Allowed

Shivalaya Construction Co. Pvt. Ltd. through Its Manager Accounts Finance Namely Janmejaya Ojha v. the State of Jharkhand through the Secretary Road Construction Department

Jharkhand HC7 Jan 2021WPC/2481/2020

Case brief

AI extract

What is this about?

The High Court of Jharkhand quashed an order rejecting a construction company's request to replace its expired performance bank guarantee with one from a different nationalized bank. The court held that the tender documents did not prohibit such exchange and allowed it to protect the beneficiary's interest.

What did the court decide?

The impugned order rejecting the Bank Guarantee replacement was quashed. The State Highways Authority of Jharkhand is directed to permit the exchange of the Bank Guarantee under Clause 34 of the Instr

Shivalaya Construction Co. Pvt. Ltd. through Its… — Consumer Protection | Jharkhand HC (2021)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P. (C) No.2481 of 2020

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Shivalaya Construction Co. Pvt. Ltd.

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.......... Petitioner.

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-Versus-

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The State of Jharkhand through the Secretary, Road Construction Department, Project Building, Dhurwa, Ranchi.

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State Highways Authority of Jharkhand (Government of Jharkhand), through its Chief Executive Officer-cum-Secretary, Din Dayal Nagar, Booty More, Ranchi.

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Member (Technical), State Highways Authority of Jharkhand, Din Dayal Nagar, Booty More, Ranchi.

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.......... Respondents.

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----- CORAM : HON’BLE MR. JUSTICE RAJESH SHANKAR

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----For the Petitioner : Mr. Sumeet Gadodia, Advocate For the State : Mr. Om Prakash Tiwari, G.P.III For Respondent nos.2 & 3:Mr. Sharad Kaushal Shaj, Advocate -----

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Order No.06 Date: 07.01.2021

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This case is taken up through video conferencing.

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The present writ petition has been filed for quashing the order contained in letter no.1474 dated 30.12.2019 (Annexure-10 to the writ petition) issued by the Member (Technical) State Highways Authority of Jharkhand-respondent No.3, whereby the request made by the petitioner for exchange of performance bank guarantee (B.G.) of ICICI Bank Ltd., being B.G. No.0007BGR0033217 dated 12.05.2016, for an amount of Rs.1,51,95,400/-, having validity up to 11.05.2021 with performance B.G. dated 22.05.2018 of equivalent amount having validity up to 21.11.2021 being B.G. No.07410002918 issued by the Oriental Bank of Commerce has been rejected. Further prayer has been made for issuance of direction upon the State Highways Authority of Jharkhand-respondent no.2 to permit the petitioner to exchange its performance B.G. with an equivalent amount of B.G. issued from any of the Branches of State Bank of India or Nationalized or Scheduled Commercial Bank, having its branches situated within the State of Jharkhand for an extended validity period up to 28th April, 2022 in terms of Clause 34 of the terms and conditions of the contract.

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The factual background of the case as stated in the writ petition is that the respondent no.2 published a Notice Inviting Tender (in short ‘NIT') dated 01.01.2016 pertaining to the work of “Widening, Strengthening/Reconstruction of Maricha (on K.T.K. Road SH-3)Rania- Soude (up to SH-4) Road (total length-36.19 Km.) including

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Construction of Bridges & Culverts” (hereinafter to be referred as ‘the said Tender’). The petitioner participated in the said tender and was declared successful. Accordingly, Letter of Acceptance (LoA) dated 22.04.2016 was issued in favour of the petitioner. In view of Clause 34 of the Instructions to Bidders (I.T.B.), the petitioner deposited performance B.G. amounting to Rs.1,51,95,400/vide B.G. No.0007BGR0033217 dated 12.05.2016 issued by the ICICI Bank Ltd., which was valid up to 11.05.2021. Thereafter, an agreement was executed on 04.07.2016 between the petitioner and the State Highways Authority of Jharkhand through its Chief Executive Officercum-Secretary- respondent no.2 and, accordingly, the petitioner commenced the work in question. As per the agreement, the date of commencement of the work was 07.10.2016 and stipulated time for completion of the work was 16.10.2018, however, the same was completed on 31.03.2019. The respondent no.2 vide its letter no.890 dated 8^th July, 2019 granted post facto approval and extended the period of completion of the work up to 31^st March, 2019. The performance B.G. submitted by the petitioner was covering the entire defect liability period of 1095 days from the date of completion of the work. Since the date of completion of the work was extended till 31^st March, 2019, the performance B.G. was also required to be revised and a fresh performance B.G. was required to be submitted for the defect liability period of 1095 days + 28 days i.e. up to 28^th April, 2022. During subsistence of the present contract, ICICI Bank Ltd. withdrew itself as a Consortium Banker of the petitioner and the petitioner's operation with ICICI Bank was closed down upon mutual discussions and as such the petitioner filed an application on 24.05.2018 before respondent no.2, seeking permission for replacement of the performance B.G. issued by the ICICI Bank Ltd. with a fresh performance B.G. issued by a Nationalized Bank i.e. Oriental Bank of Commerce of equivalent amount and containing exactly same terms and conditions which were provided in the contract document as well as in the earlier performance B.G., however, no action was taken by the respondent no.2, which compelled the petitioner to file repeated representations before the said authority, including the representations dated 2^nd July, 2018 and 29^th May, 2019. The said representations were also not

