Allowed

K.v.Anilkumar v. the General Manager

Kerala HC10 Feb 2021WP(C)/354/2021

Case brief

AI extract

What is this about?

In a writ petition, the petitioner challenged the rejection of his request to return performance guarantee by substituting it with 3% of the residual contract value. The court held that the order must be calculated on residual value and ordered the release of the guarantee.

What did the court decide?

Ext.P18 set aside; 3rd respondent directed to accept new bank guarantees and refund original performance guarantee.

K.v.Anilkumar Vs the General Manager — Contract and Commercial Disputes | Kerala HC (2021)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE SMT. JUSTICE P.V.ASHA

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WEDNESDAY, THE 10TH DAY OF FEBRUARY 2021 / 21ST MAGHA,1942 WP(C).No.354 OF 2021(T)

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PETITIONER:

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K.V.ANILKUMAR AGED 53 YEARS S/O. VELAYUDHAN, KODATHU HOUSE, THOTTAKKATTUKARA P.O., OLD DESOM ROAD, ALUVA, ERNAKULAM DISTRICT-683108. BY ADVS. SRI.S.SHANAVAS KHAN SMT.S.INDU

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RESPONDENTS:

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1 THE GENERAL MANAGER, SOUTHERN RAILWAY HEAD QUARTERS OFFICE, PARK TOWN, CHENNAI-600003.

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2 THE SENIOR DIVISIONAL FINANCE MANAGER, SOUTHERN RAILWAY, PALAKKAD-678010.

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3 THE DIVISIONAL RAILWAY MANAGER (WORKS), SOUTHERN RAILWAY, PALAKKAD-678010. BY SRI.S.ANANTHAKRISHNAN, SC, RAILWAYS

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.02.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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WP(C).No.354 OF 2021(T)

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J U D G M E N T

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Petitioner is aggrieved by Ext.P18 order by

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which his request for returning the performance guarantee, which was already deposited with the Railways for 3 works, by replacing the same with 3% of the PG on the residual value of the contract was rejected.

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Petitioner was awarded 3 works covered by Exts.P1 to P3. Furnishing performance security at the

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rates as directed and executing the agreements he started the work. While so, Government of India issued Ext.P8 Office Memorandum (OM) on 12.11.2020 reducing performance security from existing 5-10% to 3% of the value of the contract for all existing contracts and also to all tenders/contracts issued/concluded till 31.12.2021. Petitioner points out that on the basis of Ext.P8 OM issued by the Ministry of Finance on 12.11.2020, the Railway Board

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issued Ext.P4 O.M. dated 20.11.2020 by which benefit of Ext.P8 OM was extended to the Railways also reducing performance guarantee to 3% of the value of the contract for all existing contracts and for all the tenders issued till 31.12.2021 subject to the stipulations given in Ext.P8 O.M. Pursuant to that the Chief Administrative Officer, Construction, Egmore, Southern Railway had issued Ext.P5 Joint Procedure order dated 03.12.2020 for the release of performance guarantee in construction/Southern Railway. In this order, the method of calculation for arriving at the value for the revised performance guarantee needed for the residual work is explained. Therefore, performance guarantee at the rate of 3% is required only on the residual value. Petitioner had therefore submitted Exts.P9, P12 and P15 letters dated 09.12.2020 pointing out the residual value of each of the work undertaken by him as well as the performance guarantee at the rate of 3% admissible on

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the same was given. Along with these letters he had also furnished performance guarantee to the tune of

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3% of the residual value of each of the work

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undertaken by him. That was rejected as per Ext.P18 letter stating that as per the Railway Board's letter dated 20.11.2019, 3% should be on the contract value and not residual value.

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Shri S. Ananthakrishnan, learned Standing

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Counsel appearing for the respondents has filed a statement on behalf of the respondents, according to which, performance guarantee reduced to 3% should be only on the contract value and not on residual value. It is stated that the O.M. issued by the Ministry of Finance on 12.11.2020 or the decision of the Railway Board in Ext.P4 dated 20.11.2020 do not provide for remitting performance guarantee on the residual value. According to the respondents, Ext.P5 clarification relied on by the petitioner is issued by the Chief Administrative Officer/CN/MS which is

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applicable only for offices under his administrative control and not applicable and binding to offices under Open line/Divisions and will not override the O.M. issued by the Finance Ministry. Moreover, it is stated that as per Clause 63 of the contract, in the event of any dispute or difference between the parties that should be taken up with the General Manager and it is for the General Manager to take appropriate action on it.

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Heard Sri. Shanawaskhan, the learned

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Counsel for the petitioner and the learned Counsel for the Railways.

