Gauhati High Court
Dhanjit Sarma vs The Union Of India And 3 Ors on 6 March, 2026
Page No.# 1/18
GAHC010017182022
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THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : WP(C)/661/2022
DHANJIT SARMA
PROPRIETOR OF ARROW MEDICAL SOLUTIONS, S/O. LT. BIPIN CH.
SARMA, R/O. HOUSE NO.-40, ANANDA NAGAR PATH, SIXMILE, P.S.
DISPUR, P.O. KHANAPARA, GUWAHATI-781022, DIST. KAMRUP (M),
ASSAM.
VERSUS
THE UNION OF INDIA AND 3 ORS
REP. BY THE SECRETARY TO THE GOVT. OF INDIA, MINISTRY OF LABOUR
AND EMPLOYMENT, NEW DELHI.
2:THE EMPLOYEES STATE INSURANCE CORPORATION
REGIONAL OFFICE
BAMUNIMAIDAM
GUWAHATI-781021.
3:THE MEDICAL SUPDT.
EMPLOYEES STATE INS. CORPORATION MODEL HOSPITA
BELTOLA
PEER AZAN FAKIR ROAD
NEAR KHANAPARA KENDRIYA BIDYALAYA
GUWAHATI-781022.
4:THE BPL MEDICAL TECHNOLOGIES PRIVATE LTD.
11TH KM
BANNERGHATA ROAD
ARAKERE
BENGLORE
KARNATAKA
PIN-56007
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Advocate for the Petitioner : MR. A SAIKIA, MR T T MONI,MR. J ISLAM,MR. A S ALI,MR. N
K DAS,MR T KALITA
Advocate for the Respondent : ASSTT.S.G.I., MR S CHAUHAN (r-4),MR B PUSHILAL (r-4),MR.
K GOGOI (r-1),SC, ESIC
Date on which judgment was reserved : 30.01.2026
Date of pronouncement of judgment : 06.03.2026
Whether the pronouncement is of the : NA
operative part of the judgment?
Whether the full judgment has been : Yes
pronounced?
BEFORE
HONOURABLE MR. JUSTICE RAJESH MAZUMDAR
JUDGMENT & ORDER (CAV)
Date : 06-03-2026
(Rajesh Mazumdar, J.)
Heard Mr. B.K. Das, learned counsel for the petitioner and also heard Mr. M.
Smith, learned counsel appearing for the respondents.
2. This writ petition has been instituted under Article 226 of the Constitution of
India by the petitioner with the following prayer;
“Under the above facts and circumstances it is therefore prayed that your
Lordships would be pleased to admit this petition, call for the records, issue a rule
calling upon the respondents to show cause as to why a writ in nature of Mandamus
shall not be issued to direct the respondents to pay an amount of Rs. 32,25,000/-
(Rupees Thirty two lacs and twenty five thousand) only to the petitioner within a
specified time and on perusal of record and reply to show cause if any and after hearing
the parties would be pleased to make the rule absolute by directing the respondents to
pay the aforesaid amount to the petitioner within a specified time. And or pass any other
order/orders as your Lordships may deem fit and proper in the interest of justice.”
3. The story unfurled in the writ petition is that the petitioner, a proprietorship
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firm, is dealing with manufacture and supply of medical and dental instruments. The
petitioner firm fulfilled the requirements for a medical and general equipment
manufacturing & trading unit.
4. The respondent No.3, namely the Medical Superintendent, Employees State
Insurance Corporation Model Hospital, Guwahati had floated a bid document in the
“Government e Marketplace” (in short, the GeM) inviting the tender for supply of “C
ARM FLUROSCOPE X RAY Machine” from intending suppliers/vendors.
5. The proprietorship firm participated in the tender process and had offered to
supply the BPL C RAY C ARM Fluoroscope with motorised machine, the price of which
was fixed by the Original Equipment Manufacturer (OEM) as uploaded in GEM was Rs.
32,40,000/-. On finding the bid successful and to its satisfaction, the respondent No.3
awarded the bid in favour of the petitioner herein vide Contract No. GEMC-
511687762071052 generated on 13.05.2021.
