JUDGMENT : Prakash Padia, J. 1. Heard learned counsel for the petitioner and Sri B.K. Singh Raghuvanshi, learned counsel for respondent. 2. The petitioner has preferred the present writ petition challenging the letter dated 27.1.2017 passed by the respondent by which the petitioner was blacklisted for the successive three years from the date of issuing of the communication. 3. Facts in brief as contained in the writ petition are that the petitioner is a partner of M/s S. Kumar Construction Company. The aforesaid construction company is a registered partnership firm engaged in the business of providing services of laying of cable, UG/OFC Cable Construction, pipeline UG Work and other allied work. A tender was invited by the respondent on 26.06.2010 for the work namely “Underground Cable laying and associated works in Zones B, C and D of Mathura SSA.” The petitioner duly participated in the tender and the tender bid of the petitioner has been approved by the competent authority for zone and (Raya and Mant) and thereafter the petitioner was directed vide letter dated 27.09.2010 to deposit a sum of Rs.1,60,000/-as security deposit. The aforesaid security money was duly deposited by the petitioner and thereafter an agreement was executed on 15.11.2010 between the parties for the execution of work. The petitioner started his work on 22.5.2011 and completed the same within stipulated period and thereafter submitted its Bill No.21 for Rs.3,97,858/-Bill No.22 for Rs.3,50,666/-Bill No.23 for Rs.2,78,046/-, Bill No.24 for Rs.2,37,046, Bill No.25 for Rs.3,93,402, Bill No.26 for 2,89,532/-and Bill No.27 for 2,99,004/-, all dated 4.8.2011, total amounting Rs.22,45,554/-. 4. It is contended that all the aforesaid bills were duly signed and verified and 100% physically checked by the concerned authority, i.e., SDE and DE of BSNL. It is contended in paragraph 9 of the writ petition that the respondent had failed to fulfill its contractual obligations, duties and responsibilities under the contract by not paying amount against the aforementioned bills, although the line started working. In this regard, the petitioner made request for the payment of aforesaid bills from time to time. Since the request of the petitioner was not accepted, the petitioner approached this Court by filing an application for appointment of an arbitrator being Arbitration Application No.32 of 2015. This Court vide its order dated 28.4.2015 directed the respondent to appoint an arbitrator within ten days. Since the request of the petitioner was not accepted, the petitioner approached this Court by filing an application for appointment of an arbitrator being Arbitration Application No.32 of 2015. This Court vide its order dated 28.4.2015 directed the respondent to appoint an arbitrator within ten days. Thereafter the respondent vide its letter dated 25.5.2015 appointed one Mr. Israr Ahmed (DGM Aligarh) to act as an arbitrator. The petitioner and respondents have filed their claims and counter claims before the said arbitrator. 5. It is further contended that during the arbitration proceedings, the respondent submitted that a committee was constituted by GMTD Mathura on 15.7.2013 for physical verification and to find out the work done by the petitioner. It is contended that at the relevant time, vigilance inquiry was under process in which the petitioner also participated. 6. During the period while aforesaid proceedings were going on, the arbitrator pronounced its award on 27.8.2015 allowing the application submitted by the petitioner and rejected the submission of respondent, copy of the award dated 27.8.2015 is appended as Annexure 2 to the writ petition. The aforesaid award was challenged by the respondent before the District Judge Mathura. The proceedings before the District Judge Mathura is still pending. 7. In the meanwhile, the respondent floated a tender for construction work on 01.10.2016.The petitioner duly participated in the said tender but the respondent vide letter dated 27.12.2016 disqualified the petitioner. The respondent again floated a tender on 29.12.2016 but before the petitioner was able to submit his tender, the respondent passed order dated 27.01.2017 by which the petitioner was blacklisted for a period of three years, copy of the communication/letter dated 27.01.2017 is appended as Annexure 7 to the writ petition. Aggrieved by the aforesaid decision/letter dated 27.1.2017 issued by the respondent, the petitioner has preferred the present writ petition. 8. It was argued by the learned counsel for the petitioner that although blacklisting order has serious civil consequences but before passing the said order, no notice or opportunity of hearing whatsoever has been provided to the petitioner. Learned counsel for the petitioner relied upon following judgments of Supreme Court passed :- (i) Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal (1975) 1 SCC 70 . (ii) M/s Mahabir Auto Stores & Ors. Vs. Indian Oil Corporation Ltd., (1990) 3 SCC 752 . Learned counsel for the petitioner relied upon following judgments of Supreme Court passed :- (i) Erusian Equipment & Chemicals Ltd. Vs. State of West Bengal (1975) 1 SCC 70 . (ii) M/s Mahabir Auto Stores & Ors. Vs. Indian Oil Corporation Ltd., (1990) 3 SCC 752 . (iii) Gorkha Security Services VS, Government of NCT of Delhi & Others reported in (2014) 9 SCC 105 . 