1 CGHC010274532026 2026:CGHC:32804-DB NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR WPC No. 3969 of 2026 M/s Topworth Steels And Power Private Limited, A Company Incorporated Under The Companies Act Having Its Registered Office At Borai Industrial Growth Centre, Durg, Chhattisgarh And Corporate Office At-Avani Signature, 6th Floor, 91 A/1, Part Street, Kolkata, West Bengal-700016, Through Its Authorized Signatory Jai Thomas, The Chief Operating Officer. ... Petitioner versus 1 - Steel Authority Of India Limited (SAIL) Through Its Chairman, Ispat Bhawan, Lodhi Road, New Delhi. 2 - Bhilai Steel Plant, Through Director In-Charge, Bhilai, District- Durg (C.G.). 3 - General Manager (Marketing And Business Planning), Bhilai Steel Plant, District Durg (C.G.) 4 - The Chief General Manager (Finance), Bhilai Steel Plant, District- Durg (C.G.). 5 - Yes Bank Limited, Through Its Branch Manager, Dalhousie Branch, Stephen House, Kolkata, West Bengal – 700001. 6 - R. K. Industries, Plot No.- 89 D, Industrial State, Bhilai, Distt- Durg (C.G.) – 490001. 7 - Vaswani Industries Limited, Trading And Office Address Shop No. 12, Vijeta Complex, Shastri Bazar, Raipur (C.G.) - 492001 ... Respondents BABLU RAJENDRA BHANARKAR Digitally signed by BABLU RAJENDRA BHANARKAR Date: 2026.07.30 18:25:33 +0530 2 For Petitioner : Mr.Rajeev Shrivastava, Senior Advocate assisted by Mr.Jaydeep Singh Yadav, Advocate For Respondents No.1 to 4 : Mr.Avinash Singh, Advocate Hon’ble Mr. Ramesh Sinha, Chief Justice Hon’ble Mr. Ravindra Kumar Agrawal, Judge Order on Board Per Ramesh Sinha, Chief Justice 30/07/2026 1. Heard Mr. Rajeev Shrivastava, learned Senior Advocate assisted by Mr.Jaydeep Singh Yadav, learned counsel for the petitioner as well as Mr.Avinash Singh, learned counsel appearing for respondents No.1 to 4. 2. Today, the matter is listed for hearing on IA No. 02, application for exemption from filing typed copy of certain pages. The application is allowed and with the consent of learned counsel appearing for the parties, the matter is heard finally. 3. By this petition under Article 226 of the Constitution of India, the petitioner seeks for the following relief(s): “10.1) Issue an appropriate writ, order or direction in the nature of Certiorari quashing and setting aside Letter No. M&BP/2026-27/90 dated 09/04/2026 issued by Respondent No. 2, whereby Sale Offer No. 40086818 dated 30/06/2025 was cancelled, the Security Deposits aggregating to Rs.3,82,50,000/- were forfeited and encashed, and the Petitioner was debarred from participating in four consecutive forward auctions: 3 10.2) Issue an appropriate writ, order or direction quashing the action of Respondent Nos. 1 to 4 in invoking, appropriating and retaining the proceeds of the four Bank Guarantees aggregating to Rs.3,82,50,000/-, and direct the said Respondents to refund the aforesaid amount to the Petitioner along with applicable interest, within such period as this Hon'ble Court may deem fit; 10.3) Issue an appropriate writ, order or direction quashing the action of Respondent Nos. 1 to 4 in debarring the Petitioner from participation in four consecutive forward auctions, and declare the same to be illegal, arbitrary, violative of the principles of natural justice and unsustainable in law; 10.4) Hold and declare that the impugned debarment imposed upon the petitioner amounts to blacklisting in substance and effect and is liable to be quashed for want of a prior show-cause notice and opportunity of hearing. 10.5) Issue an appropriate writ, order or direction quashing the fresh Tender/NIT No. M&BP/10140663 dated 15/05/2026 and the consequential selection, Letter of Acceptance/Sale Order/Contract issued in favour of Respondent Nos. 6 and 7, insofar as it concerns the unexpired balance quantity and subject matter covered by Sale Offer No. 40086818 dated 30/06/2025, the same being consequential to and founded upon the impugned cancellation dated 09/04/2026; 10.6) Issue an appropriate writ, order or direction directing Respondent Nos. 1 to 4 to reconsider the Petitioner's case strictly in accordance with Clause 20.3 of the Notice Inviting Tender, after taking into account 4 the quantity actually lifted by the Petitioner and after granting the Petitioner a proper opportunity of hearing; 10.7) Any other relief or relief(s) which this Hon'ble Court may think proper in view of the facts and circumstances of the case may also kindly be granted.” 