Thottathil B. Radhakrishnan, J.

We have heard the learned Special Government Pleader appearing for the appellants and the learned counsel appearing for the respondent.

2. The learned Special Government Pleader appearing for the State Government presses for interim order of stay of operation of the directions contained in the impugned judgment. Both sides agree that the matter can be heard on merits. Accordingly, the writ appeal is heard finally on merits.

3. The respondent is the successful contractor for putting up a building for the State Government. The terms of the contract include a performance guarantee which would stretch for a period of three years after completion of the work and two years for completion of the work. The speceific term in this regard was that the contractor will provide guarantee for 10% of the contract amount as the performance guarantee security. This was to be provided by 50% in the form of bank guarantee and 50% as deposit with the State treasury. This term was later trimmed down to be 5% instead of 10%. This means that 2.5% of the contract amount has to be kept in deposit with the State treasury and a bank guarantee for 2.5% of the contract amo