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CGHC010271272026 2026:CGHC:30849-DB

NAFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

WPC No. 3783 of 2026

M/s. Dynami Enterprises A Registered Partnership Firm Having Office At -

65, Globus Town Ship, Near Indralok Nagar, Ratlam, Madhya Pradesh

Represented Through Its Partner, Shri Shivram Meena Aged About 62

Years, Having Office At 65- Globas Township, Near Indralok Nagar,

Ratlam (Madhya Pradesh)

... Petitioner

versus

1 - Union Of India Represented Through Its General Manager, South East

Central Railways, Bilaspur, Chhattisgarh

2 - Senior Divisional Mechanical Engineer (Freight) , Bhilai, South East

Central Railway, Raipur, Chhattisgarh

3 - Senior Divisional Mechanical Engineer (Freight ), Bhilai, South East

Central Railway, Bhilai, Chhattisgarh

... Respondents

(Cause-title taken from Case Information System)

For Petitioner :Mr. Abhishek Vinod Deshmukh, Advocate

For Respondents :Mr. Ramakant Mishra, Deputy Solicitor

General

Hon'ble Shri Ramesh Sinha, Chief Justice

Hon'ble Shri Ravindra Kumar Agrawal , Judge

Order on Board

Per Ramesh Sinha , Chief Justice

21.07.2026

1.Heard Mr. Abhishek Vinod Deshmukh, learned counsel for the

petitioner as well as Mr. Ramakant Mishra, learned Deputy

Solicitor General, appearing for the respondents.

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2.Though the matter is listed as a fresh case, considering the

submission of learned counsel appearing for the respondents that

no reply is required to be filed in the present matter as the

agreement contains an arbitration clause and that no show-cause

notice has been issued to the petitioner, accordingly, with the

consent of learned counsel for the parties, the matter is heard

finally at the admission stage itself.

3.By filing the present petition under Article 226 of the Constitution of

India, the petitioner calls in question the termination letter dated

01.04.2026, whereby its contract has been terminated and it has

also been debarred/blacklisted from participating in future tenders

for a period of two years. The petitioner has prayed for following

relief(s) :-

“1] That, this Hon'ble Court may kindly be

pleased to writ/writs, order/orders,

direction/directions quashing the termination

notice dated 01.04.2026 issued by the

Respondent No. 3, whereby the Contract of the

Petitioner has been terminated and the Petitioner

has been debarred for a period of 2 years from

participating in the bids;

2] That, this Hon'ble Court may kindly be pleased

to grant any other relief(s), which is deemed fit

and proper in the aforesaid facts and

circumstances of the case.”

4.Briefly stated, the petitioner is a partnership firm engaged in

providing services to the Indian Railways. The respondents issued

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a Notice Inviting Tender for hiring two diesel-operated 3T forklifts

along with operators at ROH Depot, PP Yard, Bhilai for a period of

two years. The petitioner participated in the tender process and,

having emerged as the successful bidder, was awarded the

contract vide agreement dated 26.05.2025 for execution of the said

work.

5.Pursuant to the award of the contract, the petitioner deployed the

requisite machinery, operators and supervisory staff and

commenced execution of the work. According to the petitioner, it

kept the respondents informed regarding deployment of equipment,

appointment of personnel, readiness to commence operations and

other operational requirements. It is further the petitioner's case

that whenever any difficulty arose during execution of the contract,

including repair of machinery or submission of requisite documents,

the same was duly intimated to the respondents and necessary

permissions were sought. The petitioner also claims to have

brought to the notice of the respondents instances of unauthorized

use of the deployed vehicles and sought permission to install CCTV

cameras for effective monitoring.

6.It is the petitioner's case that while the contract was being

performed, the respondents issued a performance notice dated

27.02.2026 alleging deficiencies in execution of the work.

Thereafter, without issuing the mandatory seven days' notice

contemplated under the General Conditions of Contract and without

affording any opportunity to explain the alleged deficiencies or to

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show cause against the proposed debarment/blacklisting, the

respondents issued the impugned termination letter dated

01.04.2026, whereby the contract of the petitioner was terminated

and the petitioner was debarred/blacklisted from participating in any

tender floated by the concerned Railway Division for a period of two

years.

7.Learned counsel for the petitioner submits that the impugned order

of termination coupled with the order of debarment/blacklisting is ex

facie arbitrary, illegal and violative of the principles of natural

justice. It is contended that the respondents have acted in complete

disregard of the procedure prescribed under the General

Conditions of Contract. Though a performance notice dated

27.02.2026 was issued, the mandatory seven days' notice

contemplated under Clause 7.4.2 of the Contract was never served

upon the petitioner before issuance of the final termination order. It

is, therefore, submitted that the termination itself is contrary to the

contractual stipulations and is liable to be set aside.

