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M/s Navneet Builders & Engineers v/s State of M.P. & Others

    Writ Petition Nos. 16478 & 18194 of 2016

    Decided On, 19 July 2018

    At, High Court of Madhya Pradesh

    By, THE HONOURABLE MS. JUSTICE VANDANA KASREKAR

    For the Petitioner: Shashank Shekhar, Learned Counsel. For the Respondents: R1 to R6, Neeraj Singh Chauhan, Learned Govt. Advocate, R7, Alok Mishra, Advocate, Praveen Kumar Chaturvedi, Learned Counsel.



Judgment Text

1. Both these above writ petitions are being decided by this common order as the common question as well as the facts are involved in both the writ petitions. However, for the sake of brevity, facts have been taken from Writ Petition No.16478/2016.

2. The petitioner is a partnership firm having its registered office at Bhopal and is carrying the construction business. The respondentdepartment floated an NIT for the work of widening and upgradation of Kerva Dam to Kaliashot Dam having the length of 3.20 kms and the probable amount of contract work was Rs.308.24 lacs. The petitioner being eligible participated in the said NIT and he was declared successful. Thereafter vide letter dated 17/3/2011 the petitioner was called upon by the respondents to execute the agreement. The agreement thereafter executed and work order was issued in favour of the petitioner on 23/03/2011. As per the agreement, the petitioner has to complete the work within a period of three years, accordingly the petitioner completed work on 10/06/2013 and it is no dispute about the work completed by the petitioner. After completing the work to the satisfaction of the respondents, the respondents have also released the final bill against the work executed by the petitioner. In the agreement certain conditions by way of modified additional special conditions were also incorporated. As per Condition No.1 of the modified additional special condition, the security deposit to be taken for the due performance and maintenance of the work under the terms and conditions printed on the tender form will be the earnest money plus a deduction from the payment made in the running bill till two together amount to 10% of the cost of the work put to tender or 10% of the cost of the work executed when the same exceeds the cost of work put to tender and this amount could be replaced by bank guarantee which shall be valid for a period of 36 months from the date of actual completion of the work. During this period, the contractor will inspect the work and will have to carry out the necessary repairs. If the contractor fails to carry out the repari work within 15 days of receipt of such communication from the Engineerin-charge/Sub Divisional Officer, the department will carry out the repairs and cost will be recovered from the security deposit and performance and maintenance security. After three years from the date of completion of the work, the security deposit and performance of maintenance security will be released to the contractor if all the repairs have been completed to the satisfaction of the Engineer-incharge. 50% of the security deposit may be released to the contractor after two years from the date of completion of work and balance security deposit and performance maintenance will be released to the contractor after three years from the date of completion of work. Thus, as per this modified additional special condition No.1, the petitioner was required to perform the work for maintenance of road after three years from the date of completion of work. The petitioner was required to deposit the bank guarantee as a performance and maintenance security. In the present case, the petitioner has already completed the work on 10/06/2013 and as such the petitioner

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was required to perform the work of maintenance till 09/06/2016.

3. Thereafter vide letter dated 26/07/2014, the respondents called upon the petitioner to perform the repair of road as pointed out by the respondents. The petitioner thereafter completed the work and again vide letter dated 21/07/2015 he was asked to perform the work of maintenance as pointed out by the respondents in the aforesaid letter. The petitioner vide reply dated 01/08/2014 has informed the respondents that he has already executed the work of maintenance as directed by them. In spite of this fact, the respondents have issued a show cause notice to the respondents on 31/07/2015 stating that the roads have been damaged for want of repairing work as such the petitioner was called upon to file reply. The petitioner filed its reply on 31/07/2015 in which he has pointed out the difficulties which are beyond his control while executing the work of maintenance. The respondents satisfied with the reply submitted by the petitioner and show cause proceeding was dropped. Thereafter the Section Officer of the respondent-department issued a letter dated 11/08/2015 to the Sub Divisional Officer demonstrating the fact that because of heavy rain in the rainy season and percolation of water of Kaliashot Dam, the damages were caused to the road and maintenance of the road is continuously executed by the petitioner. The petitioner further submits that the petitioner executed the work of maintenance of road till 09/06/2016 i.e. till completion of performance guarantee period. It is admitted fact that the petitioner had completed the work on 10/06/2013 and as such the performance guarantee period was for the period of three years i.e. from 10/06/2013 to 09/06/2016.

