1 2025:CGHC:31534-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR WPC No. 4340 of 2024 M/s Multiurban Infra Services Pvt. Ltd., Through Its Authorized Signatory- Shri Sanjeev Rungta, Aged About 54 Years, S/o Shri Govindram Rungta, Presently Working As Senior Technical Advisor Of The Petitioner Company And Presently Residing At Choubey Colony, Raipur, Chhattisgarh. ... Petitioner versus 1 - State Of Chhattisgarh Through The Secretary, Urban Administration And Development Department, Government Of Chhattisgarh, Mahanadi Bhawan, Atal Nagar, Raipur, Chhattisgarh. 2 - The Director, Urban Administration And Development Department, Indrawati Bhawan, Atal Nagar, Nava Raipur (C.G.) 3 - The Joint Director, Urban Administration And Development Department, Regional Office- Durg, District- Durg (C.G.) 4 - The Chief Engineer, Urban Administration And Development Department, Directorate- Indrawati Bhawan, Atal Nagar, Nava Raipur (C.G.) 5 - The Superintendent Engineer, Urban Administration And Development Department, Directorate- Indrawati Bhawan, Atal Nagar, Nava Raipur, (C.G.) 6 - The Chief Municipal Officer, Municipal Council, Janjgir-Naila, District- Janjgir-Champa (C.G.) --- Respondents For Petitioner : Mr. Sharad Mishra, Advocate For Respondent/State : Mr. Shashank Thakur, Dy.A.G. For Respondent No.6 : Mr. Pankaj Agrawal, Advocate. AMARDEEP CHOUBEY Digitally signed by AMARDEEP CHOUBEY Date: 2025.07.10 18:47:45 +0530 2 Hon'ble Shri Ramesh Sinha, Chief Justice Hon'ble Shri Bibhu Datta Guru, Judge Judgment on Board Per Ramesh Sinha, Chief Justice 09.07.2025 1. By the present writ petition, the petitioner is challenging the order dated 03/07/2024 (Annexure-P/1) passed by the respondent No.6, whereby, the respondent No.6 terminated the contract/agreement entered between the petitioner and Respondent No. 6 and also blacklisted/debarred the petitioner for 2 years in participating in all kinds of tenders issued by them. For which, the petitioner is seeking following reliefs:- “(i) this Hon'ble Court may kindly be pleased to allow the present writ petition & call for the entire record pertaining to the present case. (ii) this Hon'ble Court may kindly be pleased to issue an appropriate writ/order/direction to the Respondents more particularly one in the nature of Writ of Mandamus declaring the action of the Respondents more particularly of Respondent No. 6 in terminating the agreement vide its order 03/07/2024 as absolutely illegal, arbitrary, capricious, contrary to law as well as settled legal position and also against the general principles of contract and consequently, quash the same. (iii) this Hon'ble Court may kindly be pleased to issue an appropriate writ/order/direction to the Respondents more particularly one in the nature of Writ of Mandamus declaring the action of the Respondents more particularly of Respondent No. 6 in respect of 3 debarring the Petitioner for the period of two years vide its order 03/07/2024 as absolutely illegal, arbitrary, capricious, contrary to law as well as settled legal position and also against the general principles of contract and consequently, quash the same. (iv) any other order/relief which this Hon'ble Court may deem fit, proper and just in the facts and circumstances of the present case may also kindly be awarded to the petitioner in the ends of justice & equity. (v) That the cost of the petition may kindly also be awarded to the petitioner. 2. (A) Learned counsel for the petitioner would submit that the Respondent State invited tender bearing dated 10/01/2019 for "Improvement & Augmentation of Existing Water Supply Scheme of Akaltara Town District Janjgir-Naila". The above tender was called by the respondents in the form of LUMPSUM Contract and the probable amount of work was 27,59,00,000.00/- and the stipulated duration/time to complete the contract was 24 months including the rainy season. The Petitioner firm participated in the tender process and submitted its bid, which was accepted by the respondent and the work Order dated 14/06/2019 was issued in their favor and the completion time of the Contract was scheduled on 14/06/2021 (i.e., 24 months including the rainy season). It is submitted that the stipulated time of completion of the work does not cast liability only on the contractor alone to execute and complete the work within the given time but it also casts liability on the 4 employer to provide commensurate working condition as well as to enable the contractor to achieve the contracted task (which summarizes the natural justice, equity & good conscience). In the instant case, the respondent have miserably failed in fulfillment of the contractual obligation perhaps not resorting to a combo spirit in the said project. (B) Learned counsel submits that unilateral termination of the contract/agreement is arbitrary, illegal and unjustifiable as there is an arbitration clause in the agreement and in spite of that by acting capriciously in a colorful and unfair issued the impugned order which is clearly against the settled principles of law. Further, the breach of terms and conditions of the contract on the part of the petitioner does not arise as the petitioner has written several letters to the Respondents time and again requesting them to cooperate in the execution of work but after expiry of more than 24 months design / layout was approved and thereafter, there were reasons attributable to the Respondents e.g. delay in all the requisite approvals from several departments to the delay in execution of work. The petitioner is dissatisfied with the acts of the Respondents invoked arbitration clause and thereafter, when Respondents started acting malafidely and unfairly by issuing notice with respect to termination of the contract which was prejudicial to the interest of petitioner, Respondent No. 3 passed impugned order terminating the agreement of the petitioner without 5 affording them any opportunity of hearing before imposing such harsh penalty which is untenable in the eyes of law. He further submits that in the same impugned order dated 05/07/2024, the Respondent No. 6 has debarred the Petitioner for the period of 2-years without affording any opportunity to the Petitioner separately before imposing such harsh penalty which has civil consequences and that is totally contrary to the dictum of Hon'ble Apex Court passed in the judgment of Isolators & Isolators v. M.P. Madhya Kshetra Vidyut Vitran Co. Ltd., reported in (2023) 8 SCC 607 and UMC Technologies [UMC Technologies (P) Ltd. v. Food