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2025 DIGILAW 366 (GAU)

Sahabuddin Siddique v. Union of India

2025-03-04

ROBIN PHUKAN

body2025
JUDGMENT : ROBIN PHUKAN, J. Heard Mr. P.J. Saikia, learned Senior Counsel, assisted by Ms. M. Nirola, learned counsel for the petitioners. Also heard Mr. M. Kato, learned Dy.S.G.I. for the respondent Nos. 1, 2, 3 and 4 and heard Ms. S. Basar, learned Government Advocate, for the respondent No. 5. 2. In this petition, the petitioners M/s Sahabuddin Siddique and Sri Sahabuddin Siddique, have prayed for following reliefs: (i) To direct the respondent authorities to release all the pending bills for the works executed by the petitioners, after carrying out a joint verification by the BRO authority and the petitioners, and pay the bill amount directly to the bank account of the petitioners, without imposing any liquidated damages, compensation etc. (ii) To direct the respondent authorities to refund/release the withheld amount of Rs. 4,47,32,154/-, being deducted for liquidated damages including other deductions. (iii) To direct the respondent No. 3 to refund the amount of Rs. 2,41,65,000/- covered by the Bank Guarantee No. 6343NDDG00019222 and Bank Guarantee No. 6343NDDG00007722, in connection with the aforementioned project. (iv) To direct the respondent No. 3 to issue work completion certificate to the petitioners for the said project to the extent of 49% of accessible available scope of work executed by the petitioners. 3. The background facts, leading to filing of the present petition, are briefly stated as under: “The petitioner No. 1, M/s Sahabuddin Siddique had been approved as subcontractor under the respondent No. 6, Valecha Engineering Ltd. (VEL), by the respondent No. 3, vide its letter dated 10.12.2021, to the extent of 49% value of contract work for a sum of Rs. 39,46,95,000/-, for ‘Construction and Upgradation of Tato-Mechuka Road (design chainage from km 23.800 to km 33.100 and existing chainage from km 24.800 to km 36.000)(PKG-II) in the State of Arunachal Pradesh’. The petitioners had submitted bank guarantee for a sum of Rs. 2,41,65,000/- for the aforementioned project as per Memorandum of Understanding (MoU), dated 15.06.2021, executed between the respondent No. 6 and the petitioner No. 1. Thereafter, the petitioners had started execution of the work, being approved as subcontractor. But, the work could not be completed in time due to bad weather condition, heavy rainfall, various travel restrictions etc. 2,41,65,000/- for the aforementioned project as per Memorandum of Understanding (MoU), dated 15.06.2021, executed between the respondent No. 6 and the petitioner No. 1. Thereafter, the petitioners had started execution of the work, being approved as subcontractor. But, the work could not be completed in time due to bad weather condition, heavy rainfall, various travel restrictions etc. Thereafter, the respondent authorities in the BRO, had illegally deducted various amounts of money from the bills already submitted before them as deductions and compensations for reasons solely attributable to the respondent No. 6. But, despite all the aforesaid problems, the petitioners had carried out and completed 49% of the work. Thereafter, on 07.12.2023, the petitioners filed a representation before the respondent authorities to issue completion certificate, and also to release bank guarantee and to release the liquidated damages deducted by the respondent authorities as well as the amounts withheld by the respondent No. 6, and further requested to settle the pending bills for the work executed by the petitioners without imposing any liquidated damage. However, nothing has been done by the respondent authorities on account of termination of the contract with the respondent No. 6. Being aggrieved, the petitioners have approached this Court.” 4. The respondent Nos. 1 to 4 have filed their affidavit-in-opposition denying the averments made in the petition. It is stated that the work for construction and upgradation of Tato-Mechuka Road (design chainage from km 23.800 to km 33.100 and existing chainage from km 24.800 to km 36.000) to 2 lane with hard shoulders, under project Brahmank in the State of Arunachal Pradesh, on Engineering Procedure and Construction (EPC) Mode, was awarded to the respondent No. 6, being the L1 bidder, and that the respondent Nos. 1 to 4 are not aware of any Memorandum of Understanding between the petitioners and the respondent No. 6, and the petitioners were approved as subcontractor for 49% of the work, on the request of the respondent No. 6 and while according approval on the request of the respondent No. 6, it was made clear that the respondent No. 6 shall, at all times, be responsible for fulfilment of all contractual obligations under the contract. It is also stated that as per Clause 7.1 of the contract agreement, which stated that within 30 (thirty) days of receipt of Letter of Acceptance, the