Amirul Islam Chowdhury vs Government of Bangladesh and Ors.

IN THE SUPREME COURT OF BANGLADESH (HIGH COURT DIVISION)

Writ Petition No. 1812 of 2014

Decided On: 24.11.2015

Appellants: Amirul Islam Chowdhury Vs. Respondent: Government of Bangladesh and Ors.

Hon’ble Judges: Md. Moinul Islam Chowdhury and J.B.M. Hassan, JJ.

Counsels: For Appellant/Petitioner/Plaintiff: Md. Khurshid Alam Khan and Kazi Md. Arifur Rahman, Advocates

For Respondents/Defendant: Md. Eunus Ali, AAG

Subject: Banking

Catch Words

Mentioned IN

Acts/Rules/Orders: Constitution Of The People’s Republic Of Bangladesh - Article 102, Constitution Of The People’s Republic Of Bangladesh - Article 40

Citing Reference:

Discussed 2

Relied On 2

JUDGMENT

Md. Moinul Islam Chowdhury, J.

  1. At the instance of the Writ Petitioner Amirul Islam Chowdhury, this Rule has been issued calling upon the Respondents to show cause as to why the inaction of the respondents in failing to release the Bank, Guarantee with release endorsement in favour of the petitioner being Performance Guarantee No. BG/SBL/KTG/12/07 dated 20-9-2007 (Annexure-B) issued by the Standard Bank Limited, Khaturgonj Branch, Chittagong (respondent No. 8) and issuance of letter by the office of the respondent No. 06, vide Memo No. dated 26-1-2014 and 4-2-2014 (Annexure-E and E-1) should nor be declared mala fide, arbitrary and is of no legal effect and/or pass such other or further order or orders as to this court may seem fit and proper.
  2. The relevant facts for disposal of the Rule, inter alia, are that the petitioner is the proprietor of an establishment known as Transworld Logistics and Distribution, being Trade Licence No. 077278 (3rd Floor) 99, Agrabad Commercial Area Chittagong-4100. The petitioner obtained a contract for repairing of “Traction Motor Armature and Main Generator Armature”-47 in numbers for Bangladesh Railway and an agreement was signed to this effect being Agreement No. P6/DSL/007/2006/Repair/PI/191 dated 23-10-2007 between the petitioner and the office of the respondent No. 5. The period of wrapping up of the repair work was further extended on 9-6-2011 upto 30-9-2011 as per the terms of the contract the above agreement. The petitioner on 20-9-2007 provided a Bank Guarantee as performance security for a sum of Taka 59,60,000 (Taka Fifty nine lac and Sixty thousand) only issued by the Standard Bank Ltd., Khatungong Branch, Chittagong.
  3. The petitioner further stated that as per the said agreement the petitioner performed the agreed work within the period stipulated with satisfaction of the authority concerned. After receiving the repaired Traction Motor Armature and Main Generator Armature 47 the Chief Executive/Keloka, Bangladesh Railway, Parbotipur forwarded a letter in the form of a “Final Report” being Memo No. dated 19-12-2013 to the Respondent No. 5 for further necessary action as per General Condition of Contract (GCC) clause 29.5 of contract. The petitioner thereafter on several occasions wrote several letters to the respondents requesting to release the bank guarantee as he has already performed his part of the contract and a report has been given on his completion of the obligation under the contract. Due to non return of the amount of the bank guarantee, the petitioner has been incurring increased interest/charges and other miscellaneous costs. Despite there was no objection from any quarter the office of the respondent No. 6, the Financial Advisor and Chief Accounts Officer, Bangladesh Railway CRP, Chittagong issued the impugned letter dated 26-1-2014 to the respondent No. 8, the Manager, Standard Bank Ltd., stating that–
  4. It is further stated in the said-impugned letter requesting the respondent No. 8 for encashment of the Bank Guarantee by another letter dated 4-2-2014. Challenging the impugned letter date 26-1-2014 this Writ Petition has been filed and the Rule was issued thereupon.
  5. Mr. Md. Khurshid Alam Khan, the learned Advocate appearing for the petitioner submits that the petitioner being a private-contractor entered into an agreement with the statutory body of Bangladesh Railway which can be termed as a super contract because the railway entered on behalf of the government. The petitioner is under an obligation to perform his part of the contract as per the terms of the agreement and the respondents is obliged to comply with the terms on satisfaction of the performance of the petitioner, therefore, after being satisfied as to the completion of the terms of the agreement with withholding release of the bank guarantee obtained as the performance security is an act of violation of the fundamental right of the petitioner. Therefore, the respondents are under obligation to release the bank guarantee dated 20-9-2007 in favour of the petitioner but the impugned orders dated 16-1-2014 and 4-2-2014 (Annexures-E and E-1 of the Writ Petition) are absolutely conflicting and discrepant to Annexure-C issued by the Bangladesh Railway on 19-12-2013 (Annexure-G of the Supplementary Affidavit) filed by the petitioner dated 17-10-2012 containing a completion certificate, as such, the impugned order passed by the respondent No. 6 should be declared illegal and without lawful authority.
  6. The learned Advocate also submits that the inactions on the part of the respondents are mala fide, arbitrary and not in accordance with the law as well as the terms of the agreement between the parties and it is a clear violation of the law as well as the terms of the agreement by not releasing the bank guarantee in favour of the petitioner which was furnished as the Performance Guarantee No. BG/SBL/KTG/12/07 dated 20-9-2007 issued by the Standard Bank Limited, Khatungonj Branch, Chittagong and it is colourable exercised on the part of the respondents as such inaction is seriously effected the day to day businesses of the petitioner and the petitioner is also incurring huge losses without any valid reason but with an arbitrary and" mala fide intention in order to causing suffering to the petitioner financially and mentally, thus, the Rule should be made absolute.
