chapter iii - rdso - Ministry of Railways

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chapter iii - rdso - Ministry of Railways
CHAPTER III
HANDING OVER OF RAILWAY PROPERTY TO OUTSIDE PARTIES: CASH
ADVANCE ETC.
3.1 Public sector undertakings and Bank Guarantees.
3.1.1 There is no need for insisting the Bank Guarantee in respect of advance paid by
Public Sector Enterprises or Government Department to another Public Sector Enterprises as
there is no risk of the advance being lost.
3.1.2 Since the transactions between two Public Sector Enterprises or between Public
Sector Enterprises and Government Departments are of commercial nature, it would not be
appropriate to exempt the public Undertakings from the Bank Guarantee in lieu of security
deposit for the fulfilment of the contract. In fact such guarantees show the earnestness of the
Public Sector Enterprises for the fulfilment of the contract and in such cases the normal
commercial principles
should be followed.
3.1.3 It is necessary that proper Bank Guarantees are furnished by Public Sector
Enterprises for the satisfactory performance of the equipment and/or prompt action for
rectification in case of deficiencies noticed in the execution of the contract or defective
performance of the equipment.
3.1.4 In this connection it may also be mentioned that furnishing of these guarantees
would not involve in any blocking of cash resources on the part of the enterprises as they can
obtain a bond from L.I.C. on the Basis which the Bank will issue a counter Guarantee. In order
to facilitate the insurance of Bond by L.I.C Government have agreed that L.I.C. would have a
pari passu charge on the fixed assets of the company vis-a- vis the Government.
Authority: Ministry of Finance (Bureau of Public Enterprises) Office Memorandum No. BPE/1/
4/Adv.(F)69 dt 3rd November 1972; forwarded under Board's letter No. F (X)1-72/BN/1 dated
23rd Nov. 1972 – (Annexure VI/3-02) and reiterated vide Board's letter No. F(X)1-86/19/1
dated 23rd February 1987 – (Annexure VI/3-15)
3.2 Waival of interest charges on the advances made.
3.2.1 Interest charges against the advances to be paid to the Public Sector Undertakings
may be waived in individual cases in consultation with Associated Finance if the merits of the
case so warrant. For this purpose the offer may be evaluated by the loading 12 per cent interest
charges on the bid amount. In the case of monopoly items, the offer may be evaluated by
loading interest charges on the rates quoted and comparing in with the last purchase rates from
the same source.
3.2.2 Bank Guarantee for Security Deposits: - Normally, the question of submission of
Bank Guarantee for security deposit may be dealt with in terms of the conditions of the contract.
The question of exemption from furnishing Bank Guarantee where considered necessary may be
dealt with under the General Manager's power to accept unusual conditions of the contract.
3.2.3 Bank Guarantee for warranty obligations: - The question of submission of Bank
Guarantee for warranty clause should be dealt with in terms of the conditions of the contracts.
Where tenders do not stipulate Bank Guarantee for warranty obligations, Bank Guarantee need
not be insisted upon. In the case of tenders which stipulate Bank Guarantee to cover the
Warranty for supplies needing such a monetary safeguard, it may be insisted upon from Public
Sector Undertaking also.
Authority: Board's letter No.76/RS(G)753/2 dt 15th Nov. 1980 - (Annexure VI/3-11)
3.2.3.1. In order to ensure compliance of Warranty obligation the Bank Guarantee
should be obtained in a prescribed pro-forma circulated vide Railway Board's
letter No.85/RS(G)779/21 dated 27.01.1988 – (Annexure VI/3-17)
3.2.4 In respect of State Government Undertakings, however, the above relaxation are not
applicable and in such cases Bank Guarantees should be insisted upon for advance payments.
3.2.5 In special cases where the undertakings are unable to furnish the Bank Guarantee,
there is no objection to obtaining a Guarantee from the State Government concerned as was
followed in the case of Westinghouse Saxby Farmer Ltd., Calcutta vide Board's letter No. RS
(Sig)06/78/C. Reports/ WSF dated 21st April 1979.
