ORDER :

Heard Mr. Akkam Eshwar, learned counsel for the petitioner and Mr. Dominic Fernandes, learned counsel for respondent Nos.1 and 2. Despite service of notice, none appears on behalf of respondent Nos.3 to 5.

2. The present writ petition is filed seeking to declare the action of respondent No.2 in taking steps to encash bank guarantee bearing no. F33GPGEE20227001 for Rs. 4,40,000/- dated 14.08.2020 and bank guarantee bearing no. F33GPGEE20227004 for Rs. 4,40,000/- dated 14.08.2020 by addressing a letter dated 29.09.2022 to respondent No.3 as illegal, arbitrary and violative of principles of natural justice and to set aside the same.

3. Facts of the case:

i) The petitioner, M/s. Sri Siva Sai Enterprises, is a registered partnership firm. It participated in the tender process and submitted its bid in relation to work dealing with handling and transportation of food grains at FSD, Pedapally. The petitioner’s bid was accepted and a Handling and Transportation agreement dated 16.06.2020 was entered into between respondent No.2 and the petitioner.

ii) As per the terms of the agreement, the petitioner was to commence the work from 16.06.2020 and complete it by 15.06.2022. The agreement provided that the petitioner shall submit bank guarantees as security towards the completion of the work and accordingly, the petitioner submitted bank guarantees bearing nos. F33GPGEE20227001 and F33GPGEE20227004 for Rs. 4,40,000/- each (totaling Rs. 8,80,000) both dated 14.08.2020.

iii) According to the petitioner, it successfully completed the work within the time prescribed and as per the agreement. Further, according to the petitioner, the submitted bank guarantees dated 14.08.2020 were to be returned by respondent No.2 within six (6) months from the date of completion of the work.

iv) On 29.09.2022, respondent No.2 addressed a letter to respondent No.3 (bank which issued the said bank guarantees) with a request to encash the said bank guarantees.

v) Respondent No.2 seeks to encash the said bank guarantees in relation to another contract entered into between respondent No.4 (M/s Sri Siva Sai Agencies) represented by its sole proprietor who is respondent No.5 herein. According to respondent No.2, respondent No.4 was awarded a Handling and Transportation Contract at PWS, Nagunoor and a Letter of Acceptance dated 13.10.2020 (hereinafter ‘LOA’) was issued in its favour.

vi) As per the said LOA, respondent No.4 was to submit a security deposit in the form of an irrevocable and unconditional bank guarantee. However, according to respondent No.2, only 50% of the security deposit was submitted and the remaining security was not submitted within the prescribed time. Therefore, the contract/agreement for work at PWS, Nagunoor in favour of respondent No.4 was terminated.

vii) According to respondent No.2, respondent No.4 is related to the petitioner herein through respondent No.5 as respondent No.5 is a partner in the petitioner firm. Respondent No.2 relying on various clauses of the agreement/contract contends that it is entitled to encash bank guarantees submitted in relation to one contract for the losses caused by the contractor in relation to another contract.

viii) Therefore, in the present writ petition, the petitioner challenges the action of respondent Nos.1 and 2 in seeking to encash the bank guarantees submitted in relation to works at FSD, Pedapally for the alleged losses caused by respondent No.4 in relation to works agreement at PWS, Nagunoor.

4. Contentions of the petitioner

i) The petitioner is a partnership firm and is a separate entity. It is not related to respondent No.4 which is a proprietary concern run by respondent No.5. The petitioner cannot be made liable for the losses caused by another entity merely because one of its partners caused a loss in relation to another contract.

ii) Relying on Gangotri Enterprises Ltd. v. Union of India, (2016) 11 SCC 720, it was contended that bank guarantee issued in relation to one contract cannot be encashed