4. Brief facts of the case are that the petitioner company is engaged in the business of manufacture and processing of steel and allied products and participated in Forward Auction No. FA-10140619 conducted by Respondent No. 2–Bhilai Steel Plant (SAIL) for disposal of Unprocessed LD Slag. The petitioner was declared the successful bidder and was issued Sale Offer No. 40086818 dated 30.06.2025 for lifting of Unprocessed LD Slag during the contractual period. Pursuant to the terms of the Sale Offer, the petitioner furnished four Bank Guarantees amounting to a total sum of Rs. 3,82,50,000/- issued by YES Bank Limited towards security deposit. The petitioner claims that it mobilized manpower, machinery, vehicles and infrastructure and substantially performed the contract by lifting approximately 1.10 lakh Metric Tonnes of Unprocessed LD Slag valued at approximately Rs. 9.35 crores. During the period January–March 2026, environmental and pollution control issues arose concerning storage and handling of slag material. The petitioner claims that due to implementation of environmental safeguards, lifting operations were temporarily affected. The respondents issued communications referring to Clause 20.3 of the NIT regarding short lifting and called upon the petitioner to improve lifting performance. 5 5. The petitioner contends that despite acknowledging lifting of 7,188.19 Metric Tonnes during the relevant quarter, the respondents did not invoke the contractual mechanism under Clause 20.3 for computation of liquidated damages. Instead, Respondent No. 2 issued the impugned communication dated 09.04.2026 cancelling the Sale Offer, forfeiting/invoking the Bank Guarantees and debarring the petitioner from participating in four consecutive forward auctions. Subsequently, Respondent Nos. 1 to 4 issued a fresh NIT dated 15.05.2026 for disposal of Unprocessed LD Slag, pursuant to which Respondent Nos. 6 and 7 were declared successful bidders. The petitioner has challenged the action of the respondents alleging arbitrariness, violation of principles of natural justice, disproportionality and illegal blacklisting/debarment. Hence, this petition. 6. Learned Senior Advocate for the petitioner submits that Respondent Nos. 1 to 4 being instrumentalities of the State under Article 12 of the Constitution are required to act fairly, reasonably and in accordance with Article 14 even while dealing with contractual matters. It is submitted that the impugned order dated 09.04.2026 cancelling the Sale Offer, forfeiting the security deposit and debarring the petitioner from future auctions is arbitrary, disproportionate and violative of principles of natural justice. It is argued that the respondents themselves had repeatedly relied upon Clause 20.3 of the NIT, which provides for levy of liquidated damages for short lifting, and therefore they 6 were bound to first determine damages after considering the actual quantity lifted by the petitioner. 7. Learned Senior Advocate submits that the respondents failed to consider that the petitioner had already lifted approximately 1.10 lakh Metric Tonnes of material and that the temporary shortfall occurred due to environmental compliance issues and not due to any deliberate or wilful breach. It is contended that the action of debarring the petitioner from participating in future auctions amounts to blacklisting in substance and could not have been imposed without issuance of a specific show-cause notice and opportunity of hearing. Reliance is placed upon the judgments of the Hon’ble Supreme Court in Gorkha Security Services v. Government of NCT of Delhi, (2014) 9 SCC 105, UMC Technologies Pvt. Ltd. v. Food Corporation of India, (2021) 2 SCC 551, Kulja Industries Ltd. v. BSNL, (2014) 14 SCC 731, ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 553 and Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC, to submit that blacklisting by State authorities requires compliance with natural justice and that writ jurisdiction is maintainable against arbitrary State action even in contractual matters. It is further submitted that the respondents cannot take advantage of their own action by cancelling the petitioner’s contract and thereafter creating third- party rights through a fresh tender in respect of the same subject matter. Learned Senior Advocate therefore prays for quashing of 7 the impugned order, restoration of contractual rights and protection against consequential actions arising from the fresh tender. 8. On the other hand, learned counsel appearing for Respondents No. 1 to 4 submits that the present writ petition is not maintainable as the dispute raised by the petitioner arises out of contractual obligations and rights flowing from the Sale Offer and the General Conditions of the Contract. It is submitted that the petitioner has an efficacious alternative remedy available under the arbitration clause contained in the agreement and, therefore, the petitioner ought to be relegated to the contractual remedy. Learned counsel further submits that Clause 24 of the General Conditions of the Contract specifically provides for resolution of disputes through arbitration and the petitioner, if aggrieved by any contractual action, may invoke the said remedy. He further submits that the petitioner failed to adhere to the agreed lifting schedule despite repeated communications and sufficient opportunities granted by the respondents. It is contended that the respondents were justified in taking action in terms of the contractual conditions, as the petitioner failed to fulfill its contractual obligations. 