Ncc Limited vs Airport Authority Of India
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 19.05.2026
Judgment pronounced on: 01.07.2026
+ O.M.P. I. (COMM) 140/2026, I.A. 8757/2026 (For Exemption)
NCC LIMITED .....Petitioner
Through: Mr. Parag P. Tripathi, Senior
Advocate along with Mr. Rishi
Agarwala, Ms. Aanchal Mullik,
Mr. Daksh Arora, Mr. Rajat
Sinha, Mr. Aparajito Sen and
Ms. Rini Mehra, Advocates.
versus
AIRPORT AUTHORITY OF INDIA .....Respondent
Through: Mr. Raghvendra Shankar, ASG
with Mr. R Venkat Prabhat, Mr.
Daksh Pandit, Mr. Neeraj
Paulose Raj, Mr. S.D. Sharma,
Mr. P.K. Gorai, Mr. Gagan
Koehar, Ms. Pragya Bansal,
Ms. Kashish Singhal and Ms.
Kamna Behrani, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
J U D G M E N T
HARISH VAIDYANATHAN SHANKAR, J.
1
1. The present Petition has been filed by NCC Limited , under
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Petitioner
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:10.07.2026
12:25:58
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Section 9 of the Arbitration and Conciliation Act, 1996 , seeking
3
certain ad interim reliefs against the Airport Authority of India .
2. The disputes between the parties are stated to emanate from a
4
Contract dated 09.11.2018 executed between the parties for the
construction of the New Domestic Terminal Building and other allied
structures (Phase I and II) at Patna Airport.
3. By way of the present Petition, the principal relief sought by the
Petitioner is a stay on the operation and effect of the Debarment
5
Letter dated 23.03.2026 issued by the Respondent, whereby the
Petitioner has been debarred from participating in any future tenders
floated by the Respondent for a period of two (02) years. The
Petitioner has further prayed for direction to the Respondent to take
down from their website or any other platform of the public domain
the Notice debarring the Petitioner. In addition thereto, the Petitioner
has prayed for ad-interim and interim ex parte reliefs in terms of the
aforementioned reliefs.
FACTUAL MATRIX:
4. The Petitioner is stated to be a company engaged in the business
of construction and infrastructure development.
5. The Respondent is a statutory authority constituted under the
6
Airports Authority of India Act, 1994 and is entrusted with the
development, maintenance and management of civil aviation
infrastructure in India.
6. The Respondent issued a Notice Inviting Tender dated
2
A&C Act
3
Respondent
4
Contract
5
Impugned Debarment Letter
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AAI Act
Signature Not Verified
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By:HARVINDER KAUR
BHATIA
Signing Date:10.07.2026
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7
16.03.2018 for the “ Construction of New Domestic Terminal Building
and Other Structures (Phase I and II) at Patna Airport ”. Pursuant
thereto, the Petitioner emerged as the successful bidder and was
8
awarded the tendered work vide Letter of Award dated 05.10.2018 .
Thereafter, the parties executed the Contract, incorporating the
General Conditions as well as the Special Conditions governing the
project.
7. The contractual period prescribed for completion of the project
was forty-eight (48) months, with the scheduled date of completion
being 13.10.2022.
8. During the course of execution, the project encountered delays,
the causes whereof remain disputed between the parties. According to
the Petitioner, the delays were occasioned, inter alia , by restricted
availability of work fronts, disruptions caused by the COVID-19
pandemic and delays in approvals attributable to the Respondent. The
Respondent, however, disputes the said assertions and attributes the
delays to the Petitioner.
9. The record further reflects that during a Progress Review
Meeting held on 15.06.2023, the Respondent directed the substitution
of the originally approved granite flooring with vitrified tiles. The
completion period was thereafter extended from time to time and,
ultimately, stood extended till 15.12.2025 without levy of liquidated
damages.
10. The terminal building came to be inaugurated and partially
commissioned on 03.06.2025. Subsequently, the Respondent issued a
7
NIT
8
LoA
Signature Not Verified
Digitally Signed
By:HARVINDER KAUR
BHATIA
Signing Date:10.07.2026
12:25:58
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Provisional Completion Certificate dated 09.12.2025 certifying
physical completion of the works. The said PCC was accompanied by
Annexure-A, identifying certain defects and unfinished items which,
according to the Respondent, were required to be attended to during
the Defect Liability Period.
11. Following the issuance of the PCC, disputes arose between the
parties regarding the quality of execution of works and the
rectification of defects. The Respondent raised concerns relating, inter
alia , to water seepage, concrete strength and deterioration of the
vitrified flooring. The Petitioner disputed the said allegations and
maintained that the works were executed in accordance with the
contractual specifications and that any deterioration of the flooring
occurred subsequent to the commissioning of the terminal building.
12. According to the Respondent, despite various communications
dated 03.01.2026, 07.01.2026 and 20.01.2026, the Petitioner failed to
furnish an acceptable programme for rectification of the defects
identified by the Respondent.
13. In the aforementioned backdrop, the Respondent, on
12.01.2026, invoked Clause 14 of the Contract and initiated risk-and-
cost procurement by issuing a Notice Inviting Tender for the
replacement of the floor tiles, estimated at Rs. 3,18,50,400/-. The
Petitioner disputes the legality and validity of the said action and
asserts that the defect rectification activities were already underway.
14. Thereafter, the Respondent issued a Show Cause Notice dated
10
30.01.2026 proposing debarment of the Petitioner on allegations
relating to delay in completion of the project, failure to rectify defects
9
PCC
10
Show Cause Notice
Signature Not Verified
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By:HARVINDER KAUR
BHATIA
Signing Date:10.07.2026
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and deficiencies in execution of the contractual works.
15. The Petitioner submitted a detailed Reply dated 02.02.2026 to
the Show Cause Notice, denying and disputing the allegations levelled
against it in the Show Cause Letter. Upon consideration thereof, the
Respondent proceeded to issue the Impugned Debarment Letter on
23.03.2026, debarring the Petitioner from participating in future
tenders floated by the Respondent for a period of two years.
16. Aggrieved by the aforesaid action, the Petitioner has filed the
present Petition under Section 9 of the A&C Act seeking interim
protection against the operation and effect of the aforesaid debarment
order pending invocation of arbitral proceedings.
SUBMISSIONS ON BEHALF OF THE PARTIES:
17. At the very threshold, the learned Additional Solicitor
11
General appearing on behalf of the Respondent would raise a
preliminary objection to the maintainability of the present Petition
under Section 9 of the A&C Act. It would be contended that the
dispute sought to be agitated by the Petitioner does not arise out of,
nor is it referable to, any contractual right or obligation emanating
from the Contract executed between the parties.
18. It would be contended that the challenge is directed solely
against the Debarment Letter, which constitutes an independent
administrative measure taken by the Respondent in the exercise of its
statutory and executive powers.
19. Learned ASG would submit that the validity of such an action
falls squarely within the realm of public law and is therefore amenable
only to judicial review by a Constitutional Court. It would accordingly
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ASG
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BHATIA
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be contended that the dispute sought to be raised is inherently non-
arbitrable in nature and falls beyond the scope of arbitral adjudication,
thereby rendering the present Petition under Section 9 of the A&C Act
not maintainable.
20. Learned ASG would submit that the power to debar contractors
is traceable to Section 20 of the AAI Act, read with Clause 35.12 of
12
the Airports Authority of India Works Manual, 2017 , the
amendment thereto dated 16.01.2026 and Technical Instruction No.
148 dated 04.06.2024.
21. It would be contended that the source of the power exercised by
the Respondent is entirely dehors the Contract executed between the
parties and, therefore, the impugned action cannot be characterised as
a contractual dispute merely because the alleged deficiencies arose
during the execution of the contracted works.
22. It would further be contended that the Arbitration Clause
contained in Clause 25 of the Contract extends only to disputes arising
out of or relating to the Contract and cannot be expanded so as to
encompass challenges to administrative or public law decisions taken
by a statutory authority. Learned ASG for the Respondent would
contend that the distinction between disputes arising from contractual
rights and obligations, and those arising from the exercise of statutory
or administrative powers, is fundamental and cannot be effaced
merely because the factual backdrop is a contractual relationship.
