Muslim Ali Vs the State of Assam and 3 Ors.

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GAHC010285002023

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2025:GAU-AS:3091

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IN THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM & ARUNACHAL PRADESH)

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WP(C) NO. 7406 OF 2023

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Muslim Ali, (71 years) Son of Late Makbul Ali, Resident of Sundarbari, P.S. Jalukbari, Guwahati-14, District – Kamrup (Metro), Assam.

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……..Petitioner

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-Versus-

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State of Assam, Represented by the Commissioner & Special Secretary to the Govt. of Assam, Public Works (Roads) Department, Dispur, Guwahati – 781006.

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The Commissioner & Special Secretary to the Govt. of Assam, Public Works (Roads) Department, Dispur, Guwahati – 781006.

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The Chief Engineer, Public Works Department (Roads), Assam, Chandmari, Guwahati – 781003.

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The Executive Engineer, Public Works Department (Roads), Nalbari District Territorial Road Division, Nalbari, Pin - 781335.

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……..Respondents

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Page 1 of 37

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– B E F O R E –

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HON’BLE MR. JUSTICE KAUSHIK GOSWAMI

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For the Petitioner : Mr. D. Das, Senior Counsel. Mr. P. Sarma. For the Respondents : Mr. B. Gogoi, SC, PWD. Dates of Hearing : 22.11.2024, 05.12.2024, 20.12.2024, 08.01.2025, 23.01.2025, 11.02.2025 Date of Judgment : 18.03.2025.

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JUDGMENT & ORDER (ORAL)

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Heard Mr. D. Das, learned Senior Counsel assisted by Mr. P. Sarma, learned counsel for the petitioner. Also heard Mr. B. Gogoi, learned Standing Counsel, PWD for all the respondents.

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2. By way of this petition under Article 226 of the Constitution of India, the petitioner is assailing the illegal arbitrary and malafide actions of the respondent authorities in not releasing security deposit amount to the petitioner in respect of road construction works under Package No. AS-20-29 (ADB) and Pakage No. AS-20-33 (ADB) for Nalbari District, Assam.

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3. The brief facts of the case is that the petitioner is a Class 1 (A) Contractor under the Public Works Department, Assam. The respondent No. 3 had allotted two road construction works to the petitioner from HMD road to Bartal No. 3, Bamunbari to Mulaghat, Barnibari to Paikanbarmaja, Mugdi to Khudra Sinadi including Cross Drainage works and Routine Maintenance of the works for five years under PMGSY (RRS-II, ADB, Batch-II)

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PMGSY (Ph – VI), Package No. AS-20-29, ADB (hereinafter referred to as “Package No. (i)”) vide final work order (notice to proceed with the work) No. T/BR/PMGSY/ ADB/419/2006-07/3 dated 29.06.2007 and Charia to Goalpara, Bagals Road at Sivathan via Mohkhuli to Bagurihati, Bagals road to Sursuri village including Cross Drainage works and Routine Maintenance of the works for five years under PMGSY (RRS-II, ADB, BatchII) PMGSY (Ph – VI), Package No. AS-20-33, ADB (hereinafter referred to as “Package No. (ii)”) vide final work order (notice to proceed with the work) No. T/BR/PMGSY/ADB/470/2006-07/3 dated 13.07.2007. Accordingly, the petitioner proceeded with the said two works and completed the same.

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4. It is the specific case of the petitioner that the respondent authorities while preparing and passing RA bills to the petitioner in both the works in question had deducted security deposit amount. Situated thus, representations have been filed before the respondent No. 4 in respect of both the Packages. The respondent No. 4 after receiving the respresentations from the petitioner, prepared necessary bills for releasing the deducted amount towards security deposit of the petitioner for both the works and accordingly by letter dated 20.10.2022, requested the respondent No. 3 to seek necessary requisition for each amount to the petitioner. Pertinent that the statement of deduction, no Defect Liability Certificates and concerned bills were also enclosed in the said letter. However, despite of the aforesaid direction of the respondent No. 4, no security deposit was released. Hence, the present writ petition has been filed.

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5. Mr. D. Das, learned Senior Counsel for the petitioner submits that the respondents have arbitrarily and illegally not released the security deposit amount of the above two Pakages, despite the petitioner had completed the work of construction of the subject road to the full satisfaction of the respondent authorities.

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6. He further submits that the ground for non-release of the security deposit being non-performance of the Routine Maintenance work, even if the same is assumed to be correct, the same does not empower the respondent authorities under the terms of the contract to forfeit the security deposit amount, which was retained by the respondent authorities from the bills of the petitioner in connection with the road construction works, so as to ensure that in the event there is any defect in the construction work, the same can be made good from the retained security deposit amount. He accordingly submits that the non-release of the security deposit is absolutely unsustainable in law and hence, warrants interference from this Court.

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7. He further submits that in a similarly situated work contract issued by the respondents, wherein also the respondents have not released the security deposit amount on the ground of non-performance of the Routine Maintenance work, the petitioner had filed writ petitions before this Court being WP(C) No. 5933/2015 (Muslim Ali Vs. The State of Assam and 4 Ors.) and WP(C) No. 6154/2015 (Muslim Ali Vs. The State of Assam and 4 Ors.), wherein this Court

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by Judgment & Orders dated 06.09.2022 and 06.09.2022 respectively was pleased to allow the said two writ petitions by holding that the stand of the respondents in withholding the security deposit for non-performance of the Routine Maintenance work from the security deposit, which pertains to the part of the work of construction of road is unacceptable.

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8. Per contra, Mr. B. Gogoi, learned Standing Counsel, PWD submits that under the provisions of the contract, especially under Clause 43.4, it is provided that if the Routine Maintenance part of the contract is not carried out by the Contractor as per the contract, the employer is free to carry out the Routine Maintenance work and the amount required for such work will be recovered from the amount of Performance Security available with the employer and/or from any amounts of the Contractor whatever is due.

