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6. According to the petitioner, the first respondent wrongly withheld payment due to the petitioner owing to which the petitioner was disabled from performing its part of the contract and the first respondent being a public sector Company cannot interpret a contract in a wholly unfair manner. It is further contended that the invocation of Bank Guarantee was unwarranted and a high-handed action. It is further submitted that though the contract contains an arbitration Clause in Clause 11.5 for reference of disputes to the second respondent or any other person nominated by him, the conduct of the second respondent does not inspire any confidence in the petitioner that he would discharge his duties as an Arbitrator with the integrity and impartiality. The petitioner further apprehended that any decision of the second respondent to appoint some other person as Arbitrator would also be tainted with bias and prejudice. Therefore, the petitioner approached this court by way of the present writ petition.

1. (1996)6 SCC 22 (State of U.P. and others Vs Bridge & Roof Company (India) Ltd.
2. (2008)8 SCC 172 (Pimpri chinchwad Municipal Corporation and others)
3. (2008)12 SCC 500 (Kisan Sahkari Chini Mills Ltd. and others Vs Vardan Linkers and others)

9. In reply, the learned Senior counsel appearing for the petitioner would submit that the writ petition is maintainable against the first respondent as it is the Central Government Company and when the impugned termination is ex-facie arbitrary and violative of Art.14 and 19(1)(g) of the Constitution of India, this Court has sufficient jurisdiction to entertain the present writ petition. In support of the said contention, the learned Senior counsel relied on the decisions of the Hon'ble Supreme Court reported in (2004) 3 SCC 553 (ABL International Vs. Export Credit Guarantee Corporation of India), A.I.R. 2008 SC 1101 (Food Corporation of India and another) and A.I.R. 1973 SC 205 (The D.F.O. South Kheri & others Vs Ram Sanehi Singh) and the decision of the Hon'ble Full Bench of this court reported in 1997(2) SCC 636 (Aluminium Industries Ltd. Madras Vs Minerals & Metals Trading Corporation of India Ltd., Chennai and 2 others). As regards the rule of exclusion of writ jurisdiction by availing an alternative remedy of arbitration, the learned Senior counsel would contend that the said rule is a rule of discretion and not one of compulsion. In support of the said stand, the learned Senior counsel referred to the decisions of the Hon'ble Supreme Court reported in 1974(2) SCC 231 (Union of India Vs. Raman Iron Foundry) and 2003(2) SCC 107 (Harbanslal Sahnia and another Vs. Indian Oil Corporation Ltd and others). The learned Senior counsel would further contend that if there is infringement of the Article 14 of the Constitution of India, the question of invocation of arbitration clause does not arise. Finally, the learned Senior counsel would contend that the respondents 1 and 2 withheld the money payable to the petitioner by making it impossible for the petitioner to proceed with the contract and inspite of such difficulty the petitioner continued to supply the trucks under the new contract till November 2009 and subsequently supplied the trucks after the interim order was granted by this court on 21.12.2009 and in such circumstances, the first respondent cannot compel the petitioner to perform the terms of the contract and in fact despite the severe financial crunch, the petitioner had supplied the trucks and when the outstanding due was more than Rs.6.5 Crores, the petitioner was driven to a situation and took the step which every prudent and reasonable businessman would do if put in such a situation. The learned Senior counsel relied on the decision of the Hon'ble Supreme Court reported in A.I.R. 1961 SC 990 (Mahabir Prasad Rungta Vs Durga Datta), by stating that the facts in the said case were similar, the Honourable Supreme Court has held that a party to which payments were withheld was entitled to rescind the contract as the case was covered by Sec.55 of the Indian Contract Act.

16. It is now no longer res integra that contractual disputes involving public law element are amenable to writ jurisdiction. In these cases, the Central Government not only scrutinised the bills but also verified the claims of the respondents. A direction was issued to make payment. The appellant, which is State within the meaning of Article 12 of the Constitution of India, withheld payment without any legal justification.

21. Jurisdiction of the High Court to entertain a writ application involving contractual matter was considered by a Bench of this Court in ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. (2004) 3 SCC 553, wherein upon referring to a large number of decisions, it was held: (SCC p. 570, para 23) 23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the abovesaid requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent.

"7....... The learned Judicial Commissioner, on the other hand, held that Rungta had unreasonably and in breach of the agreement, withheld large payments and had left the road in a poor state of repair and thus caused the breach of the contract. He did not attach much importance to the controversy over the supply of petrol, which controversy was not mooted before us again.
8. Of the two reasons on which Rungta was held responsible for the breach of the contract, the important one was the withholding of payment.......