Blacklisting Clause Under Custom Milling Policy Does Not Permit Perpetual Debarment; Punjab & Haryana High Court Holds Blacklisting Must Be Limited to a Reasonable Period
Case Name: M/s United Foods through its Partner Naseeb Singh v. State of Haryana and Others
Date of Judgment: 27 May 2026
Citation: CWP-4767 of 2026
Bench: Justice Harsh Bunger
Held: The Punjab and Haryana High Court held that although the State is empowered under the Custom Milling Policy and the milling agreement to blacklist a defaulting rice miller for misappropriation or shortage of government paddy, such power does not authorise perpetual or indefinite blacklisting. Where neither the policy nor the impugned order specifies the duration of blacklisting, the debarment can operate only for a reasonable period. The Court further upheld the State’s decision to shift the remaining government paddy to another rice mill in accordance with the contractual provisions.
Summary: The petitioner, a rice mill engaged in custom milling of paddy under the Kharif Marketing Season (KMS) 2025–26 Policy, challenged the order directing transfer of the remaining government paddy from its premises to another mill and the subsequent order blacklisting the firm.
During physical verification, the Food and Supplies Department detected a shortage of 1005 MT of government paddy entrusted to the petitioner for custom milling. Consequently, an FIR alleging misappropriation was registered against the partners of the firm, the value of the missing stock amounting to ₹2.47 crore was recovered from the petitioner, and the competent authority passed an order directing shifting of the remaining paddy while also blacklisting the petitioner.
The petitioner primarily argued that although the agreement contemplated blacklisting, the impugned order neither specified the duration of debarment nor afforded an effective opportunity on that aspect. It was contended that an order of blacklisting without a prescribed period amounted to permanent debarment, which is arbitrary and violative of principles of natural justice.
The High Court rejected the challenge to the shifting of paddy, holding that under the KMS Policy and the milling agreement, the government paddy continued to remain the property of the State, while responsibility for its custody, quantity and quality rested upon the rice miller. Therefore, upon detection of substantial shortage and alleged misappropriation, the authorities were justified in transferring the remaining stock to another mill at the petitioner’s risk and cost.
However, while examining the blacklisting order, the Court held that the power to blacklist cannot be equated with the power to impose perpetual civil death upon a contractor. In the absence of any statutory provision expressly authorising permanent debarment, an order of blacklisting cannot continue indefinitely merely because the policy provides for blacklisting. Relying upon settled principles governing government contracts and blacklisting, the Court observed that the duration of debarment must be reasonable and proportionate to the misconduct. Accordingly, although the order of blacklisting was not set aside, the Court clarified that it would remain operative only for a reasonable period and not indefinitely.
Decision: The writ petition was partly allowed. The High Court upheld the State’s decision to shift the remaining government paddy to another rice mill and sustained the petitioner’s blacklisting. However, it clarified that the blacklisting cannot be construed as perpetual and shall remain effective only for a reasonable period, notwithstanding the absence of any specified duration in the impugned order.