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2020 DIGILAW 456 (JK)

Khurhseed and Co. v. Chief Engineer, PMGSY

2020-09-01

SANJAY DHAR

body2020
ORDER : Sanjay Dhar, J. 1. Instant application has been filed by the petitioner-contractor seeking a direction against the respondents for release of performance security deposit (performance guarantee) on account of successful completion of the contract and on account of attainment of the purpose for which performance guarantee was submitted by the applicant-contractor in relation to the contract which was subject-matter of the arbitration. 2. The application has been moved by the applicant-contractor during the pendency of arbitration petitions that have been moved by him as well as by the respondent under Section 34 of the Jammu and Kashmir Arbitration and Conciliation Act, being AA Nos. 9900001/2016 and 900002/2016 respectively, challenging the award dated 15.10.2015 passed by the Arbitral Tribunal. 3. It appears from the record that the applicant-contractor was allotted a contract relating to the construction of road from Kangan to Naranag under Pradhan Mantri Gram Sadak Yojna (PMGSY). Certain disputes arose between the petitioner-contractor and the employer (State). In terms of order dated 16.04.2012, passed on an application moved by the contractor before this Court, the Chief Engineer was authorized to appoint Arbitrator within three weeks with a further stipulation that the Arbitrator so appointed shall enter upon the reference within two weeks and to conclude the proceedings within three months. Accordingly, the Arbitral Tribunal comprising three Arbitrators entered upon the reference and passed an award on 15.10.2015. The same stands challenged by both the parties i.e. the contractor as well as the employer by way of two separate arbitration petitions, referred to hereinabove. 4. During the pendency of these two arbitration petitions, the contractor has filed the instant application in which it has been contended that the project has physically been completed on 31.08.2014 and the maintenance period of the project has also expired on 31.08.2019. It is urged that the purpose for which the performance security was deposited has been accomplished and the same is required to be released in favour of the applicant-contractor. To support his contention, the contractor has placed on record copy of communication dated 16.11.2019, addressed by Executive Engineer, PMGSY, Division Ganderbal, to the Superintending Engineer, PMGSY (JKRRDA), Circle Srinagar, and communication dated 20.11.2019, addressed by the Superintending Engineer, PMGSY (JKRRDA), Circle Srinagar, to the concerned Chief Engineer. PMGSY (JKRRDA), Kashmir. 5. The application has been resisted by the respondent-employer by filing objections thereto. PMGSY (JKRRDA), Kashmir. 5. The application has been resisted by the respondent-employer by filing objections thereto. It has been contended by the respondent that the performance security deposit made by the applicant forms part and parcel of the transaction pertaining to the contract for construction of road from Kangan to Naranag, as such, until and unless the arbitration petitions filed by the parties challenging the arbitral award are adjudicated upon, the same cannot be released. It has been further contended that the decision with regard to release of performance guarantee can be taken only when the matter is finally decided by this Court. 6. I have heard learned counsel for the parties and perused the record. 7. It is not in dispute that the performance guarantee deposit made by the petitioner is with respect to the contract which is subject-matter of arbitration between the parties. It is also not in dispute that the work relating to the contract stands completed and the maintenance period of the project also stands expired in August, 2019. The same is supported by contents of the communications dated 16.11.2019 and 20.11.2019, referred to above. The only objection that respondents have to the release of performance security deposit is that on account of pendency of arbitration petitions challenging the arbitral award, final decision with regard to release of the security deposit cannot be taken. 8. A perusal of the record reveals that on account of delay in completion of the project, an amount of Rs. 26/- lacs stands already retained by the respondent-employer from the running bills of the applicant-contractor. Therefore, claim, if any, of the respondent-employer is secured. No other claim of the respondent-employer against the petitioner-contractor is the subject-matter of dispute. Thus, there is no justification for the respondent-employer to withhold the performance security deposit when the project has already been completed and even the period of its maintenance has also expired. 9. For the foregoing reasons, the application is allowed and the respondent-employer is directed to release the performance security deposit in favour of the applicant-employer forthwith. 10. The application is disposed of accordingly. 11. The main arbitration petitions be listed for further proceedings on 10.11.2010. The record of the Arbitral Tribunal be summoned.