Termination cannot automatically trigger blacklisting without a specific hearing notice, Jharkhand High Court rules

RITES Ltd. issued an e-tender for design, supply, erection, testing and commissioning of a 25 KV OHE system and related electrical works for NUPPL’s Dumka Siding in Jharkhand.

M/s SK Electricals was declared the successful bidder, and a contract for ₹6,40,10,551 was executed on 29.04.2024.

Owing to alleged hindrances at the site, including non-availability of requisite work fronts and pending civil works, the petitioner claimed that execution could not proceed as scheduled.

RITES issued notices dated 16.02.2026 and 25.02.2026 directing the petitioner to accelerate performance and warning that failure could result in termination, forfeiture of security, and declaration as a “Poor Performer”.

The contract was terminated on 16.03.2026, and the performance guarantee and security deposit were forfeited.

By order dated 22.04.2026, RITES declared the petitioner a “Poor Performer,” placed it on the “Negative List of Contractors,” and debarred it from participating in RITES tenders for two years.

The petitioner challenged the debarment and contended that Clause 3(b) of the GCC, insofar as it contemplated automatic debarment without a specific notice and hearing, violated natural justice.

RITES opposed the writ petition on the ground that the contract conferred jurisdiction on courts at Kolkata and argued that the petitioner had received sufficient opportunities to respond to the allegations.

1. Whether the contractual clause conferring jurisdiction on courts at Kolkata excluded the High Court of Jharkhand’s jurisdiction under Article 226 of the Constitution.

2. Whether declaration of the petitioner as a “Poor Performer,” placement on the “Negative List of Contractors,” and two-year debarment could follow automatically upon termination of the contract.

3. Whether the notices dated 16.02.2026 and 25.02.2026 constituted a valid, specific and unambiguous show-cause notice proposing blacklisting or debarment.

4. Whether the order dated 22.04.2026 placing the petitioner on the “Negative List of Contractors” and debarring it for two years was sustainable in the absence of a specific notice and independent consideration of the proposed punitive action.

The Court applied the principle that a private contractual jurisdiction clause cannot, by itself, oust the constitutional writ jurisdiction of a High Court under Article 226, particularly where a substantial part of the cause of action arises within that State, as recognised in Maharashtra Chess Association v. Union of India, (2020) 13 SCC 285.

It relied on Erusian Equipment & Chemicals Ltd. v. State of West Bengal, (1975) 1 SCC 70, for the rule that blacklisting carries serious civil consequences and requires an opportunity of representation.

Under UMC Technologies (P) Ltd. v. Food Corporation of India, (2021) 2 SCC 551, a blacklisting notice must specifically and unambiguously disclose the grounds and proposed penalty, and the final order cannot travel beyond the notice.

Techno Prints v. Chhattisgarh Textbook Corporation, 2025 SCC OnLine SC 343, establishes that blacklisting requires strong and independent material and cannot ordinarily be imposed merely for breach of a contract unless the conduct is sufficiently deviant or aberrant.

Relying on A.K.G. Construction and Developers Pvt. Ltd. v. State of Jharkhand, 2026 SCC OnLine SC 520, the Court held that termination and blacklisting operate in distinct spheres; blacklisting is not automatic upon termination and requires an independent decision preceded by a specific notice.

The Court also referred to Godrej Projects Development Ltd. v. Anil Karlekar, (2025) 4 SCC 259, concerning unfair standard-form contractual terms and unequal bargaining power.

The Court held that the Kolkata jurisdiction clause did not exclude its Article 226 jurisdiction because the work was situated at Dumka, the alleged contractual defaults occurred in Jharkhand, and a substantial part of the cause of action arose there.

On the merits, the notices of 16.02.2026 and 25.02.2026 merely directed the petitioner to accelerate the work and warned of possible termination and declaration as a “Poor Performer”; they did not specifically propose placement on the “Negative List” or two-year debarment.

The Court therefore found that the petitioner had not been given a meaningful opportunity to respond to the distinct and more serious punitive consequence of blacklisting.

The order dated 22.04.2026 provided no independent reasons for debarment and treated it as an automatic consequence of contract determination, demonstrating mechanical action and absence of application of mind.

Although the petitioner’s contractual termination and declaration as a “Poor Performer” were not independently interfered with, the Court emphasised that termination and blacklisting are legally distinct and that breach of contract alone does not justify debarment without proof of conduct warranting such a severe penalty.

It quashed the order dated 22.04.2026 insofar as it placed the petitioner on the “Negative List of Contractors” and debarred it from participating in RITES tenders for two years from 22.04.2026 to 21.04.2028.

The Court declined to interfere with the petitioner’s termination or its declaration as a “Poor Performer,” leaving the petitioner at liberty to challenge those actions in accordance with law.

RITES was granted liberty to initiate fresh debarment proceedings, provided that it followed due process and issued an appropriate specific notice before passing any further order.