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2026 Supreme(Gau) 1121
THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Devashis Baruah, J.
M/S R. K. Infracorp Private Limited – Petitioner
Versus
National Highways And Infrastructure Development Corporation Limited – Respondent
WP(C) 858 of 2026
Decided On : 09-06-2026
Important Points
Subject
Administrative Law - Public Procurement and Contractual Disputes
Act Referred
Headnote
(B) Contractual Obligations - Breach of contract - Determination of fundamental versus ordinary breach - Distinction between different types of contractual infractions - Authority must determine if the breach goes to the root of the contract before contemplating blacklisting - The decision-making authority is required to assess whether there is a bonafide dispute raised by the defaulting party - Unilateral determination without hearing is violative of the right to be heard. (Paras 32, 35)
Facts of the case:
The Petitioner entered into a construction agreement for infrastructure development. Upon the termination of the contract, the respondent authority issued a notice of debarment, citing a clause in the agreement which stipulated that debarment was a ‘natural consequence’ of termination. The petitioner challenged this action, arguing that the notice was issued without any specific show-cause proceeding for blacklisting and without an opportunity for a personal hearing to explain alleged defaults or raise disputes regarding the performance of reciprocal obligations.
Findings of Court:
The Court held that the authority’s action was arbitrary and violated the principles of natural justice. It emphasized that even if a contract permits automatic debarment, such powers must be read in light of constitutional protections. The authority failed to differentiate between minor breaches and fundamental shifts in contractual performance and denied the petitioner a chance to establish the existence of a bonafide dispute, rendering the debarment notice unsustainable.
Issues: The central issues addressed were whether debarment can be imposed automatically as a result of contract termination without a fresh show-cause process, and whether such action satisfies the requirements of reasonableness and proportionality under the Constitution.
Ratio Decidendi: The court ruled that the power to blacklist is an extreme measure that requires strict adherence to natural justice. A contractual clause stating debarment is a ‘natural consequence’ of termination does not absolve the authority from the duty to issue a separate, specific show-cause notice and conduct a hearing to ensure the penalty is proportional to the nature of the breach.
Result: Writ petition allowed; the debarment notice is set aside and quashed with liberty granted to the respondent to initiate fresh proceedings in accordance with law and the principles of natural justice.
For the Petitioner:Ms. G. Goswami, Sr. Advocate, Ms. A. Neog, Advocate
For the Respondent:Mr. P. J. Saikia, Sr. Advocate, Ms. M. Nirola, Advocate, Ms. R. Bora, SC, NHIDCL
| Table of Content |
|---|
| 1. procedural scope and identification of disputed issues. (Para 1 , 2 , 3 , 4) |
| 2. contractual history, show cause, and debarment notice background. (Para 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 3. parties' conflicting contentions regarding natural justice and procedure. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19) |
| 4. necessity of natural justice and article 14 fairness. (Para 20 , 21 , 22 , 23 , 24) |
| 5. requirement to afford opportunity of personal hearing. (Para 25 , 26 , 27 , 28 , 29 , 30) |
| 6. distinguishing breach types and bonafide dispute requirements. (Para 31 , 32 , 33 , 34) |
| 7. guidelines for determining fundamental versus ordinary breach. (Para 35) |
| 8. quashing of notice with liberty to initiate fresh process. (Para 36) |
JUDGMENT :
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.
PREFACE
2. The Petitioner has approached this Court challenging the following:
(A) The Debarment Notice dated 03.02.2026;
(B) The Termination Notice dated 03.02.2026 whereby the Contract Agreement dated 22.08.2023 was terminated.
(C) In addition to that, the Petitioner also sought for a direction upon the Respondent to consider the letter dated 05.12.2025 for a mutual foreclosure of the agreement in terms with Clause 23.9 of the Contract Agreement.
3. 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.
4. 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.
BRIEF FACTS OF THE CASE
5. 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 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.
6. 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
