The Delhi High Court has ruled that blacklisting vendors without a specific show-cause notice is illegal, calling it a “civil death” for businesses, as such action gravely harms reputation and future contractual opportunities.
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NEW DELHI: In a landmark judgment, the Delhi High Court has ruled that blacklisting a vendor for a clerical or bona fide mistake is illegal and disproportionate, observing that such punitive action amounts to a “civil death” in business.
Justice Sachin Datta held that no vendor can be blacklisted without a specific show-cause notice explicitly stating the action contemplated. The Court also clarified that blacklisting cannot be imposed for ordinary breaches of contract or inadvertent mistakes, emphasizing that it is a measure of last resort.
The judgment came in a petition filed by Aman Carriers, represented by Senior Advocate Sandeep Sethi, along with Avneesh Arputham, Ankit Sharma, Krisna Gambhir, and Riya Kumar, challenging the Indian Oil Corporation Ltd. (IOCL) orders that had placed the firm on its “holiday list”, effectively blacklisting it for 60 days.
Background
The dispute arose from an IOCL tender issued via the Government e-Marketplace (GeM) for transportation of propylene between the Mathura and Paradip refineries. Aman Carriers submitted its bid as ₹3.39 per km per ton, consistent with the industry’s standard rate structure.
However, IOCL interpreted this as a lump-sum bid of ₹3.39, treating it as an upward revision when the company clarified the format. The firm was consequently blacklisted from IOCL and Chennai Petroleum contracts without any show-cause notice, and its PAN was blocked on the e-procurement portal.
The company contended that it had merely made a procedural mistake and that its rate format was standard in gas transportation tenders, arguing the tender terms were ambiguous.
Court’s Findings
Justice Datta struck down IOCL’s orders dated August 20 and 21, 2025, holding that the absence of a proper show-cause notice “strikes at the very root” of the decision.
“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, citing Supreme Court precedents including UMC Technologies v. FCI (2021) and Gorkha Security Services v. Government (NCT Delhi) (2014).
The Court emphasized that blacklisting tarnishes a company’s reputation, restricts its ability to participate in future tenders, and must therefore be exercised only in cases of egregious misconduct.
“Blacklisting amounts to a civil death, tarnishes reputation, and affects future business prospects,”
Justice Datta observed.
Rejecting IOCL’s reasoning, the Court noted that the tender’s estimated cost exceeded ₹18 crore, and no reasonable person could interpret ₹3.39 as a total bid.
“By no stretch of imagination could ₹3.39 be construed as the total bid amount,”
the Court remarked, terming IOCL’s interpretation irrational and arbitrary.
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Even if the company had made a clerical mistake, the Court said, blacklisting was disproportionate, citing rulings such as Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corporation (2024) and Techo Prints v. Chhattisgarh Textbook Corporation (2025).
“Even assuming a clerical error was made, debarring the petitioner is disproportionate,”
the Court held.
Appearance:
The Petitioner: Mr. Sandeep Sethi, Senior Advocate with Mr. Avneesh Arputham, Mr. Ankit Sharma, Mr.Krisna Gambhir and Ms. Riya Kumar.
The 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.
W.P.(C) 16517/2025 and CM APPL.67690/2025
READ JUDGMENT
