Jharkhand HC Directs JUIDCO To Pay Eagle Infra's Dues, Holds Guarantee Release Admits Completion

The Jharkhand High Court on 15 July held that a public authority cannot withhold admitted contractual dues after releasing a contractor's performance bank guarantee, as such release shows that the authority accepted the contractor's satisfactory completion of contractual obligations.

Justice Ananda Sen allowed Eagle Infra India Limited's writ petition and directed Jharkhand Urban Infrastructure Development Company Limited (JUIDCO) to clear the contractor's pending dues under the Harmu River Rejuvenation Project with 10% annual interest. The Bench observed:

“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.”

The dispute arose from Agreement No. 6 dated 24 February 2015, under which JUIDCO engaged Eagle Infra to execute the Harmu River Rejuvenation Project along with five years of operation and maintenance.

Eagle Infra completed the construction work on 31 October 2018 and completed the operation and maintenance period on 31 October 2023. It claimed that JUIDCO failed to release its final running bill (R.A. Bill No. 29), operation and maintenance dues, payments for work carried out after 1 November 2023 due to non-takeover of the project, and the performance bank guarantee.

The company approached the High Court under Article 226 of the Constitution seeking directions to release its admitted dues. It relied on JUIDCO's communication dated 29 January 2024, where the company certified completion of the project and the operation and maintenance period while stating that the final bill remained under scrutiny. It also argued that JUIDCO never communicated any defect in the work.

JUIDCO opposed the petition, arguing that the claims required adjudication through arbitration or a civil suit. It also disputed payments for work carried out after 31 October 2023 and questioned the quality of the contractor's work.

Rejecting these objections, the Court held that JUIDCO had admitted completion of the work and failed to produce any evidence supporting its allegations of poor quality. It also held that the absence of significant improvement in the project could not justify withholding contractual payments after Eagle Infra completed the assigned work.

The Bench further rejected JUIDCO's arbitration plea, holding that JUIDCO's own communications, pleadings and conduct showed that Eagle Infra had satisfactorily performed the contract. It held that JUIDCO could not create a dispute without factual or documentary support merely to invoke arbitration. It observed:

“Arbitration is a Dispute Resolution Mechanism. If there is a dispute, the same can be referred to Arbitration. In this case, I find from the admitted facts that there is no dispute itself. The respondents tried to create a dispute that too a very feeble one, without any factual backing or without any documents to justify that the work was not satisfactory. This is the only dispute which they tried to raise and the said dispute is demolished by the pleadings of the respondents themselves and also by their conduct. Thus, there is no such arbitrable dispute in this case”.

Accordingly, the High Court directed JUIDCO to release R.A. Bill No. 29, clear the operation and maintenance dues, pay for sixteen months of maintenance work from 1 November 2023 with 10% annual interest, and disburse the amount within 60 days.

Appearances for petitioner (M/s Eagle Infra India Limited): Advocate Nitin Kr. Pasari.

Appearances for respondents (Jharkhand Urban Infrastructure Development Company Limited & Anr.): Advocates Krishna Murari and Raj Vardhan.