by PSUs is ‘Civil Death’ Of Business, Cannot Be Imposed Without Show-Cause Notice, Delhi HC Reiterates

The Delhi High Court has held that blacklisting of vendors by public sector undertakings (PSUs) amounts to a “civil death” of business, carrying debilitating consequences, and cannot be imposed for ordinary breaches or inadvertent mistakes.

A bench of Justice Sachin Datta observed that it is a settled principle of law that no entity can be blacklisted unless a specific show-cause notice is issued making it clear that such punitive action is being contemplated. “It is a settled position of law that no order of blacklisting can be passed unless a proper show-cause notice is issued specifically,” the Court said.

Justice Datta added that blacklisting is not a routine administrative step but a measure of last resort, as “blacklisting amounts to a civil death, tarnishes reputation and affects future business prospects.”

The Court was hearing a petition filed by Aman Carriers, a transportation company that had participated in IOCL’s tender process, challenging Indian Oil Corporation Ltd. (IOCL)’s orders dated August 20 and 21, 2025, placing it on the “holiday list,” thereby debarring it from participating in contracts with IOCL and Chennai Petroleum Corporation. The company’s PAN was also blocked on IOCL’s e-procurement portal. This action followed the suspension of its account on the Government e-Marketplace (GeM) on August 19, 2025.

The dispute arose out of a tender issued by IOCL on May 3, 2025, via the GeM portal, for transportation of propylene from Mathura Refinery to Paradip Refinery. The tender required a lump-sum price, but Aman Carriers quoted “Rs per km per tonne,” arguing this was standard industry practice for gas transportation and that the tender format was ambiguous.

IOCL and GeM treated this as a modification of the bid. A communication was issued on July 22, and without issuing any independent show-cause notice, IOCL proceeded to blacklist the firm.

Striking down the orders, the Court held, “The absence of the show-cause notice strikes at the very root of the impugned orders dated 20.08.2025 and 21.08.2025.”

It rejected IOCL’s argument that the action was merely consequential to GeM’s suspension. “The impugned orders have a wider and more pervasive impact than the suspension order issued by respondent no.2 (GeM),” Justice Datta said.

The Court pointed out that no reasonable authority could assume a bid of ₹3.39 was a lump-sum price for a contract valued at over ₹18 crore. “By no stretch of imagination could ₹3.39 be construed as the total bid amount,” it remarked.

Calling the blacklisting “arbitrary and disproportionate,” the bench relied on Supreme Court rulings in UMC Technologies v FCI and Gorkha Security Services, which mandate a clear notice, specific mention of proposed penalty and an opportunity to respond before blacklisting. “Even assuming a clerical error was made, the action of debarring the petitioner is disproportionate,” the Court held.

Setting aside IOCL’s orders, the Court said, “The impugned orders dated 20.08.2025 and 21.08.2025 are unsustainable and are accordingly set aside, along with all consequential actions.”

For Petitioners: Mr. Sandeep Sethi, Sr. Advocate along with Mr. Avneesh, Mr. Ankit Sharma, Mr. Krisna Gambhir and Ms. Riya Kumar, Advocates.

For Respondents: Mr. Siddhant Kumar and Ms. Anshika Saxena, Advs. for R-1. Ms. Shweta Bharti, Ms. Yashodhara and Mr. Nayan Mittal, Advs. for R-2. Mr. Amit Meharia and Mr. Abinash Agarwal, Advs.

Case Title: AMAN CARRIERS versus INDIAN OIL CORPORATION LTD & ANR.

Bench: Justice Sachin Datta

Order Date: 3 November 2025