M/S R. K. Infracorp Private Limited Vs National Highways and Infrastructure Development Corporation Limited

¶1

Page No.# 1/31

¶2

GAHC010029512026

¶3

2026:GAU-AS:8120

¶4

THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

¶5

Case No. : WP(C)/858/2026

¶6

M/S R. K. INFRACORP PRIVATE LIMITED

¶7

REPRESENTED BY ITS MANAGING DIRECTOR MS. R. SRIYANKA REDDY, WITH OFFICES AT- FLAT NO. 207, LUMBINI ENCLAVE, OPP- NIMS, PUNJAGUTTA, HYDERABAD- 500082 EMAIL- RKINFRACORPGMAIL.COM, RKINFRACORPHOTMAIL.COM

¶8

VERSUS

¶9

NATIONAL HIGHWAYS AND INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED

¶10

FIRST FLOOR, TOWER A, WORLD TRADE CENTRE, NAUROJI NAGAR, NEW DELHI- 110029 ALSO WITH BRANCH OFFICE AT- PROJECT MONITORING UNIT, DIBRUGARH OPPOSITE SBI ATM, BYE LANE 5, DIBRUGARH RAILWAY STATION ROAD, BANIPUR, DIST- DIBRUGARH, ASSAM, PIN786003.

¶11

BEFORE

¶12

HONOURABLE MR. JUSTICE DEVASHIS BARUAH

¶13

For the Petitioner(s) : Ms. G. Goswami, Sr. Advocate

¶14

Ms. A. Neog, Advocate

¶15

For the Respondent(s) : Mr. P. J. Saikia, Sr. Advocate

¶16

Ms. M. Nirola, Advocate Ms. R. Bora, SC, NHIDCL

¶17

Page No.# 2/31

¶18

Date on which judgment is reserved : NA

¶19

Date of pronouncement of judgment : 09.06.2026 Whether the pronouncement is of the Operative part of the judgment? : Yes Whether the full judgment has been Pronounced? : NA

¶20

JUDGMENT AND ORDER (ORAL)

¶21

Heard Ms. G. Goswami, the learned Senior Counsel assisted by Ms. A. Neog, the learned counsel appearing on behalf of the Petitioner. Mr. P. J. Saikia, the learned Senior Counsel assisted by Ms. M. Nirola, the learned counsel appears on behalf of the Respondent.

¶22

PREFACE

¶23

The Petitioner has approached this Court challenging the following:

¶24

(A) The Debarment Notice dated 03.02.2026;

¶25

(B) The Termination Notice dated 03.02.2026 whereby the Contract Agreement dated 22.08.2023 was terminated.

¶26

(C) In addition to that, the Petitioner also sought for a direction upon the Respondent to consider the letter dated

¶27

05.12.2025 for a mutual foreclosure of the agreement in

¶28

Page No.# 3/31

¶29

terms with Clause 23.9 of the Contract Agreement.

¶30

At the outset, the learned Senior Counsel appearing on behalf of the Petitioner submitted that taking into account that there would be a requirement of adjudication of disputed questions of facts in respect to the Termination Notice dated 03.02.2026 issued by the Respondent thereby terminating the Contract Agreement dated 22.08.2023, the Petitioner herein would not like to press the said prayer without prejudice to avail remedies available under law. The learned Senior Counsel for the Petitioner also submitted that taking into account that the contract had already been terminated vide the Termination Notice dated 03.02.2026, the question of issuance of a direction for reconsideration of the letter dated 05.12.2025 may not be required to be adjudicated in the instant proceedings.

¶31

In the backdrop of the above, the question therefore arises in the instant proceedings as to whether the impugned Debarment Notice dated 03.02.2026 is in accordance with law.

¶32

BRIEF FACTS OF THE CASE

¶33

The Respondent herein along with the Petitioner entered into an agreement on 22.08.2023. In terms of the said agreement, the Petitioner was obligated to carry out the contract for widening/improvement of 2-Lane with paved shoulder from

¶34

Page No.# 4/31

¶35

km 16+900 (Bogapani) to km 27+150 (Golaigaon) on the existing Dibrugarh to Ledo road section with proposed Digboi Bypass (Green Field and Brownfield) (2 Lane PS) of NH-315 (Old NH-38) in Tinsukia District in the State of Assam on EPC mode. The period for completion of the work as per the said agreement was 730 days from the appointed date. Taking into account the said stipulation contained in Clause 10.3 (i) of the Contract Agreement, the time for completion of the work was on 06.12.2025.

