The Delhi High Court has held that the debarment letter issued by AAI was an administrative order arising from AAI’s independent statutory and administrative powers, and not a contractual measure under the construction contract. Therefore, the challenge to that debarment did not amount to a dispute “arising out of” or “relating to” the contract in the arbitral sense, and was not arbitrable under the arbitration clause.
The High Court said that a debarment/blacklisting order governing future tender eligibility flows from AAI’s independent administrative power, not from contractual rights under the works contract, and therefore cannot be stayed in Section 9 arbitration proceedings. Since Section 9 relief is only ancillary to arbitral proceedings and can be granted only where there is an arbitrable dispute, the petition itself was held to be not maintainable. The Court accordingly sustained AAI’s preliminary objection, dismissed the Section 9 petition, and left all questions on the legality, validity, and proportionality of the debarment open to be examined in appropriate proceedings before a competent forum.
A Single Judge Bench of Justice Harish Vaidyanathan Shankar first addressed the preliminary objection raised by AAI on maintainability. It held that a court exercising jurisdiction under Section 9 cannot grant interim relief in the abstract merely because an arbitration clause exists. For Section 9 to be invoked, there must not only be a valid arbitration agreement, but the dispute raised must also fall within the scope of that agreement and be capable of being referred to arbitration.
The Bench noted that NCC was not seeking protection against termination of the contract, encashment of bank guarantees, invocation of performance securities, recovery of contractual dues, or any other contractual remedy. The only substantive relief sought was a stay on the operation and implementation of the debarment letter that made NCC ineligible for future AAI tenders for two years. The Bench therefore said the real issue was whether the debarment formed part of contractual disputes or whether it was an independent action taken by AAI in exercise of administrative or public law power.
The Bench observed that the impugned debarment letter was not directed toward enforcement of any contractual remedy under the contract. It neither sought recovery of dues nor invoked termination, risk-and-cost recovery, encashment of securities or any contractual consequence within the four corners of the agreement. Instead, it operated prospectively by rendering NCC ineligible to participate in future procurement processes of AAI, and therefore travelled beyond the existing contractual framework between the parties.
A central observation of the Bench was that there is a legal difference between the factual backdrop of an action and the legal source of the power under which that action is taken. The mere fact that the allegations of delay, defects and deficient performance arose during execution of the contract did not automatically make the debarment a contractual dispute. According to the Court, what matters is the source of the power to debar, not merely the events that triggered the decision.
The Bench found that AAI had identified an independent source of authority for debarment outside the contract. It relied on the AAI Works Manual and particularly Clause 35.12, which specifically provides for action against contractors for unsatisfactory performance and authorises blacklisting or debarment in specified situations, including where the contractor’s performance has been reported unsatisfactory during or on completion of the work. The Bench emphasised that this was not incorporated as a contractual remedy in the contract or the General Conditions of Contract, but existed as part of a separate administrative framework governing AAI’s future dealings with contractors.
The Bench also observed that the statutory framework supported AAI’s stand. It referred to the Airports Authority of India Act and held that the power to enter into contracts necessarily carries with it the discretion to determine with whom the authority may or may not contract in future, subject to constitutional and administrative law limitations. Therefore, the power of debarment, as recognised in the AAI Manual, was treated as an exercise of administrative authority traceable to the statutory framework and not merely as a contractual remedy.
The High Court further held that challenges to blacklisting or debarment are ordinarily tested on public law standards such as legality, reasonableness, proportionality, fairness and compliance with the principles of natural justice. Such scrutiny is different from adjudication of contractual rights and obligations by an arbitral tribunal, which derives jurisdiction only from the contract. For that reason, the Court held that the legality of an administrative debarment order cannot be converted into an arbitrable dispute unless the contract itself expressly makes such action part of the contractual regime.
The Bench also took note of the fact that the contract had substantially worked itself out. The terminal building had already been commissioned on June 03, 2025 and a Provisional Completion Certificate had been issued on Dec 09, 2025. The impugned action neither terminated the contract nor determined any subsisting contractual right under it, but dealt only with NCC’s future eligibility to participate in AAI’s procurement processes.
Briefly, a petition was filed by NCC Limited under Section 9 of the Arbitration and Conciliation Act, 1996 against the Airport Authority of India (AAI), challenging a debarment letter dated March 23, 2026 by which AAI barred it from participating in AAI tenders for two years, and NCC sought interim protection against that debarment. The dispute arose out of a contract dated Nov 09, 2018 for construction of the new domestic terminal building and allied structures at Patna Airport.
AAI had issued the tender on March 16, 2018, NCC became the successful bidder, and the work was awarded through a letter of award dated Oct 05, 2018. The contractual completion period was 48 months and the scheduled completion date was Oct 13, 2022. During execution, delays occurred, and each side blamed the other. NCC said the delays were caused by restricted work fronts, COVID-19 disruptions, and delayed approvals by AAI, while AAI attributed the delays to NCC. The completion period was extended from time to time and ultimately stood extended till Dec 15, 2025 without levy of liquidated damages. The terminal building was inaugurated and partially commissioned on June 03, 2025, and AAI later issued a Provisional Completion Certificate on Dec 09, 2025. That certificate recorded physical completion of the work but also attached Annexure-A identifying defects and unfinished items to be addressed during the defect liability period.
After the Provisional Completion Certificate, disputes arose over quality and defect rectification. AAI raised concerns regarding water seepage, concrete strength and deterioration of vitrified flooring, while NCC denied those allegations and maintained that the work was executed according to contractual specifications. AAI alleged that despite various communications, NCC failed to submit an acceptable defect rectification programme. AAI then invoked Clause 14 of the contract and on Jan 12, 2026 initiated risk-and-cost procurement by issuing a tender for replacement of floor tiles estimated at Rs. 3.18 crores. Thereafter, AAI issued a show cause notice = proposing debarment on allegations of delay, failure to rectify defects and deficiencies in execution. NCC submitted its reply disputing the allegations, but AAI still issued the impugned debarment letter on March 23, 2026.
