The Karnataka High Court has ruled that the blacklisting of a company without prior notice or an opportunity to be heard is unconstitutional. This ruling came as the court quashed the blacklisting order against a petitioner company, emphasising that such actions violate the principles of natural justice.
The case revolved around M/S. Vital Healthcare Private Limited, a company that was blacklisted by Karnataka State Medical Supplies Corporation Limited without being given any prior notice or an opportunity to defend itself.
The petitioner company, aggrieved by the sudden and unexplained blacklisting, approached the Karnataka High Court seeking relief. The petitioner, represented by its Authorised Signatory, Mr. Rajendra Tambe argued that the blacklisting had not only tarnished its reputation but also caused substantial financial losses due to the abrupt termination of ongoing contracts and the barring from future projects.
The petitioner, represented by Sri. Piyush Kumar Jain. D contended that the blacklisting order was arbitrary and devoid of any procedural fairness. It was highlighted that the principles of natural justice, which mandate prior notice and an opportunity to be heard, were grossly violated.
The petitioner stressed that the lack of transparency and the absence of a hearing before such a punitive action contradicted the fundamental tenets of fair play and justice.
On the other hand, the respondent revenue, Karnataka State Medical Supplies Corporation Limited, earlier known as Karnataka State Drugs Logistics and Warehousing Society, represented by Smt. Sumana Baliga M contended that the blacklisting was necessitated by the company’s alleged non-performance and breach of contract. The defense also argued that the urgency and gravity of the situation justified the immediate blacklisting without prior notice.
The court ruled in favour of the petitioner. The judgment stressed that the right to a fair hearing is a cornerstone of the legal system and cannot be bypassed, even in situations warranting urgent action.
The court stated, “The action of blacklisting a company has severe repercussions on its business and reputation. Such an action, if taken without affording an opportunity to the affected party to present its case, is fundamentally opposed to the principles of natural justice.”
The bench further remarked that “administrative authorities are required to act fairly and transparently, ensuring that affected parties are given a reasonable chance to be heard before any punitive action is taken against them.”
The single bench of Justice S. R. Krishna Kumar allows the writ petition and quashed the blacklisting order affirming the principles of natural justice, ensuring that the rights of companies and individuals are protected against arbitrary administrative actions.
In conclusion, the ruling reiterates that no entity, regardless of the circumstances, can bypass the fundamental right to a fair hearing, thus emphasising the core values of the legal system.
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