Telangana High Court
Nisha Pandey vs Union Of India on 4 May, 2026
Author: Nagesh Bheemapaka
Bench: Nagesh Bheemapaka
IN THE HIGH COURT OF JUDICATURE FOR THE STATE OF
TELANGANA
HON'BLE SRI JUSTICE NAGESH BHEEMAPAKA
WRIT PETITION No. 20423 OF 2025
04.05.2026
Between:
Nisha Pandey
..... Petitioner
And
Union of India,
Through CEO and Chairman,
Railway Board, Ministry of Railways,
& others
..... Respondents
O R D E R:
Petitioner claims to be the sole proprietorship engaged in providing catering services on railway platforms. Pursuant to E-Tender Notice No. C/C/79/Catg./GMUS/A1, A, B, C/1/2023, she was awarded license vide letter dated 24.01.2024 to operate, maintain and provide catering services through Tea Stall GMU-82 at Lingampalli Railway Station for five years from 15.03.2024 to 14.03.2029. She is stated to have paid license fee for the first year and the required security deposit on 12.02.2024 as per the terms of the license. It is stated, during the relevant period, petitioner's husband was suffering from a serious liver ailment and was undergoing continuous medical 2 treatment across various hospitals, including liver transplant surgery and post-operative care, and petitioner, being the primary caregiver, was fully engaged in attending to his medical needs. It is stated that though Respondents issued letters dated 03.02.2025 and 07.05.2025 for payment of license fee for the second year, petitioner inadvertently failed to make payment due to the said compelling circumstances, and the delay was neither intentional nor deliberate.
1.1. It is stated, petitioner was shocked to receive the impugned letter dated 16.06.2025 issued by Respondent No.4 terminating the license and debarring her for five years, without issuance of any show cause notice. Had such notice been issued, petitioner would have explained the circumstances of her husband's illness and would have paid the license fee along with any applicable penalty, and that there was no intention to default payment. Petitioner is therefore, stated to have made representation dated 24.06.2025 to the Principal Chief Commercial Manager, South Central Railway and on 27.06.2025 to Respondent No.4 requesting reconsideration of termination and debarment, explaining the medical circumstances and expressing willingness to pay all outstanding dues with interest and penalties, and stating that the security deposit had already 3 been forfeited, but no response has been received. As no show cause notice or prior intimation was issued before termination and debarment, the impugned action is violative of principles of natural justice.
1.2. It is stated, on 01.07.2025, the Principal Chief Commercial Manager addressed a letter to Respondent No.4 seeking response in light of the petitioner's representations, but no decision has been taken till date, and any response would be ineffective unless the debarment is revoked, as it was imposed without due process. Petitioner states that punishment for debarment is laid down in various documents governing these catering licenses.
" (a) Rule 151 of the General Financial Rules 2017 lays down that a bidder bidding for contracts of goods or services would be debarred if he has been convicted of an offence under the Prevention of Corruption Act, 1988, Indian Penal Code or any other law for the time being in force, for causing any loss of life or property or causing a threat to public health as part of the execution of public procurement for a períod not exceeding three years. A procuring entity may debar a bidder for a period not exceeding two years if the bidder has breached the code of integrity. A bidder shall not be debarred unless such bidder has been given a reasonable opportunity to represent against such debarment.
(b) Under the General Conditions incorporated in the License Agreement, Clause 16 lists the penalty for the Breach of any terms and conditions of the License. Clause 16.1 can be read as:
Clause 16 "Breach of any terms and conditions of the License"4
The penalty (ies) that may be levied by the Railway on the Licensee In any of the instances mentioned in Article 15 above shall include but not limited to the following:
(a) forfeiture/appropriation of the security deposit and balance License fee available with Railway in whole after adjustment of all dues and
(b) to annual the license and forthwith terminate the License Agreement; and
(c) debar the Licensee from participating in all catering contracts over Indian Railways including IRCTC for a period of five (5) years."