As per the terms and conditions of the contract, the petitioner had delivered the
BPL CRAY C ARM FLUROSCOPE with motorised mechanical motion on 16.07.2021 at
ESIC Model Hospital, Beltola. The machine was installed on 20.07.2021 by the
authorized service engineer deputed by respondent No.4, i.e. the original equipment
manufacturer, who has been arrayed as the respondent No. 4 in this writ petition. The
installation report, acknowledging the installation was generated on 20.07.2021.
6. Upon successful delivery of the equipment, the petitioner uploaded the invoice
in the GeM with a unit price of Rs. 32,25,000/-. The Consignee Receipt and
Acceptance Certificate (in short, the CRAC) was uploaded by the respondent No.3 in
GeM on 21.08.2021, showing the acceptance of the item supplied by the firm of the
petitioner.
7. When the petitioner did not receive his due payment, he submitted a
representation on 07.09.2021 before the respondent No.3 for release of the payment.
A reminder was submitted on 23.09.2021. The respondent No.3, by a communication
addressed to the respondent no. 4, i.e. the original equipment manufacturer, had
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raised certain issues like the “Country of origin of monitor was made in China, high
cost, improper functioning etc.” A copy of the same was marked to the present
petitioner firm. In reply, the petitioner sent a mail on 14.10.2021 informing the
respondent No.3 that the equipment had been installed by the engineer of the
respondent No.4 and all service related issues post installation in the machine was to
be addressed by the respondent No.4, which was the original equipment
manufacturer.
8. The respondent No.3 thereafter instead of taking steps for releasing the
payment, raised a complaint in the GeM on 13.11.2021 raising grievances of “defect in
wire and camera in the machine”. In reply, the petitioner reaffirmed that after-sale
service was in the jurisdiction of the original equipment manufacturer i.e. the
respondent No.4. On 17.01.2021, the respondent No. 3 has again raised a demand for
replacement of the machine from the petitioner and the original equipment
manufacturer. The petitioner reminded respondent No. 3 that since the CRAC has been
uploaded on 21.08.2021, which is one month after the date of installation, the
petitioner was entitled to the payment of bills as raised by him within 10 days from
the date of issuance of CRAC. According to the petitioner, since an admitted amount
upon conclusion of a contract has remained unpaid, he has preferred the present writ
petition praying for an appropriate writ in the nature of mandamus directing the
respondents to pay an amount of Rs. 32,25,000/- to the petitioner by the respondent
No. 3.
9. Mr. B.K Das, learned counsel for the petitioner has referred to the terms and
conditions of the bid documents. Thereafter, by referring to the contract, the learned
counsel for the petitioner has submitted that it is not the case of the respondent No.3,
that any terms and conditions of the bid or the contract had been violated or that any
of the General terms and conditions on GeM 3.0 (Version 1.19) had been violated.
10. The learned counsel for the petitioner has submitted that the petitioner had
abided by all the conditions applicable on the present contract and it is not the case of
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the respondent No.3 that there was any violation of the same. By referring to Clause-
11 of the General terms and conditions, the learned counsel for the petitioner has
submitted that the respondent No.3 had the right to reject the goods supplied by the
petitioner within 10 days of receipt of the consignment. Clause-11 & 12 of the General
terms and conditions on GeM 3.0 (Version 1.19) referred to by the learned counsel for
the petitioner is reproduced herein below for ready reference;
“11. Buyer/Consignee’s Right of Rejection (Return Policy):
i. The Goods delivered shall bear the self certified
Manufacturer’s/Seller’s Warranty/Guaranty. Buyer/Consignee shall have
the right to inspect the supplied Goods themselves and/or through their
appointed agency at consignee’s own cost, at Consignee’s site(s) after
receipt and accept or reject on proper justification any consignment of the
Goods received within a period of 10 days (unless otherwise specified in
STC or ATC) of receipt of consignment of goods. The date of receipt shall
be reckoned from the date of receipt of the Goods as notified in the
Provisional Receipt Certificate (PRC) which will be issued online by
consignee immediately after receipt of Goods.
ii. In case of Service contract, the Buyer reserves right to reject the same
in conformance with the terms and conditions of the agreed Service Level
Agreement (SLA). However, such right to reject services offered by the
Seller under the contract shall be exercised by the Buyer within 10 days
(unless otherwise specified in STC or ATC) of the date of receipt of the
Service. The date & time of start and completion of the Service, shall be
indicated by the Seller while raising on-line invoice for a specified period
of Service as per Service Level Agreement (SLA). The date of such
invoice or the date of completion of the service, whichever is later shall be
reckoned as date of receipt of the Service.