23. In support of the aforesaid submissions, learned ASG would
place reliance upon the decisions of the Hon‟ble Supreme Court, inter
13
alia , in Vidya Drolia v. Durga Trading Corporation and Emaar
12
AAI Manual
13
(2021) 2 SCC 1
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BHATIA
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14
India Ltd. v. Tarun Aggarwal Projects LLP to contend that disputes
involving exercise of sovereign, statutory or public law powers, or
those requiring adjudication on principles ordinarily applied in judicial
review, lie beyond the domain of private adjudication and are
consequently non-arbitrable.
24. Learned ASG would further place reliance upon the decision of
the Hon‟ble Supreme Court in Patel Engineering Ltd. v. Union of
15
India to submit that the power of blacklisting or debarment is an
inherent executive power vested in the State and its instrumentalities
and does not owe its existence to any contractual stipulation. It would
be contended that the Impugned Debarment Letter is an exercise of
such independent power, pertaining to the Respondent‟s decision
regarding its future contractual dealings with the Petitioner.
25. Learned ASG would further place reliance upon the decision of
the Hon‟ble Supreme Court in Verigamto Naveen v. Government of
16
Andhra Pradesh to submit that merely because the factual
foundation of an action arises out of a contract, the dispute does not
necessarily remain within the contractual sphere. It would be
contended that where the impugned action is taken in exercise of a
statutory or public law power, the dispute assumes a character distinct
from the underlying contract. Accordingly, it would be urged that the
challenge to the Impugned Debarment Letter cannot be treated as a
purely contractual dispute.
26. Learned ASG would also place reliance upon the recent
decision of the Hon‟ble Supreme Court in A.K.G. Construction and
14
2022 SCC OnLine SC 1328
15
(2012) 11 SCC 257
16
(2001) 8 SCC 344
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By:HARVINDER KAUR
BHATIA
Signing Date:10.07.2026
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17
Developers Pvt. Ltd. v. State of Jharkhand and the decision of this
18
Court in Satish Chand Rajesh Kumar Pvt. Ltd. v. NDMC to submit
that proceedings for blacklisting or debarment are distinct from
disputes arising under the underlying contract and cannot be conflated
therewith.
27. It would be contended that such action operates prospectively,
governing the future eligibility of a contractor to participate in public
procurement processes. Learned ASG would further submit that the
validity of such action falls to be examined on the touchstones of
legality, proportionality and compliance with the Principles of Natural
Justice, which are traditionally matters of public law adjudication.
28. Learned ASG would further submit that the Impugned
Debarment Letter, on its own terms, demonstrates that the action taken
by the Respondent is not directed towards enforcement of any
contractual right inter se the parties. It would be pointed out that while
issuing the Debarment Letter, the Respondent has expressly adverted
to considerations relating to public interest, quality standards and the
integrity of public procurement. Learned ASG would contend that the
nature of the considerations taken into account by the Respondent
itself indicates that the impugned action transcends the confines of the
contractual relationship and operates in a field distinct from the rights
and obligations arising under the Contract.
29. Learned ASG would further submit that the Impugned Order
does not operate within the confines of the existing Contract but
prospectively regulates the Petitioner‟s participation in future tenders
floated by the Respondent. According to the Respondent, the issue of
17
2026 SCC OnLine SC 520
18
2022:DHC:1597
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BHATIA
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eligibility to participate in future public procurement processes is
distinct from disputes arising under the Contract and consequently
falls beyond the scope of the arbitration agreement.
30. Learned ASG would further submit that the Petitioner has
erroneously conflated the cause giving rise to the action with the
source of the power exercised. It would be argued that while the
alleged deficiencies in performance may have furnished the occasion
for initiation of proceedings, the authority to debar emanates from the
Respondent‟s independent administrative powers and not from the
Contract itself. Learned ASG would contend that the legal character of
an action must be determined with reference to the source of the
power exercised and not the factual circumstances which triggered its
exercise.
31. Learned ASG would also place reliance upon the express recital
contained in the Impugned Debarment Letter that the action has been
taken without prejudice to the Respondent‟s other contractual rights
and remedies. It would be submitted that the Respondent itself has
treated debarment as distinct from the remedies available under the
Contract, thereby reinforcing the position that the impugned action
constitutes an independent administrative measure.
32. Learned ASG would further submit that the Impugned
Debarment Letter is not confined to regulating the rights and
obligations arising under the present Contract, but operates
prospectively by rendering the Petitioner ineligible to participate in
future tenders floated by the Respondent for a period of two years. It
would be contended that the consequences flowing from the impugned
action travel beyond the contractual framework presently governing
the parties and concern the Respondent‟s future dealings with the
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BHATIA
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Petitioner.
33. Learned ASG would additionally submit that the present case
does not involve termination of the Contract, invocation of any
contractual remedy, or any action affecting the subsisting contractual
rights of the parties. It would be contended that the Contract has
substantially worked itself out and that a Provisional Completion
Certificate has admittedly been issued.
34. According to the Respondent, the Petitioner seeks to equate
debarment with termination, though the two operate in distinct
spheres. While termination concerns rights and obligations arising
under an existing contract, debarment concerns the decision of a
public authority regarding future contractual engagements. Learned
ASG would therefore submit that the impugned action neither alters
nor determines any presently subsisting contractual right and
consequently falls outside the scope of disputes capable of being
preserved through proceedings under Section 9 of the A&C Act.
35. Learned ASG would accordingly submit that the dispute sought
to be agitated by the Petitioner is non-arbitrable and incapable of
reference to arbitration. It would therefore be contended that no
arbitral proceedings could validly be invoked in relation to the
challenge laid to the Impugned Debarment Letter and, consequently,
the present Petition under Section 9 of the A&C Act is liable to be
dismissed as not maintainable.
36. Per contra, learned senior counsel appearing on behalf of the
Petitioner would submit that the Respondent seeks to artificially sever
the Impugned Debarment Letter from the underlying contractual
disputes, notwithstanding that the very foundation of the impugned
action rests upon the allegations concerning the Petitioner‟s
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BHATIA
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performance under the Contract.
37. Learned senior counsel would contend that the arbitration
agreement contained in Clause 25 of the Contract is couched in the
widest possible terms and extends to all disputes arising out of or
relating to the Contract. Reliance in this regard would be placed upon
the decision of the Hon‟ble Supreme Court in Vidya Drolia (supra) to
contend that expressions such as “all disputes”, “arising out of” and
“relating to” are required to receive a broad and liberal construction
and that, unless expressly excluded, disputes having their genesis in
the contractual relationship ought ordinarily to be regarded as
arbitrable.
38. Learned senior counsel would further submit that the Impugned
Debarment Letter itself proceeds on allegations relating to delay in
execution of the project, quality of work, alleged defects, rectification
obligations and other matters arising directly from performance of the
Contract. According to the Petitioner, the challenge to the impugned
action therefore falls squarely within the ambit of the arbitration
agreement.
39. Learned senior counsel would additionally submit that neither
the Contract Agreement nor the General Conditions of Contract confer
any power upon the Respondent to debar the Petitioner on account of
alleged deficiencies in contractual performance. It would be contended
that Clause 41(a) of the Contract merely contemplates consequences
flowing from violations of the Integrity Pact and does not authorise
debarment on the basis of alleged breaches arising during execution of
the works. It would therefore be argued that the Respondent cannot
rely upon allegations of contractual breach while simultaneously
contending that the resultant dispute falls outside the contractual
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dispute resolution framework.
40. Learned senior counsel would, in this regard, place reliance
upon the decision of this Court in Edapally to Kodungallur Highway
19
Pvt. Ltd. v. NHAI to contend that where debarment is founded upon
allegations concerning performance of contractual obligations, the
resultant dispute remains amenable to the contractual dispute
resolution mechanism and can form the subject matter of proceedings
under Section 9 of the A&C Act. It would be submitted that the
present case stands on a similar footing since the impugned action is
directly traceable to alleged deficiencies in the execution of the
contractual works.
41. Learned counsel would further rely upon Sai Consulting
20
Engineers Pvt. Ltd. v. Rail Vikas Nigam Ltd to submit that
allegations relating to deficient contractual performance and penal
consequences flowing therefrom are capable of arbitral adjudication. It
would be contended that the Respondent cannot unilaterally determine
disputed questions of contractual breach and thereafter contend that
the resulting dispute falls outside the ambit of the arbitration
agreement.
42. Learned senior counsel, in order to substantiate its stand, would
place reliance upon SPS Engineering Ltd. v. Indian Oil Corporation
21
Ltd. to contend that where the allegations forming the basis of
blacklisting or debarment are themselves disputed and arise from the
contractual relationship, the same are inextricably connected with the
underlying contract.