¶36

The records further reveal that on 05.03.2025, prior to the stipulation period for completion of the contract, a Show Cause Notice was issued to the Petitioner thereby notifying the Petitioner of the decision to debar/blacklist the Petitioner on account of defaults on the part of the Petitioner as per Clause 23.1(i)(c) and Clause 23.1(i)(h) of the EPC Contract. The Managing Director/the Chairman of the Petitioner was granted an opportunity to furnish the written reply and personal hearing before the Competent Authority at the NHIDCL HQ, 1st Floor & 2nd Floor, World Trade Centre, New Delhi within 15 days of service of the said notice. It was made clear that based upon the outcome of the personal hearing, the Authority reserved its right and would be at liberty to take further actions for blacklisting/debarment of the Petitioner, and in such

¶37

Page No.# 5/31

¶38

consequences, the Petitioner shall not be able to bid any contract of the Authority either singularly or in JV or its related parties for a period of two years. The Respondent further reserved rights or remedies available under the Contract Agreement and/or applicable law. Paragraph Nos. 15, 16 & 17 of the said Show Cause Notice, being relevant, is reproduced herein under:-

¶39

“15. WHEREAS, as per Clause 23.1 (v) of the EPC Contract,

¶40

"As a natural consequence of the termination, due to contractor’s failure, the contractor shall deemed to have been debarred for a period of 2 years and shall not be able to bid any contract of the Authority either singularly or in a JV or its Related Parties.

¶41

(Explanation:- Such debarment shall be a natural consequence of termination. No separate Show Cause Notice / proceeding shall be initiated for placing such Contractor under debarment)"

¶42

WHEREAS, Notice for Intention to Termination as per Clause 23.1 (ii) of the EPC CA for defaults has already been issued to the EPC Contractor. However, taking into account the Apex Court's Decision in one of its landmark judgements dated 04.08.2014 intimated vide NHIDCL circular no. NHIDCL/Legal/Orders & Circulars/2022/1459 dated 05.09.2023 and in the interest of natural justice, this Show cause Notice is hereby issued notifying the Contractor of the Authority's decision to debar/blacklist the Contractor on account of defaults on the part of the Contractor as per Clause 23.1(i)(c) and 23.1(i)(h) of the EPC Contractor. The

¶43

Page No.# 6/31

¶44

MD/Chairman of the EPC Contractor is hereby granted an opportunity to furnish its written reply and personal hearing before the Competent Authority at NHIDCL HQ, 1ˢᵗ & 2ⁿᵈ Floor, World Trade Centre, Nauroji Nagar, New Delhi-110029 within 15 days of serving of this Notice. It is made clear that based on the outcome of the Personal Hearing, the Authority reserves its right and would be at liberty to take further steps for Blacklisting/Debarment of the Contractor. If the Contractor is blacklisted/debarred, the Contractor shall not be able to bid any contract of the Authority either singularly or in a JV or its Related Parties for a period of 2 years.

¶45

This Notice is issued without prejudice to any other right or remedies available with the Authority under the Contract Agreement and/ or applicable law.”

¶46

The Petitioner thereupon submitted a reply on 17.03.2025 wherein the Petitioner raised various issues for which the Petitioner was not in a position to carry out the work. A perusal of the said reply shows that it was the stand of the Petitioner that the reciprocal obligations which were cast upon the Respondent were not performed by the Respondent which was one of the causes of delay in carrying out the work. In addition to that, the Petitioner categorically observed that blacklisting was an extreme punitive measure with far reaching consequences for the Petitioner's business and reputation, and as such, the recourse to blacklisting cannot be effectuated in an arbitrary,

¶47

Page No.# 7/31

¶48

mechanical or disproportionate manner, but it must be predicated upon cogent and incontrovertible evidence of wilful default, malafide or fundamental contractual infractions. It was also a stand taken in the reply by the Petitioner that there were no materials placed which would show that the contractual breach by the Petitioner, if any, was of such an egregious nature as to merit such a drastic consequence of blacklisting. The Petitioner also stated in the reply its willingness to appear before the Competent Authority at HQ, NHIDCL on any date and time that the Authority may deem expedient.

¶49

The records, however, reveal that the Respondent thereupon did not pursue with the said show cause notice and this aspect is apparent from the fact that the Petitioner was asked to carry out the various contractual obligations. In that regard, it may not be out of place to mention the communication issued by the Authority Engineer to the Petitioner on 09.08.2025 thereby stipulating the timelines within which certain performances were sought from the Petitioner.

¶50

The records further reveal that just prior to one year from the date of issuance of the Show Cause Notice, the contract by and between the Petitioner and the Respondent dated 22.08.2023 was terminated by the Termination Notice dated 03.02.2026. It may not be out of place to mention that at

¶51

Page No.# 8/31

¶52

paragraph No.17 of the said Termination Notice, there is a reference to the Show Cause Notice which was issued to the Petitioner and the reply so submitted by the Petitioner.