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considered by respondent no.2 and as such the petitioner filed a writ petition being W.P.(C) No. 3343 of 2019, praying, inter alia, for issuance of direction upon the respondents to allow it to replace its present performance B.G. issued by the ICICI Bank for an amount of Rs.1,51,95,400/- with another performance B.G. of the same amount issued by a nationalized bank i.e. Oriental Bank of Commerce, covering the same validity period. The said writ petition was disposed of vide order dated 13.09.2019, directing the respondent authorities to take decision on the request made by the petitioner for replacement of its performance B.G. with another performance B.G. of an equivalent amount having same terms and conditions as provided in the contract. The petitioner again filed a fresh representation dated 06.12.2019 before respondent no.2 and pursuant thereto it received letter no.1474 dated 30.12.2019 issued by respondent no.3 informing inter alia that its request for replacement of the performance B.G. was rejected and that the original B.G. of Oriental Bank of Commerce submitted by the petitioner which had already been accepted from its end and as such no decision was pending on its representation. Hence, the present writ petition. The learned counsel appearing on behalf of the petitioner submits that a bare perusal of the impugned order, as contained in the letter dated 30.12.2019, passed by respondent no.3, it would transpire that the respondent no.3, in fact, has not taken an independent decision on the issue of exchange of performance B.G. submitted by the petitioner rather, he has merely quoted an opinion rendered by the Advocate General, Jharkhand in this regard. It is submitted that the respondent no.3 has not even acted in terms of the earlier order passed by this Court. It has been mentioned in the impugned order that the performance B.G. of Oriental Bank of Commerce submitted by the petitioner was returned to it which was accepted from its end and hence no decision was pending on the representation filed by it. In this context, it is submitted that the said original B.G. of Oriental Bank of Commerce was returned to the petitioner by respondent no.3 on the pretext that the same could be accepted only if final decision was taken on the representation filed by the petitioner pertaining to exchange of performance B.G. and under the said background, the petitioner accepted the B.G. of Oriental Bank of Commerce submitted

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by it. It is also submitted that the impugned decision is contrary to the letter and spirit of Clause 34 of the ITB, which does not restrict replacement of a performance security/B.G. with another B.G. of an equivalent amount. On the contrary, a bare reading of the said Clause would reveal that performance security/B.G. to be submitted by a bidder should be issued by any of the branches of State Bank of India/ Nationalized/Scheduled Commercial Bank, situated within the State of Jharkhand and the B.G. should be in the form as given in Section 8 of the ITB. There is no further condition imposed regarding submission of performance B.G. far less any condition that performance B.G., which was submitted once, cannot be replaced by another performance B.G. It is further submitted that the petitioner is ready and willing to submit a fresh performance B.G. even for the extended validity period strictly in terms of Clause 34 of Section 1 of the ITB and it is really unconceivable as to why the respondents are not permitting exchange of performance B.G. of equivalent amount containing similar terms and conditions of the earlier B.G.. It is further submitted that under normal business transaction, exchange of performance B.G. is a normal phenomenon for one reason or the other including discontinuance of business with one or the other Consortium Banker, which had earlier furnished the B.G. In similar cases the respondent no.2 has permitted the bidders to exchange their performance B.G. but for the reasons best known to the said authority, the petitioner is being arbitrarily discriminated on the issue of exchange of performance B.G. Such inaction on the part of the respondent-authorities in not permitting the petitioner to exchange its performance B.G. is also detrimental and contrary to their own interest, as the performance B.G. submitted by the petitioner on the basis of the intended completion date covering defect liability period and the said B.G. is valid up to 11^th May, 2021. Moreover, the date of completion has now been extended up to 31^st March, 2019 and as such the B.G. of the extended validity period up to 28^th April, 2022 is required to be submitted by the petitioner covering entire defect liability period of 1095 days + 28 days from the date of completion of the project i.e. 31^st March, 2019. The petitioner is ready and willing to submit a fresh performance security/B.G. of the equivalent amount of Rs.1,51,95,400/- for extended validity period up to 28^th April,

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2022 strictly as per the format prescribed in Section 8 of the ITB issued by any Nationalized/Scheduled Commercial Bank. The petitioner, after receipt of the impugned decision, has informed its erstwhile BankerICICI Bank Ltd. and has brought to its notice that the respondent no.2 has not been refunding the B.G. to the petitioner, however, ICICI Bank Ltd. has been insisting the petitioner to refund the original B.G. in view of the fact that it is no longer a member of Consortium of Bankers of the petitioner failing which coercive action may be resorted to at the instance of the said Bank for realization of the amount equivalent to the B.G.