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9. He accordingly submits that since the security deposit amount was lying with the respondents, therefore, the same being an amount due to the petitioner, was utilized for carrying out the Routine Maintenance work, which was not performed by the petitioner.

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10. He further submits that as per Clause 46 of the contract, if Performance Security is not maintained, the respondents are entitled to recover the same from any dues payable to the Contractor. He further submits that in the case in hand, the writ petitioner has not maintained the Performance Security and accordingly, the action of the respondents in non-release/

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deduction of the security deposit in this regard is valid and lawful.

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11. I have given my prudent consideration to the arguments advanced by the learned counsels appearing for the contending parties and have perused the materials available on record.

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12. It appears that the petitioner was allotted with two works, i.e. Package No. (i) and Package No. (ii), which the petitioner had satisfactorily completed. However, despite satisfactorily completion of the works, the security deposit amount, which was lying with the respondents in relation to the above two Packages were not released within the stipulated time as per the terms and conditions of the contract on the ground that the petitioner has not carried out the Routine Maintenance work.

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13. The issue which falls for determination in the case is whether non-release of the security deposit amount on the ground that Routine Maintenance work was not performed is justified or not under the terms and conditions of the contract.

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14. Apt to refer to the relevant Clauses of the contract before adverting to the merit of the issue.

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15. Clause 1.1 of the definition Clause of the General Conditions of Contract defines the „Contract Data‟ as the documents and other information which comprises the contract. „Defect‟ is defined as any part of the works not completed in accordance with the contract. The „Defects Liability Period‟ is defined as five years calculated from the completion date.

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„Routine Maintenance‟ is defined as the maintenance of roads for five years as specified in the contract data.

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16. Clause 2.1 of the General Conditions of Contract provides that in interpreting these Conditions of Contract, singular also means plural, male also means female or neuter and the other way around and headings have no significance and words have their normal meaning under the language of the contract unless specifically defined.

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17. Clause 32 of the General Conditions of Contract reads as hereunder:-

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“32. Correction of Defects noticed during the Defect Liability Period and Routine Maintenance of Roads for five years

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32.1.1 The Engineer shall give notice to the Contractor of any Defects before the end of the Defects Liability Period, which begins at Completion and ends after five year. The Defects Liability Period shall be extended for as long as Defects remain to be corrected.

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32.1.2 Every time notice of Defect/Defects is given, the Contractor shall correct the notified Defect/ Defects within the duration of time specified by the Engineer's notice.

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32.2.1 The Contractor shall do the routine maintenance of roads, including pavement, road sides and cross drains including surface drains to the required standards and in the manner as defined in clause 1.1 and keep the entire road surface and structure in Defect free condition during the entire maintenance period which begins at Completion and ends after five years.

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32.2.2 The routine maintenance standards shall meet the following minimum requirements:-

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i) Potholes on the road surface to be repaired soon after these appear or brought to his notice either during contractor's monthly Inspection or by the Engineer.

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ii) Road shoulders to be maintained in proper condition to make them free from excessive edge drop offs, roughness, scouring or potholes.

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iii) Cleaning of surface drains including reshaping to maintain free flow of water.

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iv) Cleaning of culverts and pits for free flow of water.

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v) Any other maintenance operation required to keep the road traffic worthy at all time during the maintenance period.

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32.2.3 To fulfil the objectives laid down in sub-clauses 32.2.1 and 32.2.2 above, the Contractor shall undertake detailed inspection of the roads at least once in a month. The Engineer can reduce this frequency in case of emergency. The Contractor shall forward to the Engineer the record of inspection and rectification each month. The Contractor shall pay particular attention on those road sections which are likely to be damaged or inundated during rainy season.

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32.2.4 The Engineer may issue notice to the Contractor to carry out maintenance of defects, if any, noticed in his inspection, or brought to his notice. The Contractor shall remove the defects within the period specified in the notice and submit to the Engineer a compliance report.”

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18. Clause 33 of the General Conditions of Contract reads as hereunder:-

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“33. Uncorrected Defects

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33.1 If the Contractor has not corrected a Defect pertaining to the Defect Liability Period under clause 32.1.1 and clause 32.2.2 of these Conditions of Contract, to the

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satisfaction of the Engineer, within the time specified in the Engineer's notice, the Engineer will assess the cost of having the Defect corrected, and the Contractor will pay this amount, on correction of the Defect.”

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19. Reading of the aforesaid Clauses of the contract, it is apparent that the work is essentially in two parts; firstly, the Construction of the Road and secondly, the Routine Maintenance of the road. It further appears that in the event there is any defect in the construction of the road, the Contractor shall correct the notified defect within the duration of time specified by the Engineer‟s notice. It further appears that in respect of the Routine Maintenance of road, the Contractor has to perform the maintenance for a period of five years from the date of completion of the work. It further appears that in the event the Contractor fails to carry out maintenance or upon detailed inspection, if defect is noted, notice for correction of such defects shall be given to the Contractor and in the event the Contractor fails to correct such defects, the Engineer will assess the cost of having the defect corrected and the Contractor is liable to pay this amount on correction of the defect.

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20. Clause 38.2 of the General Conditions of Contract, which provides the manner in which the payment towards Routine Maintenance is to be made to the Contractor, reads as hereunder:-

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“38.2 The payment to the contractor will be as follows for routine maintenance of the works:

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(a) The Contractor shall submit to the Engineer a bill every month for the routine maintenance of the roads from the date the maintenance period starts i.e. from completion date as defined in Clause 1.1, it will be supported with a copy of the record of contractor's monthly inspection and other instructions received from the Engineer.

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(b) The payment will be made six-monthly for the monthly bills received during the previous six- months.

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(c) If the bill for a month is not received from the contractor by the 10^th day of the succeeding month or/ and if the Engineer has not certified that the contractor has carried out the maintenance work for defects brought to his notice under clause 32.2.4 within specified period, no payment will become due to the Contractor for that month.

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(d) If theContractor has failed to carry out the maintenance with in the period specified by the Engineer, no payment of any kind will be due to the Contractor for that month.”