¶53

On the same date, the impugned Notice for Debarment was issued and the Respondent in the said Debarment Notice referred to Clause 23.1(v) of the Contract Agreement and stated that on account of the Termination Notice issued on the same day that is on 03.02.2026 as a natural consequence to such termination, the Petitioner was debarred for a period of two years and the Petitioner shall not be able to bid any contract of the Authority either singularly or in any JV (Joint Venture) or its related parties. It is under such circumstances, the Petitioner had approached this court seeking the various reliefs as aforementioned.

¶54

The record reveals that this Court vide the order dated 18.02.2026 issued notice and further as an interim measure, stayed the impugned Debarment Notice dated 03.02.2026. The said interim order had been thereupon extended from time to time.

¶55

It is further relevant to take note that the Respondent had filed an affidavit-in-opposition placing on record various enclosures thereby justifying the Debarment Notice as well as

¶56

Page No.# 9/31

¶57

the Termination Notice, both dated 03.02.2026.

¶58

SUBMISSIONS ON BEHALF OF THE LEARNED COUNSELS FOR THE PARTIES.

¶59

Mrs. G. Goswami, the learned Senior Counsel appearing on behalf of the Petitioner submitted that the Petitioner would not insist on the relief pertaining to the challenge to the Termination Order dated 03.02.2026. The learned Senior Counsel for the Petitioner, however, submitted that the said submission is made taking into account that for the purpose of determination of the impugned Termination Order, this Court may have to enter into various factual adjudications which may not be permitted within the confines of the jurisdiction of this Court under Article 226 of the Constitution. She, however, submitted that the withdrawal of the said reliefs pertaining to the challenge to the Termination Notice in the instant proceeding should not preclude or prejudice the Petitioner to approach the appropriate forum.

¶60

The learned Senior Counsel for the Petitioner further submitted that the impugned Debarment Notice is contrary to the law laid down by the Supreme Court in various judgments. It is the submission of the learned Senior Counsel for the Petitioner that the said Show Cause Notice of debarment was not preceded by any Show Cause Notice. In respect to the Show Cause Notice which was issued on 05.03.2025, the Petitioner thereupon

¶61

Page No.# 10/31

¶62

submitted a reply on 17.03.2025 and sought for a personal hearing. No steps for concluding the said Show Cause Notice proceedings were carried out rather the Petitioner was allowed to carry out the work as would be apparent from the materials on record. It is the further submission of the Petitioner’s Senior Counsel in this respect that by the conduct of the Respondent in permitting the Petitioner after submission of the reply to carry out further works, the Respondent Authorities had by their own conduct given up the said Show Cause proceedings.

¶63

The learned Senior Counsel submitted that merely on account of termination, blacklisting/ debarment cannot be a natural consequence irrespective of the term in the contract. The learned Senior Counsel for the Petitioner referred to the judgment of the Supreme Court in the case of Gorkha Security Services vs. Government (NCT of Delhi) & Others , reported in (2014) 9 SCC 105 and submitted that the contractual provision on the basis of which the Respondent had issued the Debarment Notice, i.e. Clause 23.1 (v), there was a similar provision in the said case before the Supreme Court as would be apparent from paragraph No.24 of the judgment in the case of Gorkha Security Services (supra). The learned Senior Counsel submitted that in spite of that the Supreme Court categorically observed that blacklisting cannot be carried out in spite of such a Clause in as much as

¶64

Page No.# 11/31

¶65

mere termination of a contract would not be sufficient for the purpose of blacklisting of the contractor. The learned Senior Counsel for the Petitioner submitted that there is something more required for initiating proceedings for blacklisting/debarment. In that regard, the learned Senior Counsel referred to paragraph Nos.26, 27, 28 & 29 of the said judgment.

¶66

The learned Senior Counsel for the Petitioner further submitted that even the Respondent Authority duly acknowledges the said aspect as would be apparent from paragraph No.16 of the Show Cause Notice dated 05.03.2025 the judgment Gorkha Security Services (supra) was mentioned for which the Show Cause Notice and a personal hearing was sought to be provided.

¶67

The learned Senior Counsel further referring to the judgment of the Supreme Court in the case of Blue Dreamz Advertising Private Limited & Another vs. Kolkata Municipal Corporation & Others , reported in (2024) 15 SCC 264 submitted that the Supreme Court had been categorical in observing that in a case of ordinary breach of contract and when explanations are offered by the person concerned raising bonafide disputes; blacklisting/debarment/penalty ought not to be resorted to. The learned Senior Counsel for the Petitioner referring to paragraph

¶68

Page No.# 12/31

¶69

Nos.25 & 26 of the said judgment submitted that the Petitioner has raised in the reply dated 17.03.2025 about non-performance of reciprocal obligations by the Respondent, and as such, there was a bonafide dispute. It was therefore the submission of the learned Senior Counsel that merely on the ground that a contract was terminated without there being any adjudication as to whether there was a bonafide dispute or not, the Respondent Authority straight away could not have issued the impugned Debarment.