  7. The Rule has opposed by the respondent Nos. 5 and 6 by filing Affidavit-in-Opposition and the Supplementary Affidavit-in-Opposition on behalf of the respondents 5 and 6. It has been contended that as per clause-32.3(11) of GCC out of 7 Traction Motor Armature 4 armature were repaired on 16-6-2012 and rest 3 armature were repaired on 12-12-2014 and the warranty period for the said 3 armature will be completed on 17-12-2015. Accordingly, the terms of the agreement will finally completed on 17-12-2015 which show that the terms of the agreement finally complete on 17-12-2015 and thereafter there will be no claim from the petitioner by the respondents as per the agreement. It is further contended that the period of bank guarantee was extended up to 30-12-2013 before expiry of the bank guarantee period. The concerned bank was advised for extending of bank guarantee upto 13-12-2014. By filing Supplementary Affidavit the respondent Nos. 5 and 6 further filed Annexures-1 series containing certain documents on several dates such as the letter dated 27-11-2013, 24-11-2013, 22-12-2013 and 22-1-2014 which are about extension of bank guarantee upto 13-12-2015 not beyond that period of time as the petitioner completed with the terms of the agreement. It is also contended that the part of the record within the Bangladesh Railway contains a portion of the record containing that This note dated 12-6-2014 containing a request by the GCC, Pahartali for referring the matter of dispute between the parties for amicable settlement within Clause of the agreement or for arbitration under the said agreement or alternatively to proceed to file a case for breach. The Supplementary Affidavit also contains that on 10-6-2015 the respondents clearly mentioned about the completion of the work as per the terms of the agreement.
  8. Mr. Sheed Alam, the learned Advocate appearing for the respondent Nos. 5 and 6 submits that the petitioner has been under an obligation to perform the repair work by supplying certain number of traction motor armature and other materials by the contract dated 25-10-2007 and the petitioner failed to comply with the terms of the agreement for certain period for which the bank guarantee by way of performance bond that the work require by the petitioner and furnished by the petitioner has performed his part of the contract which appears from Annexure-C, Annexure-G and Annexure-F of the Writ Petition and of the Supplementary Affidavit, therefore, the petitioner Can be allowed to release the bank guarantee after stipulated period of time i.e. 30-12-2015 as warrantee for the repair work or goods would be completed by 17-12-2015.
  9. The learned Advocate further submits that by filing a Supplementary Affidavit on behalf of the respondents the petitioner proposed to deduct the repair costs for armature which has not been performed as per the agreement. Even though, the respondents has stated that 3 of the armature a which could be repaired for mechanical reasons. Accordingly it can be conceded that petitioner’s supplied materials for repairing the work under the agreement has performed and the warrantee period will expire on 17-12-2015 and the petitioner may be released the bank guarantee after 13-12-2015.
  10. Considering the above submissions made by the learned Advocates appearing for the respecting parties and also considering the Writ Petition itself filed under Article 102 of the Constitution of the People’s Republic of Bangladesh along with the Annexures therein and also considering the Affidavit-in-Opposition filed by the Respondents and the Supplementary Affidavit filed by the petitioner and the Respondents and also the Annexures therein, it appears to me that the that the petitioner entered into an agreement with the respondents Bangladesh Railway on 25-10-2007 for supplying certain goods containing the following sanction of work and the terms of the agreement include:–
  11. Traction Motor Armature P/No. 41C633012G1 = 20 Nos.
  12. Traction Motor Armature P/No. 431(.630518G5) = 12 Nos.
  13. Traction Motor Armature P/No. R775-715 = 5 Nos.
  14. Traction, Motor Armature P/No. 1056.1694 = 2 Nos.
  15. Main Generator Armature P/No. 9575.50 = 1 No.
  16. Main Generator Armature P/No. 949G241G3 = 4 Nos.
  17. Main Generator Armature P/No. 949C241 G4 = 3 Nos. BEA, BEM against this office
  18. Tender No. P6/DSL/007/2006, Repair/PI dt. 19-7-2006 Opened on 4-12-2006."
  19. Accordingly, the petitioner transferred logiest furnishes materials and a bank guarantee as the performance security on 20-6-2007 (Annexure-D of Writ Petition) from the Standard Bank Ltd., Khatungonj Branch, Chittagong. This Writ Petition has been filed against inaction of (the respondents to release the said bank guarantee in favour of the petitioner.
  20. From the above given situation I have carefully examined the agreement entered between the parties containing certain terms and condition for performance certain duties by the petitioner as well as by the respondents. In this regard it would be convenient if certain terms and conditions of the agreement dated 25-10-2007 is reproduced which has been Annexed as Annexure-A of the Writ Petition entered between and M/s. Transworld Logistics & Distribution, in particular and the respondent Railway. I have carefully considered the repair work to be done by the petitioner which includes the following things:

“Repairer of–

(1) Traction Motor Armature P/No. 41C633012GI = 20 Nos. (949C156G4/41C633243G3) = 20

(2) Traction Motor Armature P/No. 41C630518G5) = 12 Nos.