Corpn. of India, reported in (2021) 2 SCC 551. (C) Learned counsel would further submit that with regard to blacklisting of the Petitioner for the period of 2-years, it is submitted that the same is totally arbitrary, illegal and against the well settled judgments of the Hon'ble Apex Court that blacklisting of any contractor has civil consequences thus before taking such extreme steps against any contractor principles of natural justice must be adhered to which in the present case, the Respondents have failed to do so. 3. Learned counsel for the respondent No.6, who is the main contesting party in the instant petition, would submit that with regard to the termination of contract, when the assigned contractual work was not completed by the petitioner company in the stipulated time period, their contract was terminated as 6 per the provisions of the NIT, i.e. after issuance of a Show Cause Notice dated 27.02.2024 i.e. Annexure P/105 (Page 446), where the petitioner was clearly directed to give adequate reasons as to why their contract should not be terminated on account of breach of Clause 13 of Conditions of Contract which deals with fundamental breach of contract for various reasons. Hence, the action of the respondent authorities is completely in accordance with the due process of law. He further submits that if the petitioner is aggrieved by the action of termination of the contract by respondents, he has an option of alternative remedy of Arbitration under the Dispute Resolution Clause i.e. Clause 17 of the "Conditions of Contract" under the NIT, which he has failed to avail and directly approached this Court. 4. We have heard learned counsel for the parties, perused the pleadings and documents. 5. Blacklisting is a serious matter affecting commercial credibility in the business world. It has been described as a civil death also. There has to be a balance of competing interests with regard to the rights of the person entitled to supplies under the contract and those who may have failed to abide by the obligations. The jurisdiction of the Court in judicial review is primarily confined to the decision making process. If there are no infirmities in the decision making process, the writ court will ordinarily refrain from going into the matter further except where there may may be compelling circumstances. But if the decision making 7 process before blacklisting suffers from gross procedural infirmities, judicial review will step in and the order will have to be struck down. 6. The terms of the contract contained several options available to the Respondents to take any action against the Petitioner if it defaulted in supplies. Unless he was specifically told that it was the option for blacklisting which was proposed to be exercised, it cannot be said that he was given an adequate opportunity to show cause. It is very reasonable to presume that the Petitioner may have thought that the Respondents would invoke other options and not blacklisting. This aspect of the matter need not detain us for further discussions in view of the enunciation of law laid down in (2014) 9 Supreme Court Cases 105 (Gorkha Security Services vs. Government [NCT of Delhi) and Others), as follows: 21. The central issue, however, pertains to the requirement of stating the action which is proposed to be taken. The fundamental purpose behind the serving of show-cause notice is to make the notice understand the precise case set up against him which he has to meet. This would require the statement of imputations detailing out the alleged breaches and defaults he has committed, so that he gets an opportunity to rebut the same. Another requirement, according to us, is the nature of action which is proposed to be taken for such 8 a breach. That should also be stated so that the noticee is able to point out that proposed action is not warranted in the given case, even if the defaults/breaches complained of are not satisfactorily explained. When it comes to blacklisting, this requirement becomes all the more imperative, having regard to the fact that it is harshest possible action.” ……………………………………………………………... 26 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 9 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. " ………………………………………………………………. 33. When we apply the ratio of the aforesaid judgment to the facts of the present case, it becomes difficult to accept the argument of the learned Additional Solicitor General. In the first instance, we may point out that no such case was set up by the respondents that by omitting to state the proposed action of blacklisting the appellant in the show-cause notice, has not caused any prejudice to the appellant. Moreover, had the action of blacklisting being specifically proposed in the show-cause notice, the appellant could have mentioned as to why such extreme penalty is not justified. It could have come out with extenuating circumstances defending such an action even if the defaults were there and the Department was not 10 satisfied with the explanation qua the defaults. It could have even pleaded with the Department not to blacklist the appellant or do it for a lesser period in case the Department still wanted to blacklist the appellant. Therefore, it is not at all acceptable that non-mentioning of proposed blacklisting in the show- cause notice has not caused any prejudice to the appellant. This apart, the extreme nature of such a harsh penalty like blacklisting with severe consequences, would itself amount to causing prejudice to the appellant." 7. Applying the well settled principles of law to the facts of the present case as there is no specific notice issued to the petitioner proposing the blacklisting of the petitioner’s firm and for the reasons mentioned herein above, the impugned order dated 03.07.2024, in so far as it blacklists the petitioner is set aside. 8. As far as the termination of the contract by respondent No.6 is concerned, the petitioner has an option of alternative remedy of Arbitration under the Dispute Resolution Clause i.e. Clause 17 of the "Conditions of Contract" under the NIT. 9. In view of the aforesaid availability of alternative remedy of Arbitration, the petitioner is directed to raise the dispute regarding the termination of the Contract before the Arbitrator, if so advised. 11 10. In view of the above, the writ petition is allowed to the extent indicated above, leaving the parties to bear their own costs. SD/- SD/- (Bibhu Datta Guru) (Ramesh Sinha) Judge Chief Justice Amardeep/Shoaib