Court upheld the demand for additional performance security per contractual terms to prevent front loading, emphasizing the need for safeguarding project completion.

1. This writ petition is filed by the petitioners seeking to quash Ext. P19 order passed by the 1st respondent dated 16/11/2016, whereby sanction is accorded for forfeiting EMD provided by the petitioners towards the construction of Community Skill Parks at Edamattom and Pampadi in Kottayam District, and at Kattappana in Idukki District, and for other related reliefs Material facts for the disposal of the writ petition are as follows:

2. First petitioner is a construction company and 2nd petitioner is its Director. Petitioners participated in the e - tender, inviting construction of Community Skill Parks at the places specified above. Petitioners deposited an amount of Rs.12,00,000/- towards EMD in the aggregate. Subsequent to the opening of the bid and on negotiations conducted by the 2nd respondent, petitioner was awarded with contract of the said works. Petitioners quoted the contract rates on the estimated Probable Amount of Contract (PAC) between 2.5% to 4.5% of the PAC. As per Ext. P11 general conditions of the contract, if the PAC quoted by the petitioner falls below 10% and within the maximum permissible limit of 25%, of the PAC, then additional performance guarantee has to be provided. Accordingly, letter of acceptance was issued to the petitioners, evident from Exts. P5 to P7, by the 1st respondent, subject to the condition of executing additional performance guarantee. Petitioners submitted reply to the letter of acceptance issued by the 1st respondent on 16/08/2016, evident from Exts. P8 to P10, stating that petitioners are not liable to provide additional performance guarantee on the PAC. Petitioners sought clarification in respect of additional performance guarantee as per Exts. P12 to P17 communications.

3. According to the petitioners, as per the conditions pertaining to the remittance of performance guarantee provided under Clause 59.1 of Ext. P11 General Conditions of Contract (GCC), petitioners need only to provide performance guarantee of 5% of the PAC. It was also brought to the notice that as per Clause 59.2 of Ext. P11, an additional performance guarantee is required only when the quoted amount of the PAC would fall below 10% and within the maximum permissible limit, of 25% of the PAC.

4. Since the petitioners did not receive any reply from the 3rd respondent, further communications were issued, evident from Exts. P12 to P17. However, on 17/11/2016, a letter was served by the 1st respondent to the petitioners, stating that the petitioners have quoted low rates for certain items predominantly and hence assurance measures need to be adopted to ensure that petitioners perform and complete the project executing all items mentioned in the agreement and since additional performance security is not furnished, the EMD deposited of Rs.15,00,000/- is forfeited, evident from Exts. P18 and P19 respectively. Since the EMD amount forfeited by the 1st respondent was wrongly mentioned as Rs.15,00,000/- in Ext. P19 Government Order, a clarification letter was issued by the 1st respondent on 28/11/2016 along with the Government Order dated 24/11/2016 clarifying that the EMD amount is only Rs.12,00,000/-, evident from Exts. P20 and P21.

5. It is also the contention of the petitioners that the 3rd respondent without giving a reasonable explanation on the clarification sought on Additional Performance Guarantee, and without giving an opportunity to hear the petitioners, issued re - tender notification inviting bid for the construction work in question on 01/11/2016, evident from Exts. P22 to P24. It is thus challenging the aforesaid actions, this writ petition is filed by the petitioners.

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