1.3. According to petitioner, a harmonious reading of these documents leads to the following conclusion:
(a) Article 151 of the General Financial Rules states that debarment can happen only on the following grounds:
conviction under the PC Act, 1988, IPC or other laws in force or causing loss of life or property or causing a threat to public health as part of the execution of the contract. The decision of debarment can only be taken after a reasonable opportunity to be heard has been granted to the bidder.
(b) For such Clause 16.1 provides that penalties may be imposed "in the event of any breach of the said terms and conditions of the License."
However, the clause does not explicitly define which "terms and conditions" if breached would attract the penalty of debarment. It is trite to state that there could be a number of terms and conditions in the contract that may not warrant debarment upon breach. The absence of a clear identifier creates ambiguity, making it unclear which specific breaches would justify the imposition of penalties, including debarment. A vague interpretation of the Terms and Conditions cannot serve as a valid basis for enforcing severe penalties like debarment.
1.4. Placing reliance on the judgment in Erusian Equipment & Chemicals Ltd. v. State of West Bengal1, it is stated, blacklisting has civil consequences, affects reputation, 1 [1974 INSC 235] 5 and deprives a person of equal opportunity in public contracts, therefore, strict adherence to principles of natural justice including issuance of show cause notice and opportunity of hearing is mandatory before passing such order, and that the State must act fairly, without arbitrariness or discrimination in contractual matters.
1.5. The Hon'ble Supreme Court has observed that issuance of a show cause notice is a fundamental requirement for debarment proceedings in Raghunath Thakur v. State of Bihar 2 wherein it was observed that:
" 4. Indisputably, no notice had been given to the appellant of the proposal of blacklisting the appellant. It was contended on behalf of the State Government that there was no requirement in the rule of giving any prior notice before blacklisting any person. Insofar as the contention that there is no requirement specifically of giving any notice is concerned, the respondent is right. But it is an implied principle of the rule of law that any order having civil consequence should be passed only after following the principles of natural justice. It has to be realised that blacklisting any person in respect of business ventures has civil consequence for the future business of the person concerned in any event. Even if the rules do not express so, it is an elementary principle of natural justice that parties affected by any order should have right of being heard and making representations against the order. In that view of the matter, the last portion of the order insofar as it directs blacklisting of the appellant in respect of future contracts, cannot be sustained in law, in the premises, that portion of the order directing that the appellant be placed in the blacklist in respect of future contracts under the Collector is set aside. So far as the cancellation of the bid of 2 (1989) 1 SCC 229 6 the appellant is concerned, that is not affected. This order will, however, not prevent the State Government or the appropriate authorities from taking any future steps for blacklisting the appellant if the Government is so entitled to do in accordance with law i.e. after giving the appellant due notice and an opportunity of making representation. After hearing the appellant, the State Government will be at liberty to pass any order in accordance with law indicating the reasons therefor. We, however, make it quite clear that we are not expressing any opinion on the correctness of otherwise of the allegations made against the appellant.
The appeal is thus disposed of."
1.6. The Hon'ble Supreme Court in Blue Dreamz Advertising Pvt. Ltd. v. Kolkata Municipal Corp. 3 has stated that:
" 1. In case there exists a genuine dispute between the parties based on the terms of the contract, blacklisting as a penalty cannot be imposed.
2. The penalty of blacklisting may only be imposed when it is necessary to safeguard the public interest from irresponsible or dishonest contractors, and
3. The Corporation being a statutory body, have a higher threshold to satisfy before passing such blacklisting order and therefore, the measures undertaken by it should be reasonable."
1.7. The Hon'ble Supreme Court in Techno Prints v. Chattisgarh Textbook Corporation 4 has relied upon Blue Dreamz and Erusian Equipment to hold that "30.... Therefore, the Authority is expected to be very careful before issuing a show cause notice. It is expected to understand the facts well and try to ascertain what sort of violation is said to have been 3 [2024 INSC 589] 4 [2025 INSC 236] 7 committed by the contractor. As noted above, there is always an inherent power in the Authority to blacklist a contractor. But possessing su inherent power and exercising such power are two different situations anti connotations. There may be a power but there should be reasonable ground to exercise such power.