selected bidder shall furnish to the authority an irrevocable and unconditional guarantee from a bank, in the form set forth in Annexure-I of Schedule-G (the performance security) for an amount equal to 5% of its bid price and in case of bids mentioned below, the selected bidder, along with the performance security, shall also furnish to the authority an irrevocable and unconditional guarantee from a bank in the same form given at Annexure-I of Schedule-G towards an additional performance security, and being the successful bidder, the respondent No. 6 had furnished performance bank guarantee, for a sum of Rs. 2,41,65,000/- to the Chief Engineer, Project Brahmank and not by the petitioners. It is also stated that any MoU between the respondent No. 6 and the petitioners, is their internal matter and the petitioners were approved as subcontractor for 49% of the work and while according approval on the request of the respondent No. 6, it was made clear that the respondent No. 6 shall at all times will be responsible for fulfilment of all contractual obligations under the contract. 4.1. It is further stated that as per Article 4 (Obligations of the Contractor) Clause 4.8 (Unforeseeable Difficulties) and 4.11 (Site Data), the contractor’s reason for failing to carrying out the work is not tenable, and none of the reasons assigned by the petitioners comes under Article 21 Clause 21.1 (Force Majeure) and therefore, the claim of the petitioners is invalid, and that the contractor did not raise the issues during submission of plan and profile, which was approved for entire stretch, between km 23.800 to km 33.100 by the authority’s engineer. 4.2. 4.2. It is also stated that the PKG-II was completely abandoned by the contractor since October, 2023 and no work was undertaken as per work programme and progress of the contract, on the date of termination of contract, was only 26.21%, and that the authority had imposed liquidated damages as per Clause 10.3(ii) of the contract agreement for non-achievement of milestone and thereafter, the contract agreement, with the respondent No. 6, was terminated and upon such termination, on account of contractor’s default, under Clause 23.1, the authority is entitled to: (i) En-cash and appropriate the performance security, additional performance security, if any, and retention money, or in the event the contractor has failed to replenish or extend the performance security and additional performance security if any, claim the amount stipulated in Clause 7.1, as agreed predetermined compensation to the authority for any losses, delays and cost of completing the works and maintenance, if any; (ii) Encash and appropriate the Bank Guarantee, if any, for and in respect of the outstanding advance payment and interest thereon;and (iii) Pay to the contractor, by way of termination payment, an amount equivalent to the valuation of unpaid works after adjusting any other sums payable or recoverable, as the case may be, in accordance with the provisions of the agreement. 4.3. It is further stated that M/s Valecha Engineering Ltd. had prayed for extension of time, which was rejected vide letter dated 17.11.2023, as per the contract agreement, and any deduction in payment of the contractor has been done within the provisions of the contract agreement, and that deduction was made due to default on the part of the contractor for non-fulfilment of the contractual obligations. It is also stated that liquidated damages (LD) was also imposed as per Clause 10.3(ii) of the contract agreement due to non-achievement of the milestone. 4.4. It is also stated that the progress of contractor on the date of termination was 21.72% only and the issue of non-payment, so raised by the petitioners was taken care of and the respondent No. 6, vide letter dated 19.12.2023, was directed to release the payment as per terms of the conditions of the Escrow account, and therefore, it is contended to direct the petitioners to settle the final bill with the respondent No. 6 as per their internal MoU. 5. 5. The respondents had filed an additional affidavit on 18.07.2024, bringing on record the joint verification report dated 03.06.2024, pursuant to order dated 16.05.2024. But, the petitioners have failed to sign the joint verification report and as per the joint verification report, the progress of work was 26.21% only. 6. The petitioners had filed affidavit-in-reply to the affidavit-in-opposition filed by the respondents Nos. 1 to 4, denying the statement and averments made in the said affidavit-in-opposition. It is stated that the Escrow account was seized by NCLT and the same was within the knowledge of the respondent authorities and despite they had released the payment to the respondent No. 6 or in the Escrow account. It is also stated that joint verification was carried out unilaterally, without considering the objection filed by the petitioners. It is also stated that the amount, which the petitioners are entitled to, based on the joint verification report, may be directly released without imposing liquidated damages along with earlier deducted damages. 