M/S. D.C. Construction vs State Of Chhattisgarh on 9 April, 2026

Chattisgarh High Court

M/S. D.C. Construction vs State Of Chhattisgarh on 9 April, 2026

Author: Ramesh Sinha

Bench: Ramesh Sinha

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                                                                      2026:CGHC:16276-DB
Digitally signed by ALOK
SHARMA
Date: 2026.04.20
                                                                                     NAFR
20:12:54 +0530


                                HIGH COURT OF CHHATTISGARH AT BILASPUR

                                               WPC No. 1610 of 2026

                      M/s. D.C. Construction Through Partner Shri Hari Shankar Rathore, S/o
                      Dev Charan Rathore, Aged About 50 Years, R/o Parijat Extension Nehru
                      Nagar, Bilaspur, District Bilaspur Chhattisgarh
                                                                           ... Petitioner(s)

                                                       versus

                      1 - State Of Chhattisgarh Through The Secretary, Public Works
                      Department, Mantralaya, Mahanadi Bhawan, Atal Nagar, Nawa Raipur,
                      District Raipur Chhattisgarh

                      2 - Engineer In Chief Public Works Department, Atal Nagar Nawa
                      Raipur, District Raipur Chhattisgarh

                      3 - Chief Engineer (Central Tender Cell) Office Of Engineer In Chief P W
                      D Nawa Raipur, District Raipur Chhattisgarh

                      4 - Collector District Surajpur Chhattisgarh

                      5 - Chief Engineer Public Works Department, Sarguja Range, District
                      Sarguja Ambikapur Chhattisgarh

                      6 - Superintendent Engineer Public Works Department, Ambikapur
                      Circle, District Sarguja Ambikapur Chhattisgarh

                      7 - Executive Engineer Public Works Department, Surajpur Division,
                      District Surajpur Chhattisgarh

                      8 - Sub-Divisional Officer Public Works Department, Sub-Division Prem
                      Nagar, District - Surajpur Chhattisgarh
                                                                          ... Respondent(s)

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For Petitioner(s) : Mr. Abhishek Sinha, Sr. Advocate, along with
Mr. Achyut Tiwari, Advocate.

SPONSORED

For Respondent(s) : Mr. Praveen Das, Additional Advocate
General.

Hon’ble Shri Ramesh Sinha, Chief Justice
Hon’ble Shri Ravindra Kumar Agrawal, Judge

Order on Board

Per Ramesh Sinha, Chief Justice

09/04/2026

1. The petitioner has filed the present writ petition challenging the

order dated 11.02.2026 (Annexure-P/1) and order dated

30.12.2025 (Annexure-P/15) issued by the Respondent No. 7,

also claiming for restoration of an agreement and quashing of

fresh NIT issued by the Respondent No. 3, and prayed the

following relief in the writ petition:-

“10.1 That, this Hon’ble Court may kindly be pleased
to call for the entire record from the
respondents’ authorities pertaining to the case
of the petitioner.

10.2 That this Hon’ble Court may kindly be pleased
to quash/set aside impugned orders dated
11.02.2026 (Annexure P/1) and order dated
30.12.2025 (Annexure P/15) issued by
respondent no. 7, in the interest of justice.

10.3 That this Hon’ble Court may kindly be pleased
to quash/set aside impugned notice inviting
tender (Annexure P/17) issued by respondent
no. 3 and its subsequent proceedings, in the
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interest of justice.

10.4 That, this Hon’ble Court may kindly be pleased
to direct the respondent authorities to restore
the agreement (Annexure P/8) and work order
(Annexure P/9) and also to extend the due
date mentioned therein as this Hon’ble Court
may deem fit, in the interest of justice.

10.5 That, this Hon’ble Court may kindly be pleased
to grant any other relief, as it may deem fit and
appropriate, in favor of petitioner, in the
interest of justice.

2. The subject matter, in brief, is that the petitioner firm is Class- A

contractor and eligible to participate in tenders for five years from

the date of issuance of his certificate issued by the Engineer In

Chief (PWD), C.G. Respondent No. 3 issued an NIT No.

