Contractual matters beyond writ jurisdiction unless arbitrariness shown: HC

20/08/2025

JAMMU, Aug 19: Delivering a strong verdict on a long-running contractual dispute, the High Court of Jammu & Kashmir and Ladakh has dismissed the petition of G. Active Security Service against Shri Mata Vaishno Devi University (SMVDU), Katra, upholding the termination of its security contract and the forfeiture of a Rs 5 lakh deposit with the observation that Courts must refrain from interfering in contractual matters unless there is clear arbitrariness or breach of statutory duty. .
The judgment pronounced today by Justice Wasim Sadiq Nargal, held that courts must refrain from interfering in contractual matters unless there is clear arbitrariness or breach of statutory duty, neither of which was established in the present case.
The petitioner was awarded the contract on September 2, 2021, for providing 115 security guards, including supervisors, armed guards, ex-servicemen and civilian guards for round-the-clock duty at the University campus. He alleged that despite deploying 70 guards on September 7 and 8, 2021, they were prevented from taking charge by the existing agency, BSS Security. He further claimed that some of his staff managed to work temporarily till September 16, 2021, before the University abruptly terminated his contract.
Aggrieved by the action, the petitioner approached the Court seeking quashing of the termination orders dated September 16 and October 22, 2021, restoration of his contract, release of his Earnest Money Deposit, and compensation.
Through his counsel, the petitioner argued that he was unfairly denied the opportunity to provide services despite being the lowest bidder and having deployed trained manpower, many of whom were ex-servicemen. He alleged that the University acted arbitrarily by allowing BSS Security to continue without any fresh tendering process, while simultaneously denying his guards proper accommodation and facilities. He maintained that the impugned orders were mala fide, discriminatory and contrary to tender conditions.
On the other hand, SMVDU, through its counsel Ms. Shivani Jalali, submitted that the petitioner had failed to fulfill the essential conditions of the tender. The University pointed out that against the requirement of 115 security personnel, the petitioner managed to deploy only 53 guards within the stipulated period. As per Clause-iii of the contract, failure to meet deployment obligations entitled the University to terminate the contract and forfeit the security deposit.
It was further argued that the petitioner had been served with notices but failed to rectify the deficiencies. Consequently, the University was left with no option but to terminate the contract and decline the release of the Earnest Money Deposit and Security Deposit.
Justice Wasim Sadiq Nargal, after hearing both sides, observed that disputes arising purely out of contracts governed by mutually agreed terms cannot be agitated in writ jurisdiction under Article 226 unless arbitrariness, mala fide, or breach of statutory duty is demonstrated. The Court referred to several Supreme Court judgments including Tata Cellular v. Union of India, Rajasthan State Industrial Development Corporation v. Diamond & Gem Development Corporation, and Gorkha Security Services v. GNCTD, which have laid down principles restricting judicial interference in contractual matters.
The Court noted that the petitioner failed to provide the requisite number of guards and therefore breached the terms of the contract. In such circumstances, the forfeiture of security deposit was a legitimate contractual consequence and not a penalty.
In the judgment, the Court categorically held: "Courts must refrain from interfering in contractual matters unless there is clear arbitrariness or breach of statutory duty. No such ground has been pleaded or canvassed by the learned counsel for the petitioner and thus in the peculiar facts and circumstances of the case, this Court upholds the forfeiture of the security deposit as lawful and in accordance with the terms and conditions of the contract."
Holding that no arbitrariness or illegality was involved in the University's action, the Court dismissed the writ petition as devoid of merit. Justice Nargal concluded that the forfeiture of the security deposit was lawful, justified and in line with contractual obligations.

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