31. To put it by way of an illustration, the Police has the power to arrest but it is not necessary that in all cases arrest must be effected. The Police should know whether at all arrest is necessary
32. We may put it in a slightly different way. Take for instance, the show cause notice in the present case is the final order of blacklisting. The final order in any case cannot travel beyond the show cause notice. Therefore, we take the show cause notice as the final order. Whether it makes out a case for blacklisting? This should be the test to determine whether it is a genuine case to blacklist a contractor or visit him with any other penalty like forfeiture of EMD, recovery of damages etc. We say so because once an order of blacklisting is passed the same would put an end to the business of the person concerned. It is a drastic step. Once the final order blacklisting the Contractor is passed then the Contractor is left with no other option but to go to the High Court invoking writ jurisdiction under Article 226 of the Constitution and challenge the same. If he succeeds before the Single Judge then it is well and good otherwise he may have to prefer a writ appeal or LPA as the case may be. This again would lead to unnecessary litigation in the High Courts. The endeavour should be to curtail the litigation and not to overburden the High Courts with litigations of the present type more particularly when the law by and large is very well settled and there is no further scope of any debate.
33. As observed by this Court in Erusian Equipment & Chemicals Ltd. Vs. State of W.B. reported in (1975) 1 SCC 70, an order of blacklisting casts a slur on the party being blacklisted and is stigmatic. Given the nature of such an order and the import thereof, it would be unreasonable and arbitrary to visit every contractor who is in breach of his contractual obligations with such consequences. There have to be strong, independent and overwhelming materials to resort to this power given the drastic consequences that an order of blacklisting has on a 8 contractor. The power to blacklist cannot be resorted to when the grounds for the same are only breach or violation of a term or condition of a particular contract and when legal redress is available to both parties. Else, for every breach or violation, though there are legal modes of redress and which compensate the party like the Corporation before us, it would resort to blacklisting and at times by abandoning or scuttling the pending legal proceedings.
34. Plainly, if a contractor is to be visited with the punitive measure of blacklisting on account of an allegation that he has committed a breach of a contract, the nature of his conduct must be so deviant or aberrant so as to warrant such a punitive measure. A mere allegation breach of contractual obligations without anything more, per se, does not invite any such punitive action.
2. In the counter filed on behalf of Respondents, Respondent No.4 stated that Respondent Railways floated an open tender on 16.10.2023 for operating Tea Stall GMU-82 at PF-6 at Lingampalli Railway Station and petitioner being a sole proprietor, participated in the tender process along with others. After due process, contract was awarded to petitioner vide Letter of Award dated 24.01.2024 for five years from 15.03.2024 to 14.03.2029 at an annual license fee of Rs.3,91,800/- with 10% escalation for the 4th and the 5th year, with the 5th year license fee remaining the same as the 4th year.
2.1. It is stated, petitioner paid the first year license fee for the period from 15.03.2024 to 14.03.2025 and also paid Rs.2,03,736/- towards security deposit through Bank 9 Guarantee No.062GT02240430002 dated 12.02.2024 issued by HDFC Bank. She commenced contract from 15.03.2024 and was fully aware of all the terms and conditions of the Letter of Award, Catering Policy and the bid document issued through the Indian Railway E-Procurement System (IREPS), including the obligation to pay license fee within stipulated time. As per Point 3 of Letter of Award, petitioner was required to pay the second year license fee of Rs.3,91,800/- for the period from 15.03.2025 to 14.03.2026 on or before 28.02.2025. Letter dated 03.02.2025 was issued to her petitioner informing the due date of 28.02.2025 for payment of the second year license fee, which was acknowledged and accepted by petitioner.
