1 2025:CGHC:47107-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR WPC No. 4836 of 2025 Ashok Kumar Mittal S/o P.L. Mittal Aged About 59 Years Occupation A Class Contractor R/o Hig - 2 M.P. Nagar, Niharika Road Korba District- Korba (C.G.) ... Petitioner versus 1 - State of Chhattisgarh Through Secretary, Department of Housing And Environment, Mahanadi Bhawan, Mantralaya, Post And P.S. Mandir Hasaud, District - Raipur (C.G.) 2 - Raipur Development Authority Through Chief Executive Officer, Bhakt Matakarma Commercial Complex New Rajendra Nagar Raipur District - Raipur (C.G.) 3 - Chief Engineer Raipur Development Authority Raipur District - Raipur (C.G.) ... Respondents (Cause-title taken from Case Information System) For Petitioner : Mr. Sanjay Agrawal, Advocate For Respondent-State : Mr. Sangharsh Pandey, Government Advocate For Respondents No.2 and 3 : Mr. Animesh Tiwari, Advocate Hon'ble Shri Ramesh Sinha, Chief Justice Hon'ble Shri Bibhu Datta Guru, Judge Order on Board Per Ramesh Sinha , Chief Justice 15.09 .2025 1. Heard Mr. Sanjay Agrawal, learned counsel for the petitioner. Also heard Mr. Sangharsh Pandey, learned Government ANURADHA TIWARI Digitally signed by ANURADHA TIWARI Date: 2025.09.16 10:32:01 +0530 2 Advocate, appearing on behalf of the State/respondent No.1 as well as Mr. Animesh Tiwari, learned counsel appearing for respondents No.2 and 3. 2. Although the matter has been listed on I.A. No.02, an application for exemption from filing the typed copies of certain documents/annexures as well as on admission, with the consent of the learned counsel appearing for the parties, the matter is heard finally, particularly on the issues of termination and blacklisting. 3. The present petition has been filed by the petitioner with the following relief(s):- “10.1 That this Hon'ble Court may kindly pleased to call the entire records. 10.2 That this Hon'ble Court may kindly pleased to set-aside/quash the impugned orders dated (Annexure P-1) 08/07/2024 and 08/08/2024 (Annexure P-2) passed by the Respondent No. 2/ Chief Executive Officer, Raipur Development Authority. 10.3 That any other relief which this Hon'ble court may deem fit and just in the facts and circumstances of the case.” 3 4. Brief facts of the case, are that the petitioner is an ‘A’ Class contractor, duly registered with Unique Identification Number CGeR017074. Respondent No.2 initiated a project for construction of 253 EWS (2BHK) row houses at Kamal Vihar, for which NIT No.85 dated 22.12.2018 was issued amounting to ₹1970.01 lakhs. The petitioner participated in the tender process, was declared L-1, and thereafter an agreement bearing No.1384 along with the work order was executed on 07.03.2019. The petitioner commenced the work, however, despite repeated requests, the respondents failed to release payments within the stipulated time and instead issued letters alleging slow progress of work. Subsequently, on 30.11.2023, the respondents terminated the work order without granting any opportunity of hearing. Thereafter, the petitioner, by letter dated 24.06.2024, requested the release of his final bill of ₹3,46,00,000/- and refund of security deposit of approximately ₹35,58,550/-, but no payment was made. On 08.07.2024, the respondents again terminated the contract and further debarred the petitioner from participating in future tenders for two years. The petitioner replied on 13.07.2024, challenging the termination and blacklisting, and also invoked the arbitration clause, but no heed was paid. Despite sending repeated reminders dated 09.08.2024, 10.09.2024, 02.10.2024 and 06.02.2025, the respondents neither finalized the Joint Measurement Records (JMR) nor released the due payments. In the meantime, the petitioner came to know that the same work 4 was allotted to third parties without settling his claims or certifying the work already completed. The respondents kept giving false assurances of withdrawing the order of blacklisting, but no relief was granted. There is no clause in the agreement empowering the respondents to blacklist the petitioner’s firm, yet such an order has been passed. As a consequence of termination and blacklisting, the Earnest Money, Security Deposit and Performance Guarantees of the petitioner have also been forfeited, causing grave prejudice and financial loss to the petitioner. 5. Learned counsel for the petitioner submits that the impugned order (Annexure P-1), whereby the petitioner’s contract has been terminated and his firm has been blacklisted, is wholly illegal, arbitrary and unsustainable in law and therefore liable to be set aside. It is contended that the agreement entered into between the petitioner and the respondents contains no clause empowering the respondents to blacklist the petitioner, yet such drastic action has been taken against him. It is further submitted that the respondents never released payments to the petitioner within the stipulated period, which caused delay in the progress of work, but instead of curing their own defaults, the respondents terminated the contract and debarred the petitioner without granting any opportunity of hearing. The order of blacklisting has been passed without issuance of any valid show cause notice and 5 without affording the petitioner an opportunity to represent his case, which is a clear violation of the settled principles of natural justice. Learned counsel argues that blacklisting has serious civil and commercial consequences as it prevents a person from entering into lawful business relations with the Government. Such an order not only deprives the petitioner of future participation in tenders but also casts a stigma on his reputation and adversely affects his future business prospects. It is a settled position of law that before passing such an order, the authority concerned must form an objective satisfaction after complying with the requirements of natural justice. In the present case, such satisfaction is wholly absent. 