8.It is further submitted that the respondents have also

debarred/blacklisted the petitioner for a period of two years without

issuing any specific show-cause notice proposing such action or

affording an effective opportunity of hearing. Learned counsel

argues that blacklisting visits a contractor with serious civil and

commercial consequences and, therefore, strict adherence to the

principles of natural justice is mandatory. In support of the said

contention, reliance is placed upon the decisions of the Hon'ble

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Supreme Court in Gorkha Security Services v. Government

(NCT of Delhi), (2014) 9 SCC 105 and UMC Technologies (P)

Ltd. v. Food Corporation of India, (2021) 2 SCC 551, wherein it

has been held that a valid show-cause notice must specifically

indicate the proposed action of blacklisting and an order travelling

beyond the scope of such notice is unsustainable in law.

9.Learned counsel lastly submits that although the dispute arises out

of a contract, the writ petition is maintainable as the respondents,

being instrumentalities of the State within the meaning of Article 12

of the Constitution of India, are required to act fairly, reasonably

and in accordance with law. It is argued that where the decision-

making process is arbitrary, unreasonable or violative of the

principles of natural justice, this Court, in exercise of its jurisdiction

under Article 226 of the Constitution of India, can judicially review

such action notwithstanding the contractual relationship between

the parties.

10.On the other hand, learned counsel appearing for the respondents

opposes the writ petition and submits that the impugned action has

been taken strictly in accordance with the terms and conditions

governing the contract. It is contended that the petitioner had failed

to perform its contractual obligations satisfactorily and committed

repeated defaults during execution of the work, which adversely

affected the functioning of the Railway administration. It is

submitted that despite being afforded sufficient opportunities to

rectify the deficiencies, the petitioner failed to improve its

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performance, compelling the competent authority to invoke the

relevant clauses of the contract and pass the impugned order of

termination. It is argued that the decision has been taken after due

consideration of the petitioner's overall performance and does not

warrant interference in exercise of writ jurisdiction.

11.Learned counsel further submits that the relationship between the

parties is purely contractual and the rights and obligations of the

parties are regulated by the terms of the agreement. The petitioner

seeks adjudication of disputed questions of fact relating to

performance of contractual obligations, which cannot conveniently

be examined in proceedings under Article 226 of the Constitution of

India. It is argued that judicial review in contractual matters is

limited to examining the decision-making process and not the

merits of the decision itself. In the absence of any allegation of

mala fides, arbitrariness or violation of any statutory provision, no

interference is called for with the impugned action.

12.It is further submitted that the dispute arises out of a contract

containing an arbitration clause and, therefore, the writ petition is

not maintainable. It is also submitted that no show-cause notice

has been issued to the petitioner. Learned counsel further submits

that the order debarring the petitioner from participating in future

tenders has been passed by the competent authority keeping in

view the petitioner's unsatisfactory performance and in larger public

interest so as to ensure efficient execution of public contracts. It is

contended that the respondents have acted fairly, reasonably and

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within the four corners of the contract, and the impugned order

neither suffers from any procedural infirmity nor violates the

principles of natural justice.

13.We have heard learned counsel for the parties at length,

considered their rival submissions with due care and perused the

pleadings and documents available on record.

14.The controversy involved in the present writ petition lies in a narrow

compass. The petitioner calls in question the order dated

01.04.2026 whereby the respondents have terminated the contract

awarded in favour of the petitioner for hiring two diesel-operated

forklifts at ROH Depot, PP Yard, Bhilai and have simultaneously

debarred/blacklisted the petitioner from participating in future

tenders of the Railway Division for a period of two years. The

principal contention of the petitioner is that though a performance

notice dated 27.02.2026 was issued, the respondents, without

adhering to the contractual procedure prescribed under the General

Conditions of Contract and without issuing any specific show-cause

notice proposing blacklisting, proceeded to terminate the contract

and impose the additional penalty of debarment. The respondents,

on the other hand, contend that the petitioner committed repeated

defaults in performance and, therefore, the competent authority

was fully justified in invoking the contractual provisions and passing

the impugned order.

15.Before adverting to the rival submissions on merits, it is necessary

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to deal with the preliminary objection regarding maintainability of

the writ petition. Learned counsel appearing for the respondents

submits that Clause 8.2 of the agreement provides for resolution of

disputes through arbitration and, therefore, the petitioner ought to

be relegated to the contractual remedy. It is true that where parties

have consciously agreed upon an arbitral mechanism, the Court

would ordinarily decline to exercise its extraordinary jurisdiction

under Article 226 of the Constitution in matters arising purely out of

contractual obligations. However, it is equally well settled that the

existence of an arbitration clause does not by itself operate as an

absolute bar to the exercise of writ jurisdiction where the action of

the State or its instrumentalities is alleged to be arbitrary,

unreasonable, violative of the principles of natural justice or where

the challenge is directed to the decision-making process rather

than to the merits of the contractual dispute. The Supreme Court

has consistently held that contractual dealings of the State continue

to possess a public law element requiring fairness and non-

arbitrariness and, therefore, judicial review under Article 226 is not

completely excluded merely because the contract contains an

arbitration clause.

