BHEL, as a government company, is bound by the Office Memorandum dated 12.11.2020 to reduce Contract Performance Guarantees for existing contracts, regardless of restrictive conditions imposed.

JUDGMENT :

(Hiranmay Bhattacharyya, J.)

The writ petitioner has prayed for issuance of a writ in the nature of mandamus to command the respondent to set aside and/or quash the decision contained in the letter dated 18.06.2021 issued by the General Manger of Bharat Heavy Electricals Ltd. and to direct the respondent no. 1 to act in terms of the Office Memorandum dated 12.11.2020.

2. The writ petitioner claims to be engaged in the business of construction of ventilation systems and other related works in power plants, metros, road and rail tunnels and other infrastructure development projects.

3. The writ petitioner company claims to have been awarded nine different tenders from various regions of Bharat Heavy Electricals Limited (for short "BHEL") power sectors for providing ventilation works at different places. Pursuant to signing of the agreement with BHEL, the petitioner had to provide contract performance securities at the rate of 10% of contract values. The petitioner claims to have deposited some of such securities in terms of Bank Guarantee and for others it was partly in cash and the balance in the form of bank guarantee. The contracts which are the subject matter of this writ petition were awarded prior to the onset of COVID 19 pandemic.

4. Government of India issued an Office Memorandum (for short "O.M.") dated 12.11.2020 directing all Central Public Sector Enterprises ( for short "CPSEs") to reduce the Performance Bank guarantee amount from 5-10% to 3% of the project value in all existing contracts. Petitioner submitted representation to the respondent no. 1 / BHEL requesting the said authority to implement the directions contained in the O.M. dated 12.11.2020 by reducing the existing Bank guarantees held by them from 10% to 3% of the total project value. Such request of the petitioner for reduction of the percentage of the Bank Guarantee was rejected by the respondent no. 1 vide letter dated 18.06.2021. Being aggrieved by the aforesaid decision of the respondent no. 1, the petitioner company has approached this Court.

5. BHEL being the respondent no. 1 contested the writ petition by filing an affidavit-in-opposition. It has been stated in the said affidavit that BHEL subcontracts portion of its work to third party contractors and the writ petitioner is one of such subcontractors. Contracts for setting up of power plants have been awarded to BHEL upon issuing Performance Bank Guarantees ranging from 7% to 15% and the same is subcontracted to the petitioner on Back to Back contract basis specifying the terms and conditions in Notice Inviting Tenders in relation to submission of performance Bank Guarantees with specific percentage of contract values on mutually agreed terms. Upon receipt of the O.M. dated 12.11.2020, respondent no. 1 issued a Circular dated 06.03.2021 which states that contract performance security to ensure due performance of the contacts shall be reduced to 3% of the value of the contract for all existing contracts which is applicable only wherever similar benefits is provided by the end customer of the respondent no. 1.

6. Mr. Chowdhury, the learned Advocate assisted by Mr. Basu appearing in support of the writ petition contended that the O.M. dated 12.11.2020 was issued in terms of Rule 171 of the General Financial Rules 2017 and such rules have been framed in exercise of powers conferred by Article 77(3) of the Constitution of India. He further contended that BHEL being a government company cannot act contrary to the Office Memorandum issued by the Government of India. In support of such contention he placed reliance upon a decision of the Hon'ble Supreme Court of India in the case of Union of India (UOI) & Ors. v. Indo- Afghan Agencies Ltd. reported at AIR 1968 (SC) 718. He also referred to some letters and documents to support his contention that BHEL has implemented the O.M. dated 12.12.2020 and have reduced the contract performance guarantees in case of pending contracts.

7. Mr. Rohit Das, le