2.2. Since petitioner failed to pay the license fee, it is stated, another letter dated 07.05.2025 was issued requiring payment of Rs.3,91,800/- by 29.05.2025, being within 90 days of the due date, along with interest at 18% for delay, and clearly stating that failure to pay would result in termination of license without further notice and debarment from participation in Railway/IRCTC tenders for five years, as per terms and conditions of the contract. Despite, petitioner neither responded nor paid the license fee, thereby committing breach of contract. It is stated, as per Chapter 4.3 of the Master License Agreement 10 and Point 3 of the Letter of Award dated 24.01.2024, the licensee is required to pay license fee at least 15 days before commencement of the relevant year, failing which interest at 18% is applicable, and if the license fee is not paid within 90 days from the due date, the contract shall be terminated without notice treating it as breach, and the licensee shall be debarred from future catering tenders of Indian Railways and IRCTC Ltd. for five years.
2.3. The catering stall GMU-82 is meant to provide services to passengers, and petitioner closed the stall even before completion of the first year, thereby causing inconvenience to passengers and defeating the purpose of the contract, and such conduct is in violation of the terms and conditions of the Letter of Award and contract. In view of violation of terms, the contract for Tea Stall GMU-82 at Lingampalli Railway Station was terminated with effect from 29.05.2025. Termination and debarment were communicated through letter dated 16.06.2025, which was delivered to petitioner on 23.06.2025, informing termination, forfeiture of security deposit, and debarment from future tenders of Indian Railways/IRCTC Ltd. for five years with effect from 29.05.2025, and also directing payment of outstanding license fee dues. 11 2.4. Petitioner, it is stated, admitted receipt of letters dated 03.02.2025 and 07.05.2025, and despite being aware of the consequences, failed to comply with payment obligations. Failure to pay license fee within stipulated time constitutes breach of contract, and termination, forfeiture of security deposit and debarment for five years have been carried out strictly in accordance with the terms and conditions of the Letter of Award dated 24.01.2024 and the contract, and as per Railway Board guidelines no Railway official has power to relax the debarment clause for non-payment of license fee dues. 2.5. As per Railway Board guidelines, no authority has power to relax debarment for non-payment. Termination was strictly as per Clause 4.3. It is stated, reliance on Rule 151 of GFR 2017 is misplaced as Railways operate under their own statutory codes, Railway Board policies, and contract terms governing catering licenses. These override general GFR provisions. Petitioner has not disputed Clause 4.3 or contract terms and is deemed to have accepted the action taken. It is stated, Rule 151 GFR applies only to procurement contracts and not to railway catering licenses, which are commercial licensing arrangements. Clause 16.1(c) of the License Agreement authorizes 5-year debarment. Petitioner, having accepted the 12 agreement, is bound by its terms and cannot challenge the consequences.
2.6. It is stated, Railway Board Catering Policy and Commercial Circulars mandate strict debarment for non- payment. Clause 4.3 provides for interest at 18% per annum and termination for failure to pay within 90 days. Non-payment of license fee is a serious breach under Railway Board guidelines mandating 5-year debarment, and no authority has power to relax this penalty. The action taken is strictly as per binding instructions. GFR 2017 has no application, and penalties imposed are strictly under Clause 16.1 and Railway Board directions. The petitioner's contention is legally unsustainable. It is stated finally that petitioner has an alternative dispute resolution mechanism under Clause 19(2) of the contract.
3. Heard Sri Bendi Raviteja, learned counsel for petitioner and Sri Ramavath Mangulal, learned Standing Counsel for Railways.
4. Upon consideration of the pleadings and material on record, the admitted facts are, petitioner was awarded license on 24.01.2024 for the period 15.03.2024 to 14.03.2029; paid first year license fee and security deposit, and failed to pay 13 second year license fee due on 28.02.2025 despite letters dated 03.02.2025 and 07.05.2025, contract was terminated and petitioner was debarred for five years vide letter dated 16.06.2025. The contention of petitioner is that the action of termination is not preceded by any show cause notice which is in violation of principles of natural justice. In that scenario, the question that arises is whether the action of termination coupled with debarment for five years without issuance of show cause notice is sustainable in law.
