Blacklisting order issued without specific show cause notice contemplating debarment is arbitrary and legally unsustainable.

The Petitioner, a railway facility management company, was awarded a contract on 13.09.2024 for cleaning and watering trains under SECR Bilaspur

On 07.07.2025, Respondent No. 5 issued a 7-day notice alleging deficiencies and stating that failure to improve would result in the contract being rescinded under Clause 7.4 of the GCC (Service) 2018

Following the notice period, the Respondents issued the impugned order dated 24.07.2025, which not only terminated the contract and forfeited the Performance Guarantee but also debarred the Petitioner from participating in future tenders for two years

The Petitioner challenged this order, primarily arguing that no specific show-cause notice for debarment was ever issued

1. Whether the order of debarment/blacklisting is legally sustainable if the preceding show-cause notice did not specifically contemplate such action

2. Whether the court should adjudicate on disputed questions of fact regarding contractual performance and termination when an arbitration clause exists

Gorkha Security Services v. Government (NCT of Delhi) (2014), which established that blacklisting must be preceded by a show-cause notice because it is stigmatic and precludes participation in government contracts

UMC Technologies (P) Ltd. v. Food Corporation of India (2021), which held that a valid show-cause notice for blacklisting must be "particularized and unambiguous" and must clearly spell out the intention to blacklist to afford a meaningful opportunity to the noticee

The court observed that the 7-day notice dated 07.07.2025 only mentioned the rescission of the contract and forfeiture of the performance guarantee under the GCC; it contained no mention of potential debarment or blacklisting

The court reasoned that since the notice did not disclose a proposal for blacklisting, the Petitioner was denied a meaningful opportunity to respond to that specific consequence

Applying the UMC Technologies precedent, the court found that the Respondents' action of debarring the Petitioner for two years travelled beyond the scope of the original notice and was, therefore, a violation of natural justice and passed without jurisdiction

Regarding the termination of the contract and forfeiture of dues, the court determined these were "disputed questions of facts" and highlighted that Clause 8.2 of the GCC provided for an arbitration mechanism, which is the appropriate forum for such disputes

The court partly allowed the petition; it declined to adjudicate on the termination of the contract or the refund of dues, directing the Petitioner to take recourse through the arbitration provision provided under Clause 8.2 of the GCC