¶70

The learned Senior Counsel further referred to the recent judgment of the Supreme Court in the case of Techno Prints vs. Chhattisgarh Textbook Corporation & Another , reported in 2025 SCC OnLine SC 343 and in that regard submitted that a similar Clause like Clause 23.1 (v) of the Contract Agreement was present in the said proceedings, i.e. Clause 16.9 and submitted that in the said case, the Supreme Court in spite of the presence of a similar Clause interfered with the Show Cause Notice on the ground that there existed bonafide disputes for which the recourse to blacklisting was not permissible. The learned Senior Counsel submitted that even the Show Cause Notice was interfered with by the Supreme Court in the said judgment.

¶71

Per contra, Mr. P. J. Saikia, the learned Senior Counsel appearing on behalf of the Respondent submitted that the

¶72

Page No.# 13/31

¶73

Petitioner was issued a Show Cause Notice on 05.03.2025. The Petitioner submitted a reply on 17.03.2025. Though the Petitioner was allowed to carry out the work, but that was done on account of public interest in as much as termination of the contract would entail issuance of another tender process and thereby there would be delay in the construction of the roads in question. The learned Senior Counsel for the Respondent further submitted that in spite of opportunity being granted thereafter also, the Petitioner did not carry out the work and in that regard has referred to the various Notices issued which were enclosed to the affidavit-in-opposition. Situated thus, the Respondent Authority was compelled to issue the Termination Notice. The learned Senior Counsel for the Respondent further referred to paragraph No.17 of the said Termination Notice and submitted that in the said Termination Notice there is a reference to the Show Cause Notice which was issued to the Petitioner on 05.03.2025 and the reply which was submitted on 17.03.2025 by the Petitioner. This aspect was duly taken note of, and thereupon, the Respondent under compelling circumstances to maintain and improve the infrastructure had to terminate the Petitioner. The learned Senior Counsel for the Respondent further submitted that in the impugned Notice for Debarment there is a reference to the Termination Notice dated 03.02.2026 and the

¶74

Page No.# 14/31

¶75

said Termination Notice refers to the Show Cause Notice as well as the reply, and therefore, it could be deemed that the said Notice for Debarment was preceded by the Show Cause Notice as well as the reply which were duly considered.

¶76

ANALYSIS AND DETERMINATION

¶77

The issue involved in the instant proceeding is as to whether the action on the part of the Respondent to issue the impugned Debarment Notice is in violation of Articles 14 & 21 of the Constitution. It may not be out of place to mention that Article 14 of the Constitution negates any arbitrariness, unreasonableness, irrationality and illegality whereas the principles of natural justice are considered to be a facet of Article 21 of the Constitution.

¶78

In the instant case, the facts delineated above would show that on 05.03.2025, a Show Cause Notice was issued to the Petitioner asking the Petitioner to show cause why the Petitioner should not be blacklisted. In the said Show Cause Notice, more particularly at paragraph No.16, the concerned official of the Respondent referred to the judgment of the Supreme Court in the case of Gorkha Security Services (supra) and following the mandate in the said judgment, the Show Cause Notice was issued to the Petitioner and also provided an opportunity of

¶79

Page No.# 15/31

¶80

personal hearing.

¶81

The Petitioner thereupon submitted a reply on 17.03.2025 wherein not only the Petitioner had raised various issues pertaining to non-performance of the reciprocal obligations, the Petitioner also stated in clear and categorical terms that the allegations made in the Show Cause Notice were not of such substance which would entail the consequence of blacklisting. The Petitioner also submitted that the Petitioner would be participating in the personal hearing at the place as mentioned in the Show Cause Notice dated 05.03.2025 as and when the Respondent Authority duly informed the Petitioner.

¶82

Admittedly, there was no personal hearing, and on the other hand, the Petitioner was allowed to carry out the various contractual obligations.

¶83

Be that as it may, the Respondent Authority thereupon issued the Termination Notice dated 03.02.2026.

¶84

It surprises this Court to take note of the impugned Debarment Notice in as much as though the learned Senior Counsel appearing on behalf of the Respondent had categorically mentioned that there was a Show Cause Notice and there was a reply which was duly considered in the Notice for Termination, but in the opinion of this Court, the Notice for Debarment should

¶85

Page No.# 16/31

¶86

have contained the reference to the Show Cause Notice as well as the reply thereagainst at least. This observation is made by this Court even without considering as to whether the said Show Cause Notice issued almost a year back was sufficient to impose the penalty of debarment.

