Case Note & Summary
The petitioner, M/s. Shiv & Sons, a proprietorship concern, responded to a tender notice dated 01.03.2023 issued by the Nagpur Division of Central Railway for catering services at Nagpur Railway Station. The petitioner's bid was found eligible and a letter of allotment was issued on 15.05.2023, demanding a performance security deposit of 10% of the total contract value. The petitioner contended that this was a departure from the Railway Board Circular dated 20.11.2020, which prescribed a performance guarantee of only 3%. The petitioner filed a writ petition challenging the demand. The respondents argued that the Circular was not applicable to the tender in question. The court examined the Circular and found it to be binding on all railway units. The court held that the demand for 10% performance guarantee was arbitrary and unsustainable. The court directed the respondents to accept a performance guarantee of 3% as per the Circular and to proceed with the contract. The writ petition was allowed with no order as to costs.
Headnote
A) Administrative Law - Railway Tender - Performance Guarantee - Circular Binding Effect - The petitioner challenged the demand for 10% performance security deposit in a catering contract, contending it was contrary to the Railway Board Circular dated 20.11.2020 which prescribed 3% - The court held that the Circular was binding on the respondents and the demand for 10% was arbitrary and unsustainable - The respondents were directed to accept 3% performance guarantee as per the Circular (Paras 2-10).
Issue of Consideration
Whether the demand for 10% performance security deposit by the respondent-Railways, contrary to the Railway Board Circular dated 20.11.2020 prescribing 3%, is arbitrary and liable to be set aside.
Final Decision
The writ petition is allowed. The demand for 10% performance security deposit is set aside. The respondents are directed to accept a performance guarantee of 3% as per the Railway Board Circular dated 20.11.2020 and proceed with the contract. No order as to costs.
Law Points
- Administrative Law
- Contract Law
- Railway Tender Policy
- Performance Guarantee
- Arbitrariness
- Circular Binding Effect
