Release Of Bank Guarantee Is Admission Of Unblemished Completion Of Work: Jharkhand High Court Directs Payment Of Contractor's Dues
The Jharkhand High Court has held that release of a performance bank guarantee by the employer amounts to an admission by conduct that the contractor has completed the work and all post-execution obligations to the employer's satisfaction. Holding that the respondents could no longer dispute the quality or completion of the work after releasing the bank guarantee, the Court directed the...
The Jharkhand High Court has held that release of a performance bank guarantee by the employer amounts to an admission by conduct that the contractor has completed the work and all post-execution obligations to the employer's satisfaction. Holding that the respondents could no longer dispute the quality or completion of the work after releasing the bank guarantee, the Court directed the Jharkhand Urban Infrastructure Development Company Limited (JUIDCO) to release the contractor's admitted dues along with interest.
A Single Judge Bench of Justice Ananda Sen was hearing a writ petition filed by M/s Eagle Infra India Limited seeking release of its final running bill, operation and maintenance (O&M) dues, payment for maintenance carried out after expiry of the contractual O&M period owing to the respondents' failure to take over the project, and release of its performance bank guarantee.
The petitioner submitted that it was awarded the Harmu River Rejuvenation Project in 2015, which included a five-year operation and maintenance component. According to the petitioner, the project was completed on October 31, 2018 and the contractual O&M period concluded on October 31, 2023. Despite issuing a completion certificate and acknowledging by letter dated January 29, 2024 that the project and O&M period had been completed and the final bill was under scrutiny, JUIDCO failed to release the final running bill (R.A. Bill No. 29), O&M dues and payment for maintenance undertaken after October 31, 2023 because the respondents did not take over possession of the project. The petitioner further argued that since the contract had been fully performed, there was no legal basis for requiring continued renewal of the performance bank guarantee.
The respondents opposed the petition, contending that the dispute arose out of a commercial contract and involved monetary claims which should not be entertained under Article 226. They also submitted that any work allegedly carried out after October 31, 2023 lacked contractual sanction in the absence of an extension order or supplementary agreement. During the hearing, however, counsel for JUIDCO informed the Court that the performance bank guarantee had been released in favour of the petitioner a few days earlier.
The Court first held that admitted monetary claims arising out of contracts with the State are maintainable under Article 226 and that even disputed questions of fact may be examined in writ jurisdiction where they do not require elaborate evidence. Examining the facts, the Court found that completion of the work was never in dispute. It noted that the respondents' own communication dated January 29, 2024 acknowledged completion of both the project and the contractual O&M period.
The Court attached particular significance to JUIDCO's decision to release the performance bank guarantee during the pendency of the writ petition, observing:
“Release of Bank Guarantee / Performance Guarantee in favour of the petitioner will lead to the only inevitable conclusion that the petitioner has completed all its obligations under the contract even the post execution to the full satisfaction of the respondent. This act of release of Bank Guarantee is an admission of the respondent by conduct in support of the fact of unblemished completion of the work to the satisfaction of the Respondent.”
In view of this, the Court held that the respondents could no longer contend that the work had not been satisfactorily completed or that the petitioner had failed to discharge its contractual obligations.
Rejecting the respondents' objection that the dispute should be referred to arbitration, the Court observed that arbitration is a dispute resolution mechanism and can be invoked only where a genuine dispute exists. It held that no arbitrable dispute survived in the present case, as the respondents had attempted to raise a dispute regarding the quality of work without any factual foundation, which stood demolished by their own pleadings and conduct.
Accordingly, the Court allowed the writ petition and directed JUIDCO to immediately release R.A. Bill No. 29, pay all outstanding O&M dues, and also compensate the petitioner for sixteen months of maintenance work carried out from November 1, 2023 till the filing of the writ petition. The Court further directed that the entire amount shall carry interest at 10% per annum from the date it became due until actual payment.
Case Title: M/s Eagle Infra India Limited v. Jharkhand Urban Infrastructure Development Company Limited (JUIDCO)
Case Number: W.P.(C) No. 1563 of 2025.
Appearance: Mr. Nitin Kr. Pasari appeared for the Petitioner. Mr. Krishna Murari and Mr. Raj Vardhan appeared for the Respondents.