(3) Traction Motor Armature P/No. R775715 = 5 Nos.

(4) Traction Motor Armature P/No. 10564694 = 2 Nos.

(5) Main Generator Armature P/No. 9575250 = 1 No.

(6) Main Generator Armature P/No. 949G22 41G3 = 4 Nos.

(7) Main Generator Armature P/No. 949C241G4 = 3 Nos.

for Diesel Electric Locomotives against this/office Contract Agreement No. P6/DSL/007//2006/Repair/P-1/191 dated 25-10-2007.”

  1. The agreement also contains a tenure of the agreement which was extended as per clause 33.1 until the year of 2011 warrantee period as per clause 32.6 which reads as follows:–

“32.1 The Supplier warrants that all the goods are new, unused, and of the most recent or current models, and that they incorporate all recent improvements in design and materials unless provided otherwise in the Contract

32.2 Subject to GCC sub-Clause 30.1 the Supplier further warrants that the Goods shall be free from defects so arising from any act or omission or arising from design and materials and workmanship, under normal use in the conditions prevailing in Bangladesh.

32.3 Unless otherwise specified in the PCC the warranty shall remain valid for twelve (12) months after the Goods, or any portion thereof as the case may be, have been delivered to and accepted at the final destination indicated in the PCC.

The termination for default

32.4 The purchaser shall give notice to he Supplier stating the nature of any such defects together will all available evidence thereof, promptly following the discovery thereof. The Purchaser shall afford al reasonable opportunity for the Supplier to inspect such de facts

32.5 Upon receipt of such notice, the Supplier shall, within the period specified in the P.C.C. expeditiously repair or replace the defective Goods or parts thereof, at no cost to the Purchaser.

32.6 If having been notified, the Supplier tails to remedy the defect within the period specified in the PCC, the Purchaser may proceed to take within a reasonable period such remedial action as may be necessary, at the Supplier’s risk and expenses and without prejudice to any other rights which the purchaser may have against the Supplier under Contract.'

Clause 38 provides as follows:–

(a) The purchaser, without prejudice to any other remedy for breach of Contract, by giving twenty eight (28) clays written notice of default may terminate the Contract in whole or in part.

(ii) if the Supplier Tails to deliver any or all of the goods within the period specified in the Contract, or within any extension thereof granted by the Purchaser pursuant to GCC Clause 33; or

(ii) if the Supplier fails to perform any other obligation under the Contract.

(b) In the event the Purchaser terminates the Contract in whole or in part, pursuant to GCC Sub-Clause 38.1(a). the Purchaser may procure, upon such terms and such manner as it deems appropriate. Goods or Related Services similar to those undelivered or not performed, and the Supplier shall be fable to the Purchaser for any additional costs for such similar Goods or Related Services. However, the Supplier shall continue performance of the Contract to the extent not terminated.”

(c) If the Supplier, in the judgment of the Purchaser has engaged in corrupt, fraudulent collusive or coercive practices, as defined in GCC Clause 3, competing for or in executing the Contract.

  1. Besides the above conditions of the agreement, for any dispute the parties also agreed to settle any dispute as to the interpretation of the terms of the agreement amicably under Clause 38.1 and 39.2 as the arbitration clause, was available for the parties; Moreover Clauses 29.1.2 Clause 25 contain for furnishing a bank guarantee as the Performance Security by the petitioner contractor on behalf of the respondents Bangladesh Railway which read as follows:–

“29.1 In the case, of Goods having warranty obligations the Performance Security shall be reduced to the amount in the PCC after delivery and acceptance of the Goods to cover the Supplier’s warranty obligations in accordance with GCC Sub-Clause 32.3.

29.2 The Purchaser shall notify the Supplier of any claim made against the Bank issuing the Performance Security.

29.3 The Purchaser may claim against the security if any of the following events occurs for fourteen (140) days or more., 1

29.4. In the even the Supplier is liable to pay compensation under the Contract amounting to the full value of the Performance Security or more, the Purchaser may forfeit the full amount of the Performance Security.

29.5 If there is no reason to call the Performance Security 1, if shall be discharged by the Purchaser and returned to the Supplier not later than twenty eight (28) days following the date of completion of the Supplier’s performance obligations under the Contract including any warranty obligations.”

  1. From the above agreement, it is clear to me that the petitioner was under an obligation to supply the goods in order to undertake the repair work as specified in the agreement and for that purpose respondents extended the period of the agreement lastly until up to 30-9-2011 Annexure-A dated 24-5-2007 and Annexure-A-1 of the Writ Petition dated 25-10-2007 and 9-6-2011 respectively. From the date of expiry of the extension period agreed by the parties which is until 30-9-2011 it means the agreement became inoperative after the said period of time as terms and conditions of the agreement cannot be kept alive as the agreement itself became inoperative or dead by the mutual agreement. There is no documents available shoeing that' the petitioner applied under Clause 38.1. of the General Condition of Contract (GCC) or the agreement dated 25-10-2007 but by the mutual agreement it would be considered that the agreement had a natural death when the valid period of the agreement has expired and the terms of agreement had been inoperative, as such, no question arises as to the arbitration proceeding by any partly if any dispute arose before the validity period of agreement. In this regard it would be convenient to quote section 10 of the arbitration Act which reads follows:–

“10. arbitration of the dispute–(1) Where any party to an arbitration agreement or any person claiming, under him commences any legal proceedings against any other party to the agreement or any person claiming under him in respect of any matter agreed to be referred to arbitration any party to such legal proceedings may, at any time before filing a written statement, apply to the Court before which the which the proceedings are pending to refer the matter to arbitration.