4. After completion of performance guarantee period, the respondents were required to release the bank guarantee deposited by way of performance and maintenance guarantee. However, the respondents did not release the bank guarantee and requested the petitioner to execute the work of maintenance of road for further period. On the request made by the respondents, the petitioner executed the work of maintenance of road for further period. As the petitioner has refused to perform the work after completion of maintenance period, the respondents, without any authority, retained the bank guarantee deposited by the petitioner by way of maintenance in performance guarantee and in addition to this, the respondents are also pressurizing and victimizing the petitioner to further perform the work of maintenance of road beyond the period of completion of the performance guarantee period. The respondents have threatened the petitioner that if the petitioner would not perform the work of maintenance, then the bank guarantee would be encashed and a communication to that effect is also made to the respondent-bank by the respondents. The respondents vide letter dated 03/09/2016 had directed the petitioner to extend the bank guarantee deposited before the respondent-bank, failing which the petitioner was threatened that the bank guarantee would be encashed. Being aggrieved by this communication, the petitioner has filed the present writ petition.

5. Learned counsel for the petitioner argues that the agreement has been executed between the petitioner and respondent No.3 for widening and up-gradation of Kerwa Dam to Kaliashot Dam having length of 3.20 kms on 23/03/2011. As per this agreement, the work was required to be completed within a period of three years. The petitioner successfully completed the work within the period to the satisfaction of all concerned and there is no dispute with regard to completion of work. The final bill was also released in favour of the petitioner. In the agreement there is a clause No.1 regarding modified additional special condition. As per this clause, the performance guarantee period would be for three years from the date of actual completion of work, then it is the duty of the respondentdepartment to communicate the defect if noticed and the contractor is required to be cured the defect pointed out by the respondents within 15 days. If the contractor fails to carry out the repair within 15 days from the date of communication, then the respondent-department will carry out the repairs and cost will be recovered from the security deposit and performance and maintenance security. After completion of three years, if the work is satisfactorily completed, then the performance and maintenance security has to be released. Thus, as per this clause, the petitioner is required to maintain the road for a period of three years from the date of actual completion of work and in the aforesaid period, he was required to cure the defects as pointed by the respondents and if the petitioner fails to carry out the defence, then the respondents are free to carry out the said repairs by their own and the authority was with the respondent-department to recover the cost of repair from the petitioner. He further argues that not even a single instance has been demonstrated by the respondents that the respondents have cured the defects even for once and recovered the cost from the petitioner. This fact clearly demonstrates that the petitioner performed the work of maintenance to the satisfaction of the respondent-department. The petitioner was required to maintain the road for the period of three years from the date of actual completion of the work.

6. In the present case, the petitioner has completed the work on 10/06/2013 and as such the period of performance guarantee was upto 09/06/2016, thus, the petitioner was required to perform the work of maintenance upto 09/06/2016. In the meantime, certain defects were pointed out by the respondents which have been caused due to heavy rain, accident and other natural calamity etc. which have been completed by the petitioner. He further submits that the petitioner has performed the work even after expiry of performance guarantee period. The petitioner has also extended the validty of the bank guarantee upto 11/09/2016 despite expiry of performance guarantee period and performed the work of maintenance upto the month of November, 2016 i.e. more than from the date of expiry of the performance guarantee period without any cost on the request of the respondents. However, the petitioner was further threatened to perform the maintenance of work for further period. For the said purpose, the respondents have issued a letter dated 03/09/2016 whereby the respondents directed the concerned bank i.e. the bank guarantee holder to extend the bank guarantee for the period of one year from 03/09/2016 i.e. upto 03/09/2017. Thus, he submits that the entire action on the part of the respondents is mala fide and for the reasons best known to them, they withheld the bank guarantee. Learned counsel for the petitioner relies upon the judgment passed by the Apex Court in the case of National Insurance Company Limited Vs. Boghara Polypab Private Limited, reported in (2009) 1 SCC 267 and the Division Bench judgment of this Court in the case of Om Construction Company Vs. The State of M.P., reported in 2012 SCC Online MP 9089.

