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2025 Supreme(Online)(CHH) 441
HIGH COURT OF CHHATTISGARH
Shri Ramesh Sinha, CJ, Shri Ravindra Kumar Agrawal, J
M/S BSBK PRIVATE LIMITED – Appellant
Versus
THE STATE OF CHHATTISGARH – Respondent
WA/185/2025
The withholding of payment without valid reason constitutes arbitrary action, and courts have discretion to award interest for delayed payments in commercial transactions.
Headnote:(A) Chhattisgarh High Court (Appeal to Division Bench) Act, 2006 - Section 2(1) - Writ appeal against order for refund of security deposit and performance guarantee - The learned Single Judge ordered refund within two months, failing which interest at 7% per annum would apply - The appellant completed the work and was entitled to the refund as per contract terms. (Paras 4, 5, 13, 15)
(B) Contract Law - The withholding of payment without valid reason constitutes arbitrary action - Courts have discretion to award interest for delayed payments in commercial transactions. (Paras 6, 13)
Facts of the case:
The appellant participated in a tender for construction work, completed it, and was entitled to a refund of security deposit and performance guarantee, which was unjustifiably withheld by the respondents. (Paras 5, 10)
Findings of Court:
The respondents acted unfairly and arbitrarily in withholding the amounts due to the appellant, who was entitled to the refund and interest for delay. (Paras 13, 15)
Issues: Whether the withholding of the security deposit and performance guarantee was justified and whether the appellant was entitled to interest for delayed payment. (Paras 6, 13)
Ratio Decidendi: The court held that the withholding of payment without valid reason is arbitrary, and interest may be awarded for delayed payments in commercial transactions. (Paras 13, 15)
Result: Writ appeal dismissed.
Per Ramesh Sinha , Chief Justice
27 . 03 .202 5
1. Heard Mr. Satish Agrawal, appearing through virtual mode and Mr.Siddharth Dubey, learned counsel for the appellant as well as Mr. Shashank Thakur, learned Deputy Advocate General, appearing for the State/respondent No.1 and Mr. Ashish Tiwari, learned counsel, appearing for respondent Nos. 2 & 3/ Municipal Corporation, Bilaspur on I.A. No. 01 of 2025, which is an application for condonation of delay of 65 days in filing the instant appeal.
2. On due consideration and for the reasons mentioned in I.A. No. 01 of 2025, the same is allowed and delay in filing the hereby condoned.
3. With the consent of learned counsel for the parties, the appeal is heard finally.
4. By way of present writ appeal under Section 2 of Sub-Section (1) of the Chhattisgarh High Court (Appeal to Division Bench Act, 2006, the appellant, who was writ petition in the writ petition has challenged the order dated 22.10.2025 passed by learned Single Judge in WPC No. 2524 of 2024 (M/s. BSBK Private Limited Vs. State of Chhattisgarh & Others), whereby the writ petition filed by the writ petitioner / appellant herein was allowed by the learned Single Judge and it was ordered that the respondents shall refund the amount towards security deposit and performance guarantee to the petitioner within period of two months, failing which, the aforementioned amount shall carry interest at the rate of 7% per annum.
5. Brief facts necessary for disposal of this appeal are that respondent No.2 issued Notice Inviting Tender (NIT) on 25.11.2016 for the work “Construction of Multi Story Building Including Internal Water Supply, Sanitary and Internal Electrification For 1232 Nos. of DUS by Monolithic/PRE-Cast Technology with Infrastructure (Road, Drain, Water Supply, Sewerage, Rain Water Harvesting Etc.) under HFA Scheme” at Ashok Nagar. The petitioner participated in the tender proceedings, became successful and the work was awarded for lump-sum amount of Rs. 62,21,60,000/-. An agreement in this regard was also executed between the parties. Petitioner completed the work. ‘Work Completion Certificate’ was issued on 13.05.2020. Part of RA bills were not disbursed as also security deposit and performance guarantee in terms of Clause 2 & 4 as provided under Annexure -K- (Special Conditions) were also not disbursed. Petitioner wrote several letters and when the request for disbursement of the aforementioned amount was not acceded to, filed writ petition bearing WPC No.1070 of 2021 which was disposed off vide order dated 16.03.2022 granting liberty to the petitioner therein to submit representation to be decided within specified time frame. Upon considering the representation, RA bills were disbursed but the outstanding amount towards security deposit and performance guarantee amount were not disbursed. Petitioner thereafter again made several representations upon which respondent No.3 wrote letter to the petitioner mentioning that as only 50% of dwelling units have been handed over to beneficiaries, payment towards security deposit and performance guarantee as mentioned in Clause 2 & 4 Annexure -K (Special Conditions) would be released after handing over 100 % dwelling units to the beneficiaries. Petitioner again wrote letter to the respondent and also sent legal notice. However, when the amount towards security deposit and performance guarantee as per Clause 2 & 4 of Annexure -K (Special Conditions) was not disbursed, he filed writ petition bearing WPC No.2524 of 2024, which was allowed by the learned Single Judge vide impugned order dated 22.10.2024 observing that since respondents acted unfairly, arbitrarily in withholding the amount of security deposit and performance guarantee, as such, the petitioner is entitled for refund of the same, accordingly held that petitioner is entitled for the refund of security deposit as also performance guarantee. It was further observed that the petitioner is entitled for award of interest if the amount
