A contractor can not be debarred from future tenders for indefinite or unspecified period.

Supreme Court Overturns Indefinite Debarment of Contractor by Odisha Forest Development Corporation. The Supreme Court rules indefinite debarment of M/s. Mar's Developers And Suppliers impermissible, allowing participation in future tenders.

In a significant ruling, the Supreme Court of India has overturned the indefinite debarment of M/s. Mar's Developers And Suppliers from participating in future tenders by the Odisha Forest Development Corporation (OFDC). The judgment, delivered by Justices Pamidighantam Sri Narasimha and Atul S. Chandurkar, emphasizes the necessity for clarity and finite terms in debarment orders to maintain fairness and legality in administrative processes.

The case arose from an appeal by M/s. Mar's Developers And Suppliers, challenging an earlier decision by the High Court of Orissa which dismissed their writ petition on the grounds that they had alternative remedies available. The original debarment order, issued on March 1, 2023, by the Divisional Manager of OFDC, terminated the company's contract due to unsatisfactory performance and alleged damage to timber. Crucially, the debarment did not specify a duration, prompting legal scrutiny.

The Supreme Court confined its examination to the legality of the indefinite debarment, recognizing debarment as a legitimate disciplinary tool but stressing that it cannot be without a defined period. Citing the precedent set in Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL, the Court reiterated that debarment should be proportional to the nature of the contractor's misconduct and should never be permanent.

Justice Narasimha, delivering the judgment, noted, "Debarment is recognized as a method for disciplining deviant suppliers, but an indefinite period is impermissible. We declare that the period of debarment is over, allowing the appellant to participate in future tenders."

The Court's decision modifies the High Court’s order, effectively lifting the debarment on M/s. Mar's Developers And Suppliers, granting them eligibility to engage in future tenders issued by OFDC. This decision sets a precedent emphasizing the importance of transparency and fairness in contractual and administrative debarments, ensuring that penalties are clearly defined and proportionate to the offense.

Legal experts view this ruling as a reaffirmation of the principles of administrative law, where remedies must be just and equitable, and punitive measures should be clearly defined. The Supreme Court's directive serves as a reminder to corporations and state entities to uphold these principles in their operational procedures.

The judgment has been welcomed by the appellant, M/s. Mar's Developers And Suppliers, who can now resume bidding for contracts within the division. The legal community anticipates that this ruling will guide future cases involving administrative debarment, promoting clear guidelines and finite terms.

Bottom Line:

Debarment of a contractor from future tenders must specify a finite period; indefinite or unspecified debarment is impermissible.

Statutory provision(s):  

• - Contract Law  
• - Administrative Law  
• - Terms & Conditions of Agreement  
• - Clause No. 22 of Agreement  
• - Legal Precedent: Kulja Industries Ltd. v. Chief General Manager, Western Telecom Project BSNL

M/s. Mar's Developers And Suppliers v. State Of Odisha, (SC) : Law Finder Doc Id # 2788432