9. Learned counsel submits that Clause 20.3 of the NIT provides for consequences of short lifting and does not restrict the right of the respondents to terminate the contract, forfeit the security deposit or invoke the Bank Guarantees furnished by the petitioner upon 8 breach of contractual obligations. It is further submitted that the Bank Guarantees furnished by the petitioner were unconditional in nature and were liable to be invoked in accordance with their terms upon failure of contractual performance. Learned counsel further submits that the petitioner cannot claim any vested right to continue with the contract after failing to comply with the prescribed lifting obligations. It is submitted that the action of the respondents was taken in larger public interest to ensure proper disposal of industrial by-products and efficient utilization of resources. Learned counsel contends that the decision to debar the petitioner from participating in four consecutive forward auctions was a contractual consequence arising out of the petitioner’s failure and cannot be equated with blacklisting requiring issuance of a separate show-cause notice. 10. It is further submitted that Respondent Nos. 6 and 7 have acquired rights pursuant to a fresh tender process and their interests cannot be adversely affected on the basis of a disputed contractual claim raised by the petitioner. Learned counsel lastly submits that the scope of judicial review under Article 226 of the Constitution of India in contractual matters is limited and this Court cannot substitute its own view for the decision taken by the competent authority unless the action of the respondents is shown to be mala fide, arbitrary or contrary to statutory provisions. It is therefore prayed that the writ petition be dismissed and the 9 petitioner be relegated to the remedy available under Clause 24 of the General Conditions of the Contract. 11. We have heard learned counsel appearing for the parties, perused the pleadings and documents appended with the petition. 12. The grievance of the petitioner is that after being declared as the successful bidder in Forward Auction No. FA-10140619 and issuance of Sale Offer No. 40086818 dated 30.06.2025, the petitioner had substantially performed its contractual obligations by lifting approximately 1.10 lakh Metric Tonnes of Unprocessed LD Slag and had invested substantial resources towards execution of the contract. The petitioner contends that during the period January–March 2026, lifting operations were affected due to environmental and pollution control issues, pursuant to which remedial measures were undertaken by the petitioner. The communications issued by the respondents during the said period referred to Clause 20.3 of the NIT, which provided for levy of liquidated damages in case of short lifting. However, the impugned order dated 09.04.2026 cancelled the Sale Offer, forfeited/invoked the Bank Guarantees furnished by the petitioner and further debarred the petitioner from participating in four consecutive forward auctions. 13. It is evident from the record that the communications issued by the respondents prior to passing of the impugned order primarily related to compliance with the lifting schedule and consequences 10 contemplated under Clause 20.3 of the NIT. The said communications informed the petitioner regarding short lifting and called upon the petitioner to improve its performance; however, none of the said communications specifically informed the petitioner that the respondents proposed to take the extreme step of debarring or blacklisting the petitioner from participation in future auctions. The petitioner was, therefore, not put to notice that, apart from contractual consequences relating to cancellation of the Sale Offer, forfeiture of security deposit or invocation of Bank Guarantees, an independent penal consequence of debarment from future auctions was proposed to be imposed. 14. In the absence of a specific notice proposing debarment/blacklisting, the petitioner was deprived of an effective opportunity to explain the circumstances which allegedly resulted in short lifting, including the impact of environmental compliance issues and the steps undertaken by the petitioner for rectification. The requirement of notice assumes greater significance when the proposed action entails consequences beyond the contractual relationship and affects the future business prospects of an entity. 