Andhra HC (Pre-Telangana)
Sree Sairam Enterprises, Special Class ... vs Government Of A.P. And Ors. on 25 February, 2004
Equivalent citations: 2004(2)ALD494, 2004(3)ALT295, II(2004)BC545
Author: L. Narasimha Reddy
Bench: L. Narasimha Reddy
ORDER L. Narasimha Reddy, J.
1. The petitioner is a partnership firm, engaged in execution of several contracts. It has been registered as a special class contractor with the 2nd respondent in the year 1988. The registration was valid for five years upto 22.7.2003. The petitioner firm has specialization in Bituminous Asphaltic Highway Works. It claims to have executed works worth several hundreds of lakhs during the said period.
2. Since the validity of registration of the petitioner was coming to an end, it approached the 2nd respondent with an application, dated 13.5.2003 for renewal of registration. The requirements for renewal of registration are almost identical to those for fresh registration. The petitioner was under an obligation to enclose various certificates relating to experience, solvency certificate, etc. As a measure of compliance, it enclosed the solvency certificate, dated 8.3.2003 issued by the 3rd respondent-State Bank of Hyderabad, Chikkadapalli Branch. The 3rd respondent indicated that the certificate cannot be construed as any financial obligation on its part. The 2nd respondent refused to take the certificate into account on the ground that it is not in conformity with the forms prescribed under G.O. Ms. No. 94, dated 1.7.2003. In view of this development, the petitioner approached the 3rd respondent with a request to issue the solvency certificate in the proforma prescribed under G.O. Ms. No. 94, dated 1.7.2003. The 3rd respondent declined to accede to the request of the petitioner, on the ground that it has been instructed by the Reserve Bank of India to issue solvency certificates in a stipulated form and such a certificate had already been issued. Hence, the petitioner seeks a direction to the respondents to register it as special contractor so as to enable it to participate in the tenders for various works.
3. The petitioner contends that the purport of any solvency certificate is only certification as to the financial ability of the person or agency and the certifying officer or agency cannot be fastened without any liability. It is contended that the objection raised by the 2nd respondent for the condition incorporated by the 2nd respondent in the solvency certificate cannot be sustained in law.
4. In the counter-affidavit filed on behalf of Respondents 1 and 2 it is stated that the matter relating to the tender procedure was considered by the Cabinet Sub-Committee and on the basis of the report submitted by it, the Government issued G.O. Ms. No. 94, Irrigation and CAD, dated 1.7.2003, wherein it is stated that the 1st respondent had prescribed the form of solvency certificate to be issued by banks as annexure V(b). Respondents 1 and 2 contend that the solvency certificate issued by the 3rd respondent in favour of the petitioner is conditional and does not conform to the prescribed form.
5. Heard the learned Counsel for the petitioner and the learned Government Pleader for Irrigation and CAD.
6. The petitioner firm was registered as a special class contractor with the 2nd respondent, with effect from 23.7.1998. The certification was valid for five years and it expired on 22.7.2003. Much before that date, the petitioner submitted an application, dated 13.5.2003 for renewal of the registration. Prior to 1.7.2003, the registration or renewal of different categories of contractors was governed by the procedure prescribed under G.O. Ms. No. 521, dated 10.12.1984 as amended from time to time. The Government reviewed the matter and on the basis of a report submitted by the Cabinet Sub-Committee, it issued guidelines in G.O. Ms. No. 94 dated 1.7.2003. Though there are changes in various aspects, the requirement as to the submission of a solvency certificate virtually remained the same. The proforma prescribed in annexure V (b) reads as follows:
(Enclosure to G.O. Ms. No. 94, I&CAD (PW-COD) Dept., dated 1.7.2003) FORM OF SOLVENCY CERTIFICATE BY BANKS I--------------Managing Director/Manager/ General Manager/Agent of - -Bank Ltd, do hereby certify that --(here the Names and address of the contractor) to be solvent to the extent of Rs. ---- (Rupees----------) as disclosed by the information and record which are available with the afore-said Bank. Date:
Place:
For the __Bank (Designation of the Officer authorized to sign.)
