The Punjab and Haryana High Court quashed a decision of Haryana Vidyut Prasaran Nigam Ltd. (HVPNL) blacklisting a company and observed that where breach to a concluded contract becomes bonafidely explained, penalty of blacklisting/debarment ought not to be resorted to.

The Company- M/s Floral Electrical Private Limited, approached the High Court seeking quashing of the letter whereby it had been blacklisted/debarred from doing any business with respondent No. 1-HVPNL for one year, individually or with any other entity in partnership.

The Division Bench of Justice Sureshwar Thakur and Justice Vikas Suri explained, “Where breach to a concluded contract becomes bonafidely explained besides when a bonafide dispute is raised by the person/entity concerned, against his/its purportedly omitting to perform its contractual obligation, thereupons, the appositely made penalty of blacklisting/debarment, thus ought not to be resorted to.”

“That a slipshod and hurried manner/approach, thus to impose the drastic penalty of debarment/blacklisting rather is to be avoided, as the same may be disproportionate, to the otherwise resolveable dispute through the invocation of an arbitration remedy, whereupons, also the apposite omission may become ultimately condoned”, it added.

Senior Advocate Sanjay Kaushal represented the Petitioner while Advocate Ankur Mittal represented the Respondent.

Factual Background

The first Respondent-HVPNL to construct a 132 KV substation at Hansi, invited E-Tender. The second Respondent, after entering into a joint venture Agreement with the petitioner herein, duly participated in the aforesaid bidding process. Respondent No. 1- HVPNL issued a work order in favour of M/s Gupta Industries (lead partner) and M/s Floral Electricals Pvt. Ltd. (JV Partner) to complete the project within 18 months from the signing of the contract. Later on, certain disputes arose between HVPNL and the second respondent regarding the satisfactory execution of the work contract within the time schedule mentioned in the contract.

An arbitrator was appointed, and an amendment application was moved by the claimant for changing the claimant's name in the array of parties from Gupta Industries to Gupta Industries JV Floral Electrical Pvt. Ltd. (Joint Venture) through its lead partner. Further, the plea was also raised that the term 'Joint Venture' between M/s Gupta Industries and Floral Electrical Pvt. Ltd., be replaced qua 'sole proprietorship'. The Arbitrator rejected the said application.

Reasoning

Referring to the judgments in M/s Techno Prints Vs. Chhattisgarh Textbook Corporation and Another (2025) and The Blue Dreamz Advertising Pvt. Ltd. and Another Vs. Kolkata Municipal Corporation and Others (2018), the Bench said, “The penalty of debarring or blacklisting as becomes imposed upon a person or an entity but has drastic consequences, as therebys, it adversely affects the business of the person or the entity concerned besides materially prejudices the employments of the persons who render employment under it/them. The derelict conduct or the omission of the person or the entity concerned, is to be so palpably abhorrent, so as to justify the invocation of the drastic remedy of blacklisting/debarment.”

The Bench noted that when the parties opted for the arbitration mechanism then until the conclusion of the arbitration proceedings, the imposition of the harshest penalty of blacklisting/debarment, upon, the present petitioner, was to be avoided. As per the Bench, without the culmination of the arbitration proceedings, it was unamenable for the respondents, to in a slip shod and ill informed manner conclude that excepting the imposition of the harshest penalty of blacklisting upon the present petitioner, there was no other imposable levy upon the present petitioner. Till then the respondent could also not conclude, that the conduct of the present petitioner was so abhorrent, to straightway, without awaiting for the conclusion of the arbitration proceedings, infer that only the penalty of blacklisting/debarring was imposable upon it.

As per the Bench, there was no evidence on record suggestive that in the invocation of the relevant clause by the contesting respondents, whereunder the penalty of blacklisting/debarment was ordained, the contesting respondent prior thereto undertook such proceedings and complete compliance was made to the principles of natural justice. “The absence of the said material brings home an inference, that the invocation of the relevant clause, at the instance of the respondent, has been done most capriciously and arbitrarily, and, therebys, the impugned order is required to be quashed and set aside”, it said.

Thus, allowing the writ petition, the Bench quashed the impugned letter passed by the Authority concerned. “...respondent concerned is directed to remove/delete the blacklisting/debarring status in the records qua the petitioner company, as made on the basis of the impugned letter…”, it concluded.

Cause Title: M/S Floral Electrical Pvt. Ltd. v. Haryana Vidyut Prasaran Nigam Ltd. And Anr. (Neutral Citation: 2025:PHHC:047032-DB)

Appearance:

Petitioner: Senior Advocate Sanjay Kaushal, Advocates Dawelpreet Kaur, Rajan Chawla, Bhawna Thakur, Munish K. Garg

Respondent: Advocates Ankur Mittal, Kushaldeep Kaur Manchanda, Gurcharan Kaur, Sandeep Chabbra, Saanvi Singla

Click here to read/download Order


Punjab & Haryana High CourtJustice Sureshwar ThakurViaks Suri

Tulip Kanth

Assistant Editor

Tulip Kanth is an Assistant Editor at Verdictum having over 5 years of experience in the field of legal journalism and editing. She extensively covers judgments of the Supreme Court, High Courts as well as Tribunals. She has previously worked with a legal publishing website where she oversaw the work of other editors and has also created updates on notifications of different Government Ministries. She holds an English Honours Degree from SGTB Khalsa College, Delhi University and has completed her LLB course with specialisation in Corporate Law from Amity University.