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2016 Supreme(Online)(KER) 23791
HIGH COURT OF KERALA
P. B. Suresh Kumar, J
ABHIRAM INFRA PROJECTS PVT LTD – Appellant
Versus
THE SECRETARY TO GOVERNMENT, SPORTS AND YOUTH AFFAIRS – Respondent
WRIT PETITION (CIVIL) 14887/2016
The court established the necessity of adhering to contractual dispute resolution procedures, ensuring fair process before invoking performance guarantees.
Headnote:
Bank Guarantee - Contractor Dispute - Act Section List - The judgment discusses the resolution of disputes arising from a contract with references to specific sections allowing for performance guarantees and dispute resolution mechanisms. The court interpreted these provisions to facilitate a fair hearing regarding the contractor's claims and the proper invocation of the bank guarantee.
Fact of the Case:
The petitioner, a contractor, challenged the invocation of a bank guarantee by the awarder of a renovation contract for a stadium, arguing that all works had been completed as per the agreement. Respondents claimed the contract was terminated due to incomplete works.
Finding of the Court:
The court noted that the interim order preventing the invocation of the bank guarantee was still in force and decided to remand the case for resolution of disputes through the designated authority as previously ordered.
Issues: Whether the termination of the contract was justified and if the invocation of the bank guarantee was appropriate under the circumstances.
Ratio Decidendi: The court underscored the importance of resolving contractual disputes through the established mechanisms outlined in the agreement, emphasizing the need for a fair hearing for both parties.
Final Decision: The petitioner's grievance shall be addressed to the designated authority, with interim protection continuing until a final decision.
J U D G M E N T
The petitioner is a contractor who has undertaken a work in connection with the National Games. The work assigned to the petitioner was one for renovation of a stadium. The petitioner had furnished a bank guarantee to the awarder of the work namely, the fourth respondent as per the terms of the contract towards performance guarantee. Earlier, when a dispute arose between the petitioner and respondents 2 and 4, this Court as per Ext.P21 judgment directed that the said dispute be resolved as provided for under clause 58(1) of Ext.P3 agreement. The said clause provides that disputes between the contractor and the awarder shall be resolved by the first respondent. It is seen that pursuant to Ext.P21 judgment, the first respondent resolved the said dispute as per Ext.P22 order. As per Ext.P22, the first respondent permitted the petitioner to substitute the bank guarantee already furnished by them with a bank guarantee for a lesser amount namely, Rs.40 lakhs. The aforesaid amount was fixed for the bank guarantee to be furnished by the petitioner having regard to the quantum of the remaining work as also the quantum of the possible rectification works to be carried on by the petitioner as per the terms of the agreement. The time for completing the remaining work was also extended upto
21.3.2016 .
2. The case of the petitioner is that they have completed all the works remained as per the terms of the agreement as also the rectification works required to be carried on by them and they have no further obligation as per the terms of the contract. Nevertheless, according to the petitioner, the bank guarantee furnished by them pursuant to Ext.P22 order has been invoked by the fourth respondent. Ext.P27 is the communication issued by the fourth respondent to the HDFC Bank Ltd. in this connection. The petitioner, therefore, seeks orders to quash Ext.P27. They also seek direction to the first respondent to resolve the subsisting disputes between them and respondents 2 and 4, as provided in clause 58(1) of Ext.P3 agreement.
3. The case of respondents 2 and 4, on the other hand, is that the petitioner has not completed the remaining works and that therefore the contract was terminated at the risks and costs of the petitioner. It is also their case that in so far as the contract was terminated at the risks and costs of the petitioner, there is no illegality in invoking the bank guarantee furnished by the petitioner.
4. At the time of admission, this Court passed the following interim order:
“It is submitted by the learned Standing Counsel for the National Games that they will not invoke the bank guarantee till Tuesday, 12.4.2016. This submission is recorded.”
The above interim order was extended from time to time and the same is still in force.
5. Heard the learned counsel for the petitioner as also the learned counsel for respondents 2 and 4.
6. The learned counsel for respondents 2 and 4 informed that though Ext.P27 letter was issued invoking the bank guarantee, in the light of the interim order passed by this Court, the amount covered by the bank guarantee has not been collected by the said respondents.
7. In so far as the dispute earlier arose between the petitioner on one hand and respondents 2 and 4 on the other hand, was resolved by the first respondent as indicated above, I deem it appropriate to adopt the same course for resolution of the subsisting disputes as well. It is seen that unlike on the previous occasion, the petitioner has not preferred any complaint or representation for the said purpose before the first respondent. The learned counsel for the petitioner pointed out that in so far as the bank guarantee furnished by them was invoked abruptly, they had no option but to rush to this Court for appropriate relief. The learned counsel for the petitioner also submitted that if this Court directs the dispute to be resolved by the first respondent, appropriate representation will be submitted by the petitioner before first re