7. The respondents have filed their reply and in the reply they have raised a preliminary objection that the petitioner has an alternative of referring the matter to the arbitrator under the arbitration clause-29 of the tender form. The respondents stated that the petitioner first to approach to the Superintending Engineer, then aggrieved party can approach against the decision of the Superintending Engineer in appeal to the Chief Engineer and if any party is not satisfied with the order of Chief Engineer, then he can refer such dispute to the Arbitration Tribunal under the arbitration clause. The respondents, in their reply, have stated that as per the terms of the agreement, work was to be completed within a period of three years. Accordingly, the petitioner has completed the work on 10/06/2013 and from 10/06/2013to 09/06/2016 the petitionercontractor was under obligation as per the terms of the tender to maintenance and performance guarantee. On 26/07/2014 the petitioner was communicated by the respondents that it was found after inspection by the senior officers that in various places, in area 480 sq.meter Seal Coal was washed out of and surface of road was likely to be damaged. Thereafter the petitioner requested to maintain and repair the road by Bituman emulsion till 10/08/2014, otherwise department will carry out repairs and cost will be recovered the amount from security deposit and performance and maintenance security guarantee. Again a letter was issued by the respondents on 21/07/2015. The Chief Engineer communicated to the petitioner to repair 5h3 n32ly up-graded road which is under performance and maintenance guarantee till May, 2016 and as per the circulars proceeding will be initiated for black listing. Thereafter various reminders were issued to the petitioner for repairing the damaged road. The petitioner had not completed the repair work in spite of various reminders given by the respondents and breached the condition of agreement. After giving reasonable opportunity of hearing, the petitioner's registration has been suspended and the bank guarantee has been directed for encahsment as petitioner failed to repair the work. Learned counsel for the respondents relies upon the judgment passed by the Apex Court in the case of Himadri Chemicals Industries Ltd. Vs. Coal Tar Refining Co., reported in (2007) 8 SCC 110. Thus, in light of aforesaid, learned counsel for the respondents submits that the writ petition deserves to be dismissed.

8. So far as preliminary objection raised by the respondents is concerned, learned counsel for the petitioner submits that the agreement which is executed between the petitioner and the respondents was for a period of three years and it was extended for a further period of three years as a performance guarantee period. In the present case, admittedly, the petitioner has completed the work on 10/03/2013 and the performance guarantee period was upto 09/06/2016. After completion of the period as mentioned in the agreement, no relationship between the petitioner-contractor and the respondents exists, therefore, the agreement executed between the petitioner and the respondents came to an end. Thus, in such cases, the arbitration clause looses its efficacy. For the said purpose, learned counsel has already relied upon the judgment passed by the Supreme Court in the case of National Insurance Company Ltd. (supra). So far as second contention raised by the the respondents in their return that pointing out the defect by the respondents by various communication is concerned, he submits that as per Clause-1 of the modified additional special condition, it was the duty of the respondents to point out the defects. Further, the defect can be caused at any time for any reason like heavy traffic, accidents, heavy rain and other natural calamities, therefore, pointing out of the defect is the duty of the respondents and by no stretch of imagination, the same cannot be construed as the lapse on the part of the petitioner. He submits that the respondents have miserably failed in attempt as the respondents either in their return or in their arguments failed to point out even single instance that despite reminder, the petitioner did not cure the defect.

9. Heard learned counsel for the parties and perused the record.

10. Initially an NIT for widening and up-gradation of Kerwa Dam to Kaliashot Dam having length 3.20 kms was published. The petitioner participated in the NIT and vide letter dated 15/03/2011, the petitioner was declared successful. Thereafter, vide letter dated 17/03/2011, the petitioner was called upon to execute the agreement and vide Annexure-P/5 the petitioner executed the agreement. Thereafter, vide order dated 23/3/2011 the petitioner was issued work order and as such the petitioner started executing the work in question. So far as the work of widening and up-gradation of Kerwa Dam to Kaliashot Dam is concerned, the petitioner successfully completed the work in question to the saitsfaction of all concerned and there is no dispute with regard to completion of the work in question. The final bill was also released in favour of the petitioner.

