IMPORTANT POINT
Disputes over contract terms and payments should be resolved through arbitration as per the agreement and MoU signed between the parties.

JUDGMENT :

Heard Mr. Aayush Agarwala, learned counsel for the petitioner who appears through Video Conferencing, Mrs. Linda L. Fambawl, learned Addl. Advocate General for the respondent Nos. 1 to 3 and Mr. A.R. Malhotra, learned counsel for the respondent No. 4. The petitioner who is a company incorporated in the year 2003 having its corporate Office at A-28 Sector, Noida, Uttar Pradesh and its registered Office at C-84 Greater Kailash-I, New Delhi through its Chief Financial Officer has filed the instant writ petition with the following prayer:-

“In the premises aforesaid it is most humbly prayed that Your Lordship may graciously be pleased to admit this petition, call for the Record, issue Rule calling upon the respondents to show cause as to why the petition should not be allowed as prayed for .After hearing the parties be pleased to direct the respondents 1-3 not to release any further payment to the respondent No-4 without any specific authorization of the petitioner and the respondents No 1-3 be directed to repay Performance Security of Rs. 12,52,86,404/- and half the total amount of retained money of Rs. 13,28,61,597/- to the petitioner. And pass any order or orders Your Lordship may deem fit and proper in the facts and circumstances of the case.

Pending disposal of the petition, be pleased to stay the operation of impugned letter dated 14.07.2022 in the interest of justice.”

2. Be it stated herein that during the pendency of the writ petition, the performance security which according to the petitioner is due to the petitioner company was released on 03.04.2023 and therefore, the cause of action only in respect of half of the retention money survives as submitted by the counsel for the petitioner.

3. Brief facts of the case as projected by the petitioner is that the respondent No. 2 awarded contract work to the petitioner company for improvement and up-gradation of Chhumkhum - Chawngte road from Km 0.00 - Km 41.53 for a sum of Rs. 245,65,54,236/- and a contract agreement was executed on 17.09.2014 to this effect. Performance security to the tune of Rs. 12,52,86,404/- and retention money of Rs. 13,28,61,597/- were accordingly obtained by the State respondents to ensure due performance of the contract through the State Bank of India and Canara Bank.

4. The said work was given to the respondent No. 4 by way of Sub-contract with the permission of the State respondents and a Memorandum of Understanding (MoU) dated 17.04.2017 was executed between the petitioner company and the respondent No. 4 stipulating that the work is to be completed within 19 months from the date of execution of the agreement inclusive of rainy season.

5. Thereafter, another MoU was executed by the petitioner and the respondent No. 4 on 24.10.2017 at Delhi wherein it was agreed that payment will be released to the respondent No. 4 by the petitioner after credit of payment into the account of the petitioner by the authority for the said works executed by the respondent No. 4 and entered in the Initial Payment Certificate (IPC) released by the authority to the petitioner where 14 months was given for completion of the work including rainy season.

6. That as the escrow account operated by the petitioner was put on hold by the Banker due to some problems that cropped up, the petitioner vide letter dated 09.10.2019 (Annexure-V) requested the respondent No. 3 to release 11% of the total amount (9% petitioner’s and 2% TDS) plus Rs. 25 lakhs (machinery and equipment hired charges) to the petitioner and to directly release the balance payable to the respondent No. 4 in respect of IPC only. However, the respondent No. 3 continued to release all the bills directly to the respondent No. 4 and therefore, the petitioner submitted a number of request to the respondent No. 3 but the same was to no avail. The petitioner vide letter dated 07.07.2021 submitted a letter to the respondent No. 3 requesting among others that no further payments be made to the respondent No. 4 without