(2) Thereupon, the court shall, if it is satisfied that an arbitration agreement exists, refer the parties to arbitration and stay the proceedings, unless the Court finds that the arbitration agreement is void inoperative or is incapable of determination by arbitration.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority an arbitration may be commenced or continued and an arbitral award made.”

  1. There is no question of any arbitrational proceeding for any dispute if it is satisfied that the arbitration-agreement is void, inoperative or not capable for determination of the agreement. In the instant case the section 10 of the arbitration Act; 2001 arbitration clause has neither an appropriate application nor it can settle any dispute of the agreement between the parties.
  2. Now I have to decide whether the petitioner is entitled to get release of the bank guarantee given as a Performance Security in favour of the respondents Bangladesh Railway. In this regard I have examined the document contains in Annexure-C of the Writ Petition which states that Traction Motor Armature Main Generator Armature
  3. The above letter has been issued by the Chief Executive Kaleka, Bangladesh Railway, Parbortipur by his letter dated 29-11-2013. I have also considered the documents given by Md. Hasan Mansur, the Chief Executive (CFW) (CC) dated 17-10-2012 Annexure-9 of the Supplementary Affidavit filed by the petitioner which also provided a completion certificate which reads as follows:
  4. This is to certify that all huge items offered on 14-9-2011 under col. 7 were tested in running Locomotive and inspected at CLW/PBT and passed as given under col 8. of the following table, this Completion Certificate will supersedes the Completion Certificate Issued on 7-6-2012 and 10-6-2012.

This is issued as per Clause GCC 31-2 of PCC of the above mentioned Contract Agreement."

  1. However there is a conflicting statement given by the respondent No. 6, Syed Mohiuddin Financial Advisor and Chief Accounts Officer (FA & CAO) (East) Bangladesh Railway, CRB, Chittagong dated 26-1-2014, (impugned order) (Annexure-E of the Writ Petition) where it has been stated as follows:–
  2. From the above impugned letter it has been alleged by the said Account Officer that the traction motors have not been repaired as per terms of the agreement and materials of the repairing work have certain complains.
  3. From the above two conflicting statements I can only infer that the said respondents complains is about 3 Traction Motor Armature whereas the other respondents have admitted that there are 3 Traction Motors Armature which could not be completed because those became unrepeatable and this is the only thing which the impugned order contains as some of the repair work have not been until completed. The impugned order further contains a request to the respondent Nos. 7, 8 and 9 to extend bank guarantee which was provided as Performance Security under the agreement. In my view, the above conflicting statements from the highest authority against the lower employee like the Account Officer have created a serious doubt as to the genuineness of the claim of the respondents as to releasing bank guarantee in favour of the petitioner and the petitioner is entitled to get “benefit of doubt” as the petitioner appears to have no fault. When the agreement between the parties is not in operation how the Account Officer can demand that the bank guarantee should be allowed to encash by the respondents. It also can be considered that if the petitioner was in violation of any terms and conditions of the agreement during the valid period of contract the respondents as a government institution could have exercised their contractual right to cancel or terminate the agreement instead of giving extensions until 30-9-2011. Moreover it is noted from the submissions made by the learned Advocate for the respondents 5 and 6 that they are not concerned as to the performance of the petitioner as per the agreement because the petitioner has already completed his part of the obligation-under the agreement.
  4. The learned Advocate, Mr. Shaheed Alam, appearing for the respondents submits that the respondents cannot keep the bank guarantee after, the extended period of warrantee dated 30-12-2015, therefore, consider that the respondents do not have any kind of claim upon the bank guarantee after the said period of warrantee expired and after the death of the agreement originally executed between the parties on 25-10-2007. In view of the above, it can be considered that the respondents have acted so far irresponsibly and illegally by not releasing the Bank Guarantee as performance security furnished about 9(nine) years ago amounting to Taka 59,60,000. I also consider that the impugned order has certainly infringed fundamental right guaranteed under article 40 of the Bangladesh Constitution. Moreover, this kind of act on the part of a government establishment without a reasonable ground would discourage genuine businessman and encourage corruption. In my view, after the expiry of the tenure of the agreement no terms and conditions can be exercised by either of the parties including matter of amicable settlement or any proceeding under the agreements or have for arbitration.
  5. However it was an agreement between the petitioner and the Bangladesh Railway which is connected with the essential services for the best interest of commuters and about their day to day lives a government establishment must not be allowed, to deal with the petitioner as a businessman unreasonably. Thus, despite the expiry of the agreement period considering the warrantee period shall continue, as submitted by the learned Advocate for the respondents, until 17-12-2015 and the extended period of the bank guarantee until 30-12-2015 it can be considered that the bank guarantee should be allowed to encash by the petitioner and, therefore, I am inclined to dispose of the Rule with direction.
  6. Accordingly, the Rule is disposed of.
  7. The respondents Nos. 7 and 8 are hereby directed to release the bank guarantee furnished as the performance security being No. BG/SBL/KTC/12/07 dated 20-9-2007 (Annexure-B) issued by the Standard Bank Ltd., Khatungonj Branch, Chittagong in favour of the writ petitioner, namely, Amirul Islam Chowdhury, within 7 days from the date of receipt of the copy of this judgment and order.

