The court upheld the debarment of the contractor, ruling the action was not arbitrary and justified due to significant breaches impacting public interest, distinguishing it from minor breach precedents.

JUDGMENT :

1. Heard the learned counsel for the parties.

2. The petitioner challenges letter dated 22.02.2025 whereunder the decision has been taken to treat the period from 30.03.2022 to 31.07.2024 as a period of debarment of the petitioner as a contractor.

3. Admittedly, this period has concluded. However, the learned counsel for the petitioner submitted that the order casts stigma on the petitioner and, therefore, this petition should be entertained to find out whether the impugned letter/debarment passes the constitutional muster.

4. The learned counsel for the petitioner submitted that the petitioner had raised a dispute which was referred to Arbitration. In the arbitration proceedings, a preliminary award has been made holding that the termination of the petitioner’s contract was not legal and proper. He submitted that once such a decision was made by the arbitrator, the very foundation the impugned letter of debarment collapsed. He submitted that the impugned letter should now be considered as a “nullity”.

5. Without prejudice, the learned counsel for the petitioner submitted that even assuming without admitting in any manner that there was a breach of some contractual terms, the same would not fall for an order of debarment. He relies on a judgment rendered in “Techno Prints v. Chhattisgarh Textbook Corporation and Another” [2025 SCC OnLine SC 343] and “Blue Dreams Advertising Pvt. Ltd.&Anr. V. Kolkata Municipal Corporation & Ors.” [2024 SCC OnLine SC 1896] to support this proposition.

6. The learned counsel for the petitioner also submitted that the Arbitrator held that the issues of termination and debarment are distinct, and that the issue of debarment was not part of the reference to the Arbitrator. The learned counsel, therefore, submitted that the petitioner has no other alternative or efficacious remedy to challenge the letter of debarment save and except instituting the present petition.

7. The learned counsel for the petitioner also submitted that the action of debarment is grossly disproportionate to the allegations made in the show-cause notice. He submitted that proportionality is one of the aspects of non-arbitrariness guaranteed by Article 14 of the Constitution.

8. The learned counsel for the respondents defended the impugned letter based on the reasoning reflected therein. He submitted that the preliminary award has not attained finality and, therefore, no reliance can be placed on it without the respondents having an opportunity to challenge it once a final award is made in the matter. He submitted that there is inherent contradiction in the petitioner’s case because on one hand, the petitioner seeks a declaration of nullity of the impugned letter of debarment relying upon the Arbitrator’s award, and in the same breath, the petitioner admits that the issue of debarment was not gone into by the Arbitrator since, the same was not a part of the reference to the Arbitrator.

9. The learned counsel for the respondents submitted that the principles of natural justice were complied with and that the petitioner was given a full opportunity. He submitted that this is a case where the petitioner virtually abandoned a contract for the construction of a road, thereby causing prejudice not only to the respondents but to the public, which had an interest in the early completion and repairs of the road. He also pointed out that the petitioner had claimed damages of Rs. 25 crores due to wrongful debarment from future tendering for five years. Hi