060/TC/24-25 for strengthening work of Tara- Prem Nagar,

Ramanuj Nagar- Krishnapur Road, Length – 27 km. District

Surajpur with the (Work code- W 25918). The petitioner was

declared as L1, and an agreement was executed between the

petitioner and the Respondent No. 7, and he was allowed to start

work there. The work order was also issued on 19.11.2024 for the

aforesaid work, for the duration of work of 18 months. The total

cost of work was Rs. 5076.94 lakhs. The petitioner had also

submitted the bank guarantee of Rs. 2,52,86,983/- issued on

18.11.2024, and has also submitted the bank guarantee for

Additional Performance Security Deposit. The petitioner prepared

another bank guarantee amounting to Rs. 2,53,84,000/- issued on
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12.03.2025 for mobilization advance, however, the said bank

guarantee was revoked by the petitioner, and afresh bank

guarantee was prepared by him on 23.09.2025. After issuance of

work order, the petitioner started the work of strengthening the

aforesaid road under the terms and conditions of the agreement,

and raising running bills on regular monthly basis. However, due

to inaction of the respondent authorities, the running bills were not

realized within the stipulated time, and the work was adversely

affected. The subject work falls and goes through the residential

areas, and the residents of various places started creating

hindrance because of their nuisance, the progress of work was

affected, and the petitioner was facing difficulties of smooth

working for various reasons like nuisance, pipeline and poles

standing on the roads. He made several representations to the

authorities concerned for clearance of the aforesaid difficulties,

also prepared for release of the running bills within the prescribed

time, but his representation had not been given any heed, and the

position remained as itself. The respondent No. 7 issued a letter

on 16.09.2025, to the Axis Bank, Rama Trade Centre Branch,

issued the bank guarantee to the petitioner, directing the bank to

verify the bank guarantee of the petitioner.

3. It is also the case of the petitioner that during the execution of the

work, an inspection was carried out on 28.11.2025 by the

respondent authorities at the site, wherein it was found that

approximately 24% work had been completed. However, the
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authorities have prepared an adverse report against the petitioner,

and then the Chief Engineer recommended to the Executive

Engineer for termination of the contract of the petitioner. The said

recommendation by Chief Engineer violates Clause 28 of the

agreement, which provides for arbitration mechanism, and the

same is violated, as the said clause 28 contemplates adjudication

by the Superintending Engineer, thereafter, an appeal before the

Chief Engineer. However, in the present case, the Chief Engineer

himself recommended for termination of the contract and per-

determined, therefore, no remedy would be available to the

petitioner in the appeal, if ultimately filed before it.

4. It is also the case of the petitioner that the petitioner is

continuously working under the terms and conditions of the

contract and showing the progress of the work, however, on

30.12.2025, the respondent No. 7 issued a letter to the petitioner

terminating the agreement executed between them, alleging

disproportionate progress in the work. After receiving the

termination letter, the petitioner replied to the respondent

authorities on 06.01.2026, intimating them that one of the partners

of the firm had suffered a severe attack of brain on 02.01.2026,

and because of which the work is affected, and the progress of

the work will be taken care of and will be completed within the

prescribed time limit, and prayed for relaxation and reinstatement

of the agreement. The respondent No. 7, without considering the

representation of the petitioner, issued the impugned letter dated
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11.02.2026, alleging that the petitioner left the work incomplete,

and directing the petitioner to deposit the amount of Rs.

5,10,05,349.00/- on various heads, and ordered for forfeiting the

total amount of Rs. 3,09,15,704.00/- including the security

deposit, Additional Performance Security, and on the same date,

the respondent No. 3 issued fresh NIT for the same work.

5. The petitioner had challenged the order dated 11.02.2026 in

WP(C) No. 1158 of 2026 before this Court, however, the said writ

petition was dismissed as withdrawn, with liberty to file a fresh

petition, and then the present petition has been filed by the

petitioner with additional facts and grounds.

