The principle of legitimate expectation and fair play requires public authorities to act fairly towards the public, and failure to consider and give due weight to legitimate expectations may render the decision arbitrary.

JUDGMENT

Jaishree Thakur, J. - The petitioners have approached this Court under Article 226/227 of the Constitution of India seeking issuance of an appropriate writ, order or direction specially a writ in the nature of certiorari for quashing letter dated 05.10.2017(Annexure P-8) passed by the respondent instructing the petitioners to furnish another bank guarantee for an amount of ?41 lakhs in view of the demand of the petitioners for refund of the amount already withdrawn by them with a further prayer to refund the amount of ?41 lakhs given by petitioner by way of conditional bank guarantee along with interest.

2. Few facts need to be noted, which have led to the filing of the instant writ petition. The petitioner No.1 herein is a Rice sheller and approached the respondent for allotment of paddy for the crop year 2016-2017 for shelling and delivery of custom milled rice. The respondent refused to allot paddy on account of alleged recovery against the petitioners as a civil suit had been filed. The procurement agency i.e Markfed, addressed a letter to the Department of Food, Civil Supplies and Consumer Affairs to stop any allotment of paddy to the petitioner on account of pendency of a civil suit. In fact, parties had entered into an agreement for custom milling rice during the crop year 1994 -1995. On account of a dispute having arisen regarding custom milled rice, the matter was referred to the arbitrator who passed an award of ?23,06,616/- in favour of Markfed and against the petitioners. The award of the arbitrator was challenged in a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 and the award was set aside by the District Judge Ludhiana with liberty to Markfed to refer the matter to the Managing Director for decision in terms of clause 6 (iii) of the agreement. A claim petition for recovery of ?9,28,507/- was prepared in accordance with the revised policy of the government and the matter was referred to the Managing Director, Markfed for decision. In terms of the award dated 21.6.2013, the petitioners were to pay an amount of ?9,28,507/- to Markfed.

Despite Markfed addressing several letters requesting for payment, the petitioners failed to do so, which led to Markfed filing a civil suit for recovery of ?9,28,507/- along with interest and future interest against the petitioners. The suit was contested by filing written statement. In order to survive in business, the petitioners sought allotment of paddy for custom milling for the crop year 2016-2017. In order to release paddy, Markfed (during the pendency of the civil suit) asked the petitioners to furnish a bank guarantee to the tune of ?41 lakhs in lieu of the interest accumulated over the years on the principal amount allegedly due from the petitioners. The amount claimed was over and above a cheque already given for a sum of ?9,28,507/-, in lieu of the principal amount alleged to be recovered from the petitioners. The Bank Guarantee dated 21.10.2016 was valid uptill 31.3.2017 and was given under protest with conditional terms. However, during the pendency of the civil suit, the respondents unilaterally withdrew the bank guarantee without the consent of the petitioners. On being asked to refund the amount withdrawn unilaterally and without prior approval, the petitioners have been asked to deposit another bank guarantee for the same amount by Annexure P-8 dated 5.10.2017. Aggrieved against this demand the writ petition has been filed seeking to set aside Annexure P-8 and refund of the amount withdrawn.

3. Mr. Mittal, learned counsel appearing on behalf of the petitioners submitted that the respondent Markfed had filed a suit for recovery of ?9,28,507/- along with interest. During the pendency of the suit, the petitioner deposited the principal amount of ?9,28,507/- under protest and they were also asked to furnish a bank guarantee of ?41 lakhs in order to satisfy the component of interest in case Markfed was successful in its claim.

The bank