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21. Clause 39 of the General Conditions of Contract reads as

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hereunder:-

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“39. Payments

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39.1 Payments shall be adjusted for deductions for advance payments, security deposit, other recoveries in terms of the Contract and taxes at source, as applicable under the law. The Engineer shall pay the Contractor the amounts he had certified within 15 days of the date of each certificate.

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39.2 The Employer may appoint another authority, as specified in the Contract Data (or any other competent person appointed by the Employer and notified to the contractor) to make payment certified by the Engineer.

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39.3 Items of the Works for which no rate or price has been entered in the Bill of Quantities, will not be paid for by the Employer and shall be deemed covered by other rates and prices in the Contract.

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39.4 Payment for the routine maintenance of the roads will be made half-yearly for the satisfactory maintenance of the Works, certified by the Engineer and based on the monthly bills submitted by the Contractor as per Clause 38.2 above.”

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22. Reading of Clause 39.4 of the contract, it is apparent that payment for the Routine Maintenance of the roads will be made half-yearly for the satisfactory maintenance of the works as certified by the Engineer and based on the monthly bills submitted by the Contractor as per Clause 38.2.

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23. Clause 43 of the General Conditions of Contract reads as hereunder:-

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“43. Security Deposit

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43.1 The Employer shall retain security deposit of 5% percent of the amount from each payment due to the Contractor until completion of the whole of the Construction Work. No security deposit/ retention shall be retained from the payments for Routine Maintenance of works.

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43.2 On the satisfactory completion of the whole of the construction work half the total amount retained as security deposit is repaid to the contractor, one fourth of the total amount retained as security deposit is repaid to the contractor at the end of the 2^nd year after completion of the construction work and balance of the amount retained as security deposit is repaid to the contractor at the end of the 3^rd year after completion of the construction work subject to condtionthat the engineer has certified that

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all defects notified by the engineer to the contractor before the end of period prescribed for repayment have been corrected.

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43.3 The additional performance security for unbalanced bids as detailed in Clause 51 of Conditions of Contract is repaid to the contractor when the construction work is complete.

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43.4 The performance security equal to the five percent of the contract price and additional performance security for Routine Maintenance as detailed in Clause 51 of Conditions of Contract is repaid to the contractor when the period of five years fixed for Routine Maintenance is over and the Engineer has certified that the contractor has satisfactorily carried out the Routine Maintenance of the works.

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If the Routine Maintenance part of the contract is not carried out by the Contractor as per this contract, the employer will be free to carry out Routine Maintenance work and the amount required for this work will be recovered from the amount of Performance Security available with the employer and/or from any amounts of the Contractor whatever is due.

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43.5 If the contractor so desires then the Security Deposit can be converted into any interest bearing security of scheduled commercial bank in the name of the Employer or National Saving Certificates duly pledged in favour of the Employer for Defect Liability Period.”

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24. Reading of Clause 43 of the contract, it is apparent that as regards the construction of work is concerned, the employer shall retain 5% from each bill amount due to the Contractor as security deposit until completion of the whole of the construction work. It is further apparent that it is clearly provided in the contract that no security deposit/retention shall

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be retained from the payment for Routine Maintenance of works. Apparent thus, that bills in respect of the construction of road and for Routine Maintenance of the road has to be submitted separately. Therefore, bills have to be submitted separately for both in respect of the construction of work and for the Routine Maintenance of work. Bills in respect of the construction of work are submitted during the period of the construction of work and the final bill upon the construction work is completed. Whereas, in respect of the Routine Maintenance work, bill is submitted monthly from the date the maintenance period starts, i.e. from the date of completion of the construction work.

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25. It further appears that Clause 43.2 of the contract provides the manner in which the security deposit shall be returned back to the Contractor within a period of three years after completion of the construction work, subject of course to correction of the defects, if any. It further appears that Clause 43.2 of the contract provides that upon satisfactory completion of the whole of the construction work, half the total amount retained as security deposit is to be repaid to the Contractor. Thereafter, one fourth of the total amount retained as security deposit is repaid to the Contractor at the end of the 2^nd year after completion of the construction work and the balance of the amount retained as security deposit is to be repaid to the Contractor at the end of the 3^rd year after completion of the construction work, subject of course to the condition that the Engineer has certified that all defects notified by the Engineer to the Contractor before the end of period prescribed for

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repayment have been corrected. It is thus apparent that by the end of the 3^rd year after completion of the contruction work, the security deposit has to be released in full to the Contractor, subject of course that all defects notified by the Engineer in relation to the construction of work has been corrected by the Contractor.

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26. It further appears that as far as Routine Maintenance is concerned, Clause 43.4 of the contract provides that the Performance Security equal to the five percent of the contract price and additional performance security for Routine Maintenance as detailed in Clause 51 is repaid to the Contractor when the period of five years fixed for Routine Maintenance is over and the Engineer has certified that the Contractor has satisfactorily carried out the Routine Maintenance of the works.

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27. It further appears that it is provided under the said Clause that if the Routine Maintenance part of the contract is not carried out by the Contractor, the employer shall carry out the Routine Maintenance work and the amount required for this work will be recovered from the amount of Performance Security available with the employer and/or from any amounts of the Contractor whatever is due.

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28. It is crystal clear that firstly, it is the security deposit which is retained from the bills of the Contractor in connection with the construction of the work and the same is repayable at the end of three years after the satisfactorily completion of the work. Secondly, there is a specific bar for retaining security deposit from the payments for Routine Maintenance of works.

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29. It further appears that apart from the aforesaid security deposit, a Performance Security and Additional Performance Security, if required as the case may be, also is taken from the Contractor, which is repayable to the Contractor at the end of five years fixed for Routine Maintenance is over.

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30. It further appears that in the event the Routine Maintenance work is not carried out by the Contractor, the employer is entitled to recover the amount required for carrying out the Routine Maintenance from the said Performance Security available and also from any amount of the Contractor whatever is due.

