Page No.# 1/16 GAHC040000042024 2025:GAU-AP:307 THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : WP(C)/3/2024 M/S PetoDumpum Enterprises and Anr B Sector, near Raj Bhawan, Itanagar reprsented by Mrs Yamje Loriak Tamin, D/o K Dulom, resident of B Sector, PO Itanagar, Papumpare District, AP 2: Jomdu Dulom Age: Occupation : S/o Shri Kirjom Dulom rsidentnof DLM office Ganga PO Itanagar Papumpare District AP79111 VERSUS The Union of India and 6 Ors reprsented by the Secretary, Govt of India, Ministry of Defence, 101-A, South block, New Delhi 2:The BRO Age: 0 Occupation : represented by Director General Ministry of Defence Seema Sadak Bhawan Ring Road Naraina Delhi Cant New Delhi 3:The Chief Engineer cum Authority Engineer Age: 0 Occupation : BRO Project BRAHMANK Page No.# 2/16 C/o APO Pasighat AP 931722 4:The Commander BRO cum Team Leader cum Sr Highway Engineer Age: 0 Occupation : HQ 44 BRTF C/o 99 APO 930044 5:The Deputy Commisisoner Age: 0 Occupation : Tato Shi-Yami District AP 6:Valecha Engineering Ltd Age: 0 Occupation : CIN No. 174210MH1977PLC019535 office at Plot No.B-6 7th Floor Lokhandwala Complex Valecha Chambers new Link road Andheri West Azad Nagar Mumbai Maharashtra 400053 7:The ICICI Bank Ltd Age: 0 Occupation : Itanagar Branch AP represented by its Branch Manager Branch office at ICICI Bank Ltd ESS Sector NH 52A near JNK School Itanagar A Advocate for the Petitioner : P J Saikia, Kemo Lollen Advocate for the Respondent : Marto Kato, Gallen Taloh,Bomchi Taipodia,J Das,1 A Chetia,GA (AP) Page No.# 3/16 - B e f o r e- HONOURABLE MR. JUSTICE ROBIN PHUKAN Advocates for the petitioners : Mr. P.J. Saikia, Sr. Adv.; Ms. M. Nirola. Advocates for the respondents : Mr. M. Kato, Dy.S.G.I.; Ms. S. Basar, Govt. Adv.; Mr. A. Sandilya. Date of hearing : 04.12.2024 Date of judgment : 04.03.2025 JUDGMENT & ORDER (CAV) 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; Ms. S. Basar, learned Government Advocate for the respondent No. 5 and Mr. A. Sandilya, learned counsel for the proforma respondent No. 7. 2. It is to be noted here that in this writ petition, the petitioners M/s PetoDumpum Enterprise and Shri Jomdu Dulom, have prayed for granting following relief(s): (i) To direct the respondent No. 3 to issue work completion certificate to the petitioners for the project construction and upgradation of Tato-Mechuka Road (design chainage from km 33.100 to km 41.275 and Page No.# 4/16 existing chainage from km 36.00 to km 45.410)(PKG-III) to 2 lane with hard shoulders under Project Brahmank in the State of Arunachal Pradesh. (ii) To direct the respondent No. 3 to release Bank Guarantee No. 6343NDDG00042121, submitted by the petitioners in connection with the aforesaid project. (iii) To direct the respondent No. 3 to release the pending bills for the work executed by the petitioners directly to the petitioners’ account without imposing any liquidated damages. 3. The background facts, leading to filing of the present petition, are briefly stated as under:- “The petitioners and the respondent No. 6, Valecha Engineering Ltd., had entered into a Memorandum of Understanding (MoU) on 13.10.2020, for submitting tender for ‘Construction and Upgradation of Tato-Mechuka Road on EPC mode’ (‘the Project’, for short). As per the said MoU, the tender is to be submitted in the name of the respondent No. 6 and if the work is awarded to the respondent No. 6, the petitioners will be entitled to execute the entire work, on back to back basis, and in the said tender process, the respondent No. 6 came out as successful bidder and Letter of Acceptance was issued in favour of the respondent No. 6. As per the terms of the MoU, the petitioners had submitted their bank guarantee, for a sum of Rs.2,03,49,000/- for the aforesaid project. However, the respondent No. 3, vide letter dated 07.10.2021, approved the petitioners as subcontractor, only for 49% value of the contract work, amounting Rs.33,23,67,000/- under the respondent No.6. After the petitioners started execution of the work and completed 49% of the work available work, further progress could not be made as the Page No.# 5/16 authority failed to settle approximately about 1.25 km area, for which an amount of Rs. 20,00,00,000/- had been earmarked and due to rejection of the prayer of the respondent No. 6, for extension of time, the petitioners apprehend that the authorities may impose liquidated damages on the aforesaid bills, which are yet to be submitted. The petitioners then submitted a representation to the respondent authorities on 28.11.2023, praying for releasing the bank guarantee and not to impose liquidated damages on the bills and while the aforementioned representation is pending, the authorities have terminated the contract, vide letter dated 16.12.2023.” 