¶87

This Court also finds it relevant to observe that it is a facet of the principles of natural justice as was held by the Supreme Court in the case of Gorkha Security Services (supra) that not only a Show Cause Notice would suffice, but an opportunity of personal hearing should be afforded. In the reply to the Show Cause Notice so submitted by the Petitioner on 17.03.2025, it was categorically mentioned that the Petitioner be informed as to the date on which the hearing would be taken up in respect to the issue pertaining to debarment/blacklisting. Without any such hearing, the Respondent Authority resorted to Clause 23.1(v) of the Contract Agreement and issued the Debarment Notice.

¶88

This Court also finds it relevant to take note of the judgment of Gorkha Security Services (supra) and more particularly paragraph Nos.24 & 25 which is reproduced herein under:-

¶89

“24. It would be necessary to take note of the relevant portion of Clause 27 of the NIT under which umbrage is taken by the respondents to justify their action, and even appealed to the High Court. Clause 27(a) reads as under:

¶90

Page No.# 17/31

¶91

‘(a) … (sic) In case the contractor fails to commence/execute the work as stipulated in the agreement or unsatisfactory performance or does not meet the statutory requirements of the contract, Department reserves the right to impose the penalty as detailed below:

¶92

(i) 20% of cost of order/agreement per week, up to two weeks’ delays.

¶93

(ii) After two weeks’ delay principal employer reserves the right to cancel the contract and withhold the agreement and get this job carried out preferably from other contractor(s) registered with DGR and then from open market or with other agencies if DGR registered agencies are not in a position to provide such contractor(s). The difference if any will be recovered from the defaulter contractor and also shall be blacklisted for a period of 4 years from participating in such type of tender and his earnest money/security deposit may also be forfeited, if so warranted.”

¶94

(emphasis supplied)

¶95

It is clear from the reading of the aforesaid clause that when there is a failure on the part of the contractor to comply with the express terms of the contract and/or to commit breach of the said terms resulting into failure to commence/execute the work as stipulated in the agreement or giving the performance that does not meet the statutory requirements of the contract, the Department has a right to impose various kinds of penalties as provided in the aforesaid clause. These penalties are of the following nature:

¶96

Page No.# 18/31

¶97

(i) Penalty in the form of 20% of cost of orders/agreement per week, up to delay of 2 weeks.

¶98

(ii) If the delay is beyond 2 weeks then:

¶99

(a) To cancel the contract and withhold the agreement. In that event, Department has right to get the job carried out from other contractor at the cost of the defaulter contractor;

¶100

( b) To blacklist the defaulter contractor for a period of 4 years;

¶101

(c) To forfeit his earnest money/deposits, if so warranted.”

¶102

A perusal of the above paragraphs would show that a pari materia provision like Clause 23.1 (v) of the present Contract Agreement was also there as Clause 27(a) in the contract which was the subject matter of consideration before the Supreme Court. The Supreme Court in spite of the presence of such a Clause categorically observed that there was a necessity of following the principles of natural justice. In this regard, this Court further finds it pertinent to take note of paragraph Nos.26, 27 & 28 of the said judgment, which are reproduced herein under:-

¶103

“26. In the present case, it is obvious that action is taken as provided in sub-clause (ii). Under this clause, as is clear from the reading thereof, the Department had a right to cancel the contract and withhold the agreement. That has been done. The Department has also a right to get the job which was to be carried out by the defaulting contractor, to be carried out from other contractor(s). In such an event, the

¶104

Page No.# 19/31

¶105

Department also has a right to recover the difference from the defaulting contractor. This clause, no doubt, gives further right to the Department to blacklist the contractor for a period of 4 years and also forfeit his earnest money/security deposit, if so required. It is thus apparent that this sub-clause provides for various actions which can be taken and penalties which can be imposed by the Department. In such a situation which action the Department proposes to take, need to be specifically stated in the show-cause notice. It becomes all the more important when the action of blacklisting and/or forfeiture of earnest money/security deposit is to be taken, as the clause stipulates that such an action can be taken, if so warranted. The words “if so warranted”, thus, assume great significance. It would show that it is not necessary for the Department to resort to penalty of blacklisting or forfeiture of earnest money/security deposit in all cases, even if there is such a power. It is left to the Department to inflict any such penalty or not depending upon as to whether circumstances in a particular case warrant such a penalty. There has to be due application of mind by the authority competent to impose the penalty, on these aspects. Therefore, merely because of the reason that Clause 27 empowers the Department to impose such a penalty, would not mean that this specific penalty can be imposed, without putting the defaulting contractor to notice to this effect .