16.Tested on the aforesaid principles, this Court finds that the present

petition cannot be rejected at the threshold solely on the basis of

Clause 8.2 of the agreement. The grievance of the petitioner is not

confined merely to enforcement of contractual rights. The challenge

is directed against the manner in which the respondents have

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exercised their power by terminating the contract and

simultaneously blacklisting the petitioner for a period of two years.

The latter consequence undoubtedly visits the petitioner with

serious civil and commercial consequences extending far beyond

the four corners of the contract. The issue, therefore, involves

examination of compliance with the principles of natural justice and

fairness in administrative action, which squarely falls within the

ambit of judicial review under Article 226 notwithstanding the

availability of an arbitral remedy. The arbitration clause may govern

disputes arising out of performance of contractual obligations, but it

cannot be construed as excluding judicial scrutiny where the

impugned action is alleged to be arbitrary or violative of

fundamental procedural safeguards.

17.Having held that the writ petition is maintainable to the aforesaid

extent, the challenge to the impugned order deserves to be

examined under two distinct heads, namely, (i) termination of the

contract, and (ii) debarment/blacklisting of the petitioner for a period

of two years. Though both consequences have been incorporated

in a composite order dated 01.04.2026, they stand on different legal

footings and require independent examination. While termination of

the contract is essentially governed by the contractual stipulations

agreed between the parties, the order of blacklisting carries

independent penal and stigmatic consequences affecting the

petitioner's right to participate in future Government contracts and,

therefore, must satisfy the requirements of fairness and natural

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justice recognised by law.

18.At the outset, this Court deems it appropriate to consider the

objection regarding maintainability of the writ petition in view of the

existence of an arbitration clause contained in Clause 8.2 of the

agreement. It is true that disputes arising purely out of contractual

obligations are ordinarily required to be resolved through the

dispute resolution mechanism agreed upon between the parties.

The law is well settled that where parties have consciously

incorporated an arbitration clause, the Court would normally be

slow in exercising jurisdiction under Article 226 of the Constitution

of India in matters involving adjudication of disputed questions of

fact relating to performance of contractual obligations. At the same

time, it is equally settled that the existence of an arbitration clause

does not operate as an absolute bar to the exercise of writ

jurisdiction where the action of the State or its instrumentalities is

alleged to be arbitrary, unreasonable, violative of the principles of

natural justice, or where the challenge is directed to the decision-

making process itself.

19.Tested on the aforesaid principles, this Court finds that the

challenge raised by the petitioner requires examination under two

distinct compartments, namely, (i) termination of the contract, and

(ii) debarment/blacklisting of the petitioner for a period of two years.

Though both consequences have been incorporated in the

composite order dated 01.04.2026, they stand on different legal

footings. Termination of the contract is essentially governed by the

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terms and conditions of the agreement and disputes relating

thereto may ordinarily fall within the ambit of Clause 8.2 of the

agreement. However, the order of debarment/blacklisting is not

merely a contractual consequence; it carries independent penal

and stigmatic civil consequences affecting the petitioner's future

right to participate in Government contracts. Therefore,

proceedings relating to termination and blacklisting cannot be

conflated and each action must satisfy its own legal requirements.

The Supreme Court has recently reiterated that blacklisting

proceedings stand on a distinct footing and demand stricter

adherence to the principles of natural justice.

20.Insofar as the termination of the contract is concerned, the

respondents contend that the petitioner failed to satisfactorily

perform its obligations and, therefore, the competent authority was

justified in invoking the relevant contractual provisions. The

petitioner, on the other hand, disputes the allegations and asserts

that the mandatory procedure prescribed under the General

Conditions of Contract was not followed, inasmuch as after

issuance of the performance notice dated 27.02.2026, no seven

days' notice as contemplated under the contract was issued before

passing the final order dated 01.04.2026. Such disputes, involving

interpretation of contractual clauses and determination of factual

aspects relating to performance of obligations, ordinarily fall within

the realm of contractual adjudication and are amenable to the

mechanism contemplated under Clause 8.2 of the agreement. This

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Court, while exercising jurisdiction under Article 226 of the

Constitution, would ordinarily refrain from entering into disputed

questions relating purely to performance of contractual obligations,

particularly when an agreed arbitral mechanism is available to the

parties.