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 33.100 to km 41.275 and existing chainage from km 36.000 to km 45.410) to 2 lane with hard shoulders under project Brahmank in the State of Arunachal Pradesh on EPC Mode (Pkg III) was awarded to the respondent No. 6, M/s Valecha Engineering Limited on 15.06.2021 and thereafter, M/s Valecha Engineering Limited submitted one letter on 21.09.2021, requesting for approval of M/s Peto Dumpum Enterprises as sub-contractor, to execute 49% of work value of contract amount, as per Clause 4.2 of EPC agreement, which was approved by the authority i.e. the Chief Engineer (P) Brahmank, vide letter dated 07.10.2021. 4.1. 4.1. It is also stated that the work executed by M/s Peto Dumpum Enterprises was only 26.21% for which payment has already been released to the contractor and no further bill has been submitted by the contractor regarding any further progress of work on ground, and in respect of timely payment, the HQ has raised the issue with M/s Valecha Engineering Limited and Page No.# 6/16 communicated to M/s Peto Dumpum Enterprises, vide letter dated 30.05.2023, and that the payment due, if any, after making deductions for non-achievement of milestones, non-rectification of damages and other statutory deductions will be made to the respondent No. 6, after submission of requisite documents as per contract agreement by the respondent No. 6, and that the petitioners’ claim of not receiving the payment from the respondent No. 6, is their internal matter as per their mutually agreed MoU and the department has nothing to say. 4.2. It is further stated that the contract was terminated on 16.12.2023, due to contractor’s default, vide letter dated 16.12.2023 and as per EPC agreement Article 23.6(i)(a) – “Upon termination of account of contractor’s default under Clause 23.1, the authority shall encash 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 pre-determined compensation to the authority for any losses, delays and cost of completing the works and maintenance, if any”. Accordingly, the HQ has approached the ICICI Bank for encashment of bank guarantee bond No. 6343NDDG00042121, dated 18.03.2021, amounting to Rs. 2,03,49,000/-, executed in favour of the Chief Engineer, Project Brahmank, by M/s Valecha Engineering Limited, and that the ICICI Bank has issued a demand draft for the said bank guarantee amount in favour of the Chief Engineer (P) Brahamank before order of this Court dated 05.01.2024, wherein encashment of bank guarantee was stayed by this Court and that the matter of payment to the bank against performance guarantee by the sub-contractor i.e. M/S Peto Dumpum Enterprises on behalf of M/s Valecha Engineering Limited is their internal matter. Page No.# 7/16 4.3. Page No.# 7/16 4.3. It is further stated that the performance guarantee has been pledged by the bank on behalf of the contractor M/s Valecha Engineering Limited and the department has full right to encash the same on the default of contractor, under the terms and conditions of the contract, and that the petitioners’ contention to have completed more than 49% of work is baseless as only 26.21% work has been completed as per specification. 5. The petitioners herein have filed their affidavit-in-reply to the affidavit-in- opposition of the respondent Nos. 1 to 4, denying the statements and averments made by them in the said affidavit. It is stated that under Article 4.2 of the contract agreement, it is the duty of the respondents in BRO that the directions issued under the said clause are complied with and had such action been taken by the respondent BRO, the progress of the work could have been expedited and further that the valuation of the work has been assessed by the authority as on the date of milestone and not the availability of the executed work on ground. 5.1. It is also stated that delay caused in execution of the work is either due to the fault of the contractor or the BRO or both and therefore, any damage need to be realized, has to be realized from the respondent No. 6, and that the BRO is not entitled to encash the bank guarantee and shall maintain the bank draft intact till disposal of this petition, and that petitioners had executed more than 49% of the available scope of work and since only 49% of the work was allowed to the petitioners, the petitioners are entitled to refund of the entire amount, covered by the bank guarantee, and that the petitioners cannot be penalized for non-submission of the bank guarantee by the respondent No. 6 or for cancellation of the contract with the respondent No. 6. 6. The respondent Nos. 6. The respondent Nos. 1 to 4 have filed additional affidavit stating that as Page No.# 8/16 per provision of the contract agreement of Clause 23.6 (III), M/s Valecha Engineering Limited/respondent No. 6 has not raised any demand termination of payment till date, though the contract was terminated on 16.12.2023, and as per Clause 23.5 fo the contract agreement, the respondent No. 6 and the petitioners have been informed about the valuation of unpaid work, vide letter dated 12.01.2024. 7. The respondent Nos. 1 to 4 have filed another additional affidavit brining on record the joint verification report dated 07.05.2024, which was carried out as per order of this Court dated 22.04.2024, in I.A.