¶106

We are, therefore, of the opinion that it was incumbent on the part of the Department to state in the show-cause notice that the competent authority intended to impose such a penalty of blacklisting, so as to provide adequate and meaningful opportunity to the appellant to show cause against the same. However, we may also add that even

¶107

Page No.# 20/31

¶108

if it is not mentioned specifically but from the reading of the showcause notice, it can be clearly inferred that such an action was proposed, that would fulfil this requirement. In the present case, however, reading of the show-cause notice does not suggest that noticee could find out that such an action could also be taken. We say so for the reasons that are recorded hereinafter.

¶109

In the instant case, no doubt the show-cause notice dated 6-22013 was served upon the appellant. Relevant portion thereof has already been extracted above (see para 5). This show-cause notice is conspicuously silent about the blacklisting action. On the contrary, after stating in detail the nature of alleged defaults and breaches of the agreement committed by the appellant the notice specifically mentions that because of the said defaults the appellant was “as such liable to be levied the cost accordingly”. It further says “why the action as mentioned above may not be taken against the firm, besides other action as deemed fit by the competent authority”. It follows from the above that main action which the respondents wanted to take was to levy the cost. No doubt, the notice further mentions that the competent authority could take other actions as deemed fit. However, that may not fulfil the requirement of putting the defaulter to the notice that action of blacklisting was also in the mind of the competent authority. Mere existence of Clause 27 in the agreement entered into between the parties, would not suffice the aforesaid mandatory requirement by vaguely mentioning other “actions as deemed fit”. As already pointed out above insofar as penalty of blacklisting and forfeiture of earnest money/security deposit is concerned it can be

¶110

Page No.# 21/31

¶111

imposed only, “if so warranted”. Therefore, without any specific stipulation in this behalf, the respondent could not have imposed the penalty of blacklisting.”

¶112

The above quoted paragraphs of the judgment of the Supreme Court would show that mere existence of a Clause similar to Clause 23.1 (v) of the present Contract Agreement would not suffice to take steps for blacklisting/debarment without ascertaining whether such an action was at all warranted.

¶113

This Court is of the opinion that the action taken by the Respondent herein is an action taken by an Authority coming within the ambit of ‘State’ as mentioned in Article 12 of the Constitution. Merely because of a fact that the Authority has the power, it cannot be a ground for exercising such power unless the act(s) complained of are so egregious that it is necessary for the Authority to take such steps. The principles of reasonableness, in the opinion of this Court, also attract the principles of proportionality and it is well settled that if the penalty is not proportional to the act(s) for which the penalty is imposed, the penalty would not be reasonable. It is the further opinion of this Court that to adjudge whether the penalty is proportional, the party against whom blacklisting/debarment is

¶114

Page No.# 22/31

¶115

proposed should have an opportunity to provide an explanation why penalty of blacklisting/debarment is not called for in the facts of the case.

¶116

This Court finds it relevant to take note of the judgment of the Supreme Court in the case of Blue Dreamz Advertising Private Limited (supra) in as much as this judgment lays down what are the requirements to be looked into while imposing the penalty of blacklisting. Paragraph Nos.24, 25 & 26 being relevant, are reproduced herein under:-

¶117

“24. What is significant is that while setting out the guidelines prescribed in USA, the Court noticed that comprehensive guidelines for debarment were issued there for protecting public interest from those contractors and recipients who are non-responsible, lack business integrity or engage in dishonest or illegal conduct or are otherwise unable to perform satisfactorily. The illustrative cases set out also demonstrate that debarment as a remedy is to be invoked in cases where there is harm or potential harm for public interest particularly in cases where the person’s conduct has demonstrated that debarment as a penalty alone will protect public interest and deter the person from repeating his actions which have a tendency to put public interest in jeopardy. In fact, it is common knowledge that in notice inviting tenders, any person blacklisted is rendered ineligible. Hence, blacklisting will not only debar the person concerned from dealing with the employer concerned, but because of the disqualification, their

¶118

Page No.# 23/31

¶119

dealings with other entities also is proscribed. Even in the terms and conditions of tender in the present case, one of the conditions of eligibility is that the agency should not be blacklisted from anywhere. 25. In other words, where the case is of an ordinary breach of contract and the explanation offered by the person concerned raises a bona fide dispute, blacklisting/debarment as a penalty ought not to be resorted to. Debarring a person albeit for a certain number of years tantamounts to civil death inasmuch as the said person is commercially ostracised resulting in serious consequences for the person and those who are employed by him.

¶120

26. Too readily invoking the debarment for ordinary cases of breach of contract where there is a bona fide dispute, is not permissible. Each case, no doubt, would turn on the facts and circumstances thereto.”

