Contract Law; Superintending Engineer, PWD (Buildings) Vs. K.V. Joseph & Sons Pvt. Ltd. [Kerala High Court, 19-05-2016]

Contract – Public Works – requirement to provide bank guarantee – modifying the terms of contract whether permissible – Held, it is impermissible for the writ Court or any Court for that matter to tinker with the contract of parties unless it is shown to be violative of any provisions of law on which the contract is being tested as to its legality – if the writ petitioner gets a softer bargain through judicial intervention, there would have been other competing contractors who would have not even participated in the bid by treating the term insisted upon by the Government as erroneous – they get included by the process of giving the successful contractor a softer terms of the contract through judicial intervention – if the impugned judgment which makes modification to a term of Government contract is permitted to stand, that would be the next play card for different contractors carrying out public works to push for such relief after being successful in a bid in which more rigorous and onerous conditions were insisted upon by the Government, that too, on the strength of PWD Manual – the writ appeal is allowed setting aside the impugned judgment.


IN THE HIGH COURT OF KERALA AT ERNAKULAM

THOTTATHIL B.RADHAKRISHNAN, Ag.CJ. & ANU SIVARAMAN, J.

W.A.No. 907 of 2016

Dated this the 19th May, 2016

AGAINST THE ORDER/JUDGMENT IN WP(C) 8292/2016 of HIGH COURT OF KERALA DATED 16-03-2016

APPELLANT(S)/APPELLANT

1. THE SUPERINTENDING ENGINEER PUBLIC WORKS DEPARTMENT(BUILDINGS) NORTH CIRCLE , PWD COMPLEX, KOZHIKODE 673001

2. THE EXECUTIVE ENGINEER PUBLIC WORKS DEPARTMENT(BUILDINGS DIVISION) EDAPPALLY, KOCHI 682024

3. STATE OF KERALA REP BY SECRETARY, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM 695001

BY ADV. GOVERNMENT PLEADER

RESPONDENT(S)/RESPONDENT

M/S K.V.JOSEPH & SONS PVT. LTD.

R1 BY ADV. SRI.PHILIP J.VETTICKATTU R1 BY ADV. SRI.VINEETH KURIAKOSE

JUDGMENT

Thottathil B.Radhakrishnan, Ag.CJ.

We have heard the learned Special Government Pleader appearing for the appellants and the learned counsel appearing for the respondent.

2. The learned Special Government Pleader appearing for the State Government presses for interim order of stay of operation of the directions contained in the impugned judgment. Both sides agree that the matter can be heard on merits. Accordingly, the writ appeal is heard finally on merits.

3. The respondent is the successful contractor for putting up a building for the State Government. The terms of the contract include a performance guarantee which would stretch for a period of three years after completion of the work and two years for completion of the work. The speceific term in this regard was that the contractor will provide guarantee for 10% of the contract amount as the performance guarantee security. This was to be provided by 50% in the form of bank guarantee and 50% as deposit with the State treasury. This term was later trimmed down to be 5% instead of 10%. This means that 2.5% of the contract amount has to be kept in deposit with the State treasury and a bank guarantee for 2.5% of the contract amount will have to be provided to cover the period of three years of performance guarantee after the work is completed. After being the successful contractor, the respondent moved the learned single Judge when the Government refused to accede to his request that the bank guarantee should be permitted to be renewed year to year. The learned single Judge granted relief to the respondent/writ petitioner by directing the State Government to receive bank guarantee for one year in the first instance and requiring the contractor to provide renewal of the bank guarantee one month before expiry of the term immediately preceding the bank guarantee. The learned single Judge left the State Government to invoke bank guarantee, if it is not renewed within the time limit fixed in the impugned judgment.

4. The learned Special Government Pleader argued that the impugned judgment essentially results in modifying the terms of contract and that it will also obliterate similar other contracts, if various contractors were to make such claim. He further argued that the requirement to provide bank guarantee as insisted by the Government is in terms of PWD Manual and the conditions of the invitation of tenders.

5. Per contra, the learned counsel appearing for the respondent/writ petitioner supporting the judgment of the learned single Judge argued that no injustice is shown to the State or the Revenue for that matter by the directions of the learned single Judge. He argued that the directions only effectuate a commercially viable methodology of giving effect to the contract and that the interest of the State is secured by the availability of the bank guarantee with the stipulation that it shall be renewed one month before the period of its expiry.

6. Though the stand taken by the writ petitioner/respondent herein in support of the impugned judgment appears to be prima facie glossy, it does not appeal to us on a deeper consideration. Three things are certain. The parties have to stand by the bargain which they have entered into. It was a clear term of the contract that the bank guarantee and treasury deposit will be provided for five years in one go and that would operate till the performance guarantee period is over. Secondly and more importantly, it is impermissible for the writ Court or any Court for that matter to tinker with the contract of parties unless it is shown to be violative of any provisions of law on which the contract is being tested as to its legality. Thirdly, if the writ petitioner gets a softer bargain through judicial intervention, we cannot but envisage that there would have been other competing contractors who would have not even participated in the bid by treating the term insisted upon by the Government as erroneous. They get included by the process of giving the successful contractor a softer terms of the contract through judicial intervention. All these above, we can usually visualise that if the impugned judgment which makes modification to a term of Government contract is permitted to stand, that would be the next play card for different contractors carrying out public works to push for such relief after being successful in a bid in which more rigorous and onerous conditions were insisted upon by the Government, that too, on the strength of PWD Manual. For these reasons, we are unable to sustain the impugned judgment.

In the result, the writ appeal is allowed setting aside the impugned judgment.

At this point of time, the learned counsel for the respondent made a persuasive plea that his client may be permitted an accommodative time limit to provide the bank guarantee. After hearing the learned Special Government Pleader in this regard, we grant the respondent/writ petitioner a period of two weeks from today for providing the bank guarantee in satisfaction of the requirement of the contract. This shall be treated as the last opportunity.

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