IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWENTY THIRD DAY OF OCTOBER TWO THOUSAND AND EIGHT PRESENT THE HON'BLE MR JUSTICE B.SESHASAYANA REDDY WRIT PETITION NO.14012 of 2008 Between: M/s. Swathi Engineering, Civil Fabrication Structural Engineers & Contractors , Plot No. 13-167/1, Behind Sifco Limited, Fathenagar, Hyderabad-80 Rep. by its Authorized Signatory Sri A.S. Krishna Rao. ...PETITIONER AND 1 Union of India, Rep. by its General Manager, South Central Railway, Secunderabad. 2 Principal Chief Engineer, South Central Railway, Rail Nilayam, Secunderabad. 3 Divisional Engineer (South), Hyderabad Division, South Central Railway, Secunderabad. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the Aﬃdavit ﬁled herein the High Court will be pleased to issue a writ order or direction one particularly in the nature of writ of Mandamus declaring the action of the Respondents in attempting to recover the performance guarantee for the works in the Acceptance Letters (1) YW/148/W/III/172/07 dt. 30-11-2007; (2) YW/148/W.III/173/07 dt. 30-11-2007 ; (3) YW/148/W.III/174/07 dt. 30-11-2007; and (4) YW/148/W/III/179/07 dt. 3-1-2008 from the bills of the petitioners relating to other agreements is arbitrary illegal, and violative of the Railway Board Circular No. 2003/CE-I/CP/4/PT-1 dt. 12/6-5-2006 and direct the Respondents not to deduct the performance guarantee /Bank Guarantee from petitioner's other bills relating to other works and pay the bill amounts in full. Counsel for the Petitioner: MR.K.SOMESWARA KUMAR Counsel for the Respondents: MR.P.GANGA RAMI REDDY FOR RMAPP-1-3 The Court made the following: THE HON'BLE MR JUSTICE B.SESHASAYANA REDDY WRIT PETITION NO.14012 of 2008 ORDER: This Writ Petition has been ﬁled by M/s.Swathi Engineering Civil Fabrication Structural Engineers & Contractors, represented by its authorized signatory Sri A.S.Krishna Rao with a prayer to issue Writ of Mandamus declaring the action of the respondents in attempting to recover the performance guarantee for the works in the acceptance Letters (1) YW/148/W/III/172/07 dated 30.11.2007; (2) YW/148/W.III/173/07 dated 30.11.2007; (3) YW/148/W.III/174/07 dated 30.11.2007 and (4) YW/148/W.III/179/07 dated 03.01.2008, from the bills relating to other agreements as arbitrary, illegal and violative of the Railway Board Circular No.2003/CE-I/CP/4/PT-I dated 12/16.05.2006 and direct the respondents not to deduct the performance guarantee/bank guarantee from the other bills relating to other works and pay the bill amounts in full. The petitioner is a Registered Railway Contractor attending to various works of the South Central Railway. A tender submitted by the petitioner for (1) providing cover on Platform of 32 meters length each on either end of Platform No.1 where AC coaches stand when train stops; (2) extension of cover on platforms by 48meters length on Platform No.1 and by 32 meters on Platform Nos.2 and 3; and (3) provision of cover on platforms of 32 meters length each on either end of Platforms Nos.2 and 3 where AC coaches stand when the train stops in Kurnool Town Railway Station in Secunderabad Zone section was accepted by the third respondent on behalf of the ﬁrst respondent by means of Acceptance letter No.YW/148/W/III/172/07 dated 30.11.2007. The total value of the contract is Rs.58,15,423.54 ps and the period of completion is six months. The petitioner furnished security deposit of Rs.2,90,771/- apart from EMD of Rs.60,334/- in the form of FDR No.699179 dated 30.09.2007 issued by Central Bank of India, Kalyan Nagar, Hyderabad. The respondents agreed to recover the balance security deposit amounting to Rs.2,30,437/- from the Running Bills. Whatever may be the reason, the work was not commenced and consequently, the respondents invoked the performance guarantee and issued letter dated 30.11.2007. Subsequently, when the respondents contemplated to invoke performance guarantee by deducting the amounts payable to the petitioner in respect of other works by taking shelter on the proceedings No. W.148/Policy.Vol.VI dated 27.05.2008, the petitioner choose to approach this Court invoking jurisdiction under Article 226 of the Constitution of India. When the Writ Petition came up for admission, Sri P.Gangarami Reddy, learned Standing Counsel for South Central Railways, received notice on behalf of respondents 1 to 3. The ﬁrst respondent ﬁled a counter aﬃdavit. Sri D.Manohar Reddy has sworn to the counter aﬃdavit. It is stated in the counter aﬃdavit that the condition for payment of the performance guarantee was incorporated in the tender document and it is also one of the conditions in the Acceptance Letter dated 30.11.2007. The proceedings dated 27.05.2008 is the only clariﬁcation to the already existing conditions in tender documents. As there was no response from the petitioner, seven days notice was issued for the above works duly advising to submit performance guarantee and complete the work within the stipulated time, failing which further action as provided in clause 62 of GCC to terminate the contract and complete the work by other agency will be taken. When the Writ Petition came up for admission, with the consent of the counsel appearing for the parties, it is taken up for final disposal. Heard both the sides. Learned counsel for the petitioner submits that the procedure for performance guarantee came to be introduced under Circular No.2003/CE-I/CP/4/PT-I dated 12/16.05.2006 and the said proceeding does not contemplate deduction of performance guarantee amount from the bills payable in respect of other works and therefore, the circular dated 27.05.2008 issued by the Principal Chief Engineer of South Central Railways, Chief Engineer Works with regard to the deduction of the performance contract from the bills payable in respect of the other works cannot be sustained. Learned Standing Counsel appearing for respondents 1 to 3 submits that the terms of the tender document contemplates recovery of the performance guarantee from the bills payable in respect of other works. Indisputably, the General Conditions of the contract contain an arbitration clause for settlement of disputes between the parties. In that view of the matter, I deem it appropriate to dispose of the Writ Petition reserving the liberty to the petitioner to invoke Arbitration Clause in the General conditions of the Contract. With the above observation, the Writ Petition is disposed of. _______________________ (B.SESHASAYANA REDDY, J) 23rd October 2008 RRB