The court established that performance guarantees must be released upon contract expiration unless justified by established liabilities.

JUDGMENT

The petitioner is a Company, engaged in the business in connection with the undertaking of major civil and allied works under the Government and Non-Government sectors. The grievance highlighted by the petitioner is regarding the failure on the part of the respondents in releasing the performance guarantee furnished by the petitioner, as evidenced by Ext.P4.

2. Earlier, based on a tender floated by the respondents on 30.03.2023, the petitioner submitted the bid and it was selected as the successful bidder. Ext.P1 is the Letter of Acceptance and Ext.P2 is the agreement dated 22.06.2022 executed by the petitioner. The said agreement was for maintenance of various PWD roads in Roads Sections for General Civil Works of Shornur in Palakkad District and the tenure of the contract was one year. According to the petitioner, the said period expired on 21.06.2023. Despite the fact that the tenure of the agreement is over, the amount of performance guarantee has not been released to the petitioner. This writ petition is submitted in such circumstances, seeking the following reliefs:

“i. To Issue a Writ in the nature of Mandamus or any other appropriate writ, order or direction commanding the respondents to forthwith release the performance guarantee security deposit covered by Ext P4 in view of efflux of contract period as per Ext-P1 and P2.

ii. To Issue a Writ in the nature of Mandamus or any other appropriate writ, order or direction commanding the 1 st respondent to consider and dispose of Ext-P6 representation expeditiously at any rate within three weeks or any reasonable time that may be fixed by this Hon’ble Court.

iii. To declare that the respondents have no right or authority to withhold the security deposit after the efflux of contract period as per ExtP1 and P2.

iv. To pass such other orders, orders or directions that may be deemed just and proper by this Hon’ble Court.

v. To dispose with the filing of translation of vernacular documents.”

3. A counter affidavit has been submitted by the respondents controverting the averments contained in the writ petition and opposing the reliefs sought. Along with the counter affidavit, they have also produced records relating to the agreement entered into between the parties.

4. Heard Sri.R.O.Muhamed Shemeem Randuthaikkal, the learned counsel for the petitioner and Sri.Binoy Davis, the learned Government Pleader for the respondents.

5. The only question that arises for consideration is whether the respondents are justified in retaining the performance guarantee even at this point of time. Ext.R3(a) is a Government Order, which is applicable to the contract in question. Clause 24 of the said Government Order reads as follows:

“24. The road damages once rectified, again damages within 6 months, it has to be rectified by the Running Contract contractor at his own cost if not the damages are caused by KWA leakages or due to other work or any other causes other than the quality of work, even if the contract period have expired.”

6. Thus, going by the terms as referred to above, the liability of the petitioner can only be for six months after the rectification of the works. In this case, admittedly, the term of contract expired on 21.06.2023. Therefore, the period of liability as stipulated in Clause 24 of Ext.R3(a) is also expired. Therefore, there is no justification on the part of the respondents in retaining the performance guarantee. Of course, it is true that in the counter affidavit filed by the respondents, it is averred by placing reliance upon Ext.R3(b), which is a complaint dated 01.12.2023 received by the respondents with regard to the defective work of the petitioner. It is discernible from Ext.P5 that, a notice was issued by the 1^st respondent on 19.01.2024, base