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IN THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)
HONOURABLE MR. JUSTICE KAUSHIK GOSWAMI
Muslim Ali, Son of Late Makbul Ali – Appellant
Versus
State of Assam, Represented by the Commissioner & Special Secretary to the Govt. of Assam, Public Works (Roads) Department – Respondent
JUDGMENT :
(KAUSHIK GOSWAMI, J.)
Heard Mr. D. Das, learned Senior Counsel assisted by Mr. P. Sarma, learned counsel for the petitioner. Also heard Mr. B.Gogoi, learned Standing Counsel, PWD for all the respondents.
2. By way of this petition under Article 226 of the Constitution of India, the petitioner is assailing the illegal arbitrary and malafide actions of the respondent authorities in not releasing security deposit amount to the petitioner in respect of road construction works under Package No. AS-20-29 (ADB) and Pakage No. AS-20-33 (ADB) for Nalbari District, Assam.
3. The brief facts of the case is that the petitioner is a Class 1 (A) Contractor under the Public Works Department, Assam. The respondent No. 3 had allotted two road construction works to the petitioner from HMD road to Bartal No. 3, Bamunbari to Mulaghat, Barnibari to Paikanbarmaja, Mugdi to Khudra Sinadi including Cross Drainage works and Routine Maintenance of the works for five years under PMGSY (RRS-II, ADB, Batch-II) PMGSY (Ph – VI), Package No. AS-20-29, ADB (hereinafter referred to as “Package No. (i)”) vide final work order (notice to proceed with the work) No. T/BR/PMGSY/ ADB/419/2006-07/3 dated 29.06.2007
The court ruled that a security deposit related to construction work cannot be forfeited for non-performance of maintenance obligations, emphasizing fair treatment in contractual matters.
Writ petitions are maintainable for contractual claims against state entities, and withholding payments due to contractors on arbitrary grounds violates constitutional obligations to act fairly.
A party's entitlement to damages in breach of contract cases must correlate with actual damages suffered; security deposits can be refunded when no loss is incurred by the other party.
The court affirmed that failure to demonstrate actual loss precludes the forfeiture of security deposits, underscoring the principle that a breach must cause substantial damages to warrant penalties.
Point of law: Not only is the writ jurisdiction of this Court invoked in a purely contractual matter, having no colour of public law and the writ remedy is thus not maintainable.
Contractual obligations regarding tax reimbursements and security deposit releases must be met based on evidence of completion and payment obligations.
Interest on security deposit is not payable unless the contractor fulfills the conditions specified for refund, which includes obtaining a Labour Clearance Certificate.
A state instrumentality cannot extend a contract unilaterally without mutual consent, and forfeiture of security deposits requires proof of loss and compliance with natural justice principles.
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