Rakshak Securitas Private Limited vs. State Of Chhattisgarh

Facts

Rakshak Securitas Private Limited (the petitioner) filed a writ petition challenging an order dated January 20, 2026, issued by the Financial Advisor, Chhattisgarh State Marketing Corporation Limited (CSMCL) (Respondent No. 2). The order deducted ₹50,58,170 from the petitioner and proposed further deductions in two installments totaling ₹1,52,47,774. The petitioner, an empanelled placement agency, argued that it was entrusted with a limited role of supplying manpower and that its employee acted as a whistleblower, reporting illegal activities at a liquor shop. The petitioner contended that inspection reports attributed irregularities to an Excise Sub-Inspector and other agencies, not the petitioner, and that the deduction was unilateral, arbitrary, and violated principles of natural justice and contractual terms. The respondents (State and CSMCL) argued that the writ petition was not maintainable due to Clause 16 of the agreement, which mandates dispute resolution through arbitration.

Held

The Court held that the disputes raised by the petitioner, concerning the validity of the termination order, forfeiture of security deposit, and imposition of penalty, directly arose out of the contractual terms between the parties. The Court noted that Clause 16 of the agreement specifically provides a mechanism for resolving such disputes through arbitration. Citing the settled legal position that writ jurisdiction should not be exercised to adjudicate contractual disputes involving disputed questions of fact when an efficacious alternative remedy is available and parties are bound by their contract, the Court found no grounds to entertain the writ petition. The petitioner, at this stage, sought to withdraw the petition with liberty to avail the arbitration remedy. The Court dismissed the petition as withdrawn with the liberty prayed for, and also granted liberty to pursue other available legal remedies.

Key Issues

1. Whether the writ petition is maintainable under Article 226 of the Constitution of India, notwithstanding the arbitration clause in the agreement between the parties, given the alleged arbitrary and ex facie illegal deduction of funds by a State instrumentality? (Question of law) Petitioner's Arguments: The petitioner argued that the deduction was unilateral, without adjudication of liability, and in disregard of inspection reports that pointed to other parties. They contended that such arbitrary action by a State instrumentality falls within exceptions to the rule of alternative remedy, making writ jurisdiction appropriate. Respondents' Arguments: The respondents (State and CSMCL) contended that the writ petition is not maintainable because Clause 16 of the agreement mandates dispute resolution through arbitration under the Arbitration and Conciliation Act, 1996. They argued that all disputes, including those related to recovery and alleged breach of contract, must be adjudicated through arbitration.