¶121

From the above quoted paragraphs, it would show that on account of mere ordinary breach of contract or where the explanation provided can be construed to raise is a bonafide dispute, it is not permissible to imposing of the penalty blacklisting. In other words, for the purpose of imposing the penalty of blacklisting, something more is required than an ordinary breach of contract. The something more which is required for the purpose of taking steps for blacklisting can be decided by the party having the power to impose the penalty of blacklisting (the Respondent herein) only upon issuance of notice

¶122

Page No.# 24/31

¶123

to the party against whom such action is proposed in as much as without a notice, the party against whom the action is proposed would not have the opportunity to raise the issue of a bonafide dispute. Not providing the said opportunity and unilaterally opining that there is no bonafide dispute would amount to deciding the penalty of blacklisting in violation to the principles of natural justice. In other words, it is the opinion of this Court that in view of the law laid down by the Supreme Court in Blue Dreamz Advertising Private Limited (supra) , the defaulting party against whom penalty of blacklisting is contemplated has two defences. First, that it was an ordinary breach of contract and secondly there exists a bonafide dispute. These defences available to the defaulting party are recognised rights and the same cannot be abrogated without affording an opportunity to the defaulting party to explain.

¶124

This Court also duly takes note of the judgment of the Supreme Court in the case of Techno Prints (supra) wherein at paragraph Nos.29 & 30, the Supreme Court dealt with as to when Show Cause Notice should be issued. The said paragraphs being relevant are reproduced herein under:-

¶125

“29. However, what is important for us to say is that when there are guiding principles explained by this Court as to when & in what circumstances a blacklisting order can be passed then, in our

¶126

Page No.# 25/31

¶127

opinion such principles should also be borne in mind by the Authority at the time of issuing a show cause notice. We say so because in the facts of a given case like the one on hand, on the face of which it could be said that there was no good reason for the Authority to issue a show cause notice calling upon the contractor why he should not be blacklisted. Why ask the contractor to face the proceedings when applying the aforesaid principles, the issue of show cause notice would be an empty formality. We are saying all this keeping in mind the peculiar facts of this case.

¶128

Therefore, the Authority is expected to be very careful before issuing a show cause notice. It is expected to understand the facts well and try to ascertain what sort of violation is said to have been committed by the contractor. As noted above, there is always an inherent power in the Authority to blacklist a contractor. But possessing such inherent power and exercising such power are two different situations and connotations. There may be a power but there should be reasonable ground to exercise such power.”

¶129

The Supreme Court in the above quoted paragraphs in the facts of that case before the Supreme Court held that there existed no reasons for issuance of the Show Cause Notice. It may be relevant herein to observe that the Supreme Court was dealing with a case where Show Cause Notice was issued. However, in the instant case, a perusal of the impugned Debarment Notice dated 03.02.2026, there was no Show Cause Notice rather the impugned Debarment Notice was issued as a

¶130

Page No.# 26/31

¶131

consequence to the Termination Notice dated 03.02.2026. Therefore factually the case before the Supreme Court is different from the present case. However, the proposition of law laid down and more particularly the underlined portion of the quoted paragraph No.30 is very relevant whereby the Supreme Court distinguishes the two aspects, i.e. the power to impose penalty vis-a-vis the requirement to exercise the power to impose penalty.

¶132

The learned Senior Counsel for the Petitioner submitted that terms with the Judgement of the Supreme Court in Techno Prints (supra), the question of issuance of the Show Cause Notice even do not arise in the present facts and circumstances. This Court is not inclined to accept the said submission. The reasons are:-

¶133

(A) The contract in question had been terminated vide the Termination Notice dated 03.02.2026. The reason for doing so, as would be seen from a perusal of the Termination Notice dated 03.02.2026 is the failure of the Petitioner to carry out its obligations contained in the contract. In the present proceedings, the Petitioner had not pressed the challenge to the Termination Notice dated 03.02.2026 and sought the leave to avail appropriate remedies. Under such circumstances, it cannot be said that the Respondent herein

¶134

Page No.# 27/31

¶135

had no case at all for blacklisting/debarment of the Petitioner. In that view of the matter, the Respondent in the opinion of this Court had a right to initiate the show cause proceedings for blacklisting/debarment of the Petitioner. Whether the penalty of blacklisting/debarment is required to be imposed would depend on what defence(s) the Petitioner takes in reply to the show cause notice.

¶136

(B) The judgement of the Supreme Court in Blue Dreamz Advertising Private Limited (supra) stipulates the two grounds when the penalty for blacklisting should not be imposed. First, it is in respect to a case which would come within the ambit of ordinary breach of contract and second, when there exists a bonafide dispute.

¶137

(C) Cases coming within the ambit of ordinary breach of contract would be such cases where the breaches are of non-essential or collateral terms or deficiencies in performance that do not go to the root of the contract. Instances may be minor Defect in workmanship, Delay where Time is not of the essence, use of slightly substandard materials, failure to submit progress reports or breach of administrative/collateral obligations without affecting the physical progress of works, Delay of submission of Drawing; etc.

