1 HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT JABALPUR WRIT PETITION NO.10701/2010 M/s R.K.Transport and Construction Pvt.Limited, 62, Transport Nagar, Korba (C.G.) PETITIONER Versus Madhya Pradesh Rural Road Development Authority,Bhopal (MP) Through: 1. Chief Executive Officer, Bhopal. (MP) 2. General Manager P.I.U. Unit-I. Chhindwara (MP) RESPONDENTS Present: Hon'ble Justice Krishna Kumar Lahoti & Hon'ble Justice J.K. Maheshwari,JJ. Shri V.R.Rao, the learned Sr.Advocate with Shri S. Rao, Counsel for the petitioner. Shri S.Mishra, Counsel for the respondents. ORDER ( 9 .8.2011) Per Hon'ble Krishn Kumar Lahoti, J . This petition is directed against orders Annexure P/4 dated 4.6.2010 and Annexure P/ 3 dated 30.6.2010 by which the contracts of the petitioner for the construction/upgradation of Rural Road under Prime Minister Gramin Sadak Yojana Pakage No.MP-0788 and package no.MP-07105 were terminated and performance guarantees were intended to be invoked. 2) Facts of the case are that the petitioner for the construction/up gradation of Rural Road under Prime Minister Gramin Sadak Yojana( in short PMGSY) Package No.MP-0788 and package no.MP-07105 was awarded the works contracts. As per the case of 2 the petitioner, because of the defaults on account of the authorities of the respondents, required progress could not be reached while as per respondents, it was the fault on the part of the petitioner, so the aforesaid dispute deserves to be referred to the Arbitrator.The petitioner had furnished performance security for due performance of contracts as Annexures P/1 and P/2 for Rs. 17,59,000/- and for Rs.6,32,000/- respectively. 3) The respondent no.2 conveyed to the petitioner that the securities are to be encashed and further amount due to the petitioner for the work done in respect of other works would be recovered. Copies of the contract terminations are Annexures P/3 and P/4. 4) Against the intended encashment of the peformance guarantees, the petitioner has invoked jurisdiction of this Court under Articles 226 and 227 of the Constitution of India and has sought following reliefs: (I) “It is, therefore, prayed that this Hon'ble Court may kindly be pleased to quash documents P/3 and P/4, court be further pleased to direct the securities Annexures P/1 and P/2 not to be encashed. (II) To direct the respondents not to recover any amount from the amount due to the petitioner in respect of other contracts nor can the respondents withhold amount due to the petitioner in respect of other packages/works. (III)To grant any other relief, which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case including cost of the litigation in favour of the petitioner.” 4) The respondents have filed reply in which they have stated that the petitioner had entered into agreements with respondents for construction of rural road under the Package Nos.MP-0788 and MP-07105 of road of villages in District Chhindwara. The work order for package No.MP-0788 was issued and the petitioner was directed to complete the contract work in stipulated period. Similarly the work order for package no. M.P.-07105 was issued and the petitioner was directed to complete the work in the stipulated time. The petitioner in term of the contract furnished bank guarantees to the respondents 3 through the Corporation Bank. In the Bank guarantee, it was specifically stated that the respondents may ask the bank to encash the bank guarantee for breach of the contract by the petitioner. The bank guarantee agreement, executed between the respondent Bank and the answering respondent, was unconditional and for any breach by the petitioner the bank guarantee could have been invoked. The petitioner failed to complete the work within the time period of 12 months, excluding rainy season.The petitioner had shown slow progress in the work and work could not be completed within the stipulated period. The petitioner had submitted an application for extension of time for completion of work. The respondents had extended the time limit under clause 4.1 of 'special condition of the contract' and the petitioner was directed to complete the work within the extended time.As the petitioner had failed to complete the work within the extended time period, therefore, a show cause notice under clause 52 of the agreement dated 15.6.2010 was issued to the petitioner. In the show cause notice all the grounds were shown including slow progress of work.The petitioner had not replied to the show cause notice. So the respondents have terminated the contract, in respect of Package No.M-0788 and Package