Respondent to Defer Disqualification Decision Pending Arbitral Adjudication of Section 17 Application Concerning Deemed Non-Performance.

The Petitioner challenged the Respondent's (Union of India) decision dated 20.02.2026 declaring its bids for two road construction projects in Arunachal Pradesh as "non-responsive".

The disqualification was based on the Petitioner being deemed a "non-performer" regarding a separate project in Rajasthan.

The State of Rajasthan had issued a show-cause notice for debarment on 16.12.2025, which the Petitioner challenged under Section 9 of the Arbitration and Conciliation Act.

The Delhi High Court had previously directed that this challenge be treated as a Section 17 application before an Arbitral Tribunal.

While that application was pending hearing (scheduled for 07.03.2026), the Respondent declared the Petitioner technically disqualified and prepared to open financial bids of other parties.

Whether the Respondent could declare the Petitioner's bid "non-responsive" based on a pending debarment proceeding that is currently sub-judice before an Arbitral Tribunal.

Whether the Court should grant interim protection to the Petitioner to prevent the opening of financial bids until the Arbitral Tribunal decides on the interim relief application.

The Court considered Clause 2.1.14 of the RFP regarding "deemed non-performers".

It indirectly applied the principles of equity and the necessity of exhausting administrative remedies, specifically focusing on the Petitioner's right to have its representation considered by the authorities under the tender conditions and the role of the Arbitral Tribunal under Section 17 of the Arbitration and Conciliation Act, 1996 to address interim disputes.

The Petitioner argued that disqualification was premature as the State of Rajasthan had not reached a final decision and the matter was under active adjudication by an Arbitrator.

The Respondent countered that it would first scrutinize the Petitioner’s representation dated 24.02.2026 against the disqualification before proceeding to open financial bids.

The Court noted that the interim application before the Arbitrator specifically sought to prevent disqualification from other tenders based on the Rajasthan dispute.

To balance the interests, the Court observed that since the Arbitral Tribunal was set to hear the matter on 07.03.2026, it would be appropriate for the Respondent to defer its final decision on the disqualification representation until after that date to allow the specialized tribunal to weigh in on the underlying debarment issue.

This ensured that the financial bids would not be opened until after the Arbitral Tribunal heard the Petitioner's Section 17 application on 07.03.2026.

The Court clarified that it expressed no opinion on the merits of the dispute with the State of Rajasthan or the disqualification itself.