1. The petitioner, a private limited company appointed as the "Project Management Unit (PMU)" of the 2nd respondent Government Company, has filed the captioned writ petition challenging Ext.P1 Government Order dated 27.11.2020, whereby it has been blacklisted and barred from participating in projects undertaken by the Electronics and Information Technology Department of the 1st respondent State for a period of two years.

2. The short facts necessary for the disposal of this writ petition are noticed as under:

The petitioner is a private limited company engaged in providing professional consulting services to the 2nd respondent, a public limited company stated to have been promoted by the 1st respondent State. The Kerala Fibre Optics Network (KFON) was a project being implemented by the 1st respondent State through the 2nd respondent Government Company. The Kerala Fibre Optic Network Limited (KFON Limited) was incorporated between the 2nd respondent Government Company and the Kerala State Electricity Board Limited for the implementation of the afore project. Pursuant to Ext.P2 Government Order dated 24.06.2018, the Government granted sanction to the 2nd respondent to appoint the petitioner as the PMU for the KFON Project. This is followed by Ext.P3 and P4 work orders for the consultancy services. On the basis of the afore, the petitioner and the 2nd respondent entered into an agreement dated 01.03.2019. The petitioner states that the Managing Director of the 2nd respondent sought for assistance in relation to the selection of a consultant for the “Space Park Project” being implemented by the 2nd respondent Company for organizing and coordinating a “space conclave”. The petitioner further states that the Managing Director of the 2nd respondent, on 01.10.2019, shared the Curriculum Vitae (CV) of one Smt.Swapna Suresh for engagement as above. The petitioner further states that the afore Swapna Suresh was interviewed by the petitioner as well as the 2nd respondent separately, also stating that the required documents proving educational qualifications, etc., were also provided. The petitioner further states that it sought for the intervention of one M/s.Vision Technology for a background verification of the afore Swapna Suresh. M/s.Vision Technology, in turn, engaged one M/s.Knowy HR Solutions Private Limited (Knowy) to carry out the background verification, who submitted Ext.P6 report dated 18.10.2019. This is followed by Ext.P7 communication by M/s.Vision Technology to the petitioner, informing about a clean background verification check for Swapna Suresh. On the basis of the afore, the 2nd respondent submitted Ext.P8 work order for the deployment of Junior Consultant. Pursuant to this, Ext.P9 agreement is also executed between the petitioner and the 2nd respondent, based on which, afore Swapna Suresh, was also deputed to the 2nd respondent.

3. The petitioner states that, on 06.07.2020, media reports surfaced alleging that Swapna Suresh had been involved in a case of gold smuggling through Thiruvananthapuram Airport. Media reports had also reported that her degree certificate and mark sheet were fake. On the basis of the aforesaid allegations, Ext.P10 lawyer notice was issued to the petitioner proposing the termination of the agreement entered into with the petitioner, evidenced by Ext.P9. The petitioner sought to file a detailed reply at Ext.P11, to which another lawyer notice was issued by the Managing Director of the 2nd respondent, as evidenced by Ext.P12. To the said notice, the petitioner submitted a reply at Ext.P13. However, Ext.P14 notice of termination dated 24.08.2020 was issued by the 2nd respondent, also claiming damages. To the afore termination notice, the petitioner submitted a detailed reply at Ext.P15. On 29.09.2020, the petitioner submitted Ext.P18 before the 2nd respondent, pointing out that the contract was due to expire on 30.11.2020 and requesting the 2nd respondent to take necessary steps to take over the project from the petitioner. In reply, the 2nd respondent issued Ext.P19 communication inviting the petitioner for a mutual consultation with reference to the clauses in the agreement between the parties relating to arbitration. The petitioner states that in reply, the petitioner participated in the mutual consultation on 20.10.2020; however, it has not been informed about the result of the meeting. It is at that juncture that the petitioner is served with Ext.P1 order seeking to debar it from future projects in the Electronics and Information Technology Department by the 1st respondent herein.

4. I have heard Sri.E.K.Nandakumar, the learned senior counsel, instructed by Sri.Jaimohan, the learned counsel for the petitioner, Sri.Sachin Ramesh, the learned Government Pleader for the 1st respondent, and Sri.K.A.Abdul Salam, the learned counsel for the 2nd respondent Company.

5. Sri.Nandakumar, the learned senior counsel, would contend that:

                  i. The blacklisting of the petitioner pursuant to Ext.P1 is violative of the principles of natural justice since no notice whatsoever has been given to it.

                  ii. No hearing is also extended to the petitioner before issuing the impugned order.

                  iii. Mere breach of contract, assuming that be so, cannot be a ground for blacklisting.

                  iv. The name of Smt.Swapna Suresh was suggested by the Managing Director of the 2nd respondent, as evidenced by a WhatsApp message at Ext.P21, which would show that there was no negligence whatsoever on the part of the petitioner.

                  v. An enquiry has been carried out in the matter that too behind the back of the petitioner, about which the petitioner is informed only when the counter affidavit has been filed by the 1st respondent seeking to rely on Ext.R1(a) enquiry report dated 16.07.2020.

                  vi. Even the report at Ext.R1(a) would show that Swapna Suresh was referred to by the Principal Secretary (IT) to the Government, on the basis of which, the afore person was directed to be placed under suspension.

6. Per contra, Sri.Sachin Ramesh, the learned Government Pleader, would contend that:

                  i. The agreement of the 2nd respondent was with the petitioner alone.

                  ii. The petitioner is not permitted to outsource any part of its responsibility. Therefore, there is no privity of contract between the 2nd respondent and M/s.Vision or M/s.Knowy, which carried out the background verification.

                  iii. The petitioner has chosen to challenge Ext.P1 alone, by which debarring has been effected.

                  iv. There is no challenge against the notice of termination at Ext.P5.