6. Learned counsel for the petitioner would submit that the petitioner

was continuously working as best of his eligibility, however,

because of delay in payment of running bills, some delay in

progress of work was caused. The respondent authorities,

neglecting the provisions of the agreement and without affording

proper opportunity of hearing to the petitioner, and without

awarding due date for completion of work i.e. 17.03.2026, they

terminated the agreement and forfeited the security deposit of the

petitioner, also issued fresh NIT. The order dated 11.02.2026

passed by the respondent authorities, and issuance of NIT, is

arbitrary and unreasonable. He would also submit that the

impugned order is based on the recommendation of the Chief

Engineer, and the supporting authorities are bound to follow the

recommendation of the higher authorities, the Executive Engineer,
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i.e. respondent No. 7, exercised its powers under the

recommendation of the Chief Engineer, which is impermissible in

law, and they have to exercise their own discretion while taking

such decision. The termination order dated 30.12.2025 cannot by

itself constitute the valid basis for termination of the contract

under Clause 2 or 3 of the said contract. The said clause provide

the mechanism for dealing with delay or slow progress in

execution of the work including grant of extension of time either

with penalty or without penalty, depends upon the facts and

circumstances of the case. Clause 28 of the agreement

constitutes arbitration/dispute resolution clause providing a two-

tier departmental mechanism for adjudication of the dispute

arising out of the contract. As per the said clause, the disputes are

first required to be referred to the Superintending Engineer,

thereafter, an appeal lies to the Chief Engineer. In the present

case, the Chief Engineer, in the inspection report dated

28.11.2025, already recorded a finding and recommended that

since the petitioner was unwilling to complete the contract, his

contract is liable to be terminated. In such per-determined finding

by the appellate authority itself, the dispute resolution mechanism

under Clause 28 stands exhausted, and no efficacious remedy of

arbitration is available to the petitioner. He would also submit that

on various occasions, the work of the petitioner was inspected

and found satisfactory, however, with fraudulent intention to

provide the work to a favorable person, the contract of the

petitioner has been terminated, and order of recovery and
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forfeiture of security deposit has been passed. Further, on the

same day, fresh NIT has been issued for the same work. He

would further submit that the respondent authorities cannot take

advantage of their own fault for not releasing the running bills in

time, which hampered the progress of work. The respondent

authorities themselves have violated Clause 8 of the agreement,

which deals with the submission of running bills and its payment.

The petitioner had submitted the running bills of work done by him

periodically and within time, however, the said running bills have

not been released periodically, and huge sum was withheld by the

respondent authority. The vehicles and machineries of the

petitioner are on loans, and the offfice and other properties of the

petitioner have been mortgaged before the bank concerned for

issuance of bank guarantee, and forfeiture of bank guarantee and

Additional Performance Security would cause hardship to the

petitioner. The reasons for delay in completion of the work is also

that it was the forest area, some portion comes under the

residential urban area where the lands could not be available and

also the pipeline and poles are there. In between 20.01.2025 to

25.01.2025, the work was affected due to panchayat elections,

therefore, the petitioner requested the respondent authorities for

extension of time to complete the work, but they have not

considered his application. Approximately 25% of the work had

already been completed by the petitioner, and the vehicles and

machineries are still lying on the project site. He would also

submit that under Clause 2 or 3 of the contract, the respondent
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authorities are not empowered for forfeiting the security deposit,

Earnest Money Deposit, and Additional Performance Security

deposit, therefore, the recovery of Rs. 5,10,05,349/- and forfeiture

of END and APS is arbitrary, illegal and void, therefore, the

petition may be allowed, and the impugned order, as well as fresh

NIT, may be quashed, and the petitioner may be permitted to

carry out and to complete the work awarded to him under the

work order dated 19.11.2024.