11. The issue involves in this writ petition relates to the work of maintenance of the work in question. The relevant cause governing the work of maintenance is contained in the agreement under the head of 'Modified Additional Special Conditions' Clause-1 of the agreement is reproduced as under :

'1. The security deposit to be taken for the due performance and maintenance of the contract under the terms and conditions printed on the tender form will be the earnest money plus a deduction from the payment made in the running bills, till the two together amount to 10 per cent of the cost of work put to tender or 10 per cent of the cost of the works executed when the same exceeds the cost of work put to tender. This amount can be replaced by the bank guarantee which shall be valid for a period of 36 months from the date of actual completion of work. During this period the contractor shall inspect the work and will have to carry out all necessary repairs immediately. If the contractor fails to carry out the repair work within 15 days of receipt of such communication from the Engineer-in-chief/Sub Divisional Officer, the department will carry out repairs and cost will be recovered from the security deposit and performance and maintenance security. After three years from the date of completion of work, the security deposit and performance and maintenance security will be released to the contractor if all the repairs have been completed to the satisfaction of the Engineer-in-chief . 50% SD may be released to the contractor after two years from the date of completion, if all necessary repairs and maintenance have been done to the satisfaction of the Engineer-inChief. Balance 50% SD shall be released to the contractor after three years from the date of completion. For periodical renewal works where as only a thin bituminous layer of wearing course is provided, performance and maintenance guarantee period shall be one year and the amount of SD shall be refunded after one year of the completion of the work'

A bare perusal of clause-1 makes it clear that (a) the period of performance guarantee would be for the period of three years from the dat eof actual completion of the work, (b) it is the duty of the department to communicate the contractor regarding defects if noticed, (c) the contractor is required to cure the defects pointed out by the respondents within a period of 15 days, (d) if the contractor fails to carry out the repair within 15 days from the date of such communication, then the department will carry out the repairs and cost will be recovered from the security deposit and performance and maintenance security, (e) after three years, if the work is satisfactorily completed, then the performance and maintenance security has to be released. Thus, clause-1 makes it palpably clear that so far as the maintenance of the work in question is concerned, the petitioner was required to maintain the road for a period of three years from the date of actual completion of the work. In the aforesaid period, the petitioner was required to cure the defect amongst the defects pointed out by the respondents and it was the duty of the respondents to point out the defects, if caused. It is submitted that the work of maintenance of road is a continuous process. The defects may be caused at any time for any reason like heavy traffic, accidents, heavy rainfall or any natural calamity. If today there is no defect but tomorrow it is quite possible that defect may be caused in the same part of the road. Nevertheless, it was the duty of the petitioner to cure the defects as and when arises.

12. In addition to the aforesaid, clause-1 further makes it clear that if the petitioner would fail to cure the defect within 15 days, then the respondent-department was free to carry out the repairs by their own and authority was with the respondent-department to recover the cost of repair from the petitioner. Not even single instance has been demonstrated by the respondents that the respondents have cured the defects even for once and recovered the cost from the petitioner. This fact clearly demonstrates that the petitioner performed the work of maintenance to the satisfaction of the respondent-department. After successful completion of the work on 10/06/2013, the petitioner started the work of maintenance of the road for the period of three years therefrom. During these three years, certain defects were pointed out by the respondents and the petitioner promptly, successfully and to the satisfaction of the department, cured the defects. It is pertinent to mention here that in light of clause-1 of the Modified Additional Special Conditions of the agreement, it was the duty of the department to point out the defect coupled with the fact that the defencts can be caused at any time by any reason i.e. heavy traffic, heavy rain, accident or other natural calamity, pointing out defect by the department cannot be construed as lapse on the part of the petitioner. In addition to the aforesaid, the aim and object of incorporating the condition of performance and maintenance of work is that causing defects in road is bona fide and obvious and, therefore, the contractor is retained to cure the defects for a period of three years. If any defect is caused for any reason, then the contractor cannot be held responsible for the same. It is the duty of the contractor to cure the defect whenever the defect is caused.

