JUDGMENT : The petitioners had worked under a contract. The contract was for the purpose of widening and strengthening of Kalna – Katwa Road in the district of Burdwan. The agreement was executed between the petitioners and the Superintending Engineer, State Highway Circle – V of P.W. (Roads) Department from which the following relevant clauses are set out below: “7 a) A retention towards performance security amounting to 15 (fifteen) percent of the bills amount shall be made by the Executive Engineer in the first and following interim payment certificates, until the amount so retained reaches a limit of retention money towards performance security equal to 15 (fifteen) percent of contract price named in the letter of acceptance. At this stage or at any intermediate stage the agency may, at his option, replace the retention amount with an unconditional bank guarantee from a bank acceptable to employer. b) The performance security will be repaid to the agency, or the bank guarantee will be progressively reduced in the following manner, provided that the agency has executed and completed the works and remedied any defects therein to the satisfaction of the E.I.C. as mentioned below: i) After expiry of 1 year : 1/3rd of the total from the date of amount of retention completion of the money/bank works certified by the guarantee Executive Engineer. ii) After expiry of 2 years: 1/3rd of the total from the date of amount of retention completion of the money/bank works certified by the guarantee. Executive Engineer. iii) After expiry of 3 years: 1/3rd of the total from the date of amount of retention completion of the money/bank works certified by the guarantee Executive Engineer. 11. The contract debars any arbitration in any shape. If a dispute of any kind whatsoever arises between the E.I.C. and the agency in connection with the work, the same should be referred to the Superintending Engineer within 7 days. The Superintending Engineer shall give his decision within the next 15 days upon hearing both the parties. If the dispute still persists, the aggrieved person shall prefer an appeal to Chief Engineer of the Directorate. The decision of the Chief Engineer is to be given at the earliest and his decision shall be final and binding upon both the parties. The dispute settlement procedure should not be construed as arbitration. 12. If the dispute still persists, the aggrieved person shall prefer an appeal to Chief Engineer of the Directorate. The decision of the Chief Engineer is to be given at the earliest and his decision shall be final and binding upon both the parties. The dispute settlement procedure should not be construed as arbitration. 12. There shall be no addition/deduction of any sums to the contract price on account of rise/fall in the cost of labour and/or materials or any other items, which may affect the cost of the execution of works except star priced materials like Diesel and Bitumen. Only the effect due to change of tax structure by legislation will be applicable. (Price quoted by the agency in the offer/LOC’s price as on 01.12.1999 (where the price has not been mentioned) will be taken as base price, Quantum of enhancement/reduction on the said rate will only be admissible on the quantity procured during the period of consideration).” Mr. Mukherjee, learned Senior Advocate appearing on behalf of the petitioners submitted that the work was completed by his clients and two certificates of completion both dated 6th April, 2011 were issued by the State certifying excellent performance. He submitted a performance bank guarantee had been issued at the instance of his clients, which bank guarantee was to be progressively reduced as per Clause 7(b) of the agreement and after the expiry of three years from the date of completion of the works certified by the Executive Engineer, such guarantee to be discharged. He submitted his clients had applied for obtaining escalation on the cost of Diesel and Bitumen. Such claim was assessed by the Department and payment made. However, thereafter the Department had raised a dispute alleging payment on misconception with regard to Clause 12 of the agreement. His clients therefore had applied by this writ petition to obtain the completion certificate to be issued by the Department upon the expiry of the defect liability period and discharge of the bank guarantee regarding which there was interim order dated 10th March, 2004 made. Mr. Mukherjee drew attention to the affidavit-in-opposition filed on behalf of respondent nos. 1 to 5, in particular paragraph 6 therein, a portion of which is set out below. The said affidavit does not appear to have been filed. A copy thereof was handed up. “6. …………………….. Mr. Mukherjee drew attention to the affidavit-in-opposition filed on behalf of respondent nos. 1 to 5, in particular paragraph 6 therein, a portion of which is set out below. The said affidavit does not appear to have been filed. A copy thereof was handed up. “6. …………………….. I say in this connection that as per direction of the Higher Authority a letter was