Background
The Delhi High Court has reiterated that a contractor cannot be debarred or blacklisted for an indefinite or open-ended period. Holding that debarment linked to the conclusion of criminal proceedings is, in substance, a permanent/indefinite blacklisting, the Court observed that every order of blacklisting must prescribe a definite duration. The Court further held that while the State possesses the inherent power to blacklist contractors in public interest, such power cannot be exercised arbitrarily or in perpetuity.
The writ petition was filed by Kaveri Infrastructure Pvt. Ltd. challenging a speaking order dated 22 July 2022 issued by the Delhi Jal Board (“DJB“), whereby the petitioner was prohibited from participating in future tenders until the conclusion of the CBI investigation, criminal proceedings, and any consequential appeals.
Background of the Dispute
The dispute traces its origin to a contract awarded by the Delhi Jal Board in 2004 for renovation of old water pipelines.
In 2007, the Central Bureau of Investigation registered an FIR alleging that the petitioner had secured the contract through corrupt practices involving its then Managing Director and officials of the Delhi Jal Board. Consequent thereto, the petitioner was debarred from participating in future tenders.
Over the next several years, multiple rounds of litigation ensued before the Delhi High Court and the Supreme Court. Pursuant to earlier directions issued by the High Court, the Delhi Jal Board passed a fresh order on 28 March 2008 directing that the petitioner would remain debarred until the outcome of the CBI investigation became available. Subsequently, the petitioner and its Managing Director were convicted by the CBI Court in 2013 under the Indian Penal Code and the Prevention of Corruption Act, while their criminal appeals remained pending before the High Court.
Following a further representation by the petitioner, the Delhi Jal Board issued the impugned speaking order dated 22 July 2022 reiterating that the petitioner would continue to remain debarred until conclusion of the criminal proceedings, including appeals before the High Court or the Supreme Court. Aggrieved thereby, the petitioner approached the Delhi High Court under Article 226 of the Constitution.
Petitioner’s Contentions
The petitioner contended that the impugned order was arbitrary and contrary to settled law since it prescribed no definite period of debarment.
It was submitted that linking debarment to the conclusion of criminal proceedings effectively resulted in permanent blacklisting, as criminal trials and appeals could continue for an indeterminate period. Reliance was placed upon the Supreme Court’s decision in Kulja Industries Ltd. v. Chief General Manager, BSNL and the Delhi High Court’s decision in Sabharwal Medicos Pvt. Ltd. v. Union of India, wherein it was held that blacklisting cannot continue indefinitely.
The petitioner further argued that the impugned order merely reproduced the earlier order passed in 2008 without considering subsequent developments, including the conviction of the petitioner, the pendency of criminal appeals and the evolution of law governing blacklisting. It was also contended that the impugned order was contrary to the Delhi Jal Board’s own Enlistment Rules, 2023, which prescribe a maximum period of debarment of two years.
Respondent’s Contentions
The Delhi Jal Board submitted that the issue regarding the petitioner’s blacklisting had already attained finality in earlier rounds of litigation and could not be reopened through a fresh writ petition.
It was further argued that the petitioner had been convicted of offences involving corruption and fraud in securing the contract and that the State possesses an inherent right to determine with whom it would enter into contractual relationships. The respondent also contended that the present petition was barred by delay since the original order of debarment had been passed in 2008.
Indefinite Debarment is Arbitrary
The Delhi High Court observed that the impugned order failed to prescribe any definite duration of debarment.
Instead, the petitioner’s exclusion from future tenders was made contingent upon the conclusion of criminal proceedings and any appeals arising therefrom. The Court held that such contingencies are inherently uncertain and incapable of being confined within any fixed timeframe. Consequently, an order linking debarment to completion of criminal proceedings is, in effect, an order of indefinite blacklisting.
The Court also noted that the impugned order mechanically reiterated the earlier order passed in 2008 without considering subsequent events, particularly the petitioner’s conviction in 2013 and the pendency of criminal appeals. Such mechanical exercise of power, without independent application of mind, rendered the order arbitrary.
Relying extensively upon the Supreme Court’s judgment in Kulja Industries Ltd. v. Chief General Manager, BSNL, the Court reiterated that although blacklisting is a recognised mechanism for protecting public procurement from fraudulent contractors, permanent debarment is impermissible.
The Court also relied upon Coastal Marine Construction and Engineering Ltd. v. Indian Oil Corporation Ltd. and Sabharwal Medicos Pvt. Ltd. v. Union of India, wherein it was consistently held that even in cases involving allegations of fraud, forgery or corruption, blacklisting cannot continue for an indefinite period and must always prescribe a definite tenure.
Recurring Cause of Action
Rejecting the respondent’s objection regarding maintainability, the Court held that continued blacklisting gives rise to a recurring cause of action.
The Court observed that the legal position governing permanent debarment had undergone substantial development after the earlier proceedings concluded. Moreover, the impugned speaking order dated 22 July 2022 had itself been passed pursuant to directions issued by the High Court while deciding the petitioner’s representation. Consequently, the challenge to the fresh order could not be rejected either on the ground of limitation or on principles analogous to res judicata.
Decision
The Delhi High Court quashed the speaking order dated 22 July 2022 holding it to be arbitrary and contrary to settled principles governing blacklisting.
Ordinarily, the Court observed, the matter would have been remanded to the Delhi Jal Board for passing a fresh order specifying an appropriate period of debarment in accordance with the principles laid down in Kulja Industries. However, taking note of the fact that the petitioner had already remained under continuous debarment since 2008, nearly eighteen years, the Court held that no useful purpose would be served by remanding the matter.
Accordingly, the Court directed that the petitioner shall be entitled to participate in future tenders floated by the Delhi Jal Board, subject to fulfilment of the applicable eligibility conditions.
Case Details
Case Name: Kaveri Infrastructure Pvt. Ltd. v. Delhi Jal Board
Court: Delhi High Court
Case No.: W.P.(C) 16962/2022
Date of Judgment: 2 July 2026
Coram: Justice Amit Bansal