13. Clause-1 of the Modified Additional Special Condition provides that if the contractor fails to cure the defect, then the same would be cured by the department itself and the cost of the same would be recovered from the contractor. Not even single instance pointed out by the respondents in the return that the respondents themselves have cured the defect on account of failure on the part of the petitioner to cure the defect and the cost of the same has been recovered from the petitioner. This clearly demonstrates that whenever any defect was pointed out the same was promptly cured by the petitioner within the stipulated time limit and to the satisfaction of the respondents. Had it been the case that the petitioner did not cure, then there would have been several instances that the department would have cured the defect and the cost would have recovered from the petitioner. Absence of even a single instance clearly demonstrates that the petitioner performed the work of maintenance of the work in question to the satisfaction of the respondents. In addition to the aforesaid, the petitioner also extended the validity of the bank guarantee up till 11/09/2016 despite expiry of the performance guarantee period and performed the work of maintenance up till in the month of November, 2016 i.e. more than three months from the date of expiry of the performance guarantee period without any cost on the request of the respondents. However, the bona fide and goodwill of the petitioner was construed as weakness of the petitioner and the petitioner was further threatened to perform the maintenance of the work for further period. Further, the conduct and intention of the respondents are clear from letter dated 03/09/2016 whereby the respondents directed the concerned bank i.e. the bank guarantee holder to extend the bank guarantee for the period of one year from 03/09/2016 to 03/09/2017. This letter was issued despite the fact that the performance guarantee period was over on 09/06/2016 and, therefore, for what reason the bank guarantee was required to be extended for one year is not explained by the respondents.

14. On the one hand vide letter dated 03/09/2016 the respondents directed to extend the bank guarantee for a period of one year, whereas, on the other hand, in the same month i.e. in the month of September-2016, itself, the respondents issued a fresh NIT for the same work and vide orders dated 28/10/2016, not only the NIT was knocked down in favour of one GPS infra but, also agreement has been executed and work order was issued. The respondents directed to extend the bank guarantee for one year uto 03/09/2017 whereas on 28/10/2016, itself, the same work was allotted to some other agency by a fresh NIT and agreement was executed. Then, for what purpose the respondents wanted the petitioner to extend the bank guarantee upto 03/09/2017. This is the question which is unanswered by the respondents and clearly shows the intention on the part of the respondents.

15. So far as the preliminary objection raised by the respondents is concerned, they have raised merely two ground in their reply. The first ground raised by the respondent is with regard to existence of arbitration clause vide clause -29 of the agreement and as per the respondents, since the arbitration clause is in existence, therefore, the petitioner has an alternate remedy to avail arbitration clause. The respondents contended that they have issued various communication to the petitioner pointed out the defects and the petitioner did not cure the defects in spite of reminder and, therefore, the petitioner has violated the terms and conditions of the agreement.

16. So far as existence of arbitration clause and availability of alternate remedy by way of availing arbitration clause is concerned, it is submitted that in the instant case, the arbitration clause is not appliable and no alternate remedy of arbitration lies with the petitioner. It is submitted that the Supreme Court as well as this Court in catena of judgments have been kind enough to hold that the remedy of arbitration is available in cases where the agreement is existing because the arbitration clause is part of the agreement and if the contract is discharges, then the arbitration clause also loses its efficacy. The Supreme Court in the case of National Insurance Co. Ltd. (supra) in para-25 has held that when a contract has been fully performed there is a discharge of the contract by performance and the contract comes to an end. In regard to such a discharged contract, nothing remains neither any right to seek performance nor any obligation to perform. In short, there cannot obviously be reference to arbitration of any dispute arising from a discharged contract.

17. In the present case, it is admitted position on the face of the record that the performance guarantee period was upto 09/06/2016. The petitioner successfully completed the performance guarantee period upto 09/06/2016 and there is not even a single instance pointed out by the respondents that there is any dispute prior to the performance guarantee period i.e. 09/06/2016 that the petitioner failed to cure the defect and there was any dispute. It is apt to mention here that this fact finds strength from clause-1 of the Modified Additional Special Conditions of the agreement which is the relevant clause governing the matter of performance guarantee period. It is categorically provided that if the contractor failed to cure the defect pointed out by the respondents, then the department will cure the defect and th cost of the same would be recovered from the petitioner. Not even a single instance has been pointed out by the respondents that the petitioner failed to cure the defect during the performance guarantee period and the defect has been cured by the department and cost has been recovered from the petitioner. This clearly demonstrates that there is no dispute with regard to successful completion of the performance guarantee period by the petitioner.

