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2020 Supreme(Online)(KER) 43318
HIGH COURT OF KERALA
N. NAGARESH, J
JOSHY VARGHESE – Appellant
Versus
STATE OF KERALA – Respondent
WP(C)/11166/2020
SRI.V.RAJENDRAN (PERUMBAVOOR), SHRI.GEORGE VARGHESE KIZHAKKAMBALAM, SRI.N.RAJESH
The court reaffirmed that security deposits are subject to resolution of defects noted within the contract's defect liability period, and non-communication of defects during this timeframe impedes refund claims.
Headnote:
Contract - Performance Security - General Clauses Act - Section 27 - The court held that the performance security deposit can only be refunded after rectification of defects identified within the defect liability period, emphasizing that disputed factual issues cannot be resolved in writ proceedings.
Fact of the Case:
The petitioner, an A-Class Government Contractor, sought to quash a rejection of his claim for a performance guarantee refund, asserting all works had been satisfactorily completed, while the respondents contended defects were reported during the defect liability period necessitating remediation before any refund.
Finding of the Court:
The court found that the petitioner failed to prove non-receipt of the defect notice during the liability period, acknowledging that a material dispute existed regarding defect identification, which is unsuitable for adjudication in writ jurisdiction.
Issues: Whether the petitioner is entitled to a refund of the performance security deposit based on the absence of prove of defect notice or its communication within the prescribed liability period.
Ratio Decidendi: A performance guarantee is contingent upon curing identified defects within the defect liability period; disputes over defect notifications that occur during this period are not resolveable via writ petitions.
Final Decision: The writ petition is dismissed and the petitioner may pursue other legal remedies for claiming the performance security guarantee.
JUDGMENT
Dated this the 18th day of December, 2020
The petitioner, who is a A-Class Government Contractor, is before this Court seeking to quash Ext.P17 and to direct the 2nd respondent to refund the security amount deposited by the petitioner in connection with Ext.P1 work, immediately within a time limit, together with interest at the rate of 12% per annum.
2. The petitioner states that he is an A-Class Government Contractor. The petitioner was allotted a work by name “Renovation of one pond in each Panchayat-Thrissur District – Karuvannur River basin – Improvements to Thiruvanchirakulam in Avinissery Panchayat”. Ext. P1 is the selection notice. As per the tender notice and Ext.P1 `selection notice, the petitioner remitted 4,70,000/- as performance guarantee and executed agreement with the 2nd respondent on 31.03.2015.
3. The petitioner completed the scheduled work and additional works, to the satisfaction of the Department. The 2nd respondent issued a Certificate of Experience as per Ext.P4. The 2nd respondent forwarded the revised estimate with recommendation to the Chief Engineer on 02.11.2016. However in spite of expiry of more than two years, the 1st respondent did not respond. The petitioner therefore filed W.P(C) No.36084/2018 before this Court praying to declare that he is entitled to get the amount spent by him for additional works. This court as per Ext.P5 judgment, directed the 2nd respondent to consider and pass appropriate orders in the proposal to allow the amount covered by the revised estimate, within a period of two months.
4. The petitioner states that he had made a prayer for a direction to refund performance guarantee, in W.P(C) No.36084/2018. However, his prayer was not considered by this Court. The petitioner therefore filed Review Petition No.12/2019 in W.P(C) No.36084/2018. In the Review Petition, the respondents took a stand that the President of Avinissery Grama Panchayat has communicated that damages are caused to the retaining wall of the pond renovated by the petitioner and it requires rectification. In view of the said allegation, the petitioner is forced to file this writ petition.
5. The learned counsel for the petitioner argued that the petitioner claimed refund of the security deposit and the respondents are resisting the claim stating that damage has occurred to the retaining wall before expiry of the security period and hence the petitioner will be entitled to get refund of the amount only after rectification of the damages. The petitioner had contended that Ext.P8 notice was never served on him by the 5th respondent. The allegation subsequently made by the 5th respondent is incorrect.
6. The learned counsel for the petitioner further argued that in view of Section 27 of the General Clauses Act , it has to be assumed that the letter pointing out the defect in the work of the petitioner, has not been served on the petitioner. There is no proof to show that Ext.P8 was ever sent or served on the petitioner. The respondents are acting arbitrarily so as to deny the petitioner the amounts legally due to him. In the circumstances, the petitioner prayed that a direction be given to the 2nd respondent to refund the security amount deposited by the petitioner, with interest.
7. The 2nd respondent defended the writ petition filing counter affidavit. The 2nd respondent stated that the Avinissery Grama Panchayat passed a resolution requesting the 2nd and 3rd respondents to construct a 3 m. wide road along the east and north sides of the pond and also requested to raise the height of the protection wall at the west side to the level of the existing Panchayat tarred road. The petitioner executed the work completely and has carried out certain excess quantity of work as per the request of the Panchayat ` and local inhabitants. An amount of 93,85,425/- was paid to the petitioner limiting the amount with agreed PAC.
8. On the basis of the request made by the Panchayat authorities, the petitioner carried out additi