7. On the other hand, learned counsel appearing for the respondent-

state would submit that the chief engineer had submitted the

inspection report dated 28.11.2025 which was carried out by a

team headed by executive engineer and other authorities of the

department. there is no finding of the chief engineer so that it can

be said that since the chief engineer has already made up his

mind, the availing of arbitration clause would be of no use. He

would also submit that a complete mechanism has been provided

under Clause- 28 of the contract which deals with the arbitration

clause. He would also referred to Section 7 of The Chhattisgarh

Madhyastham Adhikaran Adhiniyam, 1983, and submits that

irrespective of the fact whether the agreement contains an

arbitration clause or not, refer in writing they dispute to the

tribunal, therefore, the petitioner is having an efficacious

alternative remedy to avail the arbitration clause of the

agreement. He would further submit that considering the progress

of the work which is much less than the schedule work, the
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authorities have decided to terminate the work order issued in

favour of the petitioner and ultimately vide order dated

30.12.2025, the work order has been cancelled and vide order

dated 11.02.2026, the EMB, SD and APS have been forfeited

which is strictly in accordance with the law. In the aforesaid

circumstances, the writ petition filed by the petitioners is liable to

be dismissed.

8. We have heard learned counsel for the parties and perused the

material annexed with the writ petition.

9. It is undisputed in the case that the petitioner was awarded

contract for strengthening work of Tara-Premnagar-

Ramanujnagar-Krishnapur road, length 27 KM, Dist- Surajpur and

a work order was issued in his favour on 19.11.2024. It is also not

in dispute that the total cost of Rs. 5076.94 Lakh and the total

period of work were 18 months. Since the petitioner could not

carry out the progress of work in its due schedule, the respondent

authorities had inspected the work site and found less work than

its schedule and they submitted a report to the chief engineer.

From the report dated 28.11.2025 (Annexure-P/21), it also

transpires that the quality of work done by the petitioner is also

inferior to the standard. And then the authorities have decided not

to continue with the agreement with the petitioner and ultimately

terminated the contract on 30.12.2025 and forfeited the security

deposit and EMD, SD and APS vide its order dated 11.02.2026.

The recovery order after adjustment of the work done and
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payment received by the petitioner was also issued by the order

dated 11.02.2026, and the petitioner was held liable for Rs.

5,10,5349/-.

10. From the document (Annexure-P/22) annexed with the petitioner,

which is the explanation submitted by the petitioner, on

30.05.2025 in reply to the letter dated 22.05.2025 sent by the

respondent authorities, the petitioner explained various reasons

that caused hindrance in the smooth progress of work and delay

in the execution of work under the work order.

11. Clause 28 of the contract stipulates the arbitration clause which

reads as under:-

Arbitration Clause: Clause 28

Except as otherwise provided in this contract
all question and dispute relating to the
meaning of the specification, designs,
drawings and instruction herein before
mentioned as to thing whatsoever in any way
arising out of or relating to the contract
designs, drawings, specifica estimate,
concerning the works, or the execution or
failure to execute the same, whether arising
during the progress of the work, or a after the
abandonment there of shall be referred to the
Superintending Engineer for his decision,
within a period of 30 (thirty) days of such an
occurrence (s). There upon the
Superintending Engineer shall give his written
instructions and/or decisions, after hearing
the contractor and Executive Engineer within
a period of 15 (fifteen) days of such request.
This period can be extended by mutual
consent of parties.

Upon receipt of written instructions or
decisions, of Superintending Engineer the
parties shall promptly proceed without delay
to comply such instructions or decisions. If
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the Superintending Engineer fails to give his
instruction or decisions in writing within a
period of 15 (fifteen) day’s or mutually agreed
time after being requested and/or, if the party
(es) is/are aggrieved against the decision of
the Superintending Engineer, the aggrieved
party may within 30 days prefer an appeal to
the Chief Engineer, who shall afford an
opportunity to the parties of being heard and
to offer evidence in support of his appeal.

The, Chief Engineer will give his decision
within 30 (thirty) days, or such, mutually
agreed period.

If any party is not satisfied with the
decision of the Chief Engineer he can file the
petition for resolving the dispute through
arbitration in the arbitration tribunal.