43. Learned senior counsel would submit that the allegations
19
2026 SCC OnLine Del 1052
20
2013 SCC OnLine Del 679
21
(2004) 76 DRJ 259
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concerning delay, defective performance and failure to rectify defects
remain seriously disputed and are therefore liable to be adjudicated
through the agreed dispute resolution mechanism, i.e. , Arbitration.
44. Learned senior counsel would additionally submit that the
22
decision in Prabhatam Advertisement Pvt. Ltd. v. SDMC recognises
that where the grounds of blacklisting substantially overlap with
pending contractual disputes, the forum seized of such disputes is best
placed to examine the matter and avoid conflicting findings.
45. It would be contended that the present challenge similarly arises
from allegations that are intrinsically connected with the contractual
relationship between the parties. It would be contended that the
Arbitral Tribunal would be seized of the disputes arising from the
Contract, and therefore the present Impugned Debarment Letter and
disputes arising therefrom would also form the subject matter of the
disputes before the Arbitral Tribunal, thereby amenable to reliefs
under Section 9 of the A&C Act.
46. Learned senior counsel would therefore submit that the
challenge raised by the Petitioner is fundamentally rooted in disputes
arising out of the Contract and that the present controversy falls within
the scope of the arbitration agreement executed between the parties. It
would accordingly be prayed that the preliminary objections raised by
the Respondent be rejected and the Petition be held maintainable.
47. Advancing submissions on merits , learned senior counsel
appearing on behalf of the Petitioner would submit that the Impugned
Debarment Letter is founded entirely upon allegations concerning
delay, quality of work and rectification of defects arising out of
execution of the Contract. It would be contended that each of these
22
2015:DHC:7088
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allegations is seriously disputed by the Petitioner and remains yet to
be adjudicated by any competent forum.
48. Learned senior counsel would submit that the Respondent has
proceeded on the assumption that the Petitioner is solely responsible
for the alleged deficiencies despite the Petitioner having furnished
explanations regarding the causes of delays, disputed the allegations
concerning the quality of work and relied upon independent test
reports in support of its case. Learned senior counsel would therefore
submit that the impugned action is predicated upon disputed questions
of fact which remain unresolved and incapable of unilateral
determination.
49. It would further be contended that the impugned debarment
entails serious civil and commercial consequences. Learned senior
counsel would submit that exclusion from participation in future
tenders of the Respondent for a period of two years would result in
substantial reputational harm and business prejudice to the Petitioner,
which cannot be adequately remedied by an award of damages.
50. Learned senior counsel would therefore submit that the
Petitioner has established a strong prima facie case for the grant of
interim protection. It would be contended that the balance of
convenience lies in favour of preserving its rights pending recourse to
arbitration and that the Petitioner would suffer irreparable injury to its
reputation and business. It would therefore be argued that refusal of
interim protection would render the proposed arbitral proceedings
largely inefficacious.
51. Learned senior counsel would accordingly pray that the
operation and effect of the Impugned Debarment Letter be stayed
pending initiation of arbitral proceedings between the parties.
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BHATIA
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52. In rejoinder to the submissions made on merits by the learned
senior counsel for the Petitioner , the learned ASG appearing on
behalf of the Respondent, while reiterating the objections regarding
the maintainability of the present petition and without prejudice
thereto, submitted that no case is made out for the grant of any interim
protection.
53. It would be contended that the Impugned Debarment Letter
came to be issued only after repeated notices, affording adequate
opportunity to the Petitioner to respond, and due consideration of the
explanation furnished by it. The Impugned action, therefore, cannot be
characterised as arbitrary, unilateral or violative of principles of
natural justice.
54. Learned ASG would further submit that the impugned action is
founded upon serious deficiencies noticed during execution of the
project, including delay in completion, concerns regarding quality of
workmanship and failure to satisfactorily rectify the defects identified
by the Respondent. It would accordingly be submitted that the
explanations offered by the Petitioner in their reply to the Show Cause
Notice were duly considered and the Impugned action was only taken
on the ground that such explanation was found unsatisfactory.
55. It would further be contended that the Petitioner has failed to
establish any irreparable injury warranting interference. Learned ASG
would submit that the Impugned Order debarring the Petitioner merely
regulates the Petitioner‟s participation in future tenders of the
Respondent for a limited period and does not affect any subsisting
contractual rights under the completed project, including any
liquidated damages or encashment of bank guarantees.
56. Learned ASG would therefore submit that the Petitioner has
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BHATIA
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failed to establish a prima facie case, that the balance of convenience
lies in their favour or that it would suffer irreparable injury in the
absence of interim protection. It would accordingly be prayed that the
present Petition be dismissed.
ANALYSIS:
57. This Court has heard the learned counsel appearing on behalf of
the parties and, with their able assistance, carefully examined the
pleadings, documents placed on record, and the judicial precedents
relied upon in support of their respective submissions.
58. At the outset, it is necessary to address the preliminary
objection raised by the Respondent regarding the maintainability of
the present petition. The Respondent has contended that the dispute
sought to be agitated by the Petitioner neither arises out of nor is
referable to any contractual right or obligation emanating from the
Contract executed between the parties. Since such an objection goes to
the very root of the jurisdiction sought to be invoked under Section 9
of the A&C Act, this Court considers it appropriate to examine the
same before adverting to the rival contentions on merits.
59. It is well settled that the jurisdiction of a Court under Section 9
of the A&C Act cannot be exercised in abstraction, or de hors the
arbitration agreement and the disputes contemplated thereunder. The
power conferred upon the Court to grant interim measures is ancillary,
preservative, and protective in nature. Its invocation is necessarily
predicated upon the existence of a valid and enforceable arbitration
agreement governing the dispute in question.
60. Therefore, before this Court can proceed to examine whether
the Petitioner is entitled to any interim protection, it is incumbent
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upon the Petitioner, at least on a prima facie assessment, to establish
not only the existence of a valid arbitration agreement but also that the
dispute sought to be raised falls within the scope of such agreement
and is capable of being referred to arbitration within the A&C Act. In
the absence of this foundational requirement, the jurisdiction under
Section 9 of the A&C Act cannot be invoked as an independent or
self-sustaining remedy.
61. The aforesaid position stands reiterated in Kuber Mart Global
23
Hub (P) Ltd. v. Kuber Mart Industries (P) Ltd. , wherein this Court
considered the scope and nature of the jurisdiction exercisable under
Section 9 of the A&C Act and emphasized that the existence of a valid
arbitration agreement covering the dispute in question constitutes a
foundational prerequisite for the exercise of such jurisdiction. The
relevant observations are reproduced hereunder:
“….
25. It is necessary to emphasize that the present petition does
not arise under Section 11 of the A&C Act, which is confined to
the limited question of the appointment of an arbitrator. The
present proceedings have been instituted under Section 9 of the
A&C Act, wherein this Court is called upon to exercise its
jurisdiction to grant interim measures of protection. The scope and
nature of judicial scrutiny under Section 9 are materially distinct
and considerably broader than that contemplated under Section 11.
While exercising jurisdiction under Section 9, the Court is required
to apply the well-settled triple test governing the grant of interim
relief, namely : (i) the existence of a prima facie case, (ii) balance
of convenience, and (iii) likelihood of irreparable harm.
26. To augment, the Hon‟ble Supreme Court, in Arcelor Mittal
24
Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd. , has
reiterated that these foundational principles are equally applicable
to proceedings under Section 9 of the A&C Act.
27. Significantly, the requirement of establishing a prima facie
case for the purposes of Section 9 of the A&C Act cannot be
satisfied by the mere existence of an arbitration clause in the
agreement between the parties. The prima facie case must extend
23
2026 SCC OnLine Del 3254
24
(2022) 1 SCC 712
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beyond the formal existence of an arbitration agreement and must
encompass an assessment of whether the disputes sought to be
referred are, in law, capable of being resolved through arbitration.
Where the dispute is ex facie non-arbitrable or is barred from
arbitration by operation of statute, the Court cannot grant interim
relief on the assumption that arbitral proceedings would validly
ensue.
28. In proceedings under Section 9 of the A&C Act, therefore,
the Court does not function as a mere referral or facilitative forum.
Rather, it is vested with substantive powers to scrutinize the legal
tenability of the claims raised, the maintainability of the reliefs
sought, and the jurisdictional foundation for invoking arbitral
remedies.
