Unilateral adjustment of disputed contractual damages against security deposit was impermissible; writ refund relief and bank guarantee release were refused.

A disputed contractual damages claim could not be unilaterally recovered by adjusting the contractor's security deposit or other pending or future bills, because a damages claim becomes recoverable only after adjudication and quantification; that recovery action was liable to be quashed. A writ for refund or payment of amounts withheld under separate pending bills was not maintainable, as such a money claim lay in civil suit or arbitration rather than Article 226. Immediate release of the bank guarantee was also refused, since the underlying contractual claim remained undecided in the proper forum.

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Issues: (i) Whether a disputed claim for damages arising out of a contract could be enforced or recovered by the Government by adjusting the contractor's security deposit or other pending or future bills under Article 226 proceedings. (ii) Whether the contractor could obtain a writ directing refund of amounts withheld under other pending bills. (iii) Whether the contractor was entitled to immediate release of the bank guarantee furnished as security.

Issue (i): Whether a disputed claim for damages arising out of a contract could be enforced or recovered by the Government by adjusting the contractor's security deposit or other pending or future bills under Article 226 proceedings.

Analysis: The disputed demand was founded only on an alleged breach of contract and not on any adjudicated liability or statutory obligation. A claim for damages does not become a presently recoverable debt until it is adjudicated and quantified. On the authority governing recovery of sums due under the contract, the purchaser may appropriate only sums that are admitted or adjudicated to be due and payable; it cannot, by unilateral executive action, convert a disputed damages claim into a recoverable debt or recover it from other bills or security money.

Conclusion: The Government had no right to adjust or recover the disputed damages claim from the security deposit or other pending or future bills, and that part of the recovery action was liable to be quashed.

Issue (ii): Whether the contractor could obtain a writ directing refund of amounts withheld under other pending bills.

Analysis: A writ court ordinarily does not entertain a mere money claim arising from contract to compel payment of amounts alleged to be due under separate contractual obligations. Even where the withholding is contested, the proper forum for enforcement of the money claim is a civil suit or arbitration, unless the claim rests on a statutory obligation. The contractor's claim for payment under the pending bills was independent of the invalid recovery action and did not become consequential relief for the purpose of writ jurisdiction.

Conclusion: The prayer for a writ directing refund or payment of the amounts withheld under the pending bills was not maintainable and was rejected.

Issue (iii): Whether the contractor was entitled to immediate release of the bank guarantee furnished as security.

Analysis: The bank guarantee had been furnished as security for the Government's contractual claim. Since the underlying claim had not yet been adjudicated in the proper forum, the question of releasing the security could not arise merely because unilateral adjustment was disallowed. The invalidity of the attempted adjustment did not by itself extinguish the security pending adjudication of the claim.

Conclusion: Immediate release of the bank guarantee was refused.

Final Conclusion: The writ petition succeeded only to the limited extent of preventing unilateral adjustment or recovery of the disputed damages claim from the security deposit and other bills; the remaining monetary and security-related reliefs were declined.

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