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31. The contention of Mr. B. Gogoi, learned Standing Counsel, PWD that „any amount due‟ would mean the security deposit, if the same is lying with the respondents employer is not acceptable, inasmuch as, the security deposit amount is in relation to the construction of work and the same is payable at the end of three years from the completion of the work. That apart, it is clearly stated in the contract that no security deposit retention shall be retained from the payments for Routine Maintenance of work. It appears that the contract provides utilization of the Performance Security, in the event the Routine Maintenance work is not performed by the Contractor. Thus, the words „any amount due‟ cannot be read in isolation and has to be read alongwith the other Clauses of the contract. It is apparent that the words and/or between „Performance Security available with the employer‟ and „From any amounts of the Contractor whatever is due‟ would mean amounts due from the

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bill for Routine Maintenance work. Similarly, the contention of the learned counsel for the respondent that since the petitioner has not maintained the Performance Security, deduction of security deposit is valid cannot also be accepted, inasmuch as, Performance Security is taken only in relation to Road Maintenance work.

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32. Therefore, the security deposit cannot be said to be any amount due in connection with Road Maintenance work, inasmuch as, as the security deposit under the terms and conditions of the contract is against construction work alone and the same is to be repaid at the end of three years from the completion of the construction work. The aforesaid terms and conditions are absolutely clear and unambiguous. Hence, words cannot be read into or add by this Court so as to suit the convenience of one party to the contract, contrary to the terms and conditions of the contract.

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33. Undoubtedly, in contractual matters, by way of judicial review, this Court cannot examine the correctness of the decision itself which has been taken by the State authorities, but at the same time, this Court is entitled to examine whether the manner in which the decision was taken is reasonable, rational, not arbitrary and not violative of Article 14 of the Constitution of India.

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34. In the case of the Chief Constable of North Wales Police vs. Evans, reported in (1982) 3 ALL ER 141 , the House of Lords held that “The purpose of judicial review is to ensure that the individual receives fair treatment, and not to

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ensure that the authority, often according fair treatment reaches on a conclusion which it is authorized or enjoyed by law to decide for itself a conclusion which is correct in the eyes of the Court”. Therefore, even after the contract is made, Article 14 of the Constitution of India continues to be applicable mandating fair treatment to the parties to the contract by the State authorities.

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35. In the case of Kumari Shrilekha Vidyarthi and Others Vs. State of U.P. and Others, reported in (1991) 1 SCC 212, the Apex Court has clearly indicated the scope of judicial review in contractual matter when it is alleged of violative of Article 14 of the Constitution of India. Relevant paragraphs of the said decision are reproduced, which reads as hereunder:-

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“21. The Preamble of the Constitution of India resolves to secure to all its citizens Justice, social, economic and political; and Equality of status and opportunity. Every State action must be aimed at achieving this goal. Part IV of the Constitution contains `Directives Principles of State Policy which are fundamental in the governance of the country and are aimed at securing social and economic freedoms by appropriate State action which is complementary to individual fundamental rights guaranteed in Part III for protection against excesses of State action to realise the vision in the Preamble. This being the philosophy of the Constitution, can it be said that it contemplates exclusion of Article 14--non-arbitrariness which is basic to rule of law-from State actions in contractual field when all actions of the State are meant for public good and expected to be fair and just? We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in State actions in any sphere of its activity contrary to the professed ideals in the Preamble. In our opinion, it would be alien to the Constitutional Scheme to accept the

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argument of exclusion of Article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequals.

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There is an obvious difference in the contracts between private parties and contracts to which the State is a party, Private parties are concerned only with their personal interest whereas the State while exercising its powers and discharging its functions, acts indubitably, as is expected of it, for public good and in public interest. The impact of every State action is also on public interest. This factor alone is sufficient to import at least the minimal requirements of public law obligations and impress with this character the contracts made by the State or its instrumentality. It is a different matter that the scope of judicial review in respect of disputes failing within the domain of contractual obligations may be more limited and in doubtful cases the parties may be relegated to adjudication of their rights by resort to remedies provided for adjudication of purely contractual disputes. However, to the extent, challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary, unfair or unreasonable, the fact that the dispute also fails within the domain of contractual obligations would not relieve the State of its obligation to comply with the basic requirements of Article 14. To this extent, the obligation is of a public character invariably in every case irrespective of there being any other right or obligation in addition thereto. An additional contractual obligation cannot divest the claimant of the guarantee under Article 14 of nonarbitrariness at the hands of the State in any of its actions.”

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36. In the case of Sterling Computers Limited Vs. M/s M & N Publications Limited and Others, reported in (1993) 1 SCC 445, the Apex Court has held that in contractual matters though Court cannot act as an Appellate Authority, however, if the decision making process is violative of Article 14, the Court is entitled to strike down the decision and action taken pursuant thereto. Relevant paragraphs of the said decision are reproduced, which reads as hereunder:-

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“12. At times it is said that public authorities must have the same liberty as they have in framing the policies, even while entering into contracts because many contracts amount to implementation or projection of policies of the Government. But it cannot be overlooked that unlike policies, contracts are legally binding commitments and they commit the authority which may be held to be a State within the meaning of Article 12 of the Constitution in many cases for years. That is why the court have impressed that even in contractual matters the public authority should not have unfettered discretion. In contracts having commercial element, some more discretion has to be conceded to the authorities so that they may enter into contracts with persons, keeping an eye on the augmentation of the revenue. But even in such matters they have to follow the norms recognised by courts while dealing with public property. It is not possible for courts to question and adjudicate every decision taken by an authority, because many of the Government Undertakings which in due course have acquired the monopolist position in matters of sale and purchase of products and with so many ventures in hand, they can come out with a plea that it is not always possible to act like a quasi-judicial authority while awarding contracts. Under some special circumstances a discretion has to be conceded to the authorities who have to enter into contract giving them liberty to assess the overall situation for purpose of taking a decision as to whom the

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contracts be awarded and at what terms. If the decisions have been taken in bona fide manner although not strictly following the norms laid down by the courts, such decisions are upheld on the principle laid down by Justice Holmes, that courts while judging the constitutional validity of executive decisions must grant certain measure of freedom of "play in the joints" to the executive.