No.MP-07105. As the contract of the petitioner has been rescinded for the reasons that the petitioner had not completed the work within the stipulated time and even after extension of time. Against the order dated 4.6.2010, the petitioner had filed an appeal under clause 24 of the agreement in respect of both the contracts which is pending with respondent no.1. The agreement of bank gurantee between the answering respondent and the bank is a separate contract and it was not dependent upon the adjudication of the dispute between the petitioner and the respondents. The petitioner had breached the agreement, so the respondents have right to encash bank gurantee in terms of the agreement of the bank guarantee. As per the bank agreement, the Bank had undertaken to pay the amount due and payable under the gurantee agreement without any demure merely on 4 a demand from the authority starting that the amount claimed is due by way of loss or damage caused to or suffered by the authority by reason of any breach, by said contractor of, any of the terms or conditions contained in the said agreement or by reason of the contractor's failure to perform the said agreement.The petitioner was having alternative remedy under Section 7 of the M.P.Madhyastham Adhikaran Adhiniyam and in case of success, the petitioner would get all the amounts from the respondents. Stating aforesaid, it was submitted that the petition may be dismissed. 5) After filing of the reply, the petitioner has also filed a copy of letter dated 20th April, 2010 by which it was found that after rescinding the agreement, the petitioner was liable to make payment of additional cost and liquidated damages for Rs.280.28 lakhs and the Chief Executive Officer of the respondent was directed to recover the aforesaid amount. 6) The learned counsel for the petitioner raised a sole contention that as per the bank guarantee for which liquidated damages could have been claimed by way of loss or damage caused to or suffered by the respondents and no such amount was specified by the respondents to the Bank , the Bank guarantee could not have been invoked. Reliance is placed to the Division Bench judgment of this Court in G.V. Pratap Reddy vs. M.P. Rural Road Development Authority,Bhopal & Ors. ILR (2009) MP 3079. 7) The learned counsel for the respondents opposed the aforesaid contention and submitted the same contentions which are referred hereinabove. It was also submitted by the respondents that as the appeal is pending before respondent no.1, the letter invoking the bank guarantee has not been given effect to and only after decision of the Superintending Engineer, Bank guarantee would be invoked. From the perusal of the aforesaid facts, it is apoparent that the petitioner's appeals against rescinding both the agreements are pending before the authority and as per the case of the respondents, the letter 5 invoking the Bank guarantee has not been given effect to, it would be appropriate if this petition is disposed of finally with direction to the respondent no.1 to decide the appeals expeditiously. 8) In view of the aforesaid, this petition is finally disposed of with following directions: I) The respondent no.1 before whom petitioner's appeals are pending under clause 24 of the Agreement, is directed to hear and decide the appeals expeditiously as far as poslsible within three months from the date of communication of this order. II) Till the decision of respondent no.1, the petitioner shall keep the Bank guarantees alive and the respondent no.2 shall be entitled to invoke the bank guarantee as per decision of respondent no.1. As this petition has been disposed of finally with direction to respondent no.1 to decide the appeal, the other contentions raised by the parties are not decided, as till date, as per submissions made by the respondents, the respondents have not invoked the bank guarantees. The petitioner if remains dissatisfied with the decision of respondent no.1 or by an act of respondents for invocation of the bank guarantees, the petitioner shall be free to reagitate the matter in accordance with law. No order as to costs. (Krishn Kumar Lahoti) (J.K.MAHESHWARI) Judge Judge ( 9 .8.2011) ( 9 .8.2011) JLL 6 HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT JABALPUR WRIT PETITION NO.10701/2010 M/s R.K.Transport and Construction (P) Ltd., Korba Versus M.P.Rural Road Development Authority and others. ORDER FOR CONSIDERATION (Krishn Kumar Lahoti) Judge .7.2011. HON'BLE SHRI JUSTICE J.K.MAHESHWARI. ( J.K.Maheshwari) Judge .7.2011 Post it for .7.2011. (Krishn Kumar Lahoti) Judge .7.2011. 7