29. Unlike Section 11 proceedings, where the scope of judicial
interference is deliberately circumscribed and limited to a prima
facie examination of the existence of an arbitration agreement, as
explained in Vidya Drolia ( supra ), such limited scrutiny cannot be
mechanically or indiscriminately transplanted into proceedings
under Section 9 of the A&C Act. The legislative intent underlying
Section 9 contemplates a more searching inquiry, particularly
where the grant of interim measures may have far-reaching civil
and commercial consequences.
30. Further, even otherwise, a careful and holistic reading of
the judgment in Vidya Drolia ( supra ), particularly paragraph no.
80 thereof, makes it abundantly clear that disputes pertaining to
tenancy rights governed by rent control legislation stand on a
fundamentally different footing. The Hon‟ble Supreme Court has
unequivocally held that where a special statute confers exclusive
jurisdiction upon designated statutory forums to adjudicate specific
rights and obligations, such disputes are rendered non-arbitrable.”
62. In the backdrop of the aforesaid legal position, the controversy
arising in the present case is not confined merely to determining
whether the Petitioner has satisfied the requirements for the grant of
interim protection. The more fundamental issue that falls for
consideration is whether the grievance sought to be projected by the
Petitioner constitutes a dispute governed by the arbitration agreement
contained in the Contract and is therefore arbitrable. Unless this
threshold requirement is satisfied, no further examination of the
Petitioner's entitlement to interim relief would be warranted.
63. Accordingly, the principal question that arises for determination
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in the present case is whether the Debarment Letter issued by the
Respondent forms part of the contractual disputes arising between the
parties and is therefore amenable to arbitration, or whether it
constitutes an independent action taken by the Respondent in exercise
of its public law powers and consequently falls outside the scope of
the arbitration agreement, as has been asserted by the Respondent.
Axiomatically, the answer to this question is determinative of the
maintainability of the present petition under Section 9 of the A&C
Act.
64. In the present petition, it is necessary at the outset to note that
the Petitioner does not seek protection against any threatened
termination of the Contract, invocation of risk-and-cost procurement
measures, recovery of contractual dues, encashment of bank
guarantees, invocation of performance securities, or any other action
taken in the exercise of rights and remedies arising under the Contract.
The sole substantive relief sought is a stay of the operation,
implementation, and effect of the Debarment Letter, whereby the
Petitioner has been declared ineligible to participate in future tenders
floated by the Respondent for a period of two years.
65. At this stage, the Court's inquiry must be directed towards the
true nature and legal character of the impugned action, rather than
merely the existence of a contractual relationship between the parties.
The presence of an arbitration clause in the Contract does not, by
itself, render every dispute between the parties arbitrable. What is
required to be examined is whether the impugned debarment derives
from, and is founded upon, the contractual rights and obligations of
the parties, or whether it constitutes an independent exercise of power
giving rise to legal consequences beyond the confines of the Contract.
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66. The issue, therefore, is not whether disputes concerning the
performance or execution of the Contract exist between the parties.
Rather, the Court must determine whether the impugned action is
referable to the exercise of contractual rights inter se the parties, or
whether it emanates from the Respondent's statutory, administrative,
or executive authority and operates in a sphere distinct from the
contractual relationship. This distinction is of fundamental
importance, for only upon identifying the true source of the power
exercised and the legal character of the impugned action can the Court
ascertain whether the dispute is capable of resolution through private
adjudication in arbitration or falls outside the scope of the arbitral
process.
67. In order to test the aforesaid proposition, this Court considers it
apposite to first advert to the nature and effect of the Impugned
Debarment Letter.
68. A perusal of the Impugned Debarment Letter reveals that the
action taken by the Respondent is not directed towards the
enforcement of any contractual remedy available under the Contract.
The impugned action neither seeks recovery of any contractual dues,
nor invokes any provision relating to termination, risk-and-cost
procurement, encashment of securities or any other consequence
operating within the four corners of the Contract.
69. The consequences flowing from the impugned action extend
beyond the subsisting contractual relationship between the parties. The
Debarment Letter operates prospectively and renders the Petitioner
ineligible to participate in future procurement processes of the
Respondent for a specified period. The action, therefore, is not
confined to adjudication of rights and obligations arising under the
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Contract but travels beyond the contractual framework presently
governing the parties.
70. Considerable emphasis was placed by the Petitioner on the fact
that the Impugned Debarment Letter is founded upon allegations
relating to delay in execution, defects in workmanship and
deficiencies in performance of contractual obligations.
71. Equally important, however, is the distinction between the
factual backdrop giving rise to an action and the legal source of the
power under which such action is taken. Merely because the
allegations forming the basis of the impugned action are connected
with the performance of the Contract may not necessarily give a
contractual flavour to the debarment.
72. In this regard, the decision of the Hon‟ble Supreme Court in
Vidya Drolia (supra) , reliance whereupon has been placed by both
sides, assumes relevance.
73. The said decision recognises that arbitration agreements are
ordinarily to be accorded a liberal and expansive construction, and that
disputes having their genesis in a contractual relationship would, as a
general rule, fall within the ambit thereof. While the Petitioner has
relied upon the broad import attributed to expressions such as “arising
out of” and “relating to” , the Respondent has drawn support from the
principles governing arbitrability articulated therein. Both
propositions are firmly embedded in law and admit of no controversy.
74. Equally, however, Vidya Drolia (supra) , as well as the decision
of the Hon‟ble Supreme Court in Emaar India Ltd. (supra) ,
underscore that the reach of arbitral adjudication, though wide, is not
unbounded. Disputes involving the exercise of sovereign, statutory or
public law powers, or those requiring adjudication upon standards
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traditionally applied in the exercise of judicial review, stand on a
footing distinct from ordinary private law disputes and may
consequently fall beyond the domain of arbitration. The mere
existence of a contractual backdrop, therefore, cannot be
determinative. The enquiry must, therefore, ultimately be directed
towards the true nature of the controversy, the source of the power
exercised, and the character of the action sought to be impugned.
75. It is in the aforesaid backdrop that the decisions relied upon by
the Respondent require consideration.
76. Further support for the Respondent's objection is found in the
decision of the Hon'ble Supreme Court in Patel Engineering (supra) ,
wherein the Apex Court recognised that the power to debar or
blacklist a contractor is not dependent upon the existence of an
express contractual stipulation but inheres in the State's executive
authority to enter into contracts. It was further held that such power is
a necessary concomitant of the State's freedom to determine the
persons with whom it will, or will not, engage in future contractual
relations.
77. In that context, the Hon'ble Supreme Court in that judgement
drew a clear distinction between disputes arising from existing
contractual rights and obligations inter se the parties and decisions
taken by the State in relation to its future commercial dealings with a
contractor. The said distinction assumes considerable significance in
the present case, where the challenge is directed not against the
enforcement of any contractual right or remedy, but against a decision
allegedly affecting the Petitioner's eligibility to participate in future
tenders. The relevant observations in Patel Engineering ( supra ) are
reproduced hereunder:
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“14. The nature of the authority of the State to blacklist the persons
was considered by this Court in the abovementioned case [“ 12 .
Under Article 298 of the Constitution the executive power of the
Union and the State shall extend to the carrying on of any trade and
to the acquisition, holding and disposal of property and the making
of contracts for any purpose. The State can carry on executive
function by making a law or without making a law. The exercise of
such powers and functions in trade by the State is subject to Part III
of the Constitution. Article 14 speaks of equality before the law
and equal protection of the laws. Equality of opportunity should
apply to matters of public contracts. The State has the right to
trade. The State has there the duty to observe equality. An ordinary
individual can choose not to deal with any person. The
Government cannot choose to exclude persons by discrimination.
The order of blacklisting has the effect of depriving a person of
equality of opportunity in the matter of public contract. A person
who is on the approved list is unable to enter into advantageous
relations with the Government because of the order of blacklisting.
A person who has been dealing with the Government in the matter
of sale and purchase of materials has a legitimate interest or
expectation.” ( Erusian Equipment case [(1975) 1 SCC 70] , SCC
p. 74, para 12)] and took note of the constitutional provision
(Article 298) [“ 298. Power to carry on trade, etc .—The executive
power of the Union and of each State shall extend to the carrying
on of any trade or business and to the acquisition, holding and
disposal of property and the making of contracts for any
purpose:Provided that—( a ) the said executive power of the Union
shall, insofar as such trade or business or such purpose is not one
with respect to which Parliament may make laws, be subject in
each State to legislation by the State; and ( b ) the said executive
power of each State shall, insofar as such trade or business or such
purpose is not one with respect to which the State Legislature may
make laws, be subject to legislation by Parliament.”] , which
authorises both the Union of India and the States to make contracts
for any purpose and to carry on any trade or business. It also
authorises the acquisition, holding and disposal of property. This
Court also took note of the fact that the right to make a contract
includes the right not to make a contract. By definition, the said
right is inherent in every person capable of entering into a contract.