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5 . According to petitioner, Ext.P5 joint

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procedure order should be applicable to all the works under the Railways. Learned counsel for the petitioner also made available a letter dated 26.11.2020 issued to the Deputy Chief Engineer, Construction which is similar to Exts.P9, P12 and P15 furnishing performance guarantee at the rate of 3% on

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the residual value which is accepted by the Deputy Chief Engineer. The contention of the learned counsel for the petitioner is that there cannot be any difference in interpreting the Office Memorandum issued by the Finance Department as well as Railway Department in the Construction Department and Open line Department.

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6. Ext.P4 explains how the revised performance guarantee is to be calculated. The said calculation is made for the residual value. Moreover, it is relevant to note that Ext.P5 order has been issued with the approval of Chief Accounts Officer/CN/MS and also the concurrence of FA &CAO/CN/MS. Moreover the documents made available by the learned Counsel for the petitioner would show that officers under the very same respondents have accepted the performance security based on the residual value. The calculation cannot be different in the very same department when the basic order is one and the same.

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7. Even otherwise, the purpose for which

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performance guarantee is insisted can only be to ensure the carrying out of the work in tune with the terms and conditions stipulated. Therefore, it cannot be said that Ext.P5 order issued by the Chief Administrative Officer of one wing would not be applicable to the other wing. The performance guarantee was available with the respondent for the entire value till this time and when it is reduced, it can only be on residual value of the work.

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Accordingly, Ext.P18 is set aside. There shall be a direction to the 3^rd respondent to take appropriate action for accepting Exts.P11, P14 and P17 bank guarantee and to refund original performance guarantee to the petitioner, already remitted by him.

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The writ petition is disposed of accordingly.

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APPENDIX

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PETITIONER'S EXHIBITS:

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EXHIBIT P1	TRUE COPY OF THE AGREEMENT NO. J/5	RELEVANT PAGE OF 98 DATED 12/08/2020.
EXHIBIT P2	TRUE COPY OF THE AGREEMENT NO. J/7	RELEVANT PAGE OF 3 DATED 15/03/2019.
EXHIBIT P3	TRUE COPY OF THE DATED 20/11/2019.	AGREEMENT NO. J/315
EXHIBIT P4	TRUE COPY OF THE 20/11/2020 ISSUED COMMISSIONER, RAI	LETTER DATED BY THE FINANCIAL LWAY.
EXHIBIT P5	TRUE COPY OF THE 09/12/2020 ISSUED ADMINISTRATIVE OF CHENNAI.	LETTER DATED BY THE CHIEF FICER, CONSTRUCTION,
EXHIBIT P6	TRUE COPY OF THE ALONG WITH THE LE	PROFORMA DATED NIL TTER.
EXHIBIT P7	TRUE COPY OF THE 30/11/2020 EVIDEN OF PERFORMANCE GU RESPECT OF ALL EX	LETTER DATED CING THE REDUCTION ARANTEE TO 3 PERCENT ISTING CONTRACTS.
EXHIBIT P8	TRUE COPY OF THE DATED 12/11/2020 SECRETARY TO THE	OFFICE MEMORANDUM ISSUED BY THE DEPUTY GOVERNMENT OF INDIA.
EXHIBIT P9	TRUE COPY OF THE 09/12/2020 SUBMIT RESPONDENT.	REPRESENTATION DATED TED BEFORE THE 3RD
EXHIBIT P10	TRUE COPY OF THE 09/12/2020 IN RES	LETTER DATED PECT OF EXT.P1 WORK.
EXHIBIT P11	TRUE COPY OF THE IN RESPECT OF EXT	FRESH BANK GUARANTEE .P1 WORK.

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EXHIBIT P12 TRUE COPY OF THE LETTER DATED 09/12/2020 SUBMITTED BY PETITIONER TO 3RD RESPONDENT IN RESPECT TO EXT. P2 WORK.

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EXHIBIT P13 TRUE COPY OF THE LETTER DATED 09/12/2020 SENT TO 3RD RESPONDENT IN RESPECT OF EXT.P2 WORK.

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EXHIBIT P14 TRUE COPY OF THE FRESH BANK GUARANTEE IN RESPECT OF EXT.P2 WORK.

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EXHIBIT P15 TRUE COPY OF THE LETTER DATED 09/12/2020 SUBMITTED BY PETITIONER TO 3RD RESPONDENT IN RESPECT OF EXT.P3 WORK.

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EXHIBIT P16 TRUE COPY OF THE LETTER DATED 09/12/2020 SENT TO 3RD RESPONDENT. EXHIBIT P17 TRUE COPY OF THE FRESH BANK GUARANTEE IN RESPECT OF EXT.P3 WORK.

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EXHIBIT P18 TRUE COPY OF THE COMMUNICATION DATED 29/12/2020 OF THE 2ND RESPONDENT.

K.v.Anilkumar v. the General Manager

Case brief

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K.v.Anilkumar v. the General Manager

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