The termination of a contract must explicitly include an order for the forfeiture of the Bank Guarantee or the Earnest Money Deposit (EMD) for such forfeiture to be enforceable.

JUDGMENT :

The petitioner impugns Ext.P12 letter issued by the Kerala State Civil Supplies Corporation Ltd. (SUPPLYCO) to the fourth respondent – Branch Manager of the Federal Bank, seeking that a Bank Guarantee, which they are furnished at the time when they entered into a contract with them earlier, be encashed.

2. The petitioner asserts that, even though their contract was cancelled by the SUPPLYCO through Ext.P10, it does not order the forfeiture of the Bank Guarantee or the Earnest Money Deposit (EMD); and hence that Ext.P12 is illegal and unlawful.

3. Smt.K.P.Sreeja – learned counsel for the petitioner, reiterated that, even if Ext.P10 is closely read, it would render it indubitable that SUPPLYCO did not order the forfeiture of the Bank Guarantee or the EMD, while cancelling the contract; and therefore, that their action in issuing Ext.P12, without notice to her client, but directly to the Bank, can only be construed to be illegal and unlawful. She thus prayed that the reliefs sought for in this writ petition be granted.

4. Smt.Molly Jacob – learned standing counsel for the SUPPLYCO, however, submitted that it was not necessary for her client to have specifically stated in Ext.P10 that, consequent to the termination of the contract, the Bank Guarantee and the EMD would stand forfeited. She explained that, this is because, going by Ext.P5 contract between the parties, particularly clause 7 thereof, in the case of a “flexible tenderer” violating or failing to abide by the conditions in the tender, or if he unilaterally abdicates the works awarded, the tender would stand cancelled, with the security deposit and bank guarantee being forfeited. She argued that when the petitioner was fully aware of this, the absence of a specific order in Ext.P10, relating to such forfeiture, would be of no consequence. She thus prayed that Ext.P12 be left uninterdicted and the Bank be directed to pay the amounts covered by the Bank Guarantee to her client without any avoidable delay.

5. Sri.Lawrence D.Cunha -learned standing counsel for the fourth respondent, submitted that his client will abide by any directions to be issued by this Court because, they have nothing to do with the controversy projected in this case.

6. The afore narration would render it luculent that the real controversy between the parties is whether SUPPLYCO had terminated the contract with the condition that the Bank Guarantee and the EMD furnished by the petitioner, at the time when his bid was accepted, have been forfeited. Exfacie, from Ext.P10, there is no such order and this is crucial because, had there been any such direction therein, then the petitioner ought to have and perhaps would have challenged the said order. As matters now stand, they are justified in saying that they do not challenge Ext.P10 because, they are agreeable to the termination of the contract, since it does not order forfeiture of the EMD or the Bank Guarantee.

7. Viewed from such perspective, when the SUPPLYCO concedes unequivocally that they had not specifically ordered the forfeiture of the EMD or the Bank Guarantee, while the contract was terminated through Ext.P10, their argument that, this has to be read into the said order, notwithstanding the silence on the said issue, on account of clause No.7 of Ext.P5 cannot find my favour. Otherwise, it would present a situation where, even without a specific order, the petitioner would be required to challenge Ext.P10, though they say that they are not concerned about the cancellation of the tender perse.

8. This is irrefutable because, when Ext.P5 gave full power to the SUPPLYCO to terminate the contract and order forfeiture of the Bank Guarantee and EMD, one fails to understand why they do not invoke such power when Ext.P10 was issued. The silence in this regard can only construed to be that they have decided not to forfeit the said guarantee and deposit and no other. The petitioner cannot be expected to read the mind of the SUPPLYCO and then act upon c