However, such a right either to enter or not to enter into a contract
with any person is subject to a constitutional obligation to obey the
command of Article 14. Though nobody has any right to compel
the State to enter into a contract, everybody has a right to be treated
equally when the State seeks to establish contractual relationships
[“ 17 . The Government is a Government of laws and not of men. It
is true that neither the petitioner nor the respondent has any right to
enter into a contract but they are entitled to equal treatment with
others who offer tender or quotations for the purchase of the goods.
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This privilege arises because it is the Government which is trading
with the public and the democratic form of Government demands
equality and absence of arbitrariness and discrimination in such
transactions. Hohfeld treats privileges as a form of liberty as
opposed to a duty. The activities of the Government have a public
element and, therefore, there should be fairness and equality. The
State need not enter into any contract with any one but if it does so,
it must do so fairly without discrimination and without unfair
procedure. Reputation is a part of a person's character and
personality. Blacklisting tarnishes one's reputation.” ( Erusian
Equipment case [(1975) 1 SCC 70] , SCC p. 75, para 17)]. The
effect of excluding a person from entering into a contractual
relationship with the State would be to deprive such person to be
treated equally with those, who are also engaged in similar activity.
15. It follows from the above judgment in Erusian Equipment
case [(1975) 1 SCC 70] that the decision of the State or its
instrumentalities not to deal with certain persons or class of
persons on account of the undesirability of entering into the
contractual relationship with such persons is called blacklisting.
The State can decline to enter into a contractual relationship with a
person or a class of persons for a legitimate purpose. The authority
of the State to blacklist a person is a necessary concomitant to the
executive power of the State to carry on the trade or the business
and making of contracts for any purpose, etc. There need not be
any statutory grant of such power. The only legal limitation upon
the exercise of such an authority is that the State is to act fairly and
rationally without in any way being arbitrary—thereby such a
decision can be taken for some legitimate purpose. What is the
legitimate purpose that is sought to be achieved by the State in a
given case can vary depending upon various factors.
*
33. From the impugned order it appears that the second respondent
came to the conclusion that: ( 1 ) the petitioner is not reliable and
trustworthy in the context of a commercial transaction; ( 2 ) by
virtue of the dereliction of the petitioner, the second respondent
suffered a huge financial loss; and ( 3 ) the dereliction on the part of
the petitioner warrants exemplary action to “curb any practice of
„pooling‟ and „mala fide‟ in future”.
34. We do not find any illegality or irrationality in the conclusion
reached by the second respondent that the petitioner is not
(commercially) reliable and trustworthy in the light of its conduct
in the context of the transaction in question. We cannot find fault
with the second respondent's conclusion because the petitioner
chose to go back on its offer of paying a premium of Rs 190.53
crores per annum, after realising that the next bidder quoted a
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much lower amount. Whether the decision of the petitioner is bona
fide or mala fide, requires a further probe into the matter, but, the
explanation offered by the petitioner does not appear to be a
rational explanation.”
78. The aforesaid decision clearly recognises that blacklisting or
debarment is a power distinct from contractual remedies and operates
in the sphere of future commercial dealings. Viewed in that light, the
Impugned Debarment Letter bears attributes indicative of an exercise
of the Respondent‟s independent administrative authority rather than a
contractual power arising under the Agreement.
79. Equally significant is the reliance of the Respondent on the
decision of the Hon‟ble Supreme Court in Verigamto Naveen (supra) .
The said decision recognises that merely because the genesis of a
dispute may be traceable to a contractual relationship, it does not
invariably follow that the dispute remains confined to the realm of
private law. The Hon‟ble Supreme Court observed that where the
impugned action is taken in exercise of a statutory, governmental or
public law power, the matter may assume a distinct public law
character notwithstanding the contractual backdrop against which it
arises. In doing so, the Court emphasised the distinction between the
factual cause giving rise to an action and the legal source of the power
exercised. The relevant paragraph of the said Judgment is reproduced
herein under:
“ 21 . On the question that the relief as sought for and granted by the
High Court arises purely in the contractual field and, therefore, the
High Court ought not to have exercised its power under Article 226
of the Constitution placed very heavy reliance on the decision of
the Andhra Pradesh High Court in Y.S. Raja Reddy v. A.P.
Mining Corpn. Ltd. [(1988) 2 An LT 722] and the decisions of
this Court in Har Shankar v. Dy. Excise & Taxation
Commr. [(1975) 1 SCC 737] , Radhakrishna Agarwal v. State of
Bihar [(1977) 3 SCC 457], Ramlal & Sons v. State of
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Rajasthan [(1976) 1 SCC 112], Shiv Shankar Dal Mills v. State
of Haryana [(1980) 2 SCC 437], Ramana Dayaram
Shetty v. International Airport Authority of India [(1979) 3
SCC 489] and Basheshar Nath v. CIT [AIR 1959 SC 149] .
Though there is one set of cases rendered by this Court of the type
arising in Radhakrishna Agarwal case [(1977) 3 SCC 457] much
water has flown in the stream of judicial review in contractual
field. In cases where the decision-making authority exceeded its
statutory power or committed breach of rules or principles of
natural justice in exercise of such power or its decision is perverse
or passed an irrational order, this Court has interceded even after
the contract was entered into between the parties and the
Government and its agencies. We may advert to three decisions of
this Court in Dwarkadas Marfatia & Sons v. Board of Trustees
of the Port of Bombay [(1989) 3 SCC 293], Mahabir Auto
Stores v. Indian Oil Corpn. [(1990) 3 SCC 752] and Shrilekha
Vidyarthi (Kumari) v. State of U.P. [(1991) 1 SCC 212] Where
the breach of contract involves breach of statutory obligation when
the order complained of was made in exercise of statutory power
by a statutory authority, though cause of action arises out of or
pertains to contract, brings it within the sphere of public law
because the power exercised is apart from contract. The freedom of
the Government to enter into business with anybody it likes is
subject to the condition of reasonableness and fair play as well as
public interest. After entering into a contract, in cancelling the
contract which is subject to terms of the statutory provisions, as in
the present case, it cannot be said that the matter falls purely in a
contractual field. Therefore, we do not think it would be
appropriate to suggest that the case on hand is a matter arising
purely out of a contract and, therefore, interference under Article
226 of the Constitution is not called for. This contention also
stands rejected.”
(emphasis supplied)
80. The aforesaid distinction is of particular relevance in the present
case. While the allegations relating to delay, quality of work and
defective execution may have furnished the factual foundation for
initiation of proceedings against the Petitioner, the authority invoked
by the Respondent in issuing the Impugned Debarment Letter is
asserted to emanate from powers independent of the Contract itself.
81. Further support for the Respondent‟s contention is found in the
recent decision of the Hon‟ble Supreme Court in A.K.G. Construction
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(supra) . The Apex Court therein drew a clear distinction between
proceedings relating to the termination of a contract and proceedings
for blacklisting, observing that the two operate in different spheres and
serve fundamentally different purposes. While termination concerns
the parties‟ existing contractual relationship, blacklisting governs the
authority‟s future dealings with the contractor and consequently
carries wider civil and commercial consequences.
82. The Hon‟ble Supreme Court in the said case emphasised that an
order of blacklisting transcends the confines of the underlying contract
and is therefore required to be examined on principles of legality,
proportionality, application of mind and adherence to the Principles of
Natural Justice. The decision thus reinforces the proposition that a
challenge to a blacklisting or debarment order cannot be treated as a
purely contractual dispute merely because the allegations giving rise
thereto emanate from performance of the contract. The relevant
paragraph of A.K.G. Construction (supra) reads as follows:
“ 18. The contractual conditions governing termination on the one
hand and those that relate to blacklisting on the other are distinct
and will be exercised independently. A decision of blacklisting is
not automatic and certainly not a logical consequence of a decision
of termination. Even after the Department decides to terminate the
contract, there is still a choice of exercising the power of
blacklisting. These decisions operate in two dimensions - past and
subsisting for termination and future for blacklisting. In other
words, an order of blacklisting transcends the existing contract and
debars the contractor from contracts that could probably be
executed in the next five years. In view of the serious
consequences, it is necessary for the Department to issue a specific
notice proposing blacklisting of a contractor and call for an
explanation as to why an order of blacklisting should not be
passed. This is exactly the purpose and object behind Rule 10.5.