issued vide this office Memo No. 1821 dated 19.12.2003 to Raitani Construction & Co. directing him to justify his claim of price escalation submitting authentic documents to this Division at an earliest opportunity. A sum of Rs.45,64,495/- and Rs.33,31,459/- was paid to the concerned Agency against price escalation of Diesel/Bitumen respectively through misconception. But as per clause 12 of tender agreement the escalation will be applicable only in case of charge of tax structure by legislation only, so, the agency was asked to justify his claim of price escalation and directed to submit required papers and documents in support of claim. But the agency failed to do so hence the Bank Guarantee was not released to the agency.” Mr. Mukherjee submitted further the bank guarantee issued at the instance of his clients was a conditional one. To emphasize this point he relied on the following portions of the bank guarantee. “……We, M/s. Punjab National Bank, Burdwan (hereinafter called the said Bank) do hereby agree to indemnify the said Executive Engineer for the total value of security deposit/performance security or amount of Rs.40,07,324.00 (Rupees Forty lac seven thousand three hundred twenty four) only or any part there of that may be, if the said contractor fails to perform as per terms and conditions stipulated in agreement. We, the said Bank, do hereby undertake to pay the amount payable under this guarantee without any demur merely on a demand from the said Executive Engineer that the amount claimed is due for non performance of any of the conditions of the agreement by the said contractor or any such demands made on the Bank shall be conclusive as regards the amount due or payable by the Bank under this guarantee but our liability under this guarantee shall be restricted to an amount not exceeding Rs.40,07,324.00 (Rupees Forty lac seven thousand three hundred twenty four) only.” He submitted the bank guarantee furnished by his clients was a promise by the bank which became effective if his clients failed to perform their obligations. That was a conditional promise which never became effective and therefore there was no liability under the said guarantee of the bank upon the work having been completed, the defect liability period expired and no dispute with regard thereto on performance raised by the department. He submitted still further that in any event the department being a party to the contract could not decide for itself whether there had been any breach to purport to go on to appropriate the proceeds of bank guarantee as damages. For this proposition he relied on two judgments. The first of the Supreme Court in the case of State of Karnataka vs. K. Krishnappa Naidu and Co. reported in AIR 1987 SC 1359 in paragraph 7 of which the said Court expressed, inter alia, the following view: “7. …………………….Even assuming for argument’s sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the Officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. …………………” The other case is a decision by a Learned Single Judge of this Court in the case of Shri Surendra Kumar Ray Chowdhury vs. The Collector of Calcutta & Ors. reported in 1985(1) CLJ 332 in which the contention of the petitioner therein was upheld. Such contention would appear from paragraph 12 of the judgment which is reproduced below: “12. reported in 1985(1) CLJ 332 in which the contention of the petitioner therein was upheld. Such contention would appear from paragraph 12 of the judgment which is reproduced below: “12. Thus, the petitioner, his father and his mother entered with the Governor of Bengal into a contract to save the latter from loss that might be caused by the conduct of the petitioner (vide section 124 of the Indian Contract Act) Mr. Mukherjee, learned advocate for the petitioner, has submitted that the aforesaid bond does not confer upon the Government any power to arbitrate or adjudicate whether loss had been actually caused by any act or omission on the part of the petitioner. Only after it is determined in any judicial proceeding that the petitioner is liable to indemnify, the Government would have right to sell the aforesaid Government securities. In the instant case there had been no such medical (material) determination. Therefore, the respondents were not entitled to sell the Government securities.” The State is represented but the bank is not. A notice dated 25th May, 2015 has been handed up which shows service thereof was made on the respondent nos. 6 and 7 being the bank. The petitioners are directed to obtain a copy of this order and serve the same upon the non-appearing respondent nos. 6 and 7. The said respondents are expected to make their position known regarding the submissions of the petitioners that have been recorded above. The State will also be heard on the adjourned date. List the writ petition on 29th February, 2016. The petitioners will file an affidavit-of-service to include the said notice dated 25th May, 2015 on the next date as well as a copy of the affidavit in opposition filed on behalf of the State.