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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

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suitable 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

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learned 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

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availed 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

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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, 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,

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there 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