*
22. Returning to the facts of the present case, at the outset, it is
apparent that the show cause notice dated 04.06.2024 does not
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purport to be a show cause notice for blacklisting at all. It perhaps
expects the contractor to assume that it is for termination as well as
for blacklisting. Even if we accept the submissions of Mr. Kumar
Anurag Singh that, as there is no provision for prior notice before
termination, this show cause notice must be taken to be for
blacklisting, we are of the opinion that it still falls short of the
requirement of a proper show cause notice for blacklisting. This is
for the reason that as the decision to blacklist is independent of the
decision to terminate, the Department must demonstrate
application of mind before it takes the next step of blacklisting the
contractor, over an order of termination. Upon taking such a
decision, it must also issue a show cause notice calling upon the
contractor to explain why a consequential order of blacklisting
should also not be passed. The letter must be indicative of the
proposed decision to blacklist and the requirement of the contractor
to respond to it. The show cause notice dated 04.06.2024 falls short
of these requirements. Similarly, the final order of blacklisting,
dated 23.08.2024, also does not list the reasons as to why an order
of blacklisting has become necessary.
23. The contractual relationship between the parties is governed by
two legal regimes. While GCC governs termination, the 2012
Rules govern blacklisting. Proceedings for termination should not
be conflated with proceedings for blacklisting. In the latter action,
what is at stake is the future of the contractor. A blacklisting order
assumes that the contractor is an incorrigible entity, at least for
some time to come, in this case such an assumption was intended
to operate for five years. For giving effect to such a premise, there
has to be sufficient evidence, clear application of mind and
5
stronger adherence to principles of natural justice . The blacklisting
order dated 23.08.2004 falls short of this requirement and is liable
to be set aside.”
(emphasis supplied)
83. The decision of this Court in Satish Chand Rajesh Kumar Pvt.
Ltd. (supra) , also relied upon by the Respondent, is equally
instructive. While examining the maintainability of a challenge to a
debarment order, the Co-ordinate bench of this Court emphasised that
the character of such action must be determined with reference to the
source of the power exercised. It was then found that the debarment in
that case was amenable to arbitration, as it was expressly founded
upon a contractual stipulation and constituted a contractual remedy
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available to the employer under the terms of the contract.
84. The said decision thus underscores the distinction between
debarment traceable to contractual powers and debarment founded
upon an independent statutory or administrative source. This
distinction is of importance in the present case, where the Respondent
asserts that the Impugned Debarment Letter is not referable to any
provision of the Contract but derives its authority from the statutory
and administrative framework governing the Respondent.
85. The common thread running through the aforesaid authorities is
that the arbitrability of a dispute is not determined merely by the
factual circumstances in which it arises. The enquiry must ultimately
be directed towards the source of the power exercised, the nature of
the action impugned and the legal consequences flowing therefrom. It
is these considerations that must guide the determination of the issue
presently before this Court.
86. This Court also considers it apposite to examine the scheme of
Section 9 of the A&C Act, which empowers a Court to grant interim
measures of protection before, during, or after arbitral proceedings but
prior to the enforcement of the arbitral award. The provision
authorises the Court to grant protective reliefs such as preservation of
the subject matter of arbitration, securing the amount in dispute,
preservation or inspection of property, grant of interim injunctions,
appointment of receivers, and such other interim measures as may
appear to be just and convenient. The jurisdiction under Section 9 is
thus intended to preserve and protect the subject matter of the
arbitration and to ensure that the arbitral proceedings are not rendered
infructuous. For the sake of ready reference, the provisions of Section
9 of the A&C Act are reproduced hereunder:
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“ 9. Interim measures, etc., by Court. - (1) A party may, before or
during arbitral proceedings or at any time after the making of the
arbitral award but before it is enforced in accordance with section
36, apply to a court-
(i) for the appointment of a guardian for a minor or person of
unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the
following matters, namely:
(a) the preservation, interim custody or sale of any goods
which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or
thing which is the subjectmatter of the dispute in
arbitration, or as to which any question may arise therein
and authorising for any of the aforesaid purposes any
person to enter upon any land or building in the possession
of any party, or authorising any samples to be taken or any
observation to be made, or experiment to be tried, which
may be necessary or expedient for the purpose of
obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to
the Court to be just and convenient,
and the Court shall have the same power for making orders as
it has for the purpose of, and in relation to, any proceedings
before it.
(2) Where, before the commencement of the arbitral proceedings, a
Court passes an order for any interim measure of protection under
sub-section (1), the arbitral proceedings shall be commenced within
a period of ninety days from the date of such order or within such
further time as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall
not entertain an application under sub-section (1), unless the Court
finds that circumstances exist which may not render the remedy
provided under section 17 efficacious.”
87. A plain reading of Section 9 of the A&C Act makes it evident
that the interim reliefs contemplated therein must necessarily bear a
direct and proximate nexus to the subject matter of the arbitration
agreement and the disputes arising therefrom. The jurisdiction under
Section 9 is intended to secure rights emanating from the contract and
to preserve the efficacy of the arbitral proceedings in relation thereto.
The expression “subject matter of the arbitration” has consistently
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been understood to encompass the contractual rights and obligations
of the parties, the works, goods, property, monies, or other contractual
interests forming the foundation of the arbitral dispute.
88. In the present case, the interim relief sought against the
Impugned Debarment Order does not answer this description.
Debarment is not a matter arising out of the reciprocal contractual
obligations undertaken by the parties, nor is it relatable to the
performance, breach, enforcement, or preservation of rights flowing
from the contract. Unless the contract itself expressly provides for
debarment as one of the contractual rights or remedies available to
either party, such action cannot be regarded as forming part of the
subject matter of the arbitration agreement. Consequently, an order of
debarment cannot ordinarily be made the subject matter of
proceedings under Section 9 of the A&C Act.
89. Arbitration proceedings are fundamentally concerned with
adjudicating disputes arising out of contractual rights and obligations.
An order of debarment, however, operates on an entirely different
plane. It does not merely regulate the rights and liabilities of the
parties under an existing contract; rather, it affects the legal capacity
of the concerned party to participate in future contractual relationships
with the authority. In substance, therefore, debarment constitutes a
restriction upon the person's ability to contract in futuro .
90. As noted earlier, such a restriction is not merely contractual in
character but derives its significance from principles of public law.
The authority to exclude a person from future contractual dealings is
traceable to administrative powers, statutory authority, or other public
law considerations. However, this Court is of the considered opinion
that the ambit of contractual rights arising under a particular
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agreement is necessarily confined to matters relating to the formation,
performance, interpretation, enforcement, and breach of that very
contract. Such rights cannot be extended to encompass actions
operating prospectively so as to regulate or impair the ability of a
party to enter into future contractual relationships.
91. The distinction between disputes arising out of an existing
contractual relationship and actions affecting future contractual
capacity has been recognised by the Hon'ble Supreme Court in A.K.G.
Construction ( supra ), which clearly underscores that the latter
belongs to a distinct legal domain.
92. Having examined the legal principles governing the distinction
between contractual disputes, contractual capacity, and the exercise of
independent statutory or administrative powers, the next question that
arises for determination is whether the Respondent is able to identify a
source of authority for the Impugned Debarment Order which exists
independently of the contract executed between the parties.
93. In the considered opinion of this Court, the aforesaid question
must be answered in the affirmative. The Respondent has specifically
relied upon the AAI Manual, which constitutes the administrative
framework governing the functioning of the Authority and prescribes
the procedure as well as the circumstances in which debarment may be
imposed. The existence of such an independent administrative
framework demonstrates that the impugned action is not founded
merely upon the contractual stipulations agreed between the parties.
94. The statutory foundation of the Respondent's authority also
lends considerable support to this conclusion. Section 12 of the AAI
Act enumerates the functions and responsibilities of the Airports
Authority of India, while Section 20 of the AAI Act empowers the
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Authority to enter into such contracts as may be necessary for the
discharge of its statutory functions.
95. The statutory power to enter into contracts necessarily carries
with it the corresponding discretion to determine the persons with
whom the Authority may choose to contract, subject always to the
limitations imposed by constitutional principles and administrative
law. Equally, the power to decline future contractual dealings with a
person, where justified under the governing statutory or administrative
framework, is implicit in such statutory authority. Section 12 further
authorises the Authority to take all such measures as may be necessary
or expedient for effectively discharging the functions entrusted to it
under the said Act.
