Writ courts shall not interfere with show-cause notices involving factual disputes or interdict the invocation of unconditional bank guarantees.

The Appellants were awarded an e-tender on January 17, 2024, for providing webcasting solutions for the 2024 Lok Sabha elections in West Bengal

They furnished Earnest Money Deposit (EMD) and Performance Bank Guarantees (BGs) totaling approximately ₹2.59 Crores

Following the completion of the work, the Appellants received completion certificates from 23 District Election Officers (DEOs)

On December 30, 2024, the Respondent released the contract price (approx. ₹26.45 Crores) after a deduction of ₹93.80 lakhs recommended by the IT Steering Committee

Despite full payment, the Respondent issued a show-cause notice (SCN) on July 7, 2025, alleging technical deficiencies, such as cameras going offline and lack of technical support, and threatened to forfeit the EMD/BGs and blacklist the Appellants

The Appellants challenged this SCN via a writ petition, which was dismissed by a learned Single Judge on July 15, 2025

This appeal was filed against said dismissal.

1. Whether a writ court should interfere with a show-cause notice issued by a state authority in a contractual matter alleging breach of performance

2. Whether the release of final payment and issuance of completion certificates by the state acts as an estoppel against subsequent punitive action for contractual deficiencies

3. Whether the High Court can interdict the invocation of unconditional Bank Guarantees within its writ jurisdiction when factual disputes exist

The court applied the principles governing judicial review of show-cause notices as established in Union of India v. Vicco Laboratories, which holds that interference at the SCN stage is rare unless there is a total lack of jurisdiction or abuse of process

It further relied on Siemens Ltd v. State of Maharashtra regarding the maintainability of writs when a notice is issued with a pre-meditated or "closed mind"

On contractual maintainability, the court cited Unitech Limited v. Telangana State Industrial Infrastructure Corp., noting that while Article 226 applies to state contracts, it should not be used to resolve disputed questions of fact requiring evidentiary trial

Regarding Bank Guarantees, the court followed Gujarat Maritime Board v. Larsen & Toubro, which emphasizes that a bank guarantee is an independent, unconditional contract, and its invocation should not be stayed by a writ court when performance breaches are alleged

The Court observed that the SCN was not without jurisdiction, nor was it an abuse of process

It rejected the Appellants' argument of "pre-meditation," finding no tangible material to suggest the Respondent had already pre-judged the issue

The Court emphasized that the dispute was essentially factual, involving technical parameters like camera uptime, server logs, and onsite support, which are unsuitable for summary adjudication under Article 226

While the Appellants argued that the release of payment implied "satisfactory performance," the Court held that clearing bills does not precludes an authority from later discovering and acting upon deficiencies that may have escaped notice during initial processing

Regarding the BGs, the Court held they are independent contracts between the bank and the beneficiary; since they were irrevocable and unconditional, the writ court would not interfere, especially when the underlying dispute involves complex facts

The Court held that the Appellants must reply to the SCN within a fortnight

It directed the Respondent to decide the matter fairly, following principles of natural justice, after providing a hearing

However, to protect the Appellants, the Court ordered that any adverse decision passed by the Respondent shall not be given effect for two weeks from the date of such decision to allow the Appellants to seek legal recourse

The prayer to restrain the invocation of Bank Guarantees was denied