A reference to Arbitration Tribunal shall
be no ground for not continuing the work on
the part of the Contractor. Payment as per
original terms and condition of the agreement
shall be continued by the Executive Engineer
in accordance with clause 8 above.”

12. Further Section 7 of the Chhattisgarh Madhyastham Adhikaran

Adhiniya, 1983, provided a remedy to reference to tribunal

irrespective of availability of arbitration clause in the contract.

Section 7 of the Adhiniyam, 1983 is as under:-

“7. Reference to Tribunal.-(1) Either party to
a works contract shall irrespective of the fact
whether the agreement contains an
arbitration clause or not, refer in writing the
dispute to the Tribunal.

(2) Such reference shall be drawn up in such
form as may be prescribed and shall be
supported by an affidavit verifying the
averments.

(3) The reference shall be accompanied by
such fee as may be prescribed.

[(4) Every reference shall be accompanied by
such documents or other evidence and by
such other fees for service or execution of
processes as may be prescribed.

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(5) On receipt of the reference under sub-

section (1), if the Tribunal is satisfied that the
reference is a fit case for adjudication, it may
admit the reference but where the Tribunal is
not so satisfied it may summarily reject the
reference after recording reasons therefor.]”

13. The Hon’ble Supreme Court in the case of Tata Motors Limited v

(Best) and Others passed in Civil Appeal No. 3897 of 2023 vide

judgment dated 19.05.2023 held as follows :

“48. This Court being the guardian of
fundamental rights is duty-bound to interfere
when there is arbitrariness, irrationality, mala
fides and bias. However, this Court has cautioned
time and again that courts should exercise a lot
of restraint while exercising their powers of
judicial review in contractual or commercial
matters. This Court is normally loathe to interfere
in contractual matters unless a clear-cut case of
arbitrariness or mala fides or bias or irrationality
is made out. One must remember that today
many public sector undertakings compete with
the private industry. The contracts entered into
between private parties are not subject to
scrutiny under writ jurisdiction. No doubt, the
bodies which are State within the meaning of
Article 12 of the Constitution are bound to act
fairly and are amenable to the writ jurisdiction of
superior courts but this discretionary power must
be exercised with a great deal of restraint and
caution. The courts must realise their limitations
and the havoc which needless interference in
commercial matters can cause. In contracts
involving technical issues the courts should be
even more reluctant because most of us in
Judges’ robes do not have the necessary
expertise to adjudicate upon technical issues
beyond our domain. The courts should not use a
magnifying glass while scanning the tenders and
make every small mistake appear like a big
lunder. In fact, the courts must give “fair play in
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the joints” to the government and public sector
undertakings in matters of contract. Courts must
also not interfere where such interference will
cause unnecessary loss to the public exchequer.
(See: Silppi Constructions Contractors v. Union of
India, (2020) 16 SCC 489).

52. Ordinarily, a writ court should refrain itself
from imposing its decision over the decision of
the employer as to whether or not to accept the
bid of a tenderer unless something very gross or
palpable is pointed out. The court ordinarily
should not interfere in matters relating to tender
or contract. To set at naught the entire tender
process at the stage when the contract is well
underway, would not be in public interest.

Initiating a fresh tender process at this stage may
consume lot of time and also loss to the public
exchequer to the tune of crores of rupees. The
financial burden/implications on the public
exchequer that the State may have to meet with if
the Court directs issue of a fresh tender notice,
should be one of the guiding factors that the
Court should keep in mind. This is evident from a
three-Judge Bench decision of this Court in
Association of Registration Plates v. Union of
India and Others, reported in (2005) 1 SCC 679.