96. Viewed in this statutory context, the power of debarment, as
expressly recognised and regulated by the AAI Manual, cannot be
regarded as a mere contractual remedy. Rather, it constitutes an
exercise of administrative authority traceable to the statutory powers
conferred upon the Respondent under the AAI Act. The source of the
impugned power, therefore, lies not in the contract between the parties
but in the statutory and administrative framework governing the
functioning of the Respondent Authority.
97. At this juncture, it is also necessary to note that Clause 35.12 of
the said Manual specifically provides for “ Action against contractor
for unsatisfactory performance” and authorises blacklisting or
debarment of contractors on specified grounds, including where the
performance of a contractor has been reported unsatisfactory during or
upon completion of the work.
98. Significantly, the said power is not incorporated as a contractual
remedy under the Contract Agreement or the General Conditions of
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Contract, but exists as part of an independent administrative
mechanism regulating the Respondent‟s future dealings with
contractors. The Manual further prescribes a separate procedure for
debarring contractors. The existence of such an independent
framework lends considerable support to the Respondent‟s contention
that the Impugned Debarment Letter emanates from powers distinct
from the contractual remedies available under the Agreement. Clause
35.12 reads as under:
“ 35.12 Action against contractor for unsatisfactory
performance
35.12.1 Any contractor can be blacklisted/debarred under following
conditions:
a. If he has submitted false certificate/documents as desired in
the NIT.
b. If the performance of contractor has been reported bad
during/on completion of work.
c. If an adverse advice is received from law enforcing agency or
any other appropriate/related agency of Government of
India/State Government.
35.12.2 The procedure to be adopted for debarring a contractor is
given at Section 48.3 for works where tenders are accepted by ED
or higher officer and at Section 48.4 where tenders are accepted by
RED/APD (Kolkata/Chennai) and their subordinate officers.”
(emphasis supplied)
99. A plain reading of the aforesaid provision demonstrates that the
power of debarment is conceived as a measure governing the
Respondent‟s future contractual engagements and is triggered by
considerations extending beyond the mere enforcement of contractual
rights inter se the parties. This lends further support to the distinction
between contractual remedies and the impugned action presently
under challenge. It is pertinent to note that the Impugned Debarment
Letter itself proceeds upon allegations of unsatisfactory performance
and invokes considerations germane to contractor eligibility and future
procurement. The subject matter of the impugned action substantially
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corresponds with the field occupied by Clause 35.12.1(b) of the AAI
Manual rather than any contractual provision governing performance,
termination or recovery.
100. In the facts of the present case, a careful reading of the
Impugned Debarment Letter reveals that although the allegations
giving rise to the proceedings originate from the execution of the
Contract, the impugned action is not directed towards the enforcement
of any contractual right or remedy under the Agreement. The
Impugned Debarment Letter repeatedly invokes considerations of
public interest, quality standards, public infrastructure and integrity in
public procurement, while recording that the consequences of the
alleged deficiencies extend “beyond the confines of the contract”. The
focus of the impugned action is not the determination of rights and
obligations arising under the existing Contract, but the distinct
question of whether the Petitioner ought to be permitted to participate
in future tenders floated by the Respondent.
101. The Impugned Debarment Letter further clarifies that the
debarment is without prejudice to the Respondent‟s other rights and
remedies under the Contract and in law, thereby treating the impugned
action as separate and independent from the contractual remedies
available under the Agreement. Viewed holistically, the nature,
purpose and effect of the impugned action indicate that it operates as a
measure regulating the Respondent‟s future dealings with the
Petitioner rather than as a contractual remedy arising out of the
Contract.
102. During the course of the hearing, and in response to a specific
query put by the Court, the Petitioner was unable to identify any
provision of the Contract which expressly contemplated, authorised,
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or reserved in favour of the Respondent the power to issue the
Impugned Debarment Order.
103. The principal thrust of the Petitioner's submission was that,
since the factual circumstances culminating in the debarment arose out
of and were intrinsically connected with the execution and
performance of the contractual obligations between the parties, the
impugned action must necessarily be regarded as a dispute arising
under the Contract. It was contended that the precise source of the
Respondent's power to impose debarment was of little significance,
for the action itself was rooted in alleged contractual defaults and was
inseparably connected with the contractual relationship subsisting
between the parties.
104. The Petitioner further sought to place reliance upon Clause
35.12.1(b) of the AAI Manual, contending that the said provision
demonstrates that the exercise of the power of debarment is closely
intertwined with the contractual dealings of the Respondent and its
contractors and, therefore, must be regarded as contractual in
character. According to the Petitioner, once the debarment is founded
upon allegations arising during the course of contractual performance,
the resultant dispute necessarily falls within the contractual sphere,
irrespective of whether the power to impose such debarment is
sourced from the Contract itself or from an independent administrative
framework.
105. This Court, however, finds no merit in the aforesaid
submissions and is unable to accept the line of reasoning advanced on
behalf of the Petitioner.
106. The Petitioner's argument, in substance, seeks to equate the
factual genesis of an action with the legal source of the power under
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which such action is taken. Such an approach cannot be accepted. The
mere fact that an administrative action is triggered by events occurring
during the performance of a contract does not ipso facto transform the
action into one arising under the contract. The determinative
consideration is not the factual backdrop against which the power is
exercised, but the legal source from which such power is derived. If
the power to debar is not founded upon the contractual terms agreed
between the parties, but emanates from an independent administrative
or executive authority vested in the Respondent, the character of the
action remains administrative, notwithstanding that the underlying
allegations may relate to contractual performance.
107. To accept the Petitioner's contention would, in effect, require
this Court to treat an administrative action as a contractual dispute
solely because the facts giving rise to such action emerge from the
contractual relationship. Such an approach would impermissibly
enlarge the scope of the arbitration agreement and amount to reading
into the Contract a subject matter which the parties themselves never
agreed to submit to arbitration. This Court, while exercising
jurisdiction under Section 9 of the A&C Act, cannot rewrite or expand
the contractual bargain between the parties by bringing within the
ambit of arbitration disputes that do not arise from the contractual
rights and obligations embodied in the Contract.
108. Needless to state, if this Court entertains the present petition on
merits and grants relief against the Impugned Debarment Order under
Section 9 of the A&C Act, it necessarily has to proceed on the premise
that the validity and legality of the debarment constitute disputes
capable of being referred to and adjudicated through arbitration.
109. In the considered opinion of this Court, such an approach
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would, in effect, render the legality of an administrative action
amenable to arbitral scrutiny despite the absence of any contractual
provision conferring jurisdiction upon the arbitral tribunal to examine
such issues.
110. In the facts of the present case, where the impugned debarment
derives its source from an independent administrative power of the
Respondent rather than from the Contract itself, this Court is unable to
accept an interpretation that would have the effect of converting a
public law challenge into an arbitrable contractual dispute.
111. This Court also finds considerable merit in the Respondent's
submission that challenges to orders of blacklisting or debarment are
ordinarily tested on the well-established principles governing judicial
review of administrative action, namely legality, reasonableness,
proportionality, non-arbitrariness, fairness, and adherence to the
Principles of Natural Justice. These standards are fundamentally
public law standards and are directed towards examining the validity
of the exercise of public power rather than the enforcement of
reciprocal contractual obligations.
112. An arbitral tribunal, being a creature of contract and deriving its
jurisdiction solely from the agreement between the parties, is
principally concerned with the adjudication of disputes arising from
contractual rights and obligations. The scrutiny of a debarment or
blacklisting order, on the other hand, ordinarily requires an
examination of whether the decision-making process satisfies the
requirements of fairness, transparency, proportionality, and procedural
propriety. Such an enquiry is qualitatively distinct from the
determination of contractual disputes and reinforces the Respondent's
contention that the present challenge transcends the ordinary domain
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of private law adjudication.
113. Viewed from the aforesaid perspective, the contention advanced
on behalf of the Respondent merits substantial acceptance. The
Impugned Debarment Letter derives its character not from the
contractual relationship between the parties, but from the
Respondent's exercise of an independent administrative power
regulating its future contractual and commercial dealings, unless such
power has been expressly incorporated into and sourced from the
Contract itself.