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The learned counsel for the respondent-state as well as the respondent nos.2 & 3 jointly submit that earlier the petitioner had moved this Court for the same relief in W.P.(C) No.3343 of 2019 which was disposed of by this court with a direction to the respondent authorities to decide the representation filed by the petitioner. In compliance of the order dated 13.09.2019 passed in W.P.(C) No.3343 of 2019, the respondents got the opinion of the learned Advocate General and thereafter a decision on the representation of the petitioner was taken to return the B.G. issued by the Oriental Bank of Commerce. It is further submitted that even otherwise, in absence of any general or specific clause in the agreement between the parties providing for exchange of performance B.G., the respondents are unable to go beyond the terms of the contract. It is further submitted that Clause 34 of the ITB does not provide for exchange of B.G.

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Heard the learned counsel for the parties and perused the materials available on record. The short question falls for consideration of this court is as to whether the petitioner could have been permitted to replace its earlier performance B.G. issued by the ICICI Bank Ltd. with a new B.G. of the same value containing same terms and conditions, issued by the Oriental Bank of Commerce.

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It transpires from the record that at the time of award of the said tender, the petitioner had submitted its performance B.G. issued by the ICICI Bank Ltd. in conformity with Clause 34 of the ITB. However, in course of the execution of the work, the ICICI Bank Ltd withdrew itself as a Consortium-Banker of the petitioner and as such the petitioner requested the respondent authorities to allow it to exchange the earlier performance B.G. issued by ICICI Bank Ltd. with a new

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performance B.G. of equivalent amount of a Nationalized Bank i.e. Oriental Bank of Commerce containing exactly same terms and conditions which are provided in the contract document. The respondent authorities have, however, not allowed the petitioner to replace the earlier performance B.G. with the new one. The ground taken by the respondent authorities in rejecting the prayer of the petitioner is that Clause 34 of the ITB does not provide for replacement of performance B.G. The impugned order is, in fact, based on the opinion of the learned Advocate General, who has opined as under:

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“so far the question of replacement of the said bank guarantee by the bank guarantee of the equivalent amount and validity to be issued by some another bank, it does not appear as per the provisions of the contract and accepting the bank guarantee issued by such a bank of choice of the party may not be proper.”

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Clause 34 of ITB provides for submission of performance B.G. issued by the branches of State Bank of India/Nationalized/Scheduled Commercial Bank situated within the State of Jharkhand and the B.G. should be in the form as given in Section 8 of the ITB. It is not the case of the respondents that the B.G. which the petitioner wants to submit does not fulfil the criteria mentioned in Clause 34 of ITB. Moreover, I find substance in the argument of the learned counsel for the petitioner that after the extension of the period of execution of work, the replacement of the B.G. that too with extended liability period will also be in the interest of the respondent authorities.

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The purpose of submitting B.G. is to secure the performance of the contractor and since due to compelling circumstance the petitioner wants to replace the previous performance B.G. with a new one, strictly complying the requirement of Clause 34 of ITB, the respondent authorities should have allowed such replacement more so when the same is also in their interest. The respondents have failed to show any provision in the ITB which specifically prohibits replacement of performance B.G. by a contractor and in such a situation the respondents were supposed to protect their own interest by allowing the petitioner to replace the B.G. to cover the extended defect liability period.

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In view of the discussions made hereinabove, the order as contained in letter no.1474 dated 30.12.2019 (Annexure-10 to the writ petition)

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issued by the respondent No.3 is hereby quashed. The respondent no.2 is directed to allow the petitioner to replace its previous B.G. with a new one for covering the extended defect liability period by strictly complying the terms and conditions of Clause 34 of ITB.

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The writ petition is, accordingly, allowed.

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(Rajesh Shankar, J.)

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Sanjay/AFR

Shivalaya Construction Co. Pvt. Ltd. through Its Manager Accounts Finance Namely Janmejaya Ojha v. the State of Jharkhand through the Secretary Road Construction Department

Case brief

What is this about?

What did the court decide?

Shivalaya Construction Co. Pvt. Ltd. through Its Manager Accounts Finance Namely Janmejaya Ojha v. the State of Jharkhand through the Secretary Road Construction Department

Case brief

What is this about?

What did the court decide?

What the court decided

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