7. Sri.Abdul Salam, the learned counsel for the 2nd respondent, would point out that:

                  i. The disputed questions of fact are involved, on account of which this Court may not interfere under Article 226 of the Constitution of India.

8. I have considered the rival submissions as well as the connected records.

9. The challenge in this writ petition is against Ext.P1 order of debarring, as also “the records leading to Ext.P1”. A reading of the said order would show that it is on account of the alleged failure in “comprehensive background check, including educational qualifications” with respect to the appointment of an individual in the PMU of Space Park that the said decision has been taken. It is true that by Ext.P2 Government Order dated 24.06.2018, the petitioner has been appointed as the PMU. A committee has also been constituted for selecting resource persons for the PMU. The petitioner has specifically contended that, from the very beginning, it was the Managing Director of the 2nd respondent who forwarded the CV of Swapna Suresh. This has not been denied by the respondents. The afore Swapna Suresh was also interviewed by the 2nd respondent. The background verification check of Swapna Suresh was also, admittedly, carried out through M/s.Vision Technology, which, in turn, got it done through M/s.Knowy. The fact that the candidature was routed through the 2nd respondent is also admitted in Ext.P12 notice issued by the 2nd respondent. A reference to the background verification report at Ext.P3 also shows that the candidate's employment with her previous employers was checked and verified. The mark list, etc., of the candidate is also annexed with the report. It is on that basis, the petitioner has sought to advise the candidature of Swapna Suresh.

10. This Court notices further that the agreement provides for specific clauses as regards termination under Clause 6 and settlement of disputes under Clause 14. Under Clause 14, arbitration is one of the methods by which disputes can be settled. The 2nd respondent has also referred to the provisions of the agreement based on which the petitioner was called for a meeting, as seen from Ext.P19.

11. Counter affidavit filed by the 2nd respondent, dated 31.01.2021, also states that on 20.10.2020, the petitioner and the 2nd respondent had a meeting for settlement. The affidavit further states that since the petitioner did not accept the breach, the 1st respondent was consulted in this matter. In other words, even the 2nd respondent admits that the matter needs to be proceeded with reference to Clause 14 of the agreement.

12. It is without reference to any of the above that the 1st respondent has sought to debar the petitioner. Again, the enquiry report at Ext.R1(a) is not made available to the petitioner. It is only when the same is produced along with the counter affidavit of the 1st respondent before this Court that the fact about the existence of such a report is made known. The report further admits that Swapna Suresh was referred to by the Principal Secretary of the Government (IT), for which the Principal Secretary was being separately proceeded against.

13. The impugned order at Ext.P1 requires to be set aside for more than one reason. As already noticed, Ext.P1 has been issued without serving any show cause notice and without granting an opportunity for being heard in the matter. The Apex Court, time and again, has categorically laid down that even with respect to the blacklisting, a proper show cause notice extending an opportunity of hearing, with specific reference to the grounds on the basis of which the blacklisting is proposed, requires to be extended. The Apex Court, while considering a similar situation in Kulija Industries Limited v. Chief General Manager, Western Telecom Project Bharat Sanchar Nigam Limited and Others [(2014) 14 SCC 731], wherein BSNL permanently blacklisted the appellant who committed misconduct and irregularities by creating duplicates of the bills and submitted the same for facilitating payments and thereby causing wrongful loss therein on account of irregularities held as under: -

                  “17. That apart, the power to blacklist a contractor whether the contract be for supply of material or equipment or for the execution of any other work whatsoever is in our opinion inherent in the party allotting the contract. There is no need for any such power being specifically conferred by statute or reserved by contractor. That is because “blacklisting” simply signifies a business decision by which the party affected by the breach decides not to enter into any contractual relationship with the party committing the breach. Between two private parties the right to take any such decision is absolute and untrammelled by any constraints whatsoever. The freedom to contract or not to contract is unqualified in the case of private parties. But any such decision is subject to judicial review when the same is taken by the State or any of its instrumentalities. This implies that any such decision will be open to scrutiny not only on the touchstone of the principles of natural justice but also on the doctrine of proportionality. A fair hearing to the party being blacklisted thus becomes an essential precondition for a proper exercise of the power and a valid order of blacklisting made pursuant thereto. …”

                  The Apex Court in Gorkha Security Services v. Government (NCT of Delhi) and Others [(2014) 9 SCC 105], held that:

                  “31. When it comes to the action of blacklisting which is termed as “civil death” it would be difficult to accept the proposition that without even putting the noticee to such a contemplated action and giving him a chance to show cause as to why such an action be not taken, final order can be passed blacklisting such a person only on the premise that this is one of the actions so stated in the provisions of NIT.”

                  To the same effect is the judgment of the Apex Court in Raghunath Thakur v. State of Bihar and Others [(1989) 1 SCC 229], Isolators and Isolators v. Madhya Pradesh Kshetra Vidyut Vitran Company Limited and Another [(2023) 8 SCC 607], and Jm Pharma v. Principal Secretary, Department of Health and Others [2026 SCC Online All 488]. In the case at hand, no such exercise has taken place. The order at Ext.P1 was issued admittedly without any reference to any show cause notice and without granting any opportunity for hearing. Therefore, the order at Ext.P1 is only to be set aside.

                  Therefore, this writ petition is allowed as under:

                  i. Ext.P1 order passed by the 1st respondent is annulled.

                  ii. In view of the admitted facts that it is without serving the copy of the enquiry report, serving a show cause notice, and without granting an opportunity for hearing that it was issued originally, it is further declared that the order at Ext.P1 shall not operate against the rights and interests of the petitioner in further tender process.