J.B.M. Hassan, J.

  1. I have heard the judgment pronounced by my Lord Mr. Justice Md. Moinul Islam Chowdhury and with due respect I humbly differ with the view taken by his Lordship in disposing of the Rule Nisi.
  2. Since relevant facts have already been mentioned by his Lordship, I am not repeating the same. However, the pertinent facts and laws which lead me to take a different view, have been narrated herein below:

The petitioner being the proprietor of M/S. Transworld Logistic & Distribution entered into a Contract with the Bangladesh Railway on 25-10-2007 for repair of-

(1) Traction Motor Armature P/No. 41 C633012G1 (949C156G4/41C633-243G3) = 20 Nos.

(2) Traction Motor Armature P/No. 41C630518G5 = 12 Nos.

(3) Traction Motor Armature P/No. R775-715 = 5 Nos.

(4) Traction Motor Armature P/No. 10564694 = 2 Nos.

(5) Main Generator Armature P/No. 9575250 = 1 No.

(6) Main Generator Armature P/No. 949C241G3 = 4 Nos.

(7) Main Generator Armature P/No. 949C241G4 = 3 Nos.

The petitioner contractor could not perform the contractual work within the stipulated period. However, the period for executing the work was extended from time to time and that within the said agreed time (i.e. validity period until 30-9-2011) the work was alleged to have been done.

  1. The work was protected by a warranty clause (initially for 12 months, then by amendment it was extended for 24 months under the General Conditions of Contract (GCC) being clause No. 32 which runs as follows:

“32.1 The Supplier warrants that all the Goods are new, unused, and of the most recent or current models, and that they incorporate all recent improvements in design and materials, unless provided otherwise in the Contract.

32.2 Subject to GCC Sub-Clause 30, 1, the Supplier further warrants that the Goods shall be free from defects arising from any act or omission of the Supplier or arising from design, materials and workmanship under normal use in the conditions prevailing in Bangladesh.

32.3 Unless otherwise specified in the PCC, the warranty shall remain valid for twelve (12) months after the Goods, or any portion thereof as the case may be have been delivered to and accepted at the final destination indicated in the PCC.

32.4 The Purchaser shall give notice to the Supplier stating the nature of any such defects together with all available evidence thereof, promptly-following the discovery thereof. The purchaser-shall afford all reasonable opportunity for the Supplier to inspect such defects.

32.5 Upon receipt of such notice, the Supplier shall, within the period specified in the PCC expeditiously repair or replace the defective Goods or parts thereof, at no cost to the Purchaser.

32.6 If having been notified, the Supplier fails to remedy the defect within the period specified in the PCC, the Purchaser may proceed to take within a reasonable period such remedial action as may be necessary, at the Supplier’s risk and expenses and without prejudice to any other rights which the Purchaser may have against the Supplier under the Contract.”

(Underlined)

  1. The warranty period incorporated in clause 32.3 of the GCC was amended later by section 4 of the Particular Conditions of Contract which runs as follows:

“GCC.32.3 (i) The period of validity of the Warranty shall be 24 months from the date of receipt by the buyer and inspection certificate as to satisfactory completion of work issued.”

(Underlined)

  1. Under clause 29 of the GCC the contractor-petitioner furnished Performance Security (PS) in the form of Bank Guarantee (BG) amounting to Taka 59,60,000 (10% of the Contract value) as per requirement of Notification of Award in order to ensure the quality of work and it has been kept with the purchaser respondent. Relevant clauses 29.1 and 29.5 of the GCC are quoted herein bellow:

“Performance Security.

29.1 In the case of Goods having warranty obligations the Performance Security shall be reduced to the amount specified in the PCC after delivery and acceptance of the Goods to cover the Supplier’s warranty obligations in accordance with GCC Sub-Clause 32.3.

29.2………………………………

29.3………………………………

29.4………………………………

29.5 If there is no reason to call the Performance Security, it shall be discharged by the Purchaser and returned to the Supplier not later than twenty eight (28) days following the date of completion of the, Supplier’s performance obligations under the Contract including any warranty obligations.”

(Underlined)

  1. Drawing attention to the Annexure-C to the writ petition and Annexure-G to the supplementary affidavit dated 8-11-2015. Mr. Md. Khurshid Alam Khan submits that the work has already been completed and that the respondents withhold the Bank Guarantee arbitrarily and with mala fide intention inspite of issuing completion certificate as contained in Annexure-G and therefore, he seeks direction upon the respondents for releasing the said Bank Guarantee in favour of the contractor petitioner.
  2. Mr. Shaheed Alam, the learned Advocate for the Railway-respondent neither made any elaborate statements in the affidavit-in-opposition nor could make any substantial submission. However, from the supplementary affidavit dated 18-11-2015 filed by the Railway-respondent the following correspondences have been appeared in the Annexure-I series which are as follows:

Government of the Peoples Republic of Bangladesh Office of the Chief Controller of Stores Bangladesh Railway Pahartali, Chittagong.

Phone+88031-2863133 E-mail:ccspht@railway.gov.bd

No. P6/DSL/007/2006/Repair/P-1/191

Dated: 24-11-2013.

To: M/s. Transworld Logistics & Distribution 99, Agrabad C/A

Chittagong.