6. Reliance is placed on the judgment of the Hon’ble Supreme Court in UMC Technologies Pvt. Ltd. v. Food Corporation of India (2021) 2 SCC 551, wherein it has been held that issuance of a valid, clear and unambiguous show cause notice is an essential precondition before passing any order of blacklisting, failing which the order would be rendered void. The Supreme Court emphasized that blacklisting entails grave consequences and hence the affected party must be put on adequate notice of the grounds and the proposed penalty. Similarly, in Gorkha Security Services v. Government (NCT of Delhi) (2014) 9 SCC 105, the Hon’ble Court has held that serving of a show cause notice is a mandatory requirement before resorting to blacklisting, so that the 6 noticee has an opportunity to rebut the allegations and defend itself. 7. Further reliance is placed on Erusian Equipment & Chemicals Ltd. v. State of West Bengal (1975) 1 SCC 70, where it has been held that an order of blacklisting casts a stigma upon the contractor and therefore cannot be passed in a routine manner merely for breach of contractual obligations. The Hon’ble Court observed that there must exist strong, independent and overwhelming materials to justify such drastic action. Learned counsel, therefore, submits that the impugned orders suffer from arbitrariness, non-application of mind and are in gross violation of the principles of natural justice. As such, the impugned orders dated 08.07.2024 (Annexure P-1) and 08.08.2024 (Annexure P-2) deserve to be quashed, and the petitioner is entitled to relief as prayed for. 8. On the other hand, Mr. Sangharsh Pandey, learned Government Advocate appearing for the State/respondent No. 1 submits that the main contesting party in this petition is the respondents No. 2 and 3/ Raipur Development Authority, which had passed the impugned order and blacklisted the petitioner from future participation. 9. Learned counsel appearing for respondents No. 2 and 3 submits that the impugned orders are legal, valid and passed in 7 accordance with the terms of the contract as well as the powers vested in the respondent authorities. It is contended that despite repeated opportunities and sufficient time granted, the petitioner failed to complete the work within the stipulated period. Instead of adhering to the agreed schedule, the petitioner continuously delayed the execution of the project and did not maintain the pace of construction as required under the agreement. It is further submitted that the respondents, from time to time, reminded the petitioner regarding slow progress and default in execution, but the petitioner failed to take corrective measures. On account of such non-performance and breach of contractual obligations, the respondents were left with no option but to terminate the contract in order to safeguard the public interest and timely completion of the housing project. The action of termination, therefore, was justified and within the contractual framework. As regards the issue of blacklisting, learned counsel submits that the petitioner was found to be a habitual defaulter who failed to discharge his contractual responsibilities even after repeated reminders. The decision to debar the petitioner from future tenders for two years is a policy decision taken to protect the integrity of the tender process and ensure that only responsible and reliable contractors participate in future works. It is submitted that blacklisting is not penal in nature but a preventive measure to exclude non- performing contractors from government contracts. Learned counsel further contends that principles of natural justice were 8 substantially complied with inasmuch as the petitioner was repeatedly warned about the deficiencies, delays and breach of contract. The petitioner’s plea of lack of opportunity of hearing is misconceived and untenable because the record reflects that several communications were issued to him, and he was well aware of the consequences of non-performance. 10. It is also urged that the judgments relied upon by the petitioner, including UMC Technologies Pvt. Ltd. (supra) and Gorkha Security Services (supra), are distinguishable on facts as in those cases the contractors had substantially complied with their obligations but were blacklisted without proper cause. In the present case, the petitioner himself is guilty of continuous breach, causing delay in a public housing project, and therefore he cannot take advantage of his own wrongs. In view of the above submissions, learned counsel prays that the writ petition be dismissed as being devoid of merits. 11. Learned counsel appearing for respondents No.2 and 3, in all fairness, submits that no specific show-cause notice proposing the action of blacklisting was issued to the petitioner prior to passing of the impugned order. 12. We have heard learned counsel appearing for the parties at length, carefully considered their rival submissions, and have also meticulously perused the pleadings as well as the documents 9 annexed with the writ petition, including the impugned orders. The material placed on record has been examined in the light of the applicable legal principles and the judgments relied upon. 13. The grievance of the petitioner is that the impugned orders of termination and blacklisting have been passed against him without affording any opportunity of hearing and without issuance of a valid show cause notice, despite the fact that agreement contained no clause empowering respondents to blacklist his firm. 14. It is not in dispute that the petitioner was awarded the contract pursuant to NIT No.85 and agreement No.1384 dated 07.03.2019, and that he had executed part of the work. It is also not in dispute that the respondents had failed to release the payments to the petitioner within the stipulated time, which admittedly caused hindrance in execution of the project. 