Senthilvel K vs. The Regional Manager

Facts

The petitioner's father, a Handling and Transport Contractor for the Central Warehousing Corporation (CWC), passed away on 03.09.2018. The petitioner, as a legal heir, claimed Rs. 53,65,932/- was due towards contractual dues. The CWC contended only Rs. 29,53,848/- was payable. The petitioner requested payment of the admitted amount. The CWC insisted on a "No Demand Certificate" from all legal heirs. Subsequently, the CWC stated that after adjusting GST credit entries, the net payable amount was Rs. 23,74,921/-. Despite this, the amount remained unpaid, leading the petitioner to file a writ petition seeking payment of Rs. 23,74,921/- along with 12% interest.

Held

The Court held that while the matter pertains to a commercial contract, the Central Warehousing Corporation, being a State instrumentality, must conduct its transactions fairly, and the sweep of Article 14 of the Constitution embraces its contractual dealings. The Court found that the respondents were not being fair by insisting on a "No Demand Certificate" from all legal heirs before paying the admitted amount of Rs. 23,74,921/-. Withholding this admitted sum was deemed unreasonable, arbitrary, and unfair, constituting a breach of Article 14. The Court reasoned that such insistence effectively takes away the petitioner's fundamental right to seek judicial redress. The ratio decidendi is that State instrumentalities cannot exploit a contractor's financial vulnerability by withholding admitted dues, and such actions are amenable to judicial review under Article 226. The Court directed the respondents to pay the admitted amount of Rs. 23,74,921/- with interest at 6% per annum from 01.01.2022 until the date of payment.

Key Issues

1. Whether a writ petition under Article 226 of the Constitution of India is maintainable in a matter pertaining to a commercial contract, particularly when the respondent is a State instrumentality? The petitioner argued that the writ petition is maintainable as the CWC is a State instrumentality and must act fairly, even in contractual matters. The respondent (CWC) contended that the subject matter pertains to contract law, making Article 226 invocation inappropriate, and that the petitioner is bound by the tender terms and conditions, including the requirement for a "No Demand Certificate". 2. Whether the insistence on a "No Demand Certificate" from all legal heirs for the admitted amount of Rs. 23,74,921/- is arbitrary and unfair, violating Article 14 of the Constitution? The petitioner argued that withholding the admitted amount is unreasonable and exploits the contractor's financial need. The respondent did not explicitly argue on this point but relied on the tender conditions.