iii. On Acceptance/Part Acceptance or Rejection of Goods/Services,
Consignee will issue an on-line ‘Consignee’s Receipt cum Acceptance
Certificate’ (CRAC), which will form the basis of Payments to the Seller.
iv. No payment shall be made for rejected goods or services. After
intimation of the rejection/part rejection by the Buyer/Consignee, the
Seller shall be liable to remove/lift back such rejected Goods within 10
days without any extra charge/cost to the Buyer/Consignee failing which
Page No.# 6/18suitable ground rent/warehousing charges would be payable by the Seller
to the Buyer /Consignee. If the Seller fails to remove/lift back such
rejected Goods within reasonable time period, the Buyer/Consignee shall
have the right to dispose off such rejected goods at the risk and cost of
the seller.
12. Payment Authority and Payment Terms:
Payments shall be made to the Seller in the manner below:
i. For Goods:
In case of goods, 100% payment will be released within ten (10) days
of issue of consignee receipt-cum-acceptance certificate (CRAC) and on-
line submission of bills unless otherwise in STC/ATC.
ii. For services:
In case of services, 100% payments on the basis of monthly (unless
otherwise specified) bills will be paid ten (10) days of issue of consignee
receipt-cum-acceptance certificate (CRAC) and on-line submission of bills
unless otherwise specified in STC/ATC.”
11. The learned counsel for the petitioner has submitted that it is the matter of
record, which has not been disputed, that the equipment was delivered on
16.07.2021. It was installed on 20.07.2021 and the CRAC had been uploaded by
respondent No.3 on 21.08.2021. In such circumstances, it is the submission of the
learned counsel for the petitioner that respondent No.3 could not have denied the
payment as reflected in the CRAC in Gem of Rs. 32,25,000/- beyond 31.08.2021.
12. The learned counsel for the petitioner has further submitted that the
respondent No.3, had for the first time on 07.10.2021 raised the issue of monitor
machine being made in China, that the same quality machine cost was available for
around Rs. 9-15 lacs and that the machine was not functioning properly from the
beginning of its use. The learned counsel for the petitioner has submitted that all
these grounds were initiated by views of a purported committee, of which neither the
petitioner nor the original equipment manufacturer had been given any notice. the
Page No.# 7/18learned counsel for the petitioner has submitted that, in any case, certificate of
acceptance having being issued as per the contract, any further grievances would
have to be addressed by the respondent No.4, who was the original equipment
manufacturer and who would be liable to maintain the product through the period of
warranty and guarantee of the product.
13. The learned counsel for the petitioner has submitted that even as per the
contract issued by the respondent No.3, it was well within the knowledge of the
respondent No.3 that it would have a period of 10 days to either accept or reject the
equipment that was supplied. The learned counsel for the petitioner has therefore
submitted that since the contract is one with the State and since it has been
completed qua the petitioner by delivering the equipment and uploading invoices and
had been accepted by the respondent No.3 by issuing the CRAC/acceptance
certificate, the respondent No.3, as a State had acted arbitrarily by shunning its
responsibilities and that the respondent No.3 will remain liable to pay the contract
amount to the petitioner.
14. The learned counsel for the respondent No.2 & 3 initiated his arguments by
submitting that the present writ petition is not maintainable, inasmuch as, there is a
specific arbitration clause under Clause 16 in the terms and conditions of GeM
(government e-market place) portal. According to the learned counsel, the dispute
raised by the petitioner should have been referred to sole arbitrator as per terms and
conditions of the contract at Clause 2.8. He as argued that the petitioner has not
made any application for appointment of an arbitrator although allegations of violation
of the terms and conditions of GeM and matters relating to contract has to be decided
by way of arbitration as disputed question of facts are involved and where evidences
are required to be adduced by both the parties. He has referred to the case of
Babanrao Rajaram Puna vs Samarath Builders and developers, reported in
(2022) 9 SCC 691, where the Apex Court has observed that a binding reference to
arbitration between the parties ought to have been given full effect by the High Court.
