- (1.) Leave granted.
(2.) The Respondent is a cooperative society. It has a sugar factory. It entered into a contract for installation of a paper plant at village Sonai on turnkey basis so as to enable it to utilize the left over material called "bagasse" of the sugarcane with M/s. Pentagon Engineering Pvt. Ltd. (for short "Pentagaon"). The total value of the contract was Rs. 3,40,00,000.00. Pentagon furnished a performance guarantee in regard to the machinery supplied by it. The said contract contained a clause for retention of 10% of the contract price by the cooperative society in the following terms: "15.2.4 5% of the contract price shall be payable after satisfactory commissioning and working of the plant for three months that is three months from the achievement of the performance guarantee as stipulated in clause no. 8 and 9 above, by a separate letter of credit. 15.2.5 5% of the contract price shall be paid after six months after satisfactory commissioning of the plant and continuous successful working of the plant during the period i.e. six months working of the plant as per clause 8 and 9 above, by a separate letter of credit."
(3.) Pentagon, however, by a letter dated 6.04.1985 suggested for a modification as regards the said payment clause regulating the cooperative society to waive its rights to retain the said 10% of the contract price, and in its turn proposed to have a letter of credit so that they can furnish appropriate bank guarantee; to which the cooperative society accepted stating: "You have also to submit the performance guarantee at 10% of the contract price, if the same guarantee is not received the karkhana is entitled to recover it from the balance payment and accordingly we have deducted it for want of performance guarantee.";