Debarment order is an administrative action, not a contractual dispute; section 9 petition not maintainable: Delhi high court
NCC Ltd. v. Airport Authority of India | O.M.P. (I) (COMM) 140/2026 | Delhi High Court | Mr. Justice Harish Vaidyanathan Shankar | Decided on July 1, 2026
Background
The Delhi High Court has held that a challenge to a debarment order issued by the Airport Authority of India (AAI) against a contractor is not arbitrable, since such an order stems from an independent administrative power and not from any contractual stipulation.
NCC Limited had approached the Court under Section 9 of the Arbitration and Conciliation Act, 1996, seeking a stay on a Debarment Letter dated March 23, 2026, by which it was barred from participating in AAI tenders for two years. The dispute arose from a 2018 contract for construction of the New Domestic Terminal Building at Patna Airport. Following delays and disputes over defects in the work, including water seepage and deterioration of vitrified flooring, AAI issued a Show Cause Notice proposing debarment, and thereafter passed the Debarment Letter after considering NCC's reply.
Contentions
The Additional Solicitor General, appearing for AAI, raised a preliminary objection on maintainability, contending that the debarment power was traceable to Section 20 of the Airports Authority of India Act, 1994, and Clause 35.12 of the AAI Works Manual, and was independent of the contract. It was argued that the action was prospective in nature, governing NCC's eligibility for future tenders, and was thus a matter of public law falling outside the arbitration clause. Reliance was placed on Vidya Drolia v. Durga Trading Corporation, Patel Engineering Ltd. v. Union of India, Verigamto Naveen v. Government of Andhra Pradesh and A.K.G. Construction and Developers Pvt. Ltd. v. State of Jharkhand.
NCC contended that the arbitration clause was widely worded to cover all disputes arising out of or relating to the contract, and that the Debarment Letter was founded entirely on allegations of delay and defective execution arising from performance of the contract. Reliance was placed on Edapally to Kodungallur Highway Pvt. Ltd. v. NHAI, Sai Consulting Engineers Pvt. Ltd. v. Rail Vikas Nigam Ltd. and other decisions to submit that debarment founded on contractual allegations remained arbitrable.
Court's Findings
The Court held that the jurisdiction under Section 9 is ancillary to arbitration and can be invoked only where the dispute is, at least prima facie, arbitrable. It observed that the arbitrability of a debarment order depends not on the factual allegations that triggered it, but on the legal source of the power exercised.
Examining the AAI Act and the AAI Works Manual, the Court found that the power to debar was traceable to an independent statutory and administrative framework, and not to any clause of the contract. It noted that NCC was unable to point to any contractual provision authorising debarment, and that the Debarment Letter itself stated that the action was without prejudice to AAI's other contractual rights and remedies.
Distinguishing the decisions relied upon by NCC on facts, the Court held that debarment operates prospectively to regulate future contractual dealings, as distinct from disputes concerning existing contractual rights, following the Supreme Court's reasoning in Patel Engineering and A.K.G. Construction. The Court concluded that the Debarment Letter was an administrative order and not one issued under the contractual conditions between the parties, and accordingly held the Section 9 petition not maintainable.
The petition was dismissed, with the Court clarifying that it had expressed no opinion on the legality or validity of the debarment, leaving the same open for consideration before a competent forum. No costs were awarded.