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The learned counsel for the respondent No.2 & 3 has also relied on a judgment
rendered by the High Court of Telangana in W.P No.20309/2021 in a similar case. He
has submitted that contract vide No. GEMC-51168776207152 with the petitioner
specifies the product details, the item details and the terms and conditions of GeM and
as per the product details in the contract (Annexure- 5 of the writ application) as well
as (Annexure- 10 of the writ application) the parties to the contract are bound by the
terms and conditions of the agreements.
15. The learned counsel for the respondent Nos. 2 and 3 has submitted that
supply of defective C-ARM Fluoroscope X-ray machine by the petitioner was not
acceptable to his clients. The respondent No. 4 was informed by the mail on
16.11.2021 and 18.11.2021. On 02.11.2021 the Engineer physically inspected and
verified the machine and submitted a report that the video connector wire and camera
is defective and needs to be replaced, it was also further observed that from the day
of the installation the image was faulty. The payment in respect of the machine was
not released as the machine is a defective one and needs to be replaced.
16. The learned counsel has thereafter referred to Clause 11(iv) of the GeM to
impress that the purchaser is not liable to make any payment for rejected
goods/services after intimation of the rejection/part rejection by the Buyer/Consignee.
The seller shall be liable to remove/lift back such rejected goods within 10 days
without any extra charges/cost to the Buyer/Consignee, failing which suitable ground
rent/warehousing charges would be payable by the seller to the Buyer. If the seller
failed to remove/lift back such rejected goods within a reasonable time, the
buyer/consignee shall have the right to reject such rejected goods at the risk and cost
of the seller. The petitioner as well as the respondent No. 4 have been informed
several times to cure the defects in the machine which the petitioner as well as the
respondent No.4 have miserably failed and as such, the answering respondents does
not have any liability to make payment of such rejected goods/machines as per Clause
11(iv) of the GeM.
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17. It is also submitted by the learned counsel that vide letter dated 12.11.2021
issued by the Deputy Medical Commissioner, ESI Corporation, Panchadeep Bhawan,
New Delhi addressed to the CEO, GeM informed of the supply of defective/refurbished
medical equipment by the petitioner and that the OEM/Respondent No. 4 could not
rectify the defect. The said letter also requested for forfeiting the ePBG of the
petitioner.
Having supplied the machine, it was the duty of the petitioner who had supplied
the machine to see that the same functions properly as per the terms and conditions
of GeM. The petitioner cannot evade responsibility by stating that the after sale
service is the responsibility of the respondent No. 4. The release of payment in respect
of BPL C-ARM Fluoroscope X-ray machine would arise once the defects in the machine
are fully cured and/or the machine is replaced.
18. The learned counsel has further stated that it is also the terms of the GeM that
notwithstanding the fact that the buyer or the quality assurance officer may have
inspected and or approved/accepted the goods, it is further guaranteed that if during
the guarantee/warranty period the goods be discovered not to conform to the
requisite description and quality and/or giving satisfactory performance or have
deteriorated, the decision of the buyer in that behalf shall be binding on the seller and
the buyer shall be entitled to call upon the seller to rectify or replace the goods or
such portion thereof as is found to be defective by the buyer within 7(seven) days.
The petitioner and the respondent No. 4 till date have failed to comply with the
provisions of Clause 10 (ii) of the GeM. The machine was purchased for treatment of
patients and presently is lying in a store room of hospital without its utility since its
installation and the action of the petitioner and the respondent No.4 is also against
public interest. The petitioner having failed to cure the defects in the BPL C-ARM
Fluoroscope X-ray machine which have occurred after installation, the petitioner as
well as respondent No.4 have violated the terms and conditions of Clause 10(ii) of the
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GeM and as such nothing is payable under Clause 11(iv) of the terms and conditions
of GeM and the Hon’ble Court may be pleased to dismiss the petition.
19. The first issue this Court has now to take up is, whether, due to the presence
of an “arbitration clause” in the General Terms of Contract of the GeM, the grievance
of the petitioner regarding the refusal for payment after issuing the CRAC by the
respondent No.3 is a dispute to be relegated for arbitration or whether, in view of the
admitted position of facts and circumstances, this Court would decide the issue of
maintainability of the writ in the positive and then proceed to decide the merit of the
claim.
