A contract cannot be terminated and a performance guarantee encashed if the delay in delivery of the guarantee is attributable to the courier agency and not the petitioner, provided the petitioner dispatched it promptly before the deadline.

JUDGMENT

(PER : HONOURABLE MR.JUSTICE N.S.SANJAY GOWDA)

1) On 20.06.2025, the Railways gave a Letter of Acceptance was given to the petitioner in respect of a tender which had been floated for its Rajkot Division IOT Based Intelligent Field Devices for Street Light, Lift, Escalator, substation, Platform lighting and Pump Automation.

2) One of the requirements of this Letter of Acceptance was that the petitioner was required to submit the Performance Guarantee equivalent to 5% of the contract amount, i.e., for a sum of Rs. 26,08,417.45 ps., within 21 days from the date of issuance of Letter of Acceptance and which was required to be valid up to the stipulated date of completion plus 60 days so that the contract agreement could be executed. The validity of stipulated date was admittedly 60 days from the date of Letter of Acceptance.

3) In order to comply with this requirement, the petitioner secured a Performance Bank Guarantee on 14th of August, 2025 from the ICICI Bank, as is evidenced by Annexure-G.

4) As the following day, i.e., 15.08.2025 was a public holiday, being the Independence Day, the petitioner dispatched the Performance Bank Gaurantee on 16.08.2025 as is evidenced by the courier receipt issued by DTDC Express Limited. This consignment was delivered by DTDC Express Limited on 20.08.2025, as indicated in the acknowledgement which is produced at Page No. 45.

5) It may be pertinent to state here that the 60 day period stipulated in the Letter of Acceptance, admittedly, was 18.08.2025, and this period had passed by the time the Performance Guarantee reached the Railways on 20.08.2025.

6) The Railways who received the Performance Bank Gaurantee on 20.08.2025 have proceeded to terminate the contract on 26.08.2025 on the ground that the Performance Bank Guarantee had not been furnished by the petitioner before 18.08.2025. Thereafter, the Railways have also proceeded to encash the Performance Bank Guarantee on 15.09.2025.

7) The petitioner is, therefore, before this Court seeking for quashing of the termination notice and also the consequential order by which the Performance Bank Guarantee is sought to be encashed and forfeited to the Railways.

8) Learned Counsel for the petitioner submitted that since the petitioner had, in fact, purchased the Performance Bank Guarantee on 14.08.2025 and dispatched it on 16.08.2025, the Railways could not have terminated the contract on the ground that it was received on 20.08.2025, i.e., two days after the expiry.

9) He submitted that the Performance Bank Guarantee was sent by post and by virtue of Section 27 of the General Clauses Act, if a document is sent by post, it is deemed to have been served at that time the letter would be delivered in ordinary course of post and since, the Performance Bank Guarantee was dispatched on 16.08.2025, in the normal course, the same ought to have been delivered on the following day, i.e., 17.08.2025 and before the last date i.e., 18.08.2025.

10) Learned counsel submitted that the delay, if any, in delivery of Performance Bank Guarantee by the courier agency cannot be attributed to a deliberate fault on his part and therefore, the termination notice cannot be sustained.

11) Learned counsel for the Railways on the other hand, contended that the terms of the Letter of Acceptance were clear, inasmuch as, the Performance Bank Guarantee was not received within 60 days,