53. The law relating to award of contract by the
State and public sector corporations was
reviewed in Air India Ltd. v. Cochin International
Airport Ltd., reported in (2000) 2 SCC 617 and it
was held that the award of a contract, whether by
a private party or by a State, is essentially a
commercial transaction. It can choose its own
method to arrive at a decision and it is free to
grant any relaxation for bona fide reasons, if the
tender conditions permit such a relaxation. It was
further held that the State, its corporations,
instrumentalities and agencies have the public
duty to be fair to all concerned. Even when some
defect is found in the decision-making process,
the court must exercise its discretionary powers
under Article 226 with great caution and should
exercise it only in furtherance of public interest
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and not merely on the making out of a legal point.
The court should always keep the larger public
interest in mind in order to decide whether its
intervention is called for or not. Only when it
comes to a conclusion that overwhelming public
interest requires interference, the court should
interfere.

54. As observed by this Court in Jagdish Mandal
v. State of Orissa and Others, reported in (2007)

14 SCC 517, that while invoking power of judicial
review in matters as to tenders or award of
contracts, certain special features should be
borne in mind that evaluations of tenders and
awarding of contracts are essentially commercial
functions and principles of equity and natural
justice stay at a distance in such matters. If the
decision relating to award of contract is bona fide
and is in public interest, courts will not interfere
by exercising powers of judicial review even if a
procedural aberration or error in assessment or
prejudice to a tenderer, is made out. Power of
judicial review will not be invoked to protect
private interest at the cost of public interest, or to
decide contractual disputes.”

14. It is trite law that judicial review in contractual matters is confined

to examining the decision-making process and not the merits of

the decision itself. The Court does not sit as an appellate authority

over administrative decisions relating to contracts. In Tata Cellular

v. Union of India,(1994) 6 SCC 651, the Hon’ble Supreme Court

laid down that judicial review is concerned with reviewing not the

merits of the decision but the decision-making process, and

interference is warranted only when the action of the State is

arbitrary, unreasonable, or violative of Article 14. In the present

case, the material on record indicates that the respondent

authorities conducted inspection, assessed the progress and
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quality of work, and thereafter took a decision to terminate the

contract. Whether the progress was adequate or whether the

petitioner had valid justifications are essentially factual issues,

which are not amenable to adjudication in writ jurisdiction. Hence,

this Court is not inclined to re-appreciate such factual

determinations.

15. The petitioner has contended that the recommendation made by

the Chief Engineer amounts to pre-determination, thereby

rendering the remedy under Clause 28 illusory. However, on

perusal of the inspection report dated 28.11.2025, it appears that

the said report is based on factual assessment of the work

executed and does not conclusively adjudicate the rights of the

parties. Mere recommendation by a superior authority, based on

inspection, cannot be equated with final adjudication so as to

vitiate the contractual dispute resolution mechanism. In the

present matter, the petitioner was issued notices and had

submitted explanations, which have been considered by the

authorities. Therefore, it cannot be said that there has been a

complete denial of opportunity or violation of natural justice

warranting interference under Article 226.

16. With regard to the challenge to the termination order dated

30.12.2025 and the consequential order dated 11.02.2026, this

Court finds that the respondent authorities have exercised their

contractual powers on the basis of alleged slow progress and

inferior quality of work. The terms of the contract empower the

employer to terminate the contract and forfeit security deposits in
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the event of default. The petitioner’s contention regarding delay in

payment of running bills and site hindrances gives rise to disputed

questions of fact, which would require evidence and cannot be

adjudicated in writ proceedings. In ABL International Ltd. v. Export

Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 553, it

has been held that although writ jurisdiction may be invoked in

contractual matters, the same is confined to cases where the

action of the State is arbitrary or unreasonable on the face of the

record. In the present case, the decision to issue a fresh Notice

Inviting Tender (NIT) after termination of the contract appears to

be a consequential administrative step to ensure completion of

public work and cannot, prima facie, be termed arbitrary.

17. Accordingly, no case for interference is made out. The writ petition

is, therefore, dismissed, with liberty to the petitioner to avail

appropriate remedies before the competent forum, in accordance

with law.

                   Sd/-                                         Sd/-

       (Ravindra Kumar Agrawal)                        (Ramesh Sinha)
                Judge                                   Chief Justice


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