(Civil) No. 24(AP)/2024. 8. The respondent Nos. 1 to 4 have filed another additional affidavit stating that as per Clause 10.3 (ii & iii) of the contract agreement, the contractor is liable to pay damages @ 0.05% of the contract price for delay of each day reckoned from the date specified in Schedule-J and until such project milestone is achieved or the project highway is completed, subject to maximum of 10% of contract value, and as the contractor has failed to achieve Milestone-II, due on 27.04.2023, the contractor is liable to pay Rs. 3,39,000/- per day to the authority as per contract agreement and the contractor is liable to pay maximum amount of 10% of the contract value i.e. Rs. 6,78,30,000/- as liquidated damages as per provisions of the contract, and therefore, it is contended to dismiss this petition. 9. The petitioners have filed affidavit-in-reply on 04.09.2024 to the aforementioned affidavit, denying the statements and averments made in the said affidavit. 10. Mr. P.J. Saikia, learned Senior Counsel for the petitioners, submits that the contract for construction and up gradation of Tato-Mechuka in the State of Page No.# 9/16 Arunachal Pradesh (Pkg III) 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. Mr. Saikia also submits that as per the MoU the Bank Guarantee for the said work was furnished by the present petitioners and because of several reasons, mainly because of natural calamities, the petitioner 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, the same 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 they have executed. 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 termination after issuance of notice to the respondent No.6. Further Mr. Kato submits that thereafter, a 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 in respect of pending bills, the same has 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 therefore, Mr. Kato has contended to dismiss Page No.# 10/16 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 stated that the work for construction and up gradation of Tato-Mechuka Road (design chainage from km 33.100 to km 41.275, and existing chainage from km 36.000 to km 45.410) to 2 lane, with hard shoulders under project Brahmank in the State of Arunachal Pradesh on EPC Mode (Pkg III) was awarded to the respondent No. 6, M/s Valecha Engineering Limited on 15.06.2021, being the L1 bidder. It is also not in dispute that thereafter, on the request made by M/s Valecha Engineering Limited on 21.09.2021, the present petitioners were approved by the authority i.e. the Chief Engineer (P) Brahmank, vide letter dated 07.10.2021, as sub-contractor to execute 49% of work value of contract amount, in terms of Clause 4.2 of EPC agreement. 15. It is also not in dispute that owing to default of the contractor, the contract was terminated on 16.12.2023, vide letter dated 16.12.2023, as the contractor had failed to achieve the required milestone, within the stipulated period. The achievement of project milestone, as per Annexure-7, the Termination Notice, dated 16th December, 2023 is shown as under: Page No.# 11/16 Sl. No. Project Milestone Milestones as per Schedule-I of Agreement Planned Actual (%) Current Status Contract Price to be expended Amount in Cr. 1 Milestone-I 27 Jul 2022 10% 6.78 11.62 Achieved on 26 Jul 2022 2 Milestone-II 27 Apr 2023 35% 23.74 26.21 Only 26.21% has been achieved till 27 Apr 2023 3 Milestone- III 26 Jan 2024 70% 47.48 Yet to be achieved 4 Scheduled Completion 08 Jul 2024 100% 67.83 Yet to be achieved 16. Further, it appears from the Annexure-7, the Termination Notice, dated 16th December, 2023 that the work executed by the petitioners was only 26.21%. The rate of progress is shown as under:- Sl. No. Month Year Physical Progress Achieved (in %) Cumulative Physical Progress Achieved (in %) 1 July 2021 0.0 0.0 2 August 2021 0.0 0.0 3 September 2021 0.00 0.00 4 October 2021 0.00 0.00 5 November 2021 0.00 0.00 6 December 2021 4.32 4.32 Page No.# 12/16 Sl. No. Month Year Physical Progress Achieved (in %) Cumulative Physical Progress Achieved (in %) 7 January 2022 0.00 4.32 8 February 2022 0.00 4.32 9 March 2022 1.84 6.16 10 April 2022 0.00 6.16 11 May 2022 0.00 6.16 12 June 2022 0.00 6.16 13 July 2022 3.86 10.02 14 August 2022 1.60 11.62 15 September 2022 0.0 11.62 16 October 2022 0.00 11.62 17 November 2022 0.0 11.62 18 December 2022 0.00 11.62 19 January 2023 0.00 11.62 20 February 2023 0.00 11.62 21 March 2023 10.19 21.81 22 April 2023 4.44 26.21 23 May 2023 0.0 26.21 24 June 2023 0.0 26.21 25 July 2023 0.0 26.21 26 August 2023 0.0 26.21 27 September 2023 0.0 26.21 28 October 2023 0.0 26.21 29 November 2023 0.0 26.21 17. Further it appears that having terminated the contract with respondent No.6, the respondent authorities, as per EPC agreement, Article 23.6(i)(a), had approached the ICICI Bank for encashment of bank guarantee, being bond No. 6343NDDG00042121, dated 18.03.2021, for a sum of Rs. 2,03,49,000/-, executed in favour of the Chief Engineer, Project Brahmank. Then the ICICI Page No.