5. Though respondents rely upon Clause 4.3 of the contract providing for termination without notice upon non- payment within 90 days and consequent debarment, it is well- settled that even in contractual matters involving State instrumentalities, actions having civil consequences must conform to principles of natural justice. The debarment imposed in the present case prevents petitioner from participating in Railway/IRCTC tenders for five years, thereby affecting her fundamental right under Article 19(1)(g) and has serious civil and economic consequences.
6. In Erusian Equipment & Chemicals Ltd. v. State of West Bengal, the Hon'ble Supreme Court held that blacklisting results in civil consequences and cannot be done 14 without giving an opportunity of hearing. In Raghunath Thakur v. State of Bihar, the Hon'ble Supreme Court held that even in absence of statutory requirement, principles of natural justice mandate prior notice before blacklisting. In Blue Dreamz Advertising Pvt. Ltd., it was held that blacklisting must be reasonable and necessary in public interest. In Techno Prints [2025 INSC 236], it was held that blacklisting is a drastic measure and cannot be imposed for mere breach of contract without strong and independent grounds.
7. In the present case, though respondents contend that petitioner was issued letters dated 03.02.2025 and 07.05.2025, the said letters were in the nature of demand notices for payment of license fee and not show cause notices proposing debarment. The letters did not call upon her to explain why the extreme penalty of debarment for five years should not be imposed. The requirement of a show cause notice is not an empty formality but a substantive safeguard enabling the affected party to explain circumstances, including the medical condition of petitioner's husband as pleaded. The contention of respondents that Clause 4.3 permits termination without notice cannot override constitutional requirements of fairness when the action extends beyond termination and 15 imposes debarment. Termination of contract and debarment stand on different footing. While termination may flow from contractual terms, debarment, which has wider civil consequences affecting future business, must satisfy the test of reasonableness and natural justice.
8. Further, petitioner has placed on record that her husband was undergoing serious liver ailment, including transplant and post-operative care, which is not disputed in entirety by respondents but only termed as insufficient explanation. Such circumstance required consideration by the authority before imposing the extreme penalty of five-year debarment. Respondents, however, proceeded mechanically based on contractual clause without independent application of mind to the explanation, as no opportunity was afforded.
9. The contention of respondents that GFR 2017 is inapplicable may not strictly apply to the contract, but the underlying principle therein that debarment requires reasonable opportunity reinforces the requirement of natural justice. The argument that petitioner accepted contractual terms also does not absolve the State from adhering to the constitutional mandates under Articles 14 and 19(1)(g).
16
10. It is also to be seen, respondents have not demonstrated any exceptional circumstances such as fraud, dishonesty or conduct affecting public safety warranting immediate debarment without hearing. The breach alleged is non-payment of license fee, for which other remedies such as recovery, forfeiture of security deposit, and termination were available and indeed exercised. Imposition of debarment in addition thereto without hearing is disproportionate.
11. In view of the above, this Court holds that the impugned action of debarring petitioner for five years vide letter dated 16.06.2025 issued by Respondent No.4 is violative of principles of natural justice and Articles 14 and 19(1)(g) of the Constitution of India and is liable to be set aside. However, termination of license for non-payment of licence fee, being in accordance with contractual terms, shall not be interfered with.
12. At the same time, taking into consideration the submission that at the relevant point of time, petitioner's husband underwent liver transplantation for which huge sums were expended; hence, she could not pay the requisite fee for the 2nd year, respondent authorities are directed to restore the tea stall in favour of petitioner at Lingampally Railway Station, on humanitarian grounds, and continue her for two years 17 subject to the same terms and conditions. Respondent authorities are at liberty to impose interest on petitioner on the amount to be paid for her continuation. In the event the subject tea stall was already allotted to some others, respondents shall allot an alternative space to petitioner at her own cost.
13. Subject to the above, the Writ Petition is allowed and the impugned letter dated 16.06.2025 is set aside. No costs.
14. Consequently, the miscellaneous petitions pending, if any, shall stand closed.
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NAGESH BHEEMAPAKA, J 04th May 2026 ksld