9. A short counter affidavit was filed by the respondent. It is contended in short counter affidavit that the petitioner had never completed assigned work within time, although several opportunities were given to him. It is further contended that action was taken against the petitioner vide order dated 21.10.2014. By the aforesaid order, the petitioner was blacklisted in BSNL for the period of four years. 10. Challenging the aforesaid order dated 21.10.2014, the petitioner had preferred a writ petition before this Court being Writ C No.60259 of 2014 (M/s S. Kumar Construction Company Vs. The G.M. M/s B.S.N.L. and others). The said writ petition was finally disposed of by a co-ordinate Bench of this Court vide its judgment dated 12.11.2014. The Bench was of the view that the contract entered between the petitioner and B.S.N.L. contained an arbitration clause and since the issue as to whether the petitioner was negligent in completing the work within time fixed under the contract or delay was occasioned due to lapse on the part of the B.S.N.L. is an issue of fact which can be examined during arbitral proceedings more appropriately. In view of the same, the petitioner was directed to approach the arbitrator. It appears from the record that after the aforesaid judgment was delivered on 12.11.2014, the petitioner approached the arbitrator in order to decide the dispute as stated above. An award has already been given by the arbitrator in favour of the petitioner against which the proceedings were initiated under Section 34 of the Act 1996 and the said proceedings are still pending consideration before the District Judge Mathura. 11. Heard learned counsel for the parties and perused the record. 12. From perusal of the facts as narrated above, it is clear that the order of blacklisting was passed by the respondent without affording any opportunity of hearing to the petitioner or by providing an opportunity to show cause against the said action. 11. Heard learned counsel for the parties and perused the record. 12. From perusal of the facts as narrated above, it is clear that the order of blacklisting was passed by the respondent without affording any opportunity of hearing to the petitioner or by providing an opportunity to show cause against the said action. The law on the subject of blacklisting is well settled in light of numerous decisions of the Supreme Court on this subject. 13. In the case of Erusian Equipment & Chemicals Ltd. Vs. State of WestBengal (supra) it was held by the Supreme Court that blacklisting has the affect of preventing a person from the privilege and advantage of name into relationship with the Government for purpose of aim. It was held by the Supreme Court in the aforesaid case that the fundamentals of fair play require that a person concerned should be given an opportunity to represent his case. Paragraphs 12 and 20 of the said judgment is quoted below :- "12. Under Article 298 of the Constitution the executive power of the Union and the State shall extend to the carrying on of any trade and to the acquisition, holding and disposal of property and the making of contracts for any purpose. The State can carry on executive function by making a law or without making a law. The exercise of such powers and functions in trade by the State is subject to Part III of the Constitution. Article 14 speaks of equality before the law and equal protection of the laws. Equality of opportunity should apply to matters of public contracts. The State has the right to trade. The State has there the duty to observe equality. An ordinary individual can choose not to deal with any person. The Government cannot choose to exclude persons by discrimination. The order of blacklisting has the effect of depriving a person of equality of opportunity in the matter of public contract. A person who is on the approved list is unable to enter into advantageous relations with the Government because of the order of blacklisting. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. 20. A person who has been dealing with the Government in the matter of sale and purchase of materials has a legitimate interest or expectation. When the State acts to the prejudice of a person it has to be supported by legality. 20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government for purposes of gains. The fact that a disability is created by the order of blacklisting indicates that the relevant authority is to have an objective satisfaction. Fundamentals of fair play require that the person concerned should be given an opportunity to represent his case before he is put on the blacklist." 14. Further in the case of Gorkha Security Services Vs. Government of NCT of Delhi & Others (supra), the Supreme Court reiterated the principles laid down in the case of Erusian Equipment & Chemicals Ltd. v. State of W.B. (supra) and highlighted the necessity of giving an opportunity of hearing or show-cause before blacklisting him. Paragraph 17 of the aforesaid judgment is quoted below:- 17. Way back in the year 1975, this Court in Erusian Equipment & Chemicals Ltd. v. State of W.B. [Erusian Equipment & Chemicals Ltd. v. State of W.B., (1975) 1 SCC 70 ], highlighted the necessity of giving an opportunity to such a person by serving a show-cause notice thereby giving him opportunity to meet the allegations which were in the mind of the authority contemplating blacklisting of such a person.” 15. Again in the case of Raghunath Thakur Vs. State of Bihar [(1989) 1 SCC 229] the aforesaid principles was reiterated in the following manner: (SCC p. 230, para 4). "4. ........ But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law.........." 20. Thus, there is no dispute about the requirement of serving showcause notice. We may also hasten to add that once the show-cause notice is given and opportunity to reply to the show-cause notice is afforded, it is not even necessary to give an oral hearing. The High Court has rightly repudiated the appellant's attempt in finding foul with the impugned order on this ground. Such a contention was specifically repelled in Patel Engg. [Patel Engg. Ltd. v. Union of India, (2012) 11 SCC 257 : (2013) 1 SCC (Civ) 445]." 16. In the case of M/s Mahabir Auto Stores & Ors. Vs. Indian Oil Corporation Ltd. (supra) it was held by the Supreme Court that arbitrariness and discrimination in every matter is subject to judicial review. Paragraph 11 of the aforesaid judgment is quoted below :- “It is well settled that every action of the State or an instrumentality of the State in exercise of its executive power, must be informed by reason. In appropriate cases, actions uninformed by reason may be questioned as arbitrary in proceedings under Article 226 or Article 32 of the Constitution. Reliance in this connection may be placed on the observations of this Court in M/s Radha Krishna Agarwal & Ors. v. State of Bihar & Ors., [1977] 3 SCC 457. It appears to us, at the outset, that in the facts and circumstances of the case, the respondent-company IOC is an organ of the State or an instrumentality of the State as contemplated under Article 12 of the Constitution. The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual par- ties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Article 14 can be checked. The State acts in its executive power under Article 298 of the Constitution in entering or not entering in contracts with individual par- ties. Article 14 of the Constitution would be applicable to those exercises of power. Therefore, the action of State organ under Article 14 can be checked. M/s Radha Krishna Agarwal v. State of Bihar, (supra) at p. 462, but Article 14 of the Constitution cannot and has not been construed as a charter for judicial review of State action after the contract has been entered into, to call upon the State to account for its actions in its manifold activities by stating reasons for such actions. In a situation of this nature certain activities of the respondent company which constituted State under Article 12 of the Constitution may be in certain circumstances subject to Article 14 of the Constitution in entering or not entering into contracts and must be reasonable and taken only upon lawful and relevant consideration, it depends upon facts and circumstances of a particular transaction whether heating is necessary and reasons have to be stated. In case any right conferred on the citizens which is sought to be interfered, such action is subject to Article 14 of the Constitution, and must be reasonable and can be taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action of this type of entering or not entering into contracts, Article 14 springs up and judicial review strikes such an action down. Every action of the State executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Governmental action even in the matters of entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu & Anr., [1974] 4 SCC 3; Maneka Gandhi v. Union of India & Anr., [1976] 1 SCC 248; Ajay Hasia & Ors. In this connection reference may be made to E.P. Royappa v. State of Tamil Nadu & Anr., [1974] 4 SCC 3; Maneka Gandhi v. Union of India & Anr., [1976] 1 SCC 248; Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors., [1981] 1 SCC 722; R.D. Shetry v. International Airport Authority of India & Ors., [1979] 3 SCC 1 and also Dwarkadas Marlaria and sons v. Board of Trustees of the Port of Bombay, [1989] 3 SCC 293. It appears to us that rule of reason and rule against arbitrariness and discrimination, rules of fair play and natural justice are part of the rule of law applicable in situation or action by State instrumentality in dealing with citizens in a situation like the present one. Even though the rights of the citizens are in the nature of contractual rights, the manner, the method and motive of a decision of entering or not entering into a contract, are subject to judicial review on the touchstone of relevance and reasonableness, fair play, natural justice, equality and nondiscrimination in the type of the transactions and nature of the dealing as in the present case.” 17. From perusal of the aforesaid legal preposition, which itself is a reiteration of the principles laid down by the Supreme Court in Erusian Equipment & Chemicals Ltd. v. State of W.B.(supra), we are of the view that the petitioner could not have been blacklisted without being afforded an opportunity of hearing and accorded the right to show cause why such action be not taken. It cannot be disputed that an order of blacklisting does carry serious civil consequences. It therefore follows as a necessary corollary that an adherence to the fundamental precepts of natural justice is essential and a prerequisite. 18. Since in the facts of the present case, there is a complete failure to follow due process, we find ourselves unable to sustain the order dated 27.01.2017 passed by the respondent (Annexure 7 to the writ petition.) 19. We accordingly allow the writ petition and quash the order dated 27.01.2017. We further clarify that in case the respondents do choose to initiate fresh proceedings for blacklisting the firm of the petitioner, we leave it open to them to do so subject to the observation that the proceedings if initiated shall be undertaken in accordance with law and the observations appearing herein above.