Sub:- Extension of validity of BG Pond No. BG/SBL/KTG/12/07 Dated. 20-9-2007 amounting to Taka 59,60,000 valid up to 30-12-2013 issued by Standard Bank Limited, Khatungonj Branch, Chittagong against this office Contract Agreement No. P6/DSL/007/2006/Repair/P-1/191 Dated 25-10-2007.

Dear Sir,

It is to inform that as per clause GCC 32.3 of PCC of the subject Contract Agreement, Performance Guarantee (BG Bond) shall remain valid for a period of 24 months from the date of repair of the last consignment. As such the validity of the subject BG Bond to be extended up to 30-12-2014.

You are, therefore, requested to arrange extension of the validity of subject B.G. Bond up to 30-12-2014.

Your early co-operation in this regard will be highly appreciated.

Thanking You.

(Yours faithfully (Engr Md. Rashedul Amin) District Controller of Stores/P2 For: The Chief Controller of Stores Phone: 2734, 01711-692928

Government of the Peoples Republic of Bangladesh, Office of the Chief Controller of Stores Bangladesh Railway Pahartali, Chittagong.

Phone+88031-2863133 E-mail:ccspht@railway.gov.bd

No. P6/DSL/007/2006/Repair/P-1/191

Dated: 22-12-2013.

To: M/s. Transworld Logistics & Distribution 99, Agrabad C/A

Chittagong.

Sub:- Extension of validity of B.G. Bond No. BG/SBL/KTG/12/07 Dated. 20-9-2007 amounting to Taka 59,60,000 valid up to 30-12-2013 issued by Standard Bank Limited, Khatungonj Branch, Chittagong against this office Contract Agreement No. P6/DSL/007/2006/Repair/P-1/191 Dated 25-10-2007.

Dear Sir,

In continuation to this office letter of even no dated 24-11-2013 this is to inform that as per clause GCC 32.3 of PCC of the subject Contract Agreement, Performance Guarantee (BG Bond) shall remain valid for a period of 24 months from the date of repair of the last consignment. As such the validity of the subject BG Bond to be extended up to 30-12-2014.

You are, therefore, requested to arrange extension of the validity of subject BG. Bond up to 30-12-2014.

Your early co-operation in this regard will be highly appreciated.

Thanking You.

(Yours faithfully (Md. Abul Monsur) Assistant Controller of Stores/P2 (CC) For: The Chief Controller of Stores Bangladesh Railway Pahartali, Chittagong,

Government of the Peoples Republic of Bangladesh Office of the Chief Controller of Stores Bangladesh Railway Pahartali, Chittagong.

Phone+88031-2863133 E-mail:ccspht@raihvav.gov.bd

No. P6/DSL/007/2006/Repair/P-1/191

Dated: 22-1-2014.

To: FA & CAO(S)/East Bangladesh Railway Chittagong.

Sub:- Extension of validity of BG Bond No. BG/SBL/KTG/12/07 Dated. 20-9-2007 amounting to Taka 59,60,000 valid up to 30-12-2013 issued by Standard Bank Limited, Khatungonj Branch, Chittagong against this office Contract Agreement No. P6/DSL/007/2006/Repair/P-1/191 Dated 25-10-2007.

Ref: (a) This Office letter of even no dated 24-11-2013 & 22-12-2013.

(b) Your letter No. dated 13-1-2014.

In reference-b it is to inform you that the supplier does not repair the all Traction Motors as per Contract-Agreement & several complaints issued against the repaired materials. In this circumstances the validity of the subject BG Bond to be extended up to 30-12-2014. In reference-a you were requested to advise the Bank concerned for extension the PG/Bank Guarantee upto 30-12-2014, if the supplier does not extend the BG with in the valid time/period please encash the same in favour of Bangladesh Railway.

You are, therefore, once again requested to arrange extension of the validity of subject BG Bond up to 30/12/2014, otherwise take necessary steps for encash the same in favour of Bangladesh Railway.

This matter please be treat as most urgent.

Your early co-operation in this regard will be highly appreciated

Thanking You.

(Yours faithfully (Md. Abul Monsur) Assistant Controller of Stores/P2 (CC) For: The Chief Controller of Stores Bangladesh Railway Pahartali, Chittagong"

(Underlined)

  1. Although the petitioner claims that the work was done in accordance with the Contract and that the respondent Railway issued the completion certificate. But, mere completion of work and issuance of certificate thereof, is not enough for discharge of liability as per Contract inasmuch as there is a warranty period of 24 months under the clause-32 of the GCC. The said warranty period runs from the date of issuance of inspection certificate as to satisfactory completion of work (amended GCC 32.3(i)). Therefore, annexure-G being the completion certificate issued on 17-10-2012 warranty period operated at least until 16-10-2014.
  2. The correspondences of the Railway-respondent (Annexure-I series) as mentioned above reflect that the purchaser respondent (Railway) raised objection as to quality of supplied goods for repair work. The purchaser also claimed, that the Contractor did not repair/replace the supplied defective goods on demand under the warranty period and that the purchaser (Railway) had to spend huge amounts for repairing the same. Referring to those correspondence dated 27-11-2013, 22-12-2013 and 22-1-2014 (Annexure-I series) the Accounts officer of the Railway issued the impugned letters dated 26-1-2014 and 4-2-2014 on behalf of the FA & CAO, Bangladesh Railway for extending the Bank Guarantee instead of releasing the same.
  3. Since as per clauses 29 and 32.3 of the GCC, the warranty period of 24 months are covered (protected) by the PS (BG) and that during the said warranty period the respondents raised claim for defective works, withholding of PS (BG) after issuance of completion certificate can not be said arbitrary of mala fide as there are reasonable disputes between the parties which need to be resolved.
  4. Now question arises how the said disputes relating to repair works by supplying goods under an ordinary commercial contract can be resolved: Obviously it is not by writ jurisdiction for the following reasons:

