Chattisgarh High Court
M/S. D.C. Construction vs State Of Chhattisgarh on 9 April, 2026
Author: Ramesh Sinha
Bench: Ramesh Sinha
1
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)
2
For Petitioner(s) : Mr. Abhishek Sinha, Sr. Advocate, along with Mr. Achyut Tiwari, Advocate.
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 3 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 4 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 5 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 6 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, 7 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 8 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 9 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 10 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 11 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 12 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.
13(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 The Brihan Mumbai Electric Supply & Transport Undertaking (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 14 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 15 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 16 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 17 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
Alok