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2025 Supreme(Ker) 1617
IN THE HIGH COURT OF KERALA AT ERNAKULAM
N. NAGARESH, J.
EKK Infrastructure Limited - Appellant
Versus
Kerala Road Fund Board - Respondent
W.P. (C) No. 2847 of 2025
Decided On : 27-05-2025
Advocate Appeared:
For the Appellants : Deepu Thankan, Ummul Fida, Lakshmi Sreedhar, Lekshmi P. Nair, Vineetha Bose, Cindia S., Gayathri G.
For the Respondent: E.C. Bineesh
Contractual obligations must be honored, and a contractor is entitled to the release of Performance Guarantee upon fulfilling specified conditions.
Headnote:
(A) Public Works Department Tender Regulations - Performance Guarantee - The petitioner, an A Class Contractor, completed the work under the contract but faced delays in the release of half of the Performance Guarantee despite fulfilling conditions. The respondents cited Government Orders as a basis for withholding the amount. (Paras 3, 4, 11, 12)
(B) Contractual Obligations - The court emphasized that the terms of the contract must be honored, and the petitioner is entitled to the release of the Performance Guarantee upon executing an Indemnity Bond. (Paras 10, 12)
Facts of the case:
The petitioner was awarded a contract for road improvements and completed the work, but the release of half of the Performance Guarantee was delayed due to reliance on Government Orders not specified in the contract.
Findings of Court:
The court directed the respondents to release half of the Performance Guarantee upon the petitioner executing an Indemnity Bond.
Issues: The main issues were whether the petitioner was entitled to the release of the Performance Guarantee and the applicability of Government Orders to the contract.
Ratio Decidendi: The court ruled that the contract terms must be honored, and the petitioner is entitled to the release of the Performance Guarantee upon fulfilling the necessary conditions.
Result: Writ petition disposed of directing the release of half of the Performance Guarantee.
JUDGMENT :
1. The petitioner is an A Class Contractor in the Public Works Department. The respondents had invited bids for the work, namely KIIFB Work 2016-2017 improvements to Udumbanchola Chithirapuram Road (Km 0/000 to 45/880) as per the Notice Inviting Tender dated 17.08.2019.
2. As the petitioner was the lowest tenderer in the above tender proceedings, the 2nd respondent issued Ext.P2 letter accepting tender in respect of the above work for an amount of Rs. 139,90,01,074/-. Thereafter, Ext.P4 contract was entered between the petitioner and the respondents. As per Part I of the Instructions to the bidders which form part of the Notice Inviting Tender, the successful bidder will have to submit Performance Guarantee before executing the agreement. In compliance to the same, the petitioner submitted Ext.P4 Bank Guarantee and Exts.P5 and P6 Treasury Fixed Deposits. Thereafter, the petitioner successfully completed the construction of the work and the 1st respondent issued Ext.P8 Completion Certificate to the petitioner.
3. As per Clause 7.10 of the instructions to the bidders, NIT, half of the Performance Guarantee in the form of Treasury Deposit can be released upon submission of an Indemnity Bond of equal amount by the contractor indemnifying the employer any loss on account of this after the virtual completion of the work.
4. Though the petitioner submitted Exts.P9 and P10, till date no action has been taken by the respondents for releasing half of the Performance Guarantee in the form of Treasury Deposits relying on Exts.P11 and P12 Government Orders. Those Government Orders have no relevance to the work executed by the petitioner as nowhere in the NIT, tender conditions or the agreement or special conditions of contract, it has been specified about the Government Orders, contends the petitioner.
5. Standing Counsel entered appearance on behalf of the respondents and resisted the writ petition. On behalf of the respondents, it is submitted that the successful bidder will have to submit Performance Guarantee before executing the agreement and the Performance Security Deposit which is to be recovered from the running bills. The Performance Guarantee to be submitted for executing agreement shall be 5% of the contract amount and performance security deposit shall be deducted at 2.5% from the running bills. The relevant clauses dealing with the Performance Guarantee and the Performance Security Deposit are explained in paragraph 7 and sub paragraph of Part I Instructions to the Bidders of SBD.
6. In clause 7.10, it is stated that the Performance Bank Guarantee submitted in the form of Bank Guarantee will be returned to the contractor without any interest after 28 days after the satisfactory completion of the Defects Liability Period (DLP). Half of Performance Guarantee in the form of Treasury Fixed Deposit can be released upon submission of an Indemnity Bond of equal amount by the contractor, indemnifying the employer any loss on account of this after the virtual completion of the work. The balance half of Performance Guarantee in the form of Treasury Fixed Deposit will be released after the satisfactory completion of defect liability period. As per the Letter of Acceptance, the petitioner has submitted Bank Guarantee for an amount of Rs. 3,49,75,050/- and Treasury Deposit for an amount of Rs. 3.5 Crores.
7. Standing Counsel further submitted that Ext.P9 request of the petitioner dated 30.10.2024 for releasing the Performance Guarantee in the form of Treasury Deposit after executing the Indemnity Bond cannot be admitted. Along with the SBD clause, the Government Orders issued from time to time are also applicable in the case of execution of works. In light of the Government Orders marked as Exts.P11 and P12, the security deposit cannot be released.
8. It is further submitted that the Security Deposit submitted in the form of Treasury Deposit cannot be released by the 2nd respondent, in the light of the guidelines explained in Governmen