20. This Court has noticed that the respondent No.3, on being demanded to pay
the contracted amount in the month of August 2021 against the CRAC issued by it on
21.07.2021, had raised issues regarding the equipment in the month of October 2021
for the first time. The respondent No.3 did not attempt at any point of time to refer
any so-called dispute for arbitration and on its volition, decided to withhold the
payment which it was obligated to make within 10 days of issuing the CRAC. The issue
of reference of the dispute, sought to be created by the respondent No.3 itself, to
arbitration has been taken up for the first time in the affidavit filed by it to oppose the
writ petition. The respondent No. 3 has not disputed the liability to pay but has made
a specific assertion that it would not be liable to pay unless the equipment is replaced.
These observations have been recorded at this stage in this order, since it would have
a bearing on the issue of whether the present writ is maintainable in its present form.
21. The learned counsel for the respondent no. 3 has relied upon the judgment of
the Apex Court in Babanrao Rajaram Puna (supra). The issue before the Apex
Court was whether the High Court was correct in rejecting an application filed under
Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of arbitrator
when there was a specific clause evincing a clear intention of the parties for reference
of disputes to arbitration. The Apex Court had held that rejection of the prayer for
appointment of arbitrator was erroneous, even in the absence of the term to the effect
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that “the decision of the arbitrator shall be final and binding” in the arbitration
agreement. This Court humbly agrees to the said proposition.
22. However, this Court, in the present case, is not dealing with an application for
appointment of arbitrator which is filed by a party raising a dispute. The respondent
No.3 has not prayed for appointment of an arbitrator. On the other hand, the
petitioner has approached this Court claiming arbitrariness and unreasonableness on
the part of the respondent No. 3 in refusing to make payment despite issuance of
CRAC in its favour and this Court is required to evaluate as to whether, in the presence
of an alternative remedy, this Court would proceed to adjudicate the grievance of the
petitioner qua the respondent No.3, who falls within the definition of “State” as
envisaged in Article 12 of the Constitution of India.
23. The issue whether the High Court, in exercise of its power under Article 226 of
the Constitution of India, would non-suit a litigant solely on the ground of existence of
an alternative remedy or more specifically on the ground of existence of a clause
relating to reference to arbitration, has been discussed in several landmark
judgments.
24. In Unitech Limited and Others -Versus- Telangana State Industrial
Infrastructure Corporation [TSIIC] and Others, reported in [2021] 2 SCALE 653,
the Hon’ble Apex Court has held as follows:
“E. Analysis
E.1. Maintainability of the writ petition under Article 226
32. Much of the ground which was sought to be canvassed in the
course of the pleadings is now subsumed in the submissions which
have been urged before this Court on behalf of the State of
Telangana and TSIIC. As we have noted earlier, during the course of
the hearing, learned Senior Counsel appearing on behalf of the State
of Telangana and TSIIC informed the Court that the entitlement of
Unitech to seek a refund is not questioned nor is the availability of the
land for carrying out the project being placed in issue. Learned
Senior Counsel also did not agitate the ground that a remedy for the
recovery of moneys arising out a contractual matter cannot be
Page No.# 12/18availed of under Article 226 of the Constitution. However, to clear the
ground, it is necessary to postulate that recourse to the jurisdiction
under Article 226 of the Constitution is not excluded altogether in a
contractual matter. A public law remedy is available for enforcing
legal rights subject to well-settled parameters.
33. A two judge Bench of this Court in ABL International Ltd. v. Export
Credit Guarantee Corporation of India, 7 (2004) 3 SCC 553 [ABL
International] analyzed a long line of precedent of this Court, 8K.N.
Guruswamy v. State of Mysore, AIR 1954 SC 592; Gujarat State
Financial Corporation. v. Lotus Hotels (P) Ltd, (1983) 3 SCC 379;
Gunwant Kaur v. Municipal Committee, Bhatinda, (1969) 3 SCC
769 to conclude that writs under Article 226 are maintainable for
asserting contractual rights against the state, or its instrumentalities,
as defined under Article 12 of the Indian Constitution. Speaking
through Justice N Santosh Hegde, the Court held:
“27. …the following legal principles emerge as to the maintainability
of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an
instrumentality of a State arising out of a contractual obligation is
maintainable.