7. Thereafter, on 02.12.2024, another additional affidavit was filed by the respondent authorities, stating that all obligations and liabilities for the project lie with the respondent No. 6 and the petitioners, being sub-contractor as well as the contractor i.e. respondent No. 6, had failed to fulfil its obligations under the contract agreement and as per the contract agreement, Article 23.6(i)(a), the respondents had approached the ICICI Bank for encashment of bank guarantee bond submitted by M/s Valecha Engineering Ltd., being bank guarantee No. 6343NDDG00007722, amounting to Rs. 1,20,82,500/- and bank guarantee No. 6343NDDG000019222, amounting to Rs. 1,20,82,500/- and the same was deposited in the public fund account of the Chief Engineer, Project Brahmank, and thereafter, deposited in the Government Treasury Account through SBI Pasighat, and that as per the provision of the contract agreement, Article 23.6(III), the respondent No. 6 has to raise his demand for- termination payment based on the joint survey of unpaid works carried out. But, the respondent No. 6 has not submitted the final termination demand, and therefore, it is contended to dismiss this petition. 8. The petitioners had filed reply to the aforementioned affidavit denying the statements made in the affidavit-in-opposition of the respondent Nos. 1 to 4. 9. Mr. But, the respondent No. 6 has not submitted the final termination demand, and therefore, it is contended to dismiss this petition. 8. The petitioners had filed reply to the aforementioned affidavit denying the statements made in the affidavit-in-opposition of the respondent Nos. 1 to 4. 9. Mr. P.J. Saikia, learned Senior Counsel for the petitioners, submits that the contract for construction and up-gradation of Tato-Mechuka Road in the State of Arunachal Pradesh (Pkg II) was awarded to the respondent No. 6, M/s Valecha Engineering Limited, on 15.06.2021 and thereafter, M/s Valecha Engineering Limited had allowed the petitioners to execute 49% of the aforesaid work pursuant to a memorandum of understanding (MoU) and the same was approved by the authority i.e. the Chief Engineer (P) Brahmank. Mr. Saikia also submits that as per the MoU, the bank guarantee for the said work was furnished by the present petitioners, not by the respondent No. 6 and because of excess rainfall and blockage of the road and excess earthwork, the petitioners could not complete the work within the stipulated time for which the respondent authorities had terminated the contract. Moreover, as the bank guarantee was furnished by the petitioners, on termination of the contract, may be forfeited by the authorities and as such, direction may be issued to the respondent authorities to release bank guarantee in favour of the petitioners. Further, Mr. Saikia submits that the petitioners are entitled to get pending bills and the respondent authorities may be directed to release the same, and further the respondent authorities may be directed to issue work completion certificate for whatever work the petitioners had executed, till termination of the contract. 11. Per contra, Mr. Kato, learned Dy.S.G.I. submits that the petitioners had failed achieved the milestone, as per the contract agreement, within the stipulated period, for which the contract was terminated after issuing notice to the respondent No.6. Further, Mr. Kato submits that thereafter, joint verification was conducted, and it was found that only 26.21% of work was carried out by the petitioners, and whatever the petitioners are entitled to in respect of pending bills, the same had already been paid to them by depositing a sum of Rs. Further, Mr. Kato submits that thereafter, joint verification was conducted, and it was found that only 26.21% of work was carried out by the petitioners, and whatever the petitioners are entitled to in respect of pending bills, the same had already been paid to them by depositing a sum of Rs. 3,16,66,967/- in the Escrow account and as such, the petitioners are not entitled to anything, and the deductions were made as per the contract agreement and the performance bank guarantee was also encashed and deposited in the public fund of the Chief Engineer. Mr. Kato further submits that due to non-achievement of the milestone, liquidated damages were also imposed upon the contractors as per contract agreement Clause 10.3(ii). And, therefore, Mr. Kato has contended to dismiss the petition. 12. In reply to the submission of Mr. Kato, Mr. Saikia, submits that the amount deposited in the Escrow account, had already been withdrawn by the respondent No. 6. However, in view of Clause 4.2, the respondent authorities may intervene. Therefore, Mr. Saikia contended to direct the respondent authority to intervene. 