15. It is further not in dispute that the impugned order of blacklisting has been passed without issuance of any specific show cause notice indicating the proposal to blacklist the petitioner or providing him with an opportunity to represent his case. 16. The Supreme Court, in Baccarose Perfumes & Beauty Products Pvt. Ltd. v. Central Bureau of Investigation & Another, (2025) 1 SCC 384, has observed as under: “22. A perusal of the scheme of CrPC, 1973 allows us to infer that mere registration of 10 FIR cannot be interpreted to mean that it constitutes the initiation of such proceedings. A registration of FIR necessitates an investigation by a competent officer as per the detailed process outlined in Section 155 to 176 CrPC. It is only after a final report (or as referred in the common parlance, a challan or a charge-sheet) is submitted as per the compliance of Section 173(2) CrPC, cognizance for the offence(s) concerned is taken. However, undoubtedly, the court is not bound by the said report.” 17. In M/s. Erusian Equipment & Chemicals Ltd. (supra), it has been observed by the Apex Court as under: “20. Blacklisting has the effect of preventing a person from the privilege and advantage of entering into lawful relationship with the Government 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 11 put on the blacklist. ” 18. In B.S.N. Joshi & Sons Ltd. vs Nair Coal Services Ltd. & Ors., (2006) 11 SCC 548, the Apex Court held as under: “41. … When a contractor is blacklisted by a department he is debarred from obtaining a contract, but in terms of the notice inviting tender when a tenderer is declared to be a defaulter, he may not get any contract at all. It may have to wind up its business. The same would, thus, have a disastrous effect on him. Whether a person defaults in making payment or not would depend upon the context in which the allegations are made as also the relevant statute operating in the field. When a demand is made, if the person concerned raises a bona fide dispute in regard to the claim, so long as the dispute is not resolved, he may not be declared to be defaulter.” 19. The order of blacklisting appears to be disproportionate and contrary to the ratio laid down by the Apex Court in Kulja Industries Ltd. vs Chief General Manager Western Telecom Project BSNL & Ors., (2014) 14 SCC 731, wherein the Apex Court has observed as under: 12 “25. Suffice it to say that “debarment” is recognised and often used as an effective method for disciplining deviant suppliers/contractors who may have committed acts of omission and commission or frauds including misrepresentations, falsification of records and other breaches of the regulations under which such contracts were allotted. What is notable is that the “debarment” is never permanent and the period of debarment would invariably depend upon the nature of the offence committed by the erring contractor.” 20. An order of blacklisting should not be issued in ordinary cases of breach of contract because it has severe civil consequences, amounting to “civil death” and "commercial exile" for the affected party. This drastic penalty, which bars a party from future contracts and damages their reputation, must be reserved for egregious cases, not for minor violations or bona fide disputes, and must always adhere to principles of proportionality and natural justice. 21. Insofar as the issue of termination is concerned, learned counsel appearing for respondents No.2 and 3 submits that the Notice Inviting Tender (NIT) issued by the respondents contains an 13 arbitration clause, specifically Clause 25, which provides for resolution of disputes through arbitration. It is therefore contended that if the petitioner is aggrieved by the order of termination, the appropriate remedy available to him is to invoke the said arbitration clause rather than approaching this Court under writ jurisdiction. 22. Clause 25 of the Notice Inviting Tender, which deals with arbitration, is reproduced hereinbelow for easy reference:– “25. Arbitration Clause: Except as otherwise provided in this contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions, herein before mentioned as to thing whatsoever, in anyway, arising out of or relating to the contract, designs drawings, specifications, estimates, concerning the works, or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof, shall be referred to the Chief Engineer in writing for his decision within a period of thirty days of such occurrence. Thereupon, the Chief Engineer shall give his written instructions 14 and/or decision within a period of sixty days of such written request. This period can be extended by mutual consent of the parties. Upon receipt of written instructions or decision, the parties shall promptly proceed without delay to comply such decision or instructions. If the Chief Engineer fails to give his instructions or decision in writing within a period of sixty days or mutually agreed time after being requested if the parties are aggrieved against the decision of the Chief Engineer, the parties may within thirty days prefer such dispute/disputes for arbitration to Addi. Chief Engineer/Supt Engineer subject to the jurisdiction and limitations in accordance with the provisions of Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983. In case, the dispute is within the jurisdiction of Addl. Chief Engineer/Supt Engineer, he shall then act as sole arbitrator and he shall pass an award after hearing both the parties strictly in accordance with the provisions of the Arbitration Act, 1996 and the rule made their under for the time being in force. 