The Delhi High Court has set aside a two-year debarment order passed by the National Highways Authority of India (NHAI) against a consultant, holding that contractual breaches or deficiencies in performance, by themselves, cannot justify the extreme measure of blacklisting or debarment.
Justice Sachin Datta observed that debarment carries serious civil consequences and must be imposed only on the basis of strong and compelling material demonstrating conduct sufficiently serious to warrant such action. The authority must also establish why debarment, rather than a lesser contractual remedy, is justified and why the particular period of debarment is proportionate.
The case arose from allegations concerning irregularities in the land acquisition process and valuation of a structure in Bareilly, Uttar Pradesh. NHAI had alleged that the consultant failed to properly discharge its contractual obligations and subsequently debarred it for two years from participating in bids with NHAI, the Ministry of Road Transport and Highways and their executing agencies.
Senior Advocate Shashank Garg argued that the alleged lapses amounted, at most, to deficiencies in contractual performance and that there was no allegation of fraud, fabrication, collusion or mala fide intent against the consultant. He contended that such lapses could not justify the disproportionate penalty of two-year debarment, particularly when no quantified loss was attributed to the petitioner. While on other hand, Standing Counsel Santosh Kumar maintained that although no allegation of collusion had been made, the petitioner’s conduct and the nature of its lapses warranted debarment.
The Court noted that there were no allegations of fraud, collusion, fabrication, misrepresentation or mala fides against the consultant. The alleged irregularities were substantially attributable to other actors involved in the land acquisition process, while the consultant’s alleged lapse essentially concerned deficient performance in a multi-agency process.
The Court further found that NHAI’s own omission in the initial land acquisition notification had contributed to the controversy. It also noted the existence of a genuine dispute regarding the scope of the consultant’s contractual responsibilities, observing that NHAI continued to have contractual remedies, including proceedings for damages and arbitration.
The Court also found the debarment order unreasoned and internally inconsistent. Although NHAI’s policy prescribed a graded regime of warnings and varying periods of debarment depending on the seriousness of the deficiency, the order did not explain why the consultant’s conduct amounted to major negligence or why a two-year debarment was warranted.
Additionally, the Court found that the authority had failed to properly consider the consultant’s response to the show-cause notice. The impugned order stated that no reply had been filed, despite a reply dated May 13, 2025 being on record. The Court held that reasons for rejecting the consultant’s defence had to be reflected in the order itself.
Accordingly, the Court set aside the debarment order dated September 30, 2025, while clarifying that NHAI would remain free to pursue its contractual remedies, including claims for damages and other dues, in accordance with law.