(b) Merely because some disputed questions of fact arise for
consideration, same cannot be a ground to refuse to entertain a writ
petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is
also maintainable.”
This exposition has been followed by this Court, and has been
adopted by three-judge Bench decisions of this Court in State of UP
v. Sudhir Kumar, 92020 Scconline SC 847 and Popatrao Vynkatrao
Patil v. State of Maharashtra, 10Civil Appeal 1600 of 2000 (Supreme
Court of India). The decision in ABL International, cautions that the
plenary power under Article 226 must be used with circumspection
when other remedies have been provided by the contract. But as a
statement of principle, the jurisdiction under Article 226 is not
excluded in contractual matters.
Article 23.1 of the Development Agreement in the present case
mandates the parties to resolve their disputes through an arbitration.
However, the presence of an arbitration clause within a contract
between a state instrumentality and a private party has not acted as
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an absolute bar to availing remedies under Article 226, 11Harbanslal
Sahnia v. Indian Oil Corporation Ltd., (2003) 2 SCC 107; Ram Barai
Singh & Co. v. State of Bihar & Ors., (2015) 13 SCC 592. If the state
instrumentality violates its constitutional mandate under Article 14 to
act fairly and reasonably, relief under the plenary powers of the
Article 226 of the Constitution would lie. This principle was
recognized in ABL International:
“28. However, while entertaining an objection as to the maintainability
of a writ petition under Article 226 of the Constitution of India, the
court should bear in mind the fact that the power to issue prerogative
writs under Article 226 of the Constitution is plenary in nature and is
not limited by any other provisions of the Constitution. The High Court
having regard to the facts of the case, has a discretion to entertain or
not to entertain a writ petition. The Court has imposed upon itself
certain restrictions in the exercise of this power. (See Whirlpool
Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] .) And this plenary
right of the High Court to issue a prerogative writ will not normally be exercised
by the Court to the exclusion of other available remedies unless such action of
the State or its instrumentality is arbitrary and unreasonable so as to violate the
constitutional mandate of Article 14 or for other valid and legitimate reasons, for
which the Court thinks it necessary to exercise the said jurisdiction.”
(emphasis supplied)
Therefore, while exercising its jurisdiction under Article 226, the Court
is entitled to enquire into whether the action of the State or its
instrumentalities is arbitrary or unfair and in consequence, in violation
of Article 14. The jurisdiction under Article 226 is a valuable
constitutional safeguard against an arbitrary exercise of state power
or a misuse of authority. In determining as to whether the jurisdiction
should be exercised in a contractual dispute, the Court must,
undoubtedly eschew, disputed questions of fact which would depend
upon an evidentiary determination requiring a trial. But equally, it is
well-settled that the jurisdiction under Article 226 cannot be ousted
only on the basis that the dispute pertains to the contractual arena.
This is for the simple reason that the State and its instrumentalities
are not exempt from the duty to act fairly merely because in their
business dealings they have entered into the realm of contract.
Similarly, the presence of an arbitration clause does oust the
jurisdiction under Article 226 in all cases though, it still needs to be
decided from case to case as to whether recourse to a public law
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remedy can justifiably be invoked. The jurisdiction under Article 226
was rightly invoked by the Single Judge and the Division Bench of
the Andhra Pradesh in this case, when the foundational
representation of the contract has failed. TSIIC, a state
instrumentality, has not just reneged on its contractual obligation, but
hoarded the refund of the principal and interest on the consideration
that was paid by Unitech over a decade ago. It does not dispute the
entitlement of Unitech to the refund of its principal.”
25. This Court in the case of M/s. M.K. Dhiroomal Associates JV, a Joint Venture of
M/s M.K. Engineering and M/s Shiroomal and Sons Pvt. Ltd. -Versus- Union of India
(Writ Petition (C) No. 6103 of 2012, Writ Petition (C) No. 266 of 2012 Decided on : 21-
09-2023) has, held as follows:
“11. The alleged dispute involved herein is the alleged decision to recover
a sum of Rs. 25,21,881.27 by the respondent N.F. Railway authorities on
the ground that the Contract Agreement between them stood vitiated to the
extent of Rs. 25,21,881.27. As to the maintainability of a writ petition, the
Hon’ble Supreme Court of India in ABL International Ltd. and another vs.
