The Hon’ble High Court of Madhya Pradesh accepted a writ petition under Article 226 filed
by M/S Proactive In & Out Advertisers Ltd. The Respondent in the case was Atal Indore City
Transportation Ltd. which had issued a five-year Blacklisting Order against the Petitioner.
The Petitioner, seeking the quashing of the Blacklisting Order, was represented by Advocate
Shri Varun Singh. The Leading Counsel addressed pertinent issues of Principles of Natural
Justice; legal history, meaning and implications of Blacklisting Order; and applicability of
Doctrine of Useless Formality.
The Hon’ble High Court, under Justice Vijay Kumar Shukla, took cognizance of the
presented arguments and accepted the Petition filed by Proactive In & Out Advertisers Ltd.
FACTUAL OVERVIEW
In 2018, the Respondent issued a tender for advertisement on their 150 outdoor buses. The
Petitioner, an outdoor advertising company, successfully won this bid. However, due to
unfavourable market conditions, the Petitioner was forced to withdraw early from the
contract.
Quoting this early termination of the contract as the cause, the Respondent blacklisted the
Petitioner for five years through an order dated 05.02.2020. Noticeably, this order was not
preceded by any show-cause notice given to the Petitioner.
Therefore, Shri Varun Singh, the Ld. Counsel for Petitioner appraised the Hon’ble High Court
that this kind of Blacklisting Order stands in clear violation of the Principles of Natural
Justice. The following points were given by the Counsel to establish this argument:
● The impugned order was passed without issuing any show cause notice or affording
any opportunity to the petitioner to justify its position before putting on the Blacklist.
● The order of Blacklisting is highly stigmatic and often gets equated to the “civil
death” of the person. Thus, an order with such high civil and economic consequences
must follow a fair procedure.
● The Respondent argued that a show-cause notice would fall in the Doctrine of Useless
Formality. In response to this, the Counsel argued that as per our constitutional
scheme, a decision which can bring an entire business to a standstill requires that the
person be afforded full opportunity to justify his/her position before being Blacklisted.
Hence, the show-cause notice was not a useless formality rather a pre-requisite for
the blacklisting Order.
In response to the above-mentioned points, the leading Counsel for Respondent presented the
following arguments:
● The Blacklisting order stands justified given the conduct of the Petitioner. The early
termination of the contract was not based on any justified grounds and caused
immense losses to the Respondent.
● On the matter of the issuance of show cause notice, the Counsel quoted the Doctrine
of Useless Formality. The Respondent argued that given the licence of the Petitioner
was fake, a show cause notice would have been an empty formality.
Finally, the Ld. Counsel for Petitioner also explained the applicability of writ petition in the
case as the Respondent falls under the purview of the State under Article 12.
RULING
After hearing the learned counsel of both parties, Hon’ble Justice Vijay Kumar Shukla
decided that the Doctrine of Useless Formality does not stand valid in this case. This Doctrine
holds relevance when there is absolutely no doubt about basic facts. However, here the
Petitioner needs to be allowed to justify the validity of its licence.
The Hon’ble High Court also noted different judicial cases that highlight the oppressive
nature of a Blacklisting Order. The Ld. Counsel of Petitioner explained the coercive nature
through an elaborate legal history of Blacklisting Orders
- Firstly, in The Eurasian Equipment & Co. Ltd. Vs. State of West Bengal (1975) 1
SCC-70, the Apex Court established that a Blacklisting order does not pertain to a
specific contract. Instead, the person/company is barred from participating in any
government contract for the said period. Therefore, the apex court remarked
Blacklisting Order as an “Instrument of Coercion”. - In the Jospeh Vilangandan Vs. Executive Engineer (1978) 3 SCC 36, the Hon’ble
Supreme Court again emphasised that an opportunity to represent oneself should be
given to someone before Blacklisting him/her. - In Liberty Oil Mills Vs. Union of India (1984) 3 SCC 465, the apex Court reiterated
that a Blacklisting Order must follow the Principles of Natural Justice. - In the Gorkha Security Services vs. Government of (NCT) of Delhi (2014) 9 SCC 105
the Supreme Court stayed a Blacklisting Order approved by the Delhi High Court.
The reason was mentioned that the show cause notice given to the Gorkha Security
Services did not mention the order of blacklisting. Hence, the Contractor was
seriously prejudiced in defending himself against the penalty of Blacklisting.
Hence, the Ld. Counsel for Petitioner underlined the absolute necessity for fair play vis-à-vis
Blacklisting Order. Based on the facts presented in the case, Hon’ble judge Vijay Kumar
Shukla accepted the writ petition. Moreover, the Respondent is allowed to issue a fresh order
based on a fair procedure that offers a fair opportunity of hearing to the Petitioner.
SKV Comment
The SKV Commercial Law Offices team is elated to apprise everyone that in a recent and
highly contested Writ Petition at the Hon’ble Madhya Pradesh High Court at Indore, titled
Proactive In & Out Advertisers Ltd. v. Atal Indore Transport Services Ltd. received a
judgement in favour of our client, Proactive In & Out Advertisers Ltd. The Hon’ble High
Court was pleased to note that the blacklisting order passed against the Petitioner herein was
not given with a show-cause notice. It was said that a blacklisting order entails civil
consequences and casts a barrier between the blacklisted and the government. The Hon’ble
High Court of Madhya Pradesh primarily relied on the fact that the blacklisting order was
passed without a show-cause notice and the same was in gross violation of the Principles of
Natural Justice, thereby setting aside the blacklisting order over the Petitioners.
