The Tripura High Court has reaffirmed that a writ petition is maintainable in contractual disputes where the State or its instrumentalities act arbitrarily or unreasonably, holding that constitutional remedies cannot be denied merely because the matter arises out of a contract.
A Division Bench of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha directed the respondents to refund ₹74,93,770 to the petitioner along with 12% interest per annum, terming the withholding of contractual dues “patently arbitrary, unreasonable and violative of Articles 14 and 300A of the Constitution.”
The petitioner had entered into an agreement dated December 17, 2008 with Hindustan Steelworks Construction Limited (HSCL) for execution of three road construction projects in Tripura under NIT-30. All works were completed between 2012 and 2013, with the maintenance period ending in 2020. However, while refunding the security deposit for one work, the authorities withheld ₹74.93 lakh towards performance guarantees and part of the security deposits for the other two, citing defaults in unrelated contracts under NIT-85, NIT-89, and NIT-95.
The State argued that under Clause 24 of the Standard Bidding Document (SBD), the petitioner was required to exhaust internal dispute resolution before invoking writ jurisdiction and that Clause 53 permitted withholding dues for breaches in other contracts. The petitioner countered that Clause 53 could only apply if the concerned contract had been terminated which was not the case and that all NIT-30 works had been fully completed and certified.
Rejecting the State’s defence, the Court held that Clause 24 did not provide a genuine alternative remedy like arbitration or mediation, but merely referred disputes to departmental authorities, which cannot oust the High Court’s writ jurisdiction. It further ruled that Clause 53 was inapplicable since the contracts under NIT-30 were never terminated.
Citing ABL International Ltd. v. ECGC (2004) 3 SCC 553 and Unitech Ltd. v. TSIIC (2021) 16 SCC 35, the Bench reiterated that arbitrary conduct by the State, even in contractual matters, invites judicial scrutiny under Article 226. The Court emphasized that the government cannot withhold payments due under one contract to recover alleged losses from other independent contracts without adjudication.
Accordingly, the Court allowed the writ petition, directing the respondents to refund ₹74,93,770 with 12% interest from the respective due dates and complete payment by December 31, 2025. Additionally, Respondents No.1 and 3 were directed to pay costs of ₹25,000 each to the petitioner.
Appearances:
For the Petitioner: Mr. Somik Deb, Sr. Advocate, with Ms. Simpee Saha, Advocate.
For the Respondents: Mr. Kohinoor Narayan Bhattacharyya, G.A., with Mr. Kishor Kumar Pal, Advocate.