Export Credit Guarantee Corporation of India Ltd. and others, reported
in [2004] 3 SCC 553, after discussing a number of previous
preiudacates/authorities, has laid down the legal principles as follows :-
[a] in an appropriate case, a writ petition as against a State or an
instrumentality of a State arising out of a contractual obligation is
maintainable; [b] merely because some disputed questions of fact arise
for consideration, same cannot be a ground to refuse to entertain a writ
petition in all cases as a matter of rule; and [c] a writ petition involving a
consequential relief of monetary claim is also maintainable. The aforesaid
principles have been followed in subsequent three-Judge Bench decision
in State of Uttar Pradesh vs. Sudhir Kumar, reported in 2020 SCC OnLine
SC 847 and Popatrao Vynkatrao Patil vs. State of Maharashtra, reported
in [2020] 19 SCC 241. It is, however, to be kept in mind that the plenary
power under Article 226 is to be exercised with circumspection when
other remedies have been provided by the contract. But as a statement of
principle, the jurisdiction under Article 226 is not excluded in contractual
matters. Reiterating the said principles, it has been observed in Unitech
Limited and others vs. Telangana State Industrial Infrastructure
Corporation [TSIIC] and others, reported in [2021] 2 SCALE 653, that
while exercising its jurisdiction under Article 226, the Court is entitled to
enquire into whether the action of the State or its instrumentalities is
arbitrary or unfair and in consequence, in violation of Article 14. The
Page No.# 15/18jurisdiction under Article 226 is a valuable constitutional safeguard
against an arbitrary exercise of State power or a misuse of authority. In
determining as to whether the jurisdiction should be exercised in a
contractual dispute, the Court must, undoubtedly eschew, disputed
questions of fact which would depend upon an evidentiary determination
requiring a trial. But, it is equally well-settled that the jurisdiction under
Article 226 cannot be ousted only on the basis that the dispute pertains to
the contractual arena. This is for the simple reason that the State and its
instrumentalities are not exempt from the duty to act fairly merely because
in their business dealings they have entered into the realm of contract.
Similarly, the presence of an arbitration clause does not oust the
jurisdiction under Article 226 in all cases though, it still needs to be
decided from case to case as to whether recourse to a public law remedy
can justifiably be invoked.”
26. In the present case, the undisputed facts are that the respondent No. 3 had
floated a bid in the GeM and the petitioner had participated successfully. The
equipment was supplied on 16.07.2021 and installed on 20.07.2021 and the CRAC was
issued a month thereafter on 21.08.2021. The terms of the contract, as reproduced in
the earlier paragraphs, required the payment to be made within 10 days thereafter.
The payment was not made and the first complaint was raised on 7.10.2021. The
contract does not allow withholding of payment for more than 10 days after the issue
of CRAC and in fact, office memorandums on the issue are to the effect that penalties,
in the form of interest @ 1% are to be imposed for delayed payment. The petitioner
had raised demands for payments in the month of August 2021 itself and the
respondents did not raise immediate objections and required the issue to be referred
to arbitration. Instead, demands were made for replacement of the equipment. From
the actions of the authorities at the helm of affairs in the administration of the
respondent No.3, it appears that since the payment had yet to be made for the
equipment procured, the said fact was used to pressurise the petitioner to replace the
equipment, for which a CRAC certificate had already been issued. This appears to be
arbitrary and unreasonable.
True it is that the respondent No.3 is entitled to certain relief in the event the
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equipment turns out to be defective, but such relief would only arise to the
respondent No.3 after it clears its obligation for making the contracted amount to the
supplier/OEM Certified reseller. The contract itself does not empower the respondent
No. 3 to withhold payment in the manner it has been done.
Whether a defective equipment had been supplied, whether the defects arose
after the installation and issuance of the CRAC certificate and whether the machine is
at all defective and if so, to what relief the respondents would be entitled to are
matters of disputed facts, which would require evidence to be led and thus are
arbitrable matters. But the issue as to whether a supplier would be entitled to
payment for equipment supplied within a period of 10 days from the date of issue of
the CRAC certificate does not require any deep probe, more so when the said
certificate is not disputed by the respondent No. 3.
