Calcutta High Court directs assessee to pursue arbitration for contractual dues claim

Background of the proceedings

The Calcutta High Court, in Chakvrigu Cooperative Labour Contact & Construction Society Limited & Anr. Vs State of West Bengal & Ors. (WPA 19048 of 2019, judgment dated 17/09/2026), examined whether a writ petition seeking release of alleged outstanding contractual dues could be entertained when the underlying agreement contained a comprehensive arbitration clause.

The matter came up after two interlocutory applications, CAN/1/2025 and CAN/2/2025, were filed seeking to revive a writ petition that had earlier been dismissed for default.

Applications for condonation of delay and recall

  • CAN/2/2025: This application sought condonation of a 51‑day delay in filing a recall petition against the order dated 14.01.2025, by which the writ petition had been dismissed for default.
  • CAN/1/2025: This application requested recall of the dismissal order dated 14.01.2025 and restoration of the writ petition.

The Court:

  • Examined the explanation provided in paragraph 5 of the delay condonation application.
  • Found the explanation for the delay to be adequate and acceptable.
  • Allowed CAN/2/2025, thereby condoning the delay in moving for recall.
  • Considered the reasons given by the petitioners (assessee) for their non‑appearance on 14.01.2025.
  • Accepted the cause shown for absence, allowed CAN/1/2025, and restored WPA 19048 of 2019 to its original file and number.

Once the writ petition stood restored, the Court proceeded to decide it on merits.

Factual matrix and contractual arrangement

Parties and nature of work

  • Petitioner no.1 is a registered Cooperative Society under the West Bengal Cooperative Society Act.
  • Petitioner no.2 is the Secretary of the Society and represents petitioner no.1.
  • The dispute arises out of a construction contract relating to a pucca stall (with provision for a two‑storied foundation) at Khochabari Hat under Coochbehar Sadar Regulated Market Committee, under the R.K.V.Y. Scheme 2011-2012.
  • The work was awarded pursuant to N.I.T. No. 39/2011-2012 dated 31.01.2012.
  • The tender amount was Rs. 32,66,865/-, and the contract was embodied in an agreement dated 14.05.2012 executed between the assessee and the West Bengal State Marketing Board.

Claim of the assessee

The assessee approached the High Court through a writ petition seeking, broadly, a writ of mandamus directing the respondents to:

  • Decide the payment dispute raised by the assessee, and
  • Release an allegedly unpaid amount of Rs. 17,00,000/- together with interest at the prevailing Bank rate, along with consequential benefits.

The key assertions on behalf of the assessee were:

  • The civil construction work for the pucca stall was stated to have been completed on 16.08.2016.
  • The remaining electrical work was stated to have been completed on 15.02.2018.
  • According to the assessee, the authorities had already released:
    • Rs. 16,00,000/- as a running advance bill for part completion; and
    • Rs. 6,78,345/- subsequently.
  • Even after these payments, a sum of Rs. 17,00,000/- allegedly remained unpaid and was stated to be “illegally withheld” by Respondent Nos. 3 and 4.
  • The assessee contended that, since the work was completed within the extended time period allowed by the authorities, there was no basis for imposing compensation or withholding the balance amount.
  • A specific prayer was made for a direction to release the said balance amount of Rs. 17,00,000/- along with interest from the date of completion of work till the date of actual payment.

Stand of the State respondents

The State and Respondent Nos. 3 and 4 opposed the writ petition, contending that:

  • The work had not been completed within the original stipulated time under the agreement.
  • Even after extension of time was granted up to 16.08.2016, the electrical work was completed only on 15.02.2018, i.e., beyond the extended timeline.
  • Owing to this delayed completion, the competent authority resolved to levy compensation on the tender amount.
  • After deducting compensation, a sum of Rs. 6,78,345/- was determined as the final amount payable, which was disbursed to the assessee.
  • The assessee allegedly accepted the said amount of **Rs.