Can security deposit be deducted by the purchaser from the bills payable by him for another contract ?

Now this the way Employees of Government of India work, with their empty skull & place general public in trouble. The very fact there exist a Bank guarantee as the security amount, there is no change in this contractual transaction between the parties, there is only a mention of escalated prices of the products etc, & lastly the unilateral decision to deduct the security deposit for the supplies under different contract, all these show the irregularity & illegality on the part of the government company with whom you have entered in this contract. The very fact a prior notice was to be issued to you before deducting the security amount from you bill which the government company failed to do which is clear violation of the principle of natural justice, moreover your bank guarantee was valid for this amount & hence this security amount should not have been deducted even otherwise. If there was any change in the bank guarantee terms or withdrawal of the same completely the action of the government company could have been though as somewhat justified not otherwise. Lastly as you say the security amount the company deducted relates to some other contract & not this, and then they should have settled that issue in that contractual dispute with you, they cannot mix two contracts which are independent of each other even if they are between same parties. You should give a legal notice through your lawyer on these lines I have discussed here & claim the security amount wrongly deducted from your bill.