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The action or the procedure adopted by the authorities which can be held to be State within the meaning of Article 12 of the Constitution, while awarding contracts in respect of properties belonging to the State can be judged and tested in the light of Article 14 of the Constitution, is settled by the judgments of this Court in the case of Ramana Dayaram Shetty v. International Airport Authority of India; Kasturi Lal Lakshmi Reddy v. State of J & K Fertilizer Corpn. Kamagar Union (Regd.) Sindri v. Union of India Ram and Shyam Co. v. State of Haryana; Haji T. M. Hassan Rawther v. Kerala Financial Corpn.; Mahabir Auto Stores v. Indian Oil Corpn. and Shrilekha Vidyarthi v. State of U.P. It has been said by this Court in Kasturi Lal: (SCC p. 13, para 14)

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"It must follow as a necessary corollary from this proposition that the Government cannot act in a manner which would benefit a private party at the cost of the State such an action would be both unreasonable and contrary to public interest. The Government, therefore, cannot, for example, give a contract or sell or lease out its property for a consideration less than the highest that can be obtained for it, unless of course there are other considerations which render it reasonable and in public interest to do so."

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It is true that by way of judicial review the Court is not expected to act as a court of appeal while examining an administrative decision and to record a finding whether such decision could have taken otherwise in the facts and circumstances of the case. In the book Administrative Law, Prof. Wade has said:

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"The doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the court must not usurp the discretion of the public authority which Parliament appointed to take decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If it passes those bounds, it acts ultra vires. The court must therefore resist the temptation to draw the bounds too tightly, merely according to its own opinion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which legislature is presumed to have intended. The decisions which are extravagant or capricious cannot be legitimate. But if the decision is within the confines of reasonableness, it is no part of the courts function to look further into its merits.With the question whether a particular policy is wise or foolish the court is not concerned it can only interfere if to pursue it is beyond the powers of the authority."

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But in the same book Prof. Wade has also said:

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"The powers of public authorities are therefore essentially different from those of private persons. A man making his will may, subject to any rights of his dependents, dispose of his property just as he may wish. He may act out of malice or a spirit of revenge, but in law this does not affect his exercised of his power. In the same way a private person has and absolute power to allow whom he likes to use his land, to release a debtor, or, where the law permits, to evict a tenant, regardless of his motives. This is unfettered discretion. But a public authority may do none of these things unless it acts reasonably and in good faith and upon lawful and relevant grounds of public interest.

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There are many cases in which a public authority has been held to have acted from improper motives or upon irrelevant considerations, or to have failed to take

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account of relevant considerations, so that its action is ultra vires and void."

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While exercising the power of judicial review, in respect of contracts entered into on behalf of the State, the Court is concerned primarily as to whether there has been any infirmity in the "decision making process". In this connection reference may be made to the case of Chief Constable of the North Wales Police v. Evans where it was said that: (p. 144 a)

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"The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter which it is authorised or enjoined by law to decide for itself a conclusion which is correct in the eyes of the court."

¶131

By way of judicial review the court cannot examine the details of the terms of the contract which have been entered into by the public bodies or the State. Courts have inherent limitations on the scope of any such enquiry. But at the same time as was said by the House of Lords in the aforesaid case, Chief Constable of the North Wales Police v. Evans the courts can certainly examine whether "decisionmaking process" was reasonable, rational not arbitrary and violative of Article 14 of the Constitution.

¶132

If the contract has been entered into without ignoring the procedure which can be said to be basic in nature and after an objective consideration of different options available taking into account the interest of the State and the public, then Court cannot act as an appellate authority by substituting its opinion in respect of selection made for entering into such contract. But, once the procedure adopted by an authority for purpose of entering into a contract is held to be against the mandate of Article 14 of the Constitution, the courts cannot ignore such action saying that the authorities concerned must have some latitude or liberty in contractual matters and any

¶133

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¶134

interference by court amounts to encroachment on the exclusive right of the executive to take such decision.

¶135

The cases aforesaid on which reliance was placed on behalf of the appellants, have also reiterated that once the State decides to grant any right or privilege to others, then there is no escape from the rigour of Article 14 the executive does not have an absolute discretion, certain precepts and principles have to be followed, the public interest being the paramount consideration. It has also been pointed out that for secure in the public interest one of the methods recognised is to invite tenders affording opportunity to submit offers for consideration in an objective manner. However, there may be case where in special facts and circumstances and due to compelling reasons which must stand the test on Article 14 of the Constitution, departure of the aforesaid rule can be made. This Court while upholding the contracts by negotiation in the cases referred to above has impressed as to how in the facts and circumstances refereed to above has impressed as to how and the authorities concerned were reasonable, rational and in the public interest. The decisions taken in those cases by the authorities concerned, on judicial scrutiny were held to be free from bias, discrimination and under the exigencies of the situation then existing to be just and proper. On the basis of those judgments it cannot be urged that this Court has left to the option of the authorities concerned whether to invite tenders or not according to their own discretion and to award contracts ignoring the procedures which are basic in nature, taking into account factors which are not only irrelevant but detrimental to the public interest.”

¶136

37. Reading of the aforesaid decision, it is apparent that it is imperative for the State authorities to act fairly and reasonably in contractual matters as well. Therefore, this Court is entitled to struck-off the decision of the State authorities taken in

¶137

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¶138

contractual matters, if the same is not fair, arbitrary or unreasonable.

¶139

38. Keeping the aforesaid limited scope of judicial review in mind, let me now examine the stand of the respondent authorities pleaded in their return. Relevant paragraphs of the affidavit-in-opposition filed by the respondent No. 3 on 30.10.2024, reads as hereunder:-

¶140

“5. That with regard to the statements made in paragraph 4 of the writ petition, the deponent has no comments to offer so far as the same are matters of record. However, anything beyond the records are denied and disputed by the answering respondent.