114. In view of the foregoing discussion, this Court has little
hesitation in holding that the character of an action is determined not
by the facts which trigger its exercise, but by the source from which
the authority to undertake such action is derived. Where the power
exercised is independent of the contractual framework and is directed
towards regulating future dealings rather than enforcing existing
contractual rights, the resulting dispute cannot automatically be
brought within the ambit of arbitration merely because the underlying
allegations originate in the course of contractual performance. If the
matter were to rest solely on the principles emerging from the
authorities discussed hereinabove, this Court would have little
difficulty in sustaining the Respondent's preliminary objection
regarding the non-arbitrable nature of the present challenge.
115. However, since the Petitioner has sought to rely upon a separate
line of decisions to contend that disputes concerning debarment may,
in appropriate cases, remain amenable to arbitration, it becomes
necessary to examine whether the said authorities advance the
Petitioner‟s case in the facts of the present matter.
116. Accordingly, this Court adverts to examine the decisions relied
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upon by the Petitioner in support of the maintainability of the present
Petition.
117. In the considered opinion of this Court, the reliance placed upon
by the Petitioner on Edapally to Kodungallur Highway (supra), Sai
Consulting Engineers (supra), SPS Engineering (supra) and
Prabhatam Advertisement (supra), does not advance the Petitioner‟s
case in the peculiar facts of the present matter.
118. In each of the aforesaid decisions, the Court was principally
concerned with situations where the action of blacklisting or
debarment either arose in the context of disputes already forming part
of the contractual dispute resolution process, or was founded upon
issues which themselves constituted direct subject matter of the
contractual adjudication. The said decisions cannot be construed as
laying down an absolute proposition that every order of blacklisting or
debarment, merely because it is founded upon allegations arising
during the performance of a contract, automatically becomes an
arbitrable dispute.
119. This Court further notes that the decision in Prabhatam
Advertisement (supra) itself recognises that the power of blacklisting
is distinct from the power to recover contractual dues and is not
extinguished merely because disputes concerning the underlying
contract are pending adjudication. The Court expressly observed that
pendency of arbitral proceedings does not, by itself, denude a public
authority of its power to blacklist and that the power to blacklist
constitutes a distinct and independent power.
120. Similarly, SPS Engineering (supra) was decided in the context
of a challenge where the grounds forming the basis of blacklisting
were themselves the subject matter of „pending‟ arbitral proceedings
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and where the Court also found non-compliance with Principles of
Natural Justice. The decision turned upon its own factual matrix and
cannot be read as laying down an inflexible rule that every challenge
to a debarment order founded upon contractual allegations must
necessarily be treated as an arbitrable dispute.
121. The reliance placed upon Sai Consulting Engineers (supra) is
equally misplaced. The said decision turned upon its own peculiar
factual matrix, where the Court found that the impugned blacklisting
order had itself been founded upon alleged breaches of contractual
obligations and had been passed with express reference to various
clauses of the underlying agreement. It was in those circumstances
that the Court observed that the respondent could not simultaneously
justify the impugned action on the basis of contractual stipulations and
yet contend that the resultant dispute fell outside the scope of
arbitration. The Court accordingly left the issue of arbitrability to be
examined by the arbitral tribunal in exercise of its jurisdiction under
Section 16 of the A&C Act.
122. The reliance placed upon Edapally to Kodungallur Highway
(supra) is equally distinguishable. In the said case, this Court found
the petition maintainable primarily because the issue of debarment had
already been treated by the parties themselves as falling within the
contractual dispute resolution framework and had, in fact, travelled
before the Independent Engineer as well as the Dispute Resolution
Board, as per the contractual dispute resolution mechanism. This
Court also attached significance to the conduct of the parties and the
broad dispute resolution architecture contained in the concession
agreement. No comparable circumstance exists in the present case.
The said decision, therefore, turned upon the peculiar contractual
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framework and conduct of the parties obtaining therein and cannot be
construed as laying down a general proposition that every challenge to
a debarment order issued by a statutory authority must necessarily be
regarded as arbitrable.
123. The aforesaid authorities, relied upon by the Petitioner, are
therefore distinguishable both on principle and on facts. Far from
detracting from the conclusion arrived at hereinabove, the said
decisions reinforce the proposition that the arbitrability of a dispute
concerning blacklisting or debarment must ultimately depend upon the
source of the power exercised, the nature of the action impugned and
the relief sought in the proceedings.
124. At the cost of repetition, it is necessary to emphasize that the
present dispute derives its essential character not from the Contract
itself, but from the nature and source of the power sought to be
exercised by the Respondent. The arbitration agreement undoubtedly
governs disputes arising out of or relating to the Contract. However,
the present proceedings are not concerned with enforcement,
preservation or determination of any contractual right or obligation
arising thereunder. The challenge is directed exclusively against the
Respondent‟s decision to debar the Petitioner from participating in
future tenders for a specified period, thereby regulating the
Respondent‟s future commercial relationship with the Petitioner.
125. Importantly, neither the source of the impugned power nor the
consequence flowing from its exercise can be located within the
contractual dispute resolution framework. The authority to debar is
asserted by the Respondent not under any provision of the arbitration
agreement, but under its independent administrative framework
governing public procurement and contractor eligibility.
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126. In the considered opinion of this Court, acceptance of the
Petitioner‟s submission would reduce the distinction between
contractual disputes and administrative actions to a nullity. Any
exercise of blacklisting or debarment power founded upon events
occurring during performance of a contract would then become
arbitrable merely because the factual foundation is contractual in
origin. Such an approach would be contrary to the principles emerging
from Patel Engineering (supra) , Verigamto Naveen (supra) and
A.K.G. Construction (supra) . What determines arbitrability is not
merely the factual source of the allegations, but the juridical character
of the power exercised and the nature of the relief sought. Tested on
that standard, the present challenge cannot be regarded as a dispute
arising out of or relating to the Contract in the sense contemplated by
the arbitration agreement.
127. The possibility that questions relating to delay, quality of work,
or contractual performance may themselves be referable to arbitration
does not alter the character of the present challenge. Even if such
issues form part of arbitral proceedings inter se the parties, the legality
of the impugned debarment remains a distinct question arising from
the exercise of an independent administrative power.
128. Further, another circumstance which cannot be overlooked is
that the Contract itself has substantially worked itself out. The
terminal building stood commissioned on 03.06.2025 and a
Provisional Completion Certificate was admittedly issued on
09.12.2025, albeit subject to certain defects being rectified during the
Defect Liability Period. The impugned action does not terminate the
Contract nor determine any subsisting contractual right under the
Agreement. Rather, it concerns the Petitioner‟s future eligibility to
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participate in procurement processes of the Respondent.
129. In view of the foregoing discussion, this Court is of the
considered view that the Impugned Debarment Letter draws its
authority from the Respondent‟s independent administrative and
executive powers, as reflected in the statutory framework governing
the Respondent and the administrative instruments issued thereunder,
including the AAI Works Manual, and therefore, the Debarment Letter
is held to be an administrative order and not an order issued in
exercise of contractual conditions governing the parties amongst
themselves. Hence, any relief vis-à-vis the Debarment Letter falls
beyond the scope of the arbitration agreement contained in the
Contract.
130. It is trite law that the relief under Section 9 of the A&C Act is
ancillary to and in aid of arbitral proceedings. In the absence of an
arbitrable dispute as the Petitioner has raised in the present Petition,
no occasion arises for the grant of interim measures under the said
provision.
131. In view thereof, once the challenge to the Impugned Debarment
Letter is held to be non-arbitrable, the very foundation for the
invocation of jurisdiction under Section 9 of the A&C Act disappears.
DECISION:
132. Accordingly, the preliminary objection raised by the
Respondent is sustained. The present Petition under Section 9 of the
A&C Act is held to be not maintainable and is consequently
dismissed.
133. Having upheld the preliminary objection raised by the
Respondent and having found the present Petition to be not
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maintainable under Section 9 of the A&C Act, this Court does not
consider it appropriate to examine the rival submissions advanced on
the merits of the impugned Debarment Letter. Any observation on the
merits of the allegations underlying the impugned action would be
wholly unnecessary for the purposes of the present adjudication and
may prejudice the rights and contentions of the parties in proceedings
before a competent forum. The contentions of the parties on the merits
are therefore left open.
134. It is clarified that this Court has expressed no opinion on the
legality, validity or proportionality of the Impugned Debarment Letter,
all of which remain open for consideration in appropriate proceedings
before a competent forum in accordance with law.
135. Accordingly, the present Petition, along with pending
Application(s), if any, is disposed of.
136. There shall be no order as to costs.
HARISH VAIDYANATHAN SHANKAR, J.
JULY 01, 2026/sm/DJ
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