# 13/16 Bank has issued a demand draft for the said bank guarantee in favour of the Chief Engineer (P) Brahamank, and the same was carried out before order of this Court dated 05.01.2024. 18. It is to noted here that Article 23.6(i)(a) reads as under:- “Upon termination of account of contractor’s default under Clause 23.1, the authority shall encash 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 pre-determined compensation to the authority for any losses, delays and cost of completing the works and maintenance, if any”. 19. It also appears from Annexure 9 of the affidavit-in-opposition of the respondent No.1, 2, 3 and 4 that the bank guarantee was furnished by the respondent No.6 to the ICICI Bank on March 18 of 2021. Though it is contended by the petitioners that they had furnished the bank guarantee, yet, the record speaks otherwise. Therefore, the submission of Mr. Saikia, the learned counsel for the petitioners left this court unimpressed. However, it appears to be a disputed question of fact. But, it is worth mentioning in this context that while exercising writ jurisdiction, this court is not entitled to adjudicate the disputed question of fact. 20. It is also to be noted here that the performance guarantee was pledged by the bank on behalf of the contractor, respondent No.6 i.e. M/s Valecha Engineering Limited. And having been defaulted in executing the contract work within the stipulated time, the respondent authority has full right to en-cash the same under the terms and conditions of the contract, i.e. Article 23.6(i)(a). And it is apparent from the termination notice, dated 16th December, 2023, Page No.# 14/16 (Annexure-7) that intention to termination Notice was given to the respondent No.6 on 07th February, 2023, cure period Notice dated 01.03.2023 and this cure period Notice dated 20.03.2023, was given to the respondent No.6 and the same also failed to yield any result. 21. Thus, in view of contractual provision, i.e. Article 26.3(i)(a), and in view of Notice and opportunity to rectify, given to the respondent No.6, the action of the respondent authority in en-cashing the performance guarantee, cannot be said to be arbitrary or unreasonable. Besides, as per Clause 10.3(ii) & 10.3(iii) of the contract agreement, the authority can recover its losses and the damages as well as the expenditures incurred in maintenance of the project as per Clause 10.4. 22. Mr. Kato, the learned standing counsel for the respondent authorities, however, made a categorical statement that the respondent authorities had released the payment to the contractor and that no further bill has been submitted by the contractor regarding any further progress of work on ground, yet, it is not in dispute that the petitioners had not received the same, and it is the categorical statement of the petitioners that whatever amount was deposited in the Escrow account, the same was withdrawn by the respondent No.6. Though, a stand is taken by the respondent authority that the petitioners’ claim of not receiving the payment form the respondent No. 6, is their internal matter as per their mutually agreed MoU and the department has nothing to say, yet in view of Clause 4.2, the respondent authorities may intervene the same as it had approved the petitioners as sub-contractor under respondent No.6. Page No.# 15/16 23. However, Mr. Kato has pointed out that in respect of timely payment, the respondent authority had taken up the issue with respondent No.6, vide letter dated 30.05.2023. Mr. Kato also submits that the payment due, if any, after making deductions for non-achievement of milestones, non-rectification of damages and other statutory deductions, will be made to the respondent No. 6, after submission of requisite documents as per contract agreement by the respondent No. 6. 24. Under the given facts and circumstances, and also in the light of the submissions advances by learned Advocates of both sides, this Court is inclined to dispose of this petition with the following directions: (i) In terms of the joint verification, regarding the work executed by the petitioners, having already been carried out by the respondent authorities and a report thereof being prepared, a work completion certificate to that extent what the petitioners had executed, shall be issued to them by the respondent Nos. 1 to 4. (ii) In respect of the issue of liquidated damages, compensation and releasing of the performance bank guarantee etc., 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) All pending bills, if not paid in the meantime, shall be released in favour of the petitioners in terms of joint verification report. 25. 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 Page No.# 16/16 the respondent authorities within a period of 2(two) weeks from today. 26. In terms of above, this writ petition stands disposed of. Interim order, if any, passed earlier stands vacated. 27. The parties have to bear their own costs. JUDGE Comparing Assistant