¶141

Further, the deponent begs to submit the following for the just and proper adjudication of the case:

¶142

a. That with regard to Clause 43.1 of the contract agreement, the deponent has no comments to offer.

¶143

b. That with regard to Clause 43.2 of the contract agreement, the deponent begs to submit that the release of security deposit at the end of the 3rd year after completion of the construction work is allowed only if defects are noticed and notified by the Engineer are corrected by the contractor.

¶144

c. That with regard to Clause 43.3 of the contract agreement, the deponent has no comments to offer.

¶145

d. That with regard to Clause 43.4 of the contract agreement, the deponent begs to submit that the performance security equal to the 5% of the contract price and additional performance security for routine maintenance as detailed in Clause 51 of the Conditions of Contract is paid

¶146

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¶147

to the contractor when the period of 5 years fixed for Routine Maintenance is over and the Engineer has certified that the contractor has satisfactorily carried out the Routine Maintenance of the works. Further, the deponent begs to submit that if the Routine Maintenance part of the contract is not carried out by the contractor as per this contract, the employer will be free to carry out Routine Maintenance work and the amount required for this work will be recovered from the amount of performance security available with the employer and/or from any amounts of the contractor whatever is due.

¶148

e. That with regard to Clause 43.5 of the contract agreement, the deponent begs to submit that the security deposit amount is repayable to the contractor at the end of 3 years subject to correction of any defect notified by the Engineer. However, for this package, the contractor did not carry out any Routine Maintenance work which has detoriated the road and failed to provide intended service to the road users. The defects developed due to non-maintenance of the road during five years Routine Maintenance period, which is also called Defect Liability Period, are to be corrected at the cost of the contractor. In this connection, the deponent begs to refer and rely on Clause 33 of General Conditions of Contract which states:

¶149

"33. Uncorrected Defects:

¶150

33.1 If the contractor has not corrected a Defect pertaining to the Defect Liability Period under Clause no. 32.1.1 and 32.2.2 of these Conditions of Contract, to the satisfaction of the Engineer, with on the time specified in the Engineers notice, the Engineer will assess the cost of having the Defect corrected, and

¶151

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¶152

the Contractor will pay this amount, on correction of the Defect."

¶153

The deponent further begs to submit that the work was completed on 31.07.2010 wherein:

¶154

a. The total SD amount retained from bill = Rs. 10,37,661/-

¶155

b. SD amount (50%) released on 12.08.2011 = Rs. 5,18,830/-

¶156

c. Remaining (50%) SD amount forfeited for defect correction work on 12.09.2014 = Rs. 5,18,831/-

¶157

d. Expenditure already made for defect correction work =Rs. 5,13,940/-

¶158

e. Balance SD amount available = Rs. 4,891/-.

¶159

Copies of the notices served to the contractor and assessment made for correction of defect is annexed herewith and marked as ANNEXURE C.

¶160

That with regard to the statements made in paragraph 5 of the writ petition, the deponent begs to submit that the release of Security Deposit at the end of the 3rd year after completion of construction work is allowed only if defects noticed and notified by the Engineer are corrected by the contractor. In this Package however, the contractor did not carry out any Routine Maintenance work which has detoriated the road and failed to provide intended service to the road users. The defects developed due to nonmaintenance of the road during 5 years Routine Maintenance period, which is also called Defect Liability Period are to be corrected at the cost of the contractor. In this connection, the deponent begs to refer

¶161

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¶162

and rely on the Clause 33 of General Conditions of Contract which states:

¶163

"33. Uncorrected Defects:

¶164

33.1 If the contractor has not corrected a Defect pertaining to the Defect Liability Period under Clause no. 32.1.1 and 32.2.2 of these Conditions of Contract, to the satisfaction of the Engineer, with on the time specified in the Engineers notice, the Engineer will assess the cost of having the Defect corrected, and the Contractor will pay this amount, on correction of the Defect."

¶165

The deponent further begs to submit that the work was completed on 31.12.2013 wherein:

¶166

a. The total SD amount retained from bill = Rs. 13,34,881/-

¶167

No SD amount released to the contractor

¶168

b. SD amount forfeited for defect correction work on 30.04.2015 = Rs. 6,91,700/-

¶169

c. SD amount forfeited for defect correction work on 31.05.2015 = Rs. 4,82,071/-

¶170

d. Expenditure already made for defect correction work = Rs. 11,73,666/-

¶171

e. Balance SD amount available = Rs. 1,61,215/-

¶172

That with regard to the statements made in paragraph 6 of the writ petition, the deponent begs to submit that the total SD amount deducted from the bills of Package No. AS-20-29 is Rs. 10,37,661/- and the total SD amount deducted from bills of Package No. AS-20-33 is Rs. 13,34,881/-, out of which, SD amounting to Rs. 5,18,830/was released against Package No. AS-20-29.

¶173

Copies of the explanation call

¶174

for SD money release proposal and copies of the

¶175

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¶176

statement of SD money retained/released and forfeite d are annexed herewith and marked as ANNEXURE - E and ANNEXURE - F respectively.

¶177

That with regard to the statements made in paragraph 7 of the writ petition, the deponent begs to refer and rely on the statements made in paragraphs 5 and 6 of the instant affidavit-in- opposition.

¶178

That with regard to the statements made in paragraph 8 of the writ petition, the deponent has no comments to offer so far as the same are matters of record. However, anything beyond the records are denied and disputed by the answering respondent.

¶179

That with regard to the statements made in paragraph 9 of the writ petition, the deponent begs to submit that the construction works were completed on 31.07.2010 and 31.12.2013 for Package No. AS-20-29 and AS-20-33 respectively. 5 years Routine Maintenance period as well as Defect Liability period were also over on 31.07.2015 and 31.12.2018 respectively.