Firstly, our apex Court consistently held that disputed question of facts cannot be decided in writ jurisdiction, in particular, in the case of Inland Fisheries Development Limited vs. Bangladesh reported in 5 MLR (AD) 71. And secondly, a dispute as to release of Performance Security arising out of an ordinary commercial contract although Government functionary (Railway) is a party, cannot be settled under writ jurisdiction because of the consistent views of our apex Court laid down in the cases of Sharping Matshyajibi Samabaya Samity Ltd. vs. Bangladesh reported in 39 DLR (AD) 85, Bangladesh Power Development Board vs. Md. Asaduzzaman Sikder reported in 8 MLR (AD) 241 : 9 BLC (AD) 1 and the case of Ananda Builders Ltd. vs. Bangladesh Inland Water Transport Authority reported in 57 DLR (AD) 31.

  1. Now regarding first reason, in the case of Inland' Fisheries Development Limited vs. Bangladesh reported in 5 MLR (AD) 71 their Lordships held as under:

“It is a fairly settled principle that where the question raised is a controversial one of fact requiring investigation and proof, it does not fall appropriately within the writ jurisdiction of the High Court Division. So we do not find any error of law in the decision of the High Court Division.”

  1. Moreover, to settle aforementioned disputes the GCC (Contract) incorporates clause 39 which runs as follows:

Settlement of Disputes:

“39.1 Amicable Settlement

(a) The Purchaser and the Supplier shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or its interpretation

39.2 arbitration

(a) If the Parties are unable to reach a settlement as per GCC Clause 39.1(a) within twenty eight (28) days of the first written correspondence on the matter of disagreement then either Party may give notice to the other party of its intention to commence arbitration in accordance with GCC Sub-Clause 39.2(b).

(b) The arbitration shall be conducted in accordance with the Arbitration' Act (Act No. 1 of 2001) of Bangladesh as at present in force and in the place shown in the PCC.”

(Underlined)

  1. The aforesaid clauses provide that any dispute arising out of or in connection with the Contract shall be settled firstly, by amicable settlement and on failure thereby the dispute shall be settled through arbitration in accordance with the provisions of the arbitration Act, 2001.
  2. In the present case at hand, the stipulated validity period for supplying goods and repair works has already beer, expired On 30-9-2011 (Annexure-A/1. Therefore, question arises that after expiry of stipulated time for execution of work/supply whether the Contract got natural death or it became inoperative and that whether the dispute relating to release/encashment of the PS (BG) furnished in connection with the said Contract can be settled through arbitration in accordance with the conditions provided in the said Contract.
  3. It appears that the validity period was until 30-9-2011 (Annexure-A/1). But warranty period would run in accordance with the clause 32.3 (as amended) of the GCC providing 24 (Twenty Four) months from the date of issuance of inspection certificate as to satisfactory completion of work. Moreover, a Contract runs so long any transaction exists relating to said Contract. The time provided in the Contract for supplying/repairing the goods did not mean that on the expiry of the said date the Contract naturally became dead inasmuch as the Contract itself provided that after execution of the work there would be further 24 months warranty period binding the contractor to repair/replace defective work and therefore, it cannot be said that during this warranty period the Contract became naturally dead.
  4. Clause 29 of the GCC required the Contractor-petitioner to furnish a Performance Security in the form of Bank Guarantee in order to protect the quality of work not only till validity period but also covering the warranty period.
  5. Another aspect of the Contract is that clause 38 of the GCC provides provisions for termination of the Contract either for default or insolvency or for convenience. But it is not the case of both the parties that the Contract was ever terminated under any circumstances provided in clause. 38 of the GCC. Validity period being the time limit for execution of work, it’s expiry does not mean that the Contract expired or it became inoperative. The completion of work and thereby expiry of the time for supplying goods and repairing thereof (i.e. execution period of work or validity period) will not automatically render the Contract terminated inasmuch as even after completion of the work within the validity period, the Contract provides warranty period of further 24 months from the date of issuance of satisfactory completion certificate and that during this period if any defect is found the Contractor shall have to repair/replace the same at his own costs in accordance with the clause 32.5, of the GCC. Therefore, the validity period for execution of work being until 30-9-2011 (Annexure-A/1) as per the said Contract, it cannot be said that after the said period the Contract got natural death or it became inoperative.
  6. During this warranty period the Railway-purchaser brought allegations (as contained in the letters dated 27-11-2013 and 22-1-2014, Annexure-I series) that inspite of pointing out the defect of supplied goods, the Contractor did not repair/replace the same within the warranty period and so the contractor(supplier) was liable to pay the costs (expenses) incurred for repairing/replacing the defective works. Moreover, the purchaser raised other objections about the work. Thus, it is apparent that, there was dispute raised during warranty period which led the purchaser-respondent (Railway) to withhold the Performance Security.
  7. The Performance Security was furnished in terms of the Contract and, as such, it has to be released or encashed in pursuance of the said Contract and that any dispute, if arises, regarding the said Performance Security, shall also be settled in terms of the said Contract. Therefore, expiry of completion date of work or validity period (expired on 30-9-2011), will not stand as bar to settle the dispute as per terms of said Contract when the dispute arose out of the said Contract and that at no point of time the Contract was terminated by any of the parties under clause 38 of the GCC.
  8. Now by this Rule Nisi the petitioner seeks direction upon the Railway to release the Performance Security in the form of the BG and that on the other hand the correspondences (Annexure-1 series) show that the Railway has a claim on account of repairing/replacing the goods during warranty period due to defective works. Thus, dispute being appeared as to fate of the Performance Security, certainly it has to be settled in accordance with the terms and conditions of the said Contract and so, it attracts clause 39 of the Contract providing arbitration. Therefore, the present writ petition is misconceived being related to said Performance Security furnished under an ordinary commercial Contract and particularly where disputed question of facts as to claim of the parties are involved. Since the Contract was not terminated under clause 38, all disputes arising out of said Contract have to be settled in accordance with the terms and conditions of the said Contract inasmuch as objection about performance of the work was raised within the warranty period although the period for executing the work i.e. the validity period of the Contract has already been ended.
  9. Over and above, second question arises as to whether the issue regarding release of the BG furnished as Performance Security relating to an ordinary commercial contract can be resolved under writ jurisdiction. In this context. Mr. Khan answers that the Railway being the government functionary, the Contract entered into by the Railway was sovereign contract and therefore, writ petition is maintainable for settling an issue arose out of the said Contract.
  10. But the landmark judgment pronounced in the case of Sharping Matshyajibi Samabaya Samity Ltd. vs. Bangladesh reported in 39 DLR (AD) 85 supported by subsequent consistent views of the apex Court, negate the answer of Mr. Khan. In this case the apex Court elaborately explained about the sovereign contract in respect of which writ petition is maintainable. In the said case their Lordships held that:

