P&H HC: railway contract dispute over security deposit must go to arbitration, not writ court

The Punjab and Haryana High Court dismissed a writ petition by a Northern Railway e-auction contractor seeking a Rs 24,10,000 refund of her security deposit, holding that the dispute should go through arbitration rather than a writ court. The petitioner held a contract for parking and access-control rights at Ambala Cantonment railway station, and had sought to surrender it under Clause 17.1 of the Standard Conditions of Contract after completing six months, citing financial losses. The Railway did not accept her surrender on her terms, invoked a different clause to terminate the contract for non-payment of licence fee, and forfeited the deposit.

She argued that different divisions of Northern Railway had interpreted Clause 17.1 inconsistently — some applying a '5+1 month' rule and others a thirty-day-notice rule — making the forfeiture arbitrary and violative of Article 14 of the Constitution. A Division Bench of Justices Suvir Sehgal and Rajesh Gaur noted that the contract itself provided for dispute resolution and arbitration under Clause 22, read with the Railways' Standard General Conditions of Contract, April 2022. Relying on the Supreme Court's rulings in State of U.P. v. Bridge and Roof Co. (India) Ltd., Kerala State Electricity Board v. Kurien E. Kalathil, and Assistant Commissioner of State Tax v. Commercial Steel Ltd., the Court held that a dispute that is essentially contractual does not become a public-law matter merely because one party is a State instrumentality, and relegated the petitioner to arbitration without expressing any view on the merits.