18. In addition to the aforesaid, the work in question was widening and up-gradation of Kerwa Dam to Kaliashot Dam having length 3.20 kms. The respondents in the year 2016 itself had already issued a fresh NIT of the same work which has been knocked down in favour of one G.P.S. Infra and agreement has already been executed by the respondents with one G.P.S. Infra with regard to the same work and work order has already been issued. A bare perusal of the fresh NIT clearly demonstrates that this was an independent and fresh NIT and was not issued at the risk and cost of the petitioner. This fact clearly demonstrates that there is no dispute with regard to maintenance of the work and the petitioner had successfully discharged the contract. After issuance of fresh NIT of the same work, there is no iota of doubt that the contract stood successfully discharged by the petitioner to the satisfaction of the respondents and, therefore, in light of the law laid down by the Sukpreme Court in the case of National Insurance Co. Ltd.(supra), the contract has been fully performed and there is discharge of contract by performance and the contract had been come to an end. The contract had been discharged and nothing remains including any right to seek performance or any obligation to performance. In short, there cannot be any and there is no dispute, therefore, once there is no dispute, there is no remedy of arbitration.

19. The law laid down by the Supreme Court in the case of National Insurance Com. Ltd.(supra) has been relied upon by this Court in the case of Steel Tube of India Ltd. Indore Vs. Gujarat Mercantile Credit Sahakarita Indore and another reported in 2015(1) MPLJ 366 wherein this Court has held that the tripartite agreement dated 01/09/1999 did not survive on account of subsequent development and execution of fresh agreement dated 27/03/2002. Thus, it is not open to the applicant to seek appointment of Arbitrator under the agreement dated 01/09/1999, which does not survive now. In the present case also a fresh NIT in the year 2016, itself, has been issued by the respondents with respect to the same work and agreement has already been executed and the work order has already been issued therefor. Thus, in light of the aforesaid, the agreement of the petitioner did not survive in view of the fresh agreement in respect of the same work in question coupled with the fact that the fresh NIT was independent NIT and was not issued at the risk and cost of the petitioner, hence, there is no remedy of arbitration available to the petitioner or to the respondents.

20. The other contention which raised by the respondents is with regard to pointing out the defect by the respondents by various communication. In this regard, clause -1 of the Modified Additional Special Conditions provides that it was the duty of the respondents to point out the defects. Further, the defects can be caused at any time for any reason like heavy traffic, accidents, heavy rain and other natural calamity etc and, therefore, pointing out of the defect is the duty of the respndents and by no stretch of imagination, the same cannot be construed as the lapse on the part of the petitioner. Further, it is incorrect on the part of the respondents to submit that despite communications the petitioner did not cure the defects. This submission has been made by the respondents only with the intention that the respondents would be able to demonstrate before this Court that there may be any dispute. However, the respondents miserably failed in their attempt as the respondents either in their return or in their argument failed to point out even a single instance that despite reminder, the petitioner did not cure the defect. Not a single example of any defect has been pointed out by the respondents and has not been cured by the petitioner. This fact also find strength from clause-1 of the Modified Additional Special Conditions which categorically provides that if the contractor failed to cure the defect, then the same would be cured by the department itself and the cost would be recovered from the contractor. The respondents miserably failed to apprise this Court even a single incident or example that the defect was not cured by the petitioner and the respondents cured the aforesaid defect as provided in clause-1 and the cost of the same has been recovered from the petitioner. The judgment relied upon by learned counsel for the respondents would not be applicable in the present case as the agreement, itself, is not in existence due to lapse of time.

21. Thus, in light of the aforesaid discussion, the writ petition is allowed. The respondents are directed to release the bank guarantee No.16360000515 dated 13/02/2015 to the tune of Rs.18,78,000/- deposited by the petitioner by way of performance of maintenance guarantee under agreement No.776 of 2011-12. The respondents are also directed to release the bank guarantee No.16360000813 dated 06/09/2013 to the tune of Rs.5,89,000/- deposited by the petitioner by way of performance and maintenance guarantee under agreement No.776 of 2011-12. The respondents are further directed to release the bank guarantee No.16360000713 dated 06/09/2013 to the tune of Rs.29,11,000/- deposited by the petitioner in Writ Petition No.18194/2016 by way of performance maintenance guarantee under agreement No.777 of 2011-12. within a period of six months from the date of receipt of certified copy of this order.
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