“Modern Government has multifarious activities. Some of its functions are Governmental function while exercising sovereign power and again some of the functions can be described as trading function. To put it in plain language when the Government after accepting the tender places an order for supplying, say, for ten thousand chairs and the supplier agreed to do so a contract is entered into there is offer and its acceptance, backed by obligation. A full-fledged contract comes into existence. Here the Government functions in the capacity as a trader e.g. an ordinary buyer, if there is a breach of such contract the aggrieved party can sue for damages or any other appropriate remedy-But not by way of invoking the writ jurisdiction.

On the other hand, When the Government grants lease, privilege, settlement, etc., the Government acts and discharges sovereign function “performing function in connection with affairs of the republic or the local authority” Such function can best be appreciated if matters of settlement of hat, bazar fisheries, khas land, etc. are kept in view. The Government acts in these., affairs in pursuance of some statutory power and any such contract when rooted in stature the Government discharges its sovereign function. While doing so, if there is a breach of any statute or rule the same can be remedied by invoking writ jurisdiction. Even if any discretion is left in statute such discretion must be exercised in accordance with settled principles and not arbitrarily”.

(Underlined)

  1. In the, case of Bangladesh Power Development Board vs. Md. Asaduzzaman Sikder reported in 8 MLR (AD) 241 : 9 BLC (AD) 1 and apex Court held as under:

“The contract that was entered into by the appellants with the respondent was not in terms of Statutory provision or in exercise of statutory power but the contract so entered into was an ordinary commercial contract or contract of general nature or in other words a pure and simple contract. So it comes to the relief sought for and granted by the High Court Division is not legally available to the respondent in respect of the contract entered into between the appellants and the respondent. In that view of the matter the course that respondent ought to have pursued in respect of his claim of payment for the works executed by him at the rate schedule of 1999 and not at the rate schedule of 1992 was either arbitration as provided in the work order or the Civil Court.”

  1. Subsequently this issue has again been raised in the case of Ananda Builders Ltd. vs. Bangladesh Inland Water Transport Authority reported in 57 DLR (AD) 31 wherein our apex Court held as under:

“19. A contract does not become a statutory contract simply because a public functionary entered into the contract unless a statute stipulates terms which have been incorporated in the contract.”

  1. In view of above decisions of our apex Court, it is now well settled principle that a dispute arising out of an ordinary commercial contract although Government functionary is a party, cannot be settled under the writ jurisdiction unless the terms and conditions incorporated in the said agreement are the statutory rules or order. In the case at hand, the Railway entered into an ordinary contract for repair work by supplying goods which do not attract any rule or order.
  2. Regard to the above, I am led to hold that the petitioner filed the misconceived writ petition, instead of availing the forum of arbitration under clause 39 of the Contract or the Civil Court for settling disputed questions of facts. Therefore, in no way the aforementioned dispute relating to an ordinary commercial contract or disposal of Performance Security furnished in connection with the said Contract can be settled under this constitutional jurisdiction in view of above mentioned ratio of our apex Court held in the cases reported in 39 DLR (AD) 85, 57 DLR (AD) 31, 8 MLR (AD) 241 : 9 BLC (AD) 1 and 5 MLR (AD) 71.
  3. Therefore, the Rule Nisi finds no merit.

In the result, the Rule is discharged without any order as to costs.

Order of the Court

Since we have differed in deciding the case, hence, let it be placed before the Hon’ble Chief Justice for necessary order.