Agartala, Nov 1: The Tripura High Court has rejected the State Government’s defence of cross-contract liability, ruling that authorities cannot arbitrarily withhold security deposits and performance guarantees from completed road projects by citing alleged defaults in unrelated construction agreements, terming such action unconstitutional.
Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha delivered the judgment on October 30, 2025, in Writ Petition No.360 of 2023, directing the respondents to refund Rs 74,93,770 to contractor Ratan Sarkar with 12 percent annual interest by December 31, 2025. The Court also imposed costs of Rs 25,000 each on Respondents No. 1 and 3.
The case centred on three road construction and maintenance contracts awarded to Ratan Sarkar under an agreement dated December 17, 2008, with Hindustan Steelworks Construction Limited. The Public Works Department of the Government of Tripura had entrusted these works to the Executive Engineer, Kumarghat Division, who engaged the petitioner for execution.
The petitioner completed all three contracts along with the mandatory fifth-year maintenance period. The first work was completed on March 31, 2012, with maintenance concluded on November 18, 2020. The second work was completed on April 30, 2013, with maintenance finishing on November 15, 2018. The third work was completed on March 31, 2012, and all payments for this contract were released without issue.
Despite successful completion and the passage of the maintenance period, the respondents withheld Rs 20,54,804 in performance guarantee for the first contract and Rs 27,19,504 in security deposit plus Rs 27,19,462 in performance guarantee for the second contract, totaling Rs 74,93,770.
The State authorities defended their position by invoking Clause 53 of the Standard Bidding Document, claiming they were entitled to recover alleged damages from the petitioner’s dues under NIT-30 because of his supposed non-performance in three other contracts designated as NIT-85, NIT-89, and NIT-95. They contended that the petitioner had “abandoned two roads vide NIT-85 midway, and the contract of the petitioner was terminated in 2019 at the risk and cost of the petitioner.”
According to the respondents, “For non-performance in other projects or roads, damages caused may be recovered from the petitioner as a debt payable to the employer” under Clause 53.
The respondents also argued that the writ petition was not maintainable because the petitioner had failed to utilize the Dispute Redressal System provided under Clause 24 of the General Conditions of Contract before approaching the Court.
The petitioner countered by arguing that Clause 53 was being misapplied. According to the petitioner’s counsel, Senior Advocate Somik Deb and Advocate Simpee Saha, the clause “is invocable only in case of termination of the contract in question on account of a fundamental breach of contract committed by the contractor” and “cannot be pressed into service with reference to non-performance, even if any by the contractor, under any other contract.”
The Court accepted the petitioner’s interpretation. According to the judgment, “A perusal of the said Clause shows that it deals with a situation of termination of contract on account of fundamental breach of the contract by the contractor.”
The Court emphasized that the term “contract” as defined in the agreement documents specifically referred only to “the contract between the employer and the contractor to execute, complete and maintain the works” under NIT-30. “Thus only the agreement relating to NIT-30 is the ‘contract’ which can be referred to and relied upon, and other contracts, if any, between the parties, cannot be considered,” the order stated.
“Clause 53 cannot be invoked in the facts and circumstances of the case because admittedly the petitioner has completed the three contracts covered by the subject agreement NIT-30, and even the maintenance period of five years has already elapsed long back,” the judgment declared.
Also read | Northeast India Receives Only 8.5% of Centre’s Total Rs 1.01 Lakh Crore Fund Release
On the question of maintainability, the Court rejected the respondents’ reliance on the Dispute Redressal System. “A reading of the above Clause indicates that what this Clause proposes is a decision on a dispute between the parties by officers of the respondents. It is not an independent adjudicatory mechanism, such as arbitration. It also does not provide for an alternative dispute mechanism such as conciliation or mediation,” the order observed.
The Court noted that the agreement specifically prohibited arbitration through Clause 25, which “specifically prohibits arbitration in regard to disputes arising under the contract.”
According to the judgment, “Clause 24 relied upon by the respondents is not an alternative remedy at all, as it makes the respondents, judges in their own cause, and the petitioner is not obligated to subject himself to any decision made by the persons nominated by the respondents as mentioned in Clause 24, and he is entitled to invoke the jurisdiction of this Court under Article 226 of the Constitution of India.”
The Court relied on established Supreme Court precedents to support its decision to entertain the writ petition. Citing ABL International Ltd. and Another v. Export Credit Guarantee Corporation of India Ltd. and Others, the Court noted that the Supreme Court had held that “if on a given set of facts, the State is found to have acted in an arbitrary manner even in a matter of contract, an aggrieved party can approach the Court by way of writ under Article 226 of the Constitution.”
The Supreme Court judgment had established three principles: that writ petitions against the State or its instrumentalities arising from contractual obligations are maintainable in appropriate cases; that disputed questions of fact do not automatically bar writ jurisdiction; and that writ petitions involving monetary claims are also maintainable.
Also read | Th. Muivah’s Journey Home to Somdal Revives the NSCN’s Spiritual and Political Resolve
The Court also cited Unitech Limited and Others v. Telangana State Industrial Infrastructure Corporation, which held that “if the State instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under Article 226 of the Constitution of India would lie.”
According to that judgment, “The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of State power or the misuse of authority, and that the State and its instrumentalities are not exempt from their duty to act fairly, merely because in their business dealings they have entered into the realm of contract.”
Applying these principles, the Court concluded that “the refusal of the respondents to pay to the petitioner the amounts owed to the petitioner towards security deposit and performance guarantee in respect to the NIT-30 contract on the pretext that some other contracts which the petitioner had entered into with the respondents had not been satisfactorily completed by the petitioner, is patently arbitrary, unreasonable and violative of Articles 14 and 300A of the Constitution of India.”
The Court dismissed the respondents’ allegation that the petitioner had suppressed material facts by not disclosing issues with other contracts.
“All the facts relating to the subject contract has been placed on record by the petitioner, and there is no suppression of facts and there is no fraud. Failure of the petitioner to mention about the other contracts which are not subject matter of the agreement NIT-30 cannot be said to be a suppression of fact because it was not necessary for the petitioner to refer to the same,” the order stated.
Also read | Arunachal Pradesh: Principal, Warden, and Accountant Arrested in Sanggo English School sexual assault case
The judgment also noted that “there are also no disputed questions of fact except the interpretation of Clause 24 and Clause 53 of the SBD, and there is no impediment to this Court to exercise jurisdiction under Article 226 of the Constitution of India.”
The petitioner had also invoked Section 70 of the Indian Contract Act, 1872, arguing that since he had delivered services to the respondents which were accepted, and since these services were not rendered gratuitously, the respondents were legally bound to repay the amounts due.
The Court’s order directing payment by December 31, 2025, with 12 percent annual interest from the respective dates amounts fell due, recognizes the commercial nature of the transaction. The judgment has been marked as fit for reporting, establishing an important precedent against arbitrary State action in contractual matters.