7. With a view to comply with the requirement, the petitioner has approached 3rd respondent. He in turn issued a solvency certificate, dated 8.5.2003, which reads as hereunder:
SOLVENCY CERTIFICATE "This is to state to the best of our knowledge and information, M/s. SREE SAI RAM ENTERPRISES Special class contractors, H.No. 1.4.208, Balaji Nagar, Jagital, a customer of our Bank, is respectable and can be treated as good for a sum of upto Rs. 1,00,00,000/-(Rupees one crore only). It is clarified that this information is furnished without any risk and responsibility on our part in any respect at whatsoever more particularly either as guarantor or otherwise. This certificate is issued at the specific request of the customer. CHIEF MANAGER"
8. The 2nd respondent refused to take the solvency certificate into account and did not grant renewal. The objection taken by the 2nd respondent is that the solvency certificate does not conform to annexure V(b). It was in this context that the petitioner approached the 3rd respondent to remove the 2nd paragraph from the solvency certificate, dated 8.5.2003. The 3rd respondent, however, informed that the certificate, dated 8.5.2003 was issued by it, in the prescribed proforma and it cannot be changed.
9. The 3rd respondent issued the solvency certificate in the proforma prescribed by the Reserve Bank of India. Being a National Bank, it did not take an option to deviate from it. This aspect of the matter was considered by the 2nd respondent himself in his letter, dated 29.4.2003, which was addressed to the 1st respondent The 2nd respondent indicated that the 1st respondent may take up the matter with the Reserve Bank of India for suitable instructions. What emerged thereafter is not evident. For the present, it has to be treated that the instructions issued by the Reserve Bank of India hold the field and that the 3rd respondent is handicapped from issuing solvency certificate in annexure V(b). Hence, it needs to be seen as to whether there is any impediment for the 2nd respondent to register or accord renewal for the petitioner.
10. The solvency of an individual or agency indicates his or its financial capacity. Whenever transactions are contemplated with such persons or agencies, the contracting party prefers to take into account such capability. In this process, instead of relying upon the self-serving statements of the persons or agencies, certifications are required to be furnished by certain known authorities or organizations. Irrespective of the circumstances under which these certifications are required, except certifying the financial capability of the person, the certifying agencies do not undertake any liability, either direct, or vicarious on behalf of such persons and agencies. Certification by itself, cannot be treated as indemnity or guarantee. By no stretch of imagination, the certification of solvency can be equated with such legal concepts.
11. On the basis of the transaction which it had, the 3rd respondent issued solvency certificate stating that the petitioner's financial capacity is good for a sum upto Rs. 1,00,00,000/-. As a measure of precaution, the 3rd respondent had added the 2nd paragraph in the certificate. This paragraph does nothing more than clarifying the legal position. It cannot be said that on account of the existence of this paragraph, the certification is rendered doubtful in any manner. If the 2nd respondent entertains any doubt in this regard it ought to have insisted upon furnishing of the relevant material, which prompted the 3rd respondent to issue of certificate. That is not the case here. In a way, the 2nd respondent wants the 3rd respondent to indemnify or stand guarantee for that amount. That never can be the subject-matter of any solvency certificate. Therefore, it is improper on the part of the 2nd respondent in not accepting the certificate, dated 8.5.2003 issued by the 3rd respondent. At any rate, it is not as if any considerations are being awarded to the petitioner on the basis of the solvency certificate, the registered contractors are required to submit bank guarantees for the amounts involved and also solvency certificates and enable them to be awarded works.
12. Under these circumstances, the writ petition is allowed directing the 2nd respondent to act upon the solvency certificate, dated 8.5.2003 issued by the 3rd respondent and to consider the application of the petitioner for renewal of the registration, if it is otherwise in order. No costs.