¶138

Page No.# 28/31

¶139

(D) Fundamental or manifest breach of the contract are those breaches which go to the root of the contract entitling the employer or the contractor to treat the contract as discharged or repudiated. Instances may be of cases where there is total abandonment of work by the contractor; structural failures due to gross negligence; contractor's express repudiation before completion; employer's total failure to pay; employer's failure to hand over the site; employer's interference by issuing contradictory instructions; withholding necessary design decisions for extended periods; denial of access to areas needed for work persistently etc.

¶140

(E) The above are some of the aspects which would distinguish between an Ordinary Breach of Contract with a Fundamental Breach of Contract. This Court has not in the present proceedings dealt in detail as to the breaches which led to the Termination Notice as the Petitioner did not insist on the challenge to the same in the present proceedings with liberty to assail in the appropriate proceedings.

¶141

(F) The Respondent herein, in the in the opinion of this Court, in the present facts and circumstances, has to decide whether the termination of the contract was a case of an ordinary breach of contract or fundamental breach of

¶142

Page No.# 29/31

¶143

contract. Basing upon such decision, the Respondent has to decide whether to issue Show Cause Notice. This discretion so conferred upon the Respondent in the opinion of this Court, cannot be thwarted at this stage by this Court.

¶144

(G) The second aspect when the imposition of penalty of blacklisting/debarment is not called is when there is a bonafide dispute. Bonafide dispute is not any dispute. The dispute so raised by the person is a dispute arising out of a defence taken in good faith and one of substance. The said defence is likely to succeed in point of law and most pertinently the person taking the defence of bonafide dispute adduces prima facie proof of the facts on which the defence depends.

¶145

(H) It is the opinion of this Court that the question of the existence of a bonafide dispute can only be decided by the Respondent when a Show Cause Notice is issued and the Petitioner is called upon to reply. Without the Show Cause Notice, the bonafide dispute if any cannot be raised by the Petitioner.

¶146

(I) The above analysis made by this Court therefore shows that the Respondent Authorities have to first decide whether it is a case of ordinary breach of contract or a case

¶147

Page No.# 30/31

¶148

of a fundamental breach of contract. Upon such decision taken, the Show Cause Notice can be issued if it is a case of fundamental breach of contract. The Petitioner herein would be at liberty to take up both the defences that it is a case of ordinary breach of contract or there exists a bonafide dispute.

¶149

(J) This Court under Article 226 of the Constitution and more particularly without ascertaining the legality or validity of the Termination Notice, cannot at this stage supplant any opinion which is specifically reserved for the Respondent to take.

¶150

CONCLUSIONS

¶151

Considering the above, this Court therefore, disposes of the instant writ petition with the following observations and directions:-

¶152

(i) The impugned Notice of Debarment dated 03.02.2026 is set aside and quashed.

¶153

(ii) This Court observes that in terms with the Conditions of the Contract, the Respondent has the power to proceed with debarment or blacklisting pursuant to termination of the contract. However, such debarment/blacklisting cannot be carried out mechanically. It should be preceded by a

¶154

Page No.# 31/31

¶155

Show Cause Notice and an opportunity of hearing to be granted.

¶156

(iii) Under such circumstances, despite the Notice of Debarment dated 03.02.2026 having been set aside by this Court, liberty is granted to the Respondent to initiate proceedings for debarment if so permissible as per the observation made in the instant judgment.

¶157

(iv) This Court further observes that the withdrawal of challenge to the Termination Notice dated 03.02.2026 shall not prejudice or preclude the Petitioner to avail remedies before the appropriate forums.

¶158

(v) There shall be no order as to costs.

¶159

(vi) Interim order, if any, stands vacated.

¶160

JUDGE

¶161

Comparing Assistant

M/S R. K. Infracorp Private Limited v. National Highways and Infrastructure Development Corporation Limited

Case brief

What is this about?

What did the court decide?

M/S R. K. Infracorp Private Limited v. National Highways and Infrastructure Development Corporation Limited

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

Similar cases

Nekbar Ali Alias Nekbor Ali and 88 Ors. Vs the State of Assam and 12 Ors.

Safikul Ali Vs Partha Sarthi Mahanta, IPS

Shri Kaustav Kumar Das Vs the State of Assam and 7 Ors.

Ucn Construction Co. Pvt. Ltd. Vs the Union of India and 7 Ors.

Mrs Manjita Kalita Chowdhury Vs the State of Assam and 5 Ohers

Dr Madhurjya Bhattacharyya and Anr. Vs the State of Assam and Ors.