¶180

After passing of 11 years, the contractor raised the request for release of SD money and forwarded a claim for release to Chief Engineer's Office with "No Defect Liability Certificates" issued after 11 years where data are not filled up properly, which are not asper actual fact and figures and records available in Division Office. But the same was detected at Accounts Branch of the Chief Engineer's Office and explanation was called for from the concerned Executive Engineer, Nalbari Territorial Road Division for submission of demand for release of SD money, which were already expended for defect correction work. Accordingly, the concerned Executive Engineer later on withdrew these 'No Defect Liability Certificates'.”

¶181

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¶182

39. Relevant paragraphs of the additional affidavit filed on behalf of the respondent No. 2 on 09.01.2025 reads as hereunder:-

¶183

“3. That in pursuance of the Hon'ble High Court's order dated 20.12.2024 passed in the instant writ petition bearing W.P.(C) No. 7406/2023 (Muslim Ali Vs. The State of Assam and 3 ors.), the deponent by way of an Additional Affidavit begs to submit the following for the just and proper adjudication of the case:

¶184

a. That the Performance Security submitted by the contractor or Security Deposit deducted from the bills can be forfeited if the contract is not performed by the contractor. In this specific case, Routine Maintenance part of the contract is not performed by the Contractor.

¶185

The deponent further begs to submit that as per Clause No. 43.4, paragraph 2, "If the Routine Maintenance part of the contract is not carried out by the contractor as per this contract, the employer will be free to carry out Routine Maintenance work and the amount required for this work will be recovered from the amount of Performance Security available with the employer and/or from any amounts of the Contractor whatever is due."

¶186

A copy of the relevant part of the contract containing Clause No. 43.4 is annexed herewith and marked as ANNEXURE-A.

¶187

b. That the Additional Performance Security is taken from the Contractor in case of unbalanced bids (in case of hug variation in rate and cost with respect to estimate) as per ITB Clause No. 32.1. In this

¶188

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¶189

specific case, no Additional Performance Security is taken from the Contractor.

¶190

A copy of the relevant part of the contract containing ITB Clause No. 32.1 is annexed herewith and marked as ANNEXURE - B.

¶191

c. That the Routine Maintenance work for 5 (five) years is awarded to the Contractor along with the construction work. The bidder quoted rates for both construction items as well as Routine Maintenance item. Then, Letter of Acceptance and Notice to Proceed with the work are issued to the contractor which includes construction work as well as Routine Maintenance work.

¶192

A copy of the Notice to Proceed with the work and the pages relating to Bills of Quantity where the agreed rates for Routine Maintenance items are available for both the Packages bearing No. AS-20-29 and AS- 20-33 are annexed herewith and marked as ANNEXURE-C.

¶193

d. That the deponent begs to refer and rely on the statements made in paragraph 3 (b) of the instant additional affidavit and begs to submit that the Additional Performance Security is taken from the Contractor in case of unbalanced bids. In this specific case, no Additional Performance Security was taken from the Contractor.

¶194

e. That the deponent begs to bring into record, the Letter of Acceptance with regard to the Packages bearing No. AS-20- 29 and AS-20-33.

¶195

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¶196

Copies of the Letter of Acceptance with regard to the Packages bearing No. AS-20-29 and AS-2033 are annexed herewith and marked as ANNEXURE-D.

¶197

f. That the deponent begs to bring into the kind notice of the Hon'ble High Court, the financial status of the forfeited Security Deposits which is stated herein below:

¶198

i. Package No. AS-20-29:

¶199

SD amount deducted from Bill : Rs. 10,37,661/-

¶200

SD amount released on 10.08.2011 : Rs. 5,18,830/-

¶201

Expenditure made for Defect correction : Rs. 5,13,940/-

¶202

arises due to non-maintenance

¶203

Balance with the Department : Rs. 4, 891/-

¶204

ii. Package No. AS-20-33:

¶205

SD amount deducted from bill : Rs. 13,34,881/-

¶206

SD amount released : NIL

¶207

Expenditure made for Defect : Rs. 11,73,666/-

¶208

correction arises due to non-maintenance

¶209

Balance with the Department : Rs. 1,61,215/-

¶210

Further, the deponent begs to submit that the Performance Securities submitted for both the Packages in the form of Bank Guarantee are already expired and have no monetary value.”

¶211

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¶212

40. Reading of the aforesaid paragraphs, it is apparent that the respondents have forfeited the security deposit against the non-performance of Road Maintenance by the petitioner in respect of the subject two works. It further appears that in connection with the Package No. (i), 50% of the security deposit was released on 12.08.2011 and the remaining 50% was forfeited for defect correction work. It further appears that the respondents have clarified that the defect correction work is in relation to the Routine Maintenance work, which has deteriorated because the Contractor did not carry out the maintenance as required and failed to provide intended service to the road users. In connection with the second work, i.e. Package No. (ii), it appears that no security deposit amount has been released to the petitioner till date and an amount of Rs. 6,91,700/- and Rs. 4,82,071/- have been forfeited from the security deposit against defect correction work on 30.04.2015 and 31.05.2015 respectively. It appears that an amount of Rs. 1,61,215/- is still lying with the respondents. It further appears that the construction work was completed on 31.07.2010 and 31.12.2013 in respect of Package No. (i) and Package No. (ii) respectively. It further appears that the five years Routine Maintenance period as well as Defect Liability Period were also over on 31.07.2015 and 31.12.2018 respectively. It further appears that the No Liability Certificate issued by the respondent No. 4, which is enclosed to the writ petition as Annexures-7 & 8 series was later on withdrawn.

¶213

41. What transpires from the above is that admittedly, the petitioner has completed the subject construction work to the

¶214

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¶215

full satisfaction and within the time stipulated. It further appears that neither during the period of the construction of work nor after the said work was completed, no defect whatsoever was notified against the aforesaid construction work by the concerned Engineer. It further appears that there is no plea taken in the affidavit-in-opposition and in the additional affidavit filed on behalf of the respondents that the petitioner has not carried out the construction work properly.