15 If the Bidder does not make any demand for arbitration in respect of claim(s) in writing within ninety days on receiving information from the Engineer-In- Charge that the final bill is ready for payment, the claim of the Bidder shall be deemed to have been waived and shall be absolutely barred and the RDA shall be discharged or released of all the liabilities under the contract in respect of such claim(s). A reference to the Arbitration shall be no ground for not continuing the work on the part of the Bidder and payment as per terms and conditions of the agreement shall be continued by the RDA.” 23. Having considered the rival submissions and upon perusal of the record, this Court finds substance in the grievance of the petitioner to the extent of the order of blacklisting dated 08.08.2024 (Annexure P-2). Blacklisting is a drastic measure which not only prevents a contractor from participating in future tenders but also casts a stigma on his professional reputation, amounting in effect to a “civil death” in the commercial sphere. 24. It is, therefore, well settled that before imposing such a severe consequence, the authority concerned must put the affected party on adequate notice of the proposed action and the grounds 16 therefor, and must afford a reasonable opportunity of hearing. In the present case, learned counsel appearing for respondents No.2 and 3 has fairly conceded that no specific show-cause notice proposing blacklisting was ever issued to the petitioner prior to passing of the impugned order. Such a course of action is clearly violative of the principles of natural justice and contrary to the binding precedents of the Hon’ble Supreme Court. Accordingly, the order of blacklisting dated 08.08.2024 cannot be sustained and is liable to be quashed. 25. With regard to the termination of contract dated 08.07.2024 (Annexure P-1), this Court is of the considered view that such action stands on a different footing from that of the blacklisting order. Termination of a work order arises essentially out of the contractual relationship between the parties and is governed by the express terms and conditions of the agreement executed pursuant to NIT No.85. The record reflects that the respondents, from time to time, expressed their dissatisfaction with the pace of execution of the project and issued reminders and warnings to the petitioner regarding delay. In these circumstances, it cannot be said that the termination of contract is vitiated on the same ground as the blacklisting order. Whether the termination was legally justified or whether it was occasioned by the respondents’ own default in releasing payments within time are questions which go to the root of contractual performance and obligations between 17 the parties. Such issues are essentially matters of evidence and contractual interpretation, which cannot be conveniently adjudicated in writ proceedings under Article 226 of the Constitution. It is also pertinent that Clause 25 of the Notice Inviting Tender specifically provides for arbitration as the agreed mechanism for resolution of disputes arising out of or in relation to the contract. Therefore, the petitioner’s remedy against the order of termination lies in invoking the arbitration clause or any other efficacious remedy provided under the agreement, and this Court does not consider it proper to interfere with the termination in exercise of writ jurisdiction. 26. At the same time, this Court deems it appropriate to observe that while the respondents, being public authorities, may be entitled to safeguard public interest by taking timely action against contractors who, in their view, are not performing satisfactorily, such actions must always conform to the requirements of fairness, transparency and adherence to due process. Any measure that has civil consequences, particularly those which affect the petitioner’s right to carry on business or to seek redressal of contractual grievances, must strictly comply with the principles of natural justice. If, in future, the respondents propose to take any coercive or penal action against the petitioner, they shall be under a legal obligation to issue a clear, specific and unambiguous show-cause notice, setting out the precise allegations and the 18 proposed course of action, and must afford the petitioner a meaningful opportunity of hearing. Failure to follow such due process would render the action legally unsustainable. 27. In the result, and for the reasons recorded hereinabove, the writ petition is allowed in part. The impugned order of blacklisting dated 08.08.2024 (Annexure P-2), having been passed without issuance of a valid show-cause notice and in violation of the principles of natural justice, is hereby quashed and set aside. 28. However, the impugned order of termination dated 08.07.2024 (Annexure P-1) is upheld, as this Court is not inclined to interfere with the same in exercise of writ jurisdiction. It shall, however, be open to the petitioner to challenge the said termination in accordance with the remedies available to him in law, including recourse to Clause 25 of the Notice Inviting Tender, which provides for arbitration of disputes. If such remedy is invoked, the arbitral authority shall consider and decide the petitioner’s claims on their own merits, uninfluenced by any observations made in this order. 29. Accordingly, the writ petition stands partly allowed in the above terms. No order as to costs. Sd/- Sd/- (Bibhu Datta Guru) (Ramesh Sinha) Judge Chief Justice Anu