27. The Hon’ble Supreme Court in Kumari Shrilekha Vidyarthi reported in [1991] 1
SCC 212, has gone on to observe as under;
“22. There is an obvious difference in the contracts between private parties and
contracts to which the State is a party. Private parties are concerned only with their
personal interest whereas the State while exercising its powers and discharging its
functions, acts indubitably, as is expected of it, for public good and in public interest.
The impact of every State action is also on public interest. This factor alone is sufficient
to import at least the minimal requirements of public law obligations and impress with
this character the contracts made by the State or its instrumentality. It is a different
matter that the scope of judicial review in respect of disputes falling within the domain
of contractual obligations may be more limited and in doubtful cases the parties may be
relegated to adjudication of their rights by resort to remedies provided for adjudication
of purely contractual disputes. However, to the extent, challenge is made on the ground
of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or
unreasonable, the fact that the dispute also falls within the domain of contractual
obligations would not relieve the State of its obligation to comply with the basic
requirements of Article 14. To this extent, the obligation is of a public character
invariably in every case irrespective of there being any other right or obligation in
addition thereto. An additional contractual obligation cannot divest the claimant of the
guarantee under Article 14 of non-arbitrariness at the hands of the State in any of its
actions.
23. Thus, in a case like the present, if it is shown that the impugned State
action is arbitrary and, therefore, violative of Article 14 of the Constitution,
Page No.# 17/18there can be no impediment in striking down the impugned act
irrespective of the question whether an additional right, contractual or
statutory, if any, is also available to the aggrieved persons.
24. The State cannot be attributed the split personality of Dr Jekyll and Mr
Hyde in the contractual field so as to impress on it all the characteristics
of the State at the threshold while making a contract requiring it to fulfil
the obligation of Article 14 of the Constitution and thereafter permitting it
to cast off its garb of State to adorn the new robe of a private body during
the subsistence of the contract enabling it to act arbitrarily subject only to
the contractual obligations and remedies flowing from it. It is really the
nature of its personality as State which is significant and must
characterize all its actions, in whatever field, and not the nature of
function, contractual or otherwise, which is decisive of the nature of
scrutiny permitted for examining the validity of its act. The requirement of
Article 14 being the duty to act fairly, justly and reasonably, there is
nothing which militates against the concept of requiring the State always
to so act, even in contractual matters. There is a basic difference between
the acts of the State which must invariably be in public interest and those
of a private individual, engaged in similar activities, being primarily for
personal gain, which may or may not promote public interest. Viewed in
this manner, in which we find no conceptual difficulty or anachronism, we
find no reason why the requirement of Article 14 should not extend even
in the sphere of contractual matters for regulating the conduct of the State
activity.”
28. In the present case, the decision to withhold the payment to the petitioner is a
unilateral decision of the respondent No.3 and the same does not arise out of any
terms engraved in the contract or in the General Terms and Conditions of the GeM.
The payments are in fact required to be effected within a time span, failure of which is
amenable to penalties. In such facts and circumstances, this Court has no hesitation in
holding that the refusal of the respondent No.3 to make payments is an arbitrary and
unreasonable attempt, violating the protection guaranteed by Article 14 of the
Constitution of India.
29. Thus, in the considered opinion of this Court, there is no impediment to
adjudicate the grievance of the petitioner in this writ petition only because of a clause
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in the General Terms and Condition of the GeM which requires referral of disputes
arising out of the contract to arbitration. This Court has noticed that there is no clause
in the contract or the GTC which allows withholding of payments beyond 10(ten) days
after issuing the CRAC. Therefore, the respondent No.3 remains liable to release the
contracted amount to the petitioner forthwith. It is ordered accordingly. The
respondent No. 3 shall make payment of the contracted amount to the petitioner to
the tune of Rs. 32,25,000/- within a period of ten days from the date of receipt of a
certified copy of this order as ten days’ time was fixed in the contract itself from the
date of issuing the CRAC. This order will not impede any rights of the respondent No.
3 to seek such remedies as available under the contract and the GTC of the GeM, so
far as any grievances regarding the performance or efficiency of the equipment is
concerned.
30. Writ petition is allowed to the extent indicated above.
31. Parties are left to bear their own costs.
JUDGE
Comparing Assistant