13. Having heard the submissions of learned Advocates of both sides, I have carefully gone through the petition and the documents placed on record, and also perused the MoU, between the petitioners and the respondent No. 6. 14. It is not in dispute that the construction and up-gradation of Tato-Mechuka Road (design chainage from km 23.800 to km 33.100 and existing chainage from km 24.800 to km 36.000)(PKG-II) to 2 lane with hard shoulders, under project Brahmank, in the State of Arunachal Pradesh was allotted to the respondent No.6, being L1 bidder. Thereafter, the respondent No. 6 had requested the respondent authorities to approve the petitioners as sub- contractor and then the respondent authorities had approved the petitioners as sub-contractor for 49% of the work and while approving the same, it was made clear that respondent No. 6 shall, all time, be responsible for fulfilment of contractual obligations, under the contract. 15. It is also not in dispute that the respondent No. 6 had to furnished an irrevocable and unconditional guarantee from a bank, for an amount, equal to 5% of its bid price, and accordingly, the respondent No. 6 had furnished performance bank guarantee for a sum of Rs. 2,41,65,000/- and the same was not furnished by the petitioners herein, though a contention is being made to that effect. 2,41,65,000/- and the same was not furnished by the petitioners herein, though a contention is being made to that effect. Though, Mr. Saikia, learned Senior Counsel for the petitioners, submits that the performance bank guarantee was furnished by the petitioners, yet his submission has left this Court unimpressed. The stand taken by the respondent Nos. 1 to 4 in para Nos. 5 and 9 of their affidavit-in-opposition and in para No. 5 of their additional affidavit were evasively denied by the petitioners. Thus, it appears to be disputed question of fact, and it is well settled that while exercising writ jurisdiction, this Court is not entitled to adjudicate disputed question of fact. 16. It is also not in dispute that the petitioners had failed to achieve the projected milestone and the same is apparent from the notice issued on 03.05.2023, by respondent authorities and the milestone the petitioners had achieved during the period, is shown as under: Sl. No. Project Milestone Milestones as per Schedule-J of Agreement % Progress % Achievement Current Status 1 Milestone-I 13 Oct 2022 10% Achieved Achieved on 09 Nov 2022 with cure period of 30 days 2 Milestone-II 14 Jul 2023 35% In Progress 14.18% Achieved up to till date 3 Milestone- III 13 Apr 2024 70% In Progress Yet to be Achieved 4 Scheduled Completion 24 Sep 2024 100% In Progress Yet to be Achieved 17. As the petitioners had failed to achieve the required milestone, the respondent authorities had terminated the contract, by issuing a prior notice on 07.02.2023 and though the respondent No. 6 has prayed for extension of time, the same was denied by the respondent authorities, being the reason, shown for extension, is not covered under terms of the contract agreement. 18. Under the given facts and circumstances on the record, the termination of the contract and forfeiture of the bank guarantee by the respondent Nos. 1 to 4, appears to be not arbitrary and unreasonable. 18. Under the given facts and circumstances on the record, the termination of the contract and forfeiture of the bank guarantee by the respondent Nos. 1 to 4, appears to be not arbitrary and unreasonable. Therefore, under the given facts and circumstances as well taking note of the submission of learned Advocates of both sides, this court is inclined to dispose of this petition with following relief(s):- (i) The respondent authorities shall release all the pending bills, if any, for the work executed by the petitioners in terms of the joint verification conducted by the BRO authority and the petitioners, and shall make payment of the bill directly to the bank account of the petitioners. (ii) In respect of the issue of liquidated damages, compensation and releasing of the performance bank guarantee etc., including deductions for a sum of Rs. 4,47,32,104/-, the petitioners stand relegated to seek redress in an appropriate Civil Court for recovery of the amount forfeited by the respondent authorities, if so advised. (iii) The respondent No. 3 shall issue a work completion certificate to the petitioners, for whatever works, they had executed till the date of termination of the contract and in terms of the joint verification report. 19. This exercise has to be carried out within a period of one month from the date of receipt of certified copy of this judgment and order. The petitioners shall obtain a certified copy of this judgment and order and place the same before the respondent authorities within a period of 2(two) weeks from today. 20. In terms of above, this writ petition stands disposed of. Interim order, if any, passed earlier stands vacated. 21. The parties have to bear own costs.