21.The position, however, stands on a substantially different footing

insofar as the order of debarment/blacklisting is concerned.

Blacklisting is not a mere administrative formality or an incidental

consequence of termination of a contract. It is a serious punitive

measure having the effect of debarring a person from participating

in future Government contracts and casts a stigma on the

commercial reputation of the contractor. The Supreme Court in

Gorkha Security Services (supra) and thereafter in UMC

Technologies Private Limited (supra), has held that blacklisting

entails grave civil consequences and that a valid show-cause

notice must specifically disclose not only the allegations but also

the proposed action of blacklisting so as to afford an effective

opportunity of hearing. The Supreme Court has described

blacklisting as being akin to “civil death” inasmuch as it deprives a

person of the opportunity to participate in Government contracts.

22.In the case at hand, the material placed on record indicates that

though a performance notice dated 27.02.2026 alleging

deficiencies in execution of the contract was issued, there is

nothing on record to demonstrate that the petitioner was ever

specifically put to notice that debarment/blacklisting for a period of

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two years was one of the proposed actions. A notice alleging

deficiencies in performance or proposing termination of the contract

cannot, by itself, be treated as a substitute for a notice proposing

blacklisting unless such penal consequence is specifically

disclosed therein. The requirement of a specific and unambiguous

notice is not an empty formality but a substantive safeguard

intended to ensure fairness in administrative action. In absence of

such notice, the petitioner was deprived of a meaningful opportunity

to explain why the extreme consequence of debarment ought not to

be imposed.

23.This Court also finds that the impugned order is a composite order

whereby two distinct consequences, namely termination of the

contract and debarment/blacklisting for a period of two years, have

been imposed simultaneously. However, the order does not

disclose any independent reasoning as to why the petitioner's

conduct was of such gravity as to warrant the penal consequence

of blacklisting. Proceedings for termination of contract and

proceedings for blacklisting operate in different fields. While

termination is primarily governed by contractual stipulations,

blacklisting carries wider civil consequences and requires an

objective assessment, independent application of mind and stricter

compliance with the principles of natural justice. The absence of

such consideration renders the order vulnerable to judicial review to

the extent of the penal consequence of debarment.

24.In view of the aforesaid discussion, this Court is of the considered

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opinion that disputes relating to termination of the contract,

involving questions of contractual performance and interpretation of

contractual clauses, may appropriately be agitated by the petitioner

by resorting to the remedy available under Clause 8.2 of the

agreement. However, insofar as the order debarring/blacklisting the

petitioner for a period of two years is concerned, the same cannot

be sustained in law for want of a specific show-cause notice and

non-compliance with the principles of natural justice. Consequently,

while leaving it open to the petitioner to avail the contractual

remedy in respect of termination of the contract, the portion of the

impugned order relating to debarment/blacklisting deserves to be

and is accordingly set aside.

25.Consequently, the writ petition succeeds in part. The challenge to

the impugned order dated 01.04.2026, insofar as it relates to

termination of the contract, is not entertained in exercise of the

extraordinary jurisdiction of this Court under Article 226 of the

Constitution of India, as the dispute pertains to enforcement of

contractual obligations and the agreement contains an arbitration

clause under Clause 8.2, providing an efficacious alternative

remedy. It is, however, made clear that this Court has expressed no

opinion on the merits of the rival claims relating to termination of

the contract, and it shall be open to the petitioner to invoke the

remedy available under Clause 8.2 of the agreement. In the event

such proceedings are initiated, the same shall be decided

independently and uninfluenced by any observations made in this

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order.

26.However, insofar as the impugned order debarring/blacklisting the

petitioner for a period of two years is concerned, this Court finds

that the same has been passed in violation of the principles of

natural justice, as admittedly no specific show-cause notice

proposing the penalty of blacklisting was ever issued to the

petitioner. The order of debarment, therefore, cannot be sustained

in law and is accordingly quashed. Nevertheless, this order shall

not preclude the respondents from initiating fresh proceedings for

debarment/blacklisting, if so advised, strictly in accordance with

law, after issuing an appropriate show-cause notice specifically

indicating the proposed action and after affording the petitioner a

reasonable opportunity of hearing.

27.Resultantly, the writ petition is partly allowed in the aforesaid

terms. The impugned order dated 01.04.2026 is upheld to the

extent it terminates the contract, leaving it open to the petitioner to

avail the contractual remedy under Clause 8.2 of the agreement.

However, the impugned order is set aside to the extent it

debars/blacklists the petitioner for a period of two years.

28.No order as to costs.

Sd/- Sd/-

(Ravindra Kumar Agrawal) (Ramesh Sinha)

Judge Chief Justice

Anu