15. The Hon’ble Supreme Court in Gorkha Security Services (supra) has held that blacklisting has serious civil consequences and a specific show-cause notice indicating the proposed action of blacklisting is mandatory. The Hon’ble Supreme Court observed as under: 11 “16. It is a common case of the parties that the blacklisting has to be preceded by a show-cause notice. Law in this regard is firmly grounded and does not even demand much amplification. The necessity of compliance with the principles of natural justice by giving the opportunity to the person against whom action of blacklisting is sought to be taken has a valid and solid rationale behind it. With blacklisting, many civil and/or evil consequences follow. It is described as “civil death” of a person who is foisted with the order of blacklisting. Such an order is stigmatic in nature and debars such a person from participating in government tenders which means precluding him from the award of government contracts.” 16. The aforesaid principle has subsequently been reiterated by the Hon’ble Supreme Court in UMC Technologies Pvt. Ltd. (supra), wherein it has been held that blacklisting has long-lasting civil consequences affecting the reputation and future business prospects of the concerned entity and, therefore, requires issuance of a valid, specific and unambiguous show-cause notice before such action is taken. 17. In the present case, though the respondents have described the action as debarment from participation in four consecutive forward auctions, the effect and consequence of such action is identical to blacklisting, as it prevents the petitioner from participating in future contractual opportunities offered by the respondents. Such action carries serious civil and commercial consequences and could not have been imposed without following the principles of natural justice. Since no notice proposing debarment or blacklisting was 12 issued to the petitioner, the impugned action of debarment cannot be sustained in law. 18. So far as the dispute regarding the alleged failure of the petitioner to fulfill the prescribed lifting obligations is concerned, this Court is of the considered view that the said issue involves disputed questions of fact relating to contractual performance, the circumstances leading to short lifting, the effect of environmental restrictions, the quantity actually lifted by the petitioner and the applicability of Clause 20.3 of the NIT. The petitioner asserts that the shortfall occurred due to bona fide environmental compliance requirements and that substantial performance of the contract had already been achieved, whereas the respondents contend that the petitioner failed to comply with the contractual lifting schedule despite repeated communications. 19. Such disputed contractual issues are ordinarily required to be adjudicated in appropriate contractual proceedings. Clause 24 of the General Conditions of the Contract provides for resolution of disputes through arbitration, and the petitioner may avail the said remedy in respect of contractual disputes relating to cancellation, forfeiture, damages or other contractual consequences. However, the action of the respondents in imposing debarment from participation in future auctions, which operates beyond the scope of the contract in question and entails serious civil consequences, cannot be sustained in view of the admitted absence of any prior 13 notice or opportunity of hearing on the proposed penal action. The respondents, being instrumentalities of the State, are required to act fairly, reasonably and in accordance with the principles of natural justice. 20. Accordingly, while this Court does not express any opinion on the inter se contractual disputes between the parties or the legality of the other contractual consequences arising from the alleged short lifting, the impugned order dated 09.04.2026 (Annexure P/1), to the extent it debars the petitioner from participating in four consecutive forward auctions conducted by the Bhilai Steel Plant, is hereby quashed for violation of principles of natural justice. 21. Consequently, the writ petition stands partly allowed. The respondents shall be at liberty to take appropriate action in accordance with law after following due process, including issuance of a proper notice and affording reasonable opportunity of hearing to the petitioner before imposing any action having the effect of blacklisting/debarment. The petitioner shall, however, be at liberty to avail the arbitration remedy under Clause 24 of the General Conditions of Contract in respect of the remaining contractual disputes. Sd/- Sd/- (Ravindra Kumar Agrawal) (Ramesh Sinha) JUDGE CHIEF JUSTICE Bablu