¶216

42. On the contrary, it appears that the dispute is as regards not carrying out the Road Maintenance work by the petitioner, for which the respondents have not released the security deposit amount in question.

¶217

43. Pertinent that no defect at any point of time was notified to the petitioner for correction in relation to Road Maintenance work either.

¶218

44. In the case of Muslim Ali (supra) in WP(C) No. 5933/2015, the Co-ordinate Bench of this Court in the context of similarly situated facts has held as hereunder:-

¶219

“9. A reading of the stand of the petitioner is that according to the petitioner the security money deposited was for the part of the contract work for construction of the road and it is not related to the routine maintenance part of the work and therefore, the part of the contract work of construction of the road having been satisfactorily completed, the respondents under the terms of the contract agreement cannot forfeit the security deposit although the petitioner may have not performed or completed the other part of the work of routine maintenance.

¶220

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¶221

On the other hand, it is the stand of the respondents in the PWRD that as per the clause 43.2 of the tender agreement, the Engineer has to satisfy that all defects notified by the Engineer has to be corrected by the contractor prior to release of security deposit.

¶222

In the instant case, we have noticed that there is no such stand of the respondents that the original work performed by the petitioner in construction of the road was defective or that any such defect has been pointed out which the contractor is required to rectify and had not done so, so as to enable the respondents to forfeit the security deposit. The stand that has been taken by the respondents in thePWRD is that the petitioner had not performed the other part of the contract work i.e. routine maintenance of the work, which was otherwise satisfactorily completed.

¶223

Non performing of the other part of the contract work for routine maintenance would be a violation of the terms of the contract by the petitioner contractor and for such violation, the petitioner can be subjected to the procedure under any relevant provisions of law that may be available including any such penal provisions that also may be available for not performing a particular requirement of a contract work. But at the same time, the security money that has been forfeited is directly related to the part of the contract work of construction of the road which work even according to the respondents otherwise been satisfactorily performed and further no defects thereof could be pointed out by the respondents, so as to entitle them to deduct the security deposit.

¶224

From such point of view, we are unable to accept the stand of the respondents that as because the other part of the contract work for performing the routine maintenance work had not been performed by the petitioner, therefore the security deposit which pertains to the part of the work of construction of the road also liable to be forfeited.

¶225

Accordingly, we direct the respondents in the PWRD to pay the security deposit pertaining to the part of the

¶226

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¶227

contract work related to the construction of the road. But, however, as the petitioner had not performed the other part of the contract work in undertaking the routine maintenance, liberty remains with the respondents to take any action under the law as may be available including any other penal provisions for not performing the other part of the work. But, in doing so, the appropriate procedure of law be followed.

¶228

The writ petition is disposed of in the above terms.”

¶229

45. In the case of Muslim Ali (supra) in WP(C) No. 6154/2015, the Co-ordinate Bench of this Court in the context of similarly situated facts has held as hereunder:-

¶230

“13. Non performing of the other part of the contract work for routine maintenance would be a violation of the terms of the contract by the petitioner contractor and for such violation, the petitioner can be subjected to the procedure under any relevant provisions of law that may be available including any such penal provisions that also may be available for not performing a particular requirement of a contract work. But at the same time, the security money that has been forfeited is directly related to the part of the contract work of construction of the road, which work even according to the respondents otherwise been satisfactorily performed and further no defects thereof could be pointed out by the respondents, so as to entitle them to deduct the security deposit.

¶231

From such point of view, we are unable to accept the stand of the respondents that as because the other part of the contract work for performing the routine maintenance work had not been performed by the petitioner, therefore the security deposit which pertainsto the part of the work of construction of the road also liable to be forfeited.

¶232

Accordingly, we direct the respondents in the PWRD to pay the security deposit pertaining to the part of the contract work related to the construction of the road. But,

¶233

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¶234

however, as the petitioner had not performed the other part of the contract work in undertaking the routine maintenance, liberty remains with the respondents to take any action under the law as may be available including any other penal provisions for not performing the other part of the work. But, in doing so, the appropriate procedure of law be followed.”

¶235

46. It is submitted at the bar that the State respondents have not filed any appeal against the said two Judgment & Order. Hence, the said two Judgment & Order of the Co-ordinate Bench has attained finality. Reading of the aforesaid two Judgment & Order of the Co-ordinate Bench, it appears that the Co-ordinate Bench of this Court has held that forfeiture of the security money relating to the part of contract work of construction of the road on the ground of non-performance of the contract work for Routine Maintenance is in violation of terms of the contract. The aforesaid two decisions squarely covers the issue in hand and this Court finds no reasons to defer from the view taken by the Co-ordinate Bench of this Court.

¶236

47. That being so, this Court is unable to accept the stand of the respondents that as because the other part of the contract work for performing the Routine Maintenance work has not been performed by the petitioner, therefore, the security deposit which pertains to the part of the work of contruction of the road is liable to be forfeited. It is crystal clear that the security deposit amount cannot be utilized against nonperformance of Road Maintenance work as per the terms and conditions of the contract. Therefore, non-release of the

¶237

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¶238

security deposit in question by the respondents to the petitioner on the ground of non-performance of Road Maintenance of work is totally unfair, arbitrary and illegal. Hence, the petitioner has not been treated in a fair manner.

¶239

48. In view of the above, this Court is of the unhesitant view that non-release of the security deposit in question by the State respondents is not justified.

¶240

49. Accordingly, this Court directs the respondents to pay the balance security deposit in relation to Package No. (i) and the entire security deposit in relation to Package No. (ii), relating to the construction of the road in question with liberty to the respondents to take any action under the law as may be available including any other penal provisions for not performing the other part of the work, i.e., relating to the Routine Maintenance by following the appropriate procedure of law.

¶241

50. Writ petition accordingly stands disposed of.

¶242

JUDGE

¶243

Comparing Assistant

¶244

Page 37 of 37

Muslim Ali v. the State of Assam and 3 Ors.

Case brief

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Muslim Ali v. the State of Assam and 3 Ors.

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