Authority: Letter No. 73/RS (G)/779/ 51 dt 28th June 1979 (Annexure VI/3-07) and RS(Sig)
06/78/C. Reports / WSF dated 21st April 1979
3.3 Cash Advances along with orders
3.3.1. Normally conditions for stipulating payment of advance along with orders should
not be agreed to for indigenous contracts. Where however it becomes unavoidable and is found
that procurement cannot be made without accepting these terms of payment, advances up to 80
per cent of the order may be considered on merits subject to the levy of interest charges at a rate
2 per cent less than the prevailing bank lending rate of interest (where the Bank lending rate is
variable, the upper limit is to be taken as the prevailing Bank’s lending rate) and further subject
to the contractor furnishing adequate safeguards such as Bank guarantee etc., to protect the
interest of Railways.
3.3.2 The calculation of the interest on the advances paid/to be paid to the firms may be
made on reducing the balance basis through a demand for payment of interest raised at the end of
every quarter. In other words, the interest may be calculated on the amount outstanding at
various points of time during the quarter.
Authority: Board's letter No.79/RS(G)753/1 dated 24th Oct.1980 - (Annexure VI/3-09)
3.3.3 In case of imported contracts i.e. contracts placed on foreign firms and contracts
financed under I.D.A. agreements the standard payment terms adopted by the Railway Board
should be clearly indicated in the terms and conditions of tender enquiry and it should be further
stipulated that in cases where a variation from the standard payment terms including advances
along with the order were asked for by the tenderer, then his quotation will be loaded for the
purpose of comparison of offers with interest charges on the basis of 12.5 percent per annum
for such advance payments. Even after such loading, if the offer of the said tenderer becomes
competitive and is otherwise acceptable, then advance payments, etc., for protecting the interest
of the Railway Administration. No interest charges for advance however need be levied in such
cases.
Authority: Board's letter No.79/RS(G)753/1 dated 21 st April 79 – (Annexure IV/3-06)
3.3.4 In stores contracts Railways can agree to conditions for payment of advance along with
the orders up to a limit of Rs.3 lakhs or 30% of the value of the orders whichever is less.
Authority: Board's letter No.87/RS (G)/779/21 dated 13th Jan. 88 - (Annexure IV/3-16)
3.3.5 General Managers are authorised to sanction advance payments up to a maximum
of Rs.2 crores to MMTC and other Public Sector Undertakings for procurement through the
centralised Canalising Agency at a time for the procurement of non-ferrous metals in relaxation
of the provisions contained in item 49 of Appendix 7 G. (II). C.O.S. may sanction advance
payments up to Rs.25 lakhs and including acceptance of unusual terms and conditions quoted by
M.M.T.C. and other Public Sector Undertakings in their offers for the supply of non-ferrous
metals. These powers may not be delegated further to the lower authorities.
Authority: Board's letter No. 75/RS(G)753/2 dated 14th April 78 (Annexure VI/3-05)
and 75/RS(G)753/2 dated 14th December 1981—(Annexure VI/3-12)
& 76/RS(G)753/2 dated 7th August 1984 – (Annexure III/2-06)
3.3.6 The advance payment to the extent of 25% of the ordered value can be made to
M/s I.T.I. any Bangalore without ceiling limit for purchase of all non-competitive products for
which I.T.I. are sole suppliers.
Authority: Board's letter No.86/RS(G)175312 dated 21.05.1986 — (Annexure VI/3-12)
3.3.7 Advance and progress payment against Indemnity Bonds approved by Board in
specific cases of order on N.G.E.F., B.H.E.L., etc. should be taken as an exception and not as a
procurement.
Authority: Letter No. 73/RS (G)/779/ 51 dt 28th June 1979 (Annexure VI/3-07)
3.3.8 COS is empowered to allow 100 per cent advance payment with Finance
concurrence in respect of orders up to the value of Rs.50,000/- in each single case.
3.3.9 The powers delegated should be sparingly used. If however situations arise for
utilisation of the above powers, it should be ensured that sufficient safeguards like Bank
Guarantee etc., are provided so that the interest of the Government is protected in the event of
failure of supplies, defective supplies and short receipts, etc.,
Authority: Board's letter No. 64/RS(G)385/1 dated 7th Sept. 1979-- (Annexure IV/3-08)
and 64/RS(G)385/1 dated 25th October 1980 -- (Annexure IV/3-10)
3.3.10 Proposals submitted by the various Administrations seeking Board's sanction for
the payment of advance along with the orders should be accompanied with the Tender
Committee Proceedings, FA&CAOs comments and other relevant papers to enable them to issue
the sanction in time.
Authority: Board's letter No.79/RS(G)753/1 dt 17th Aug. 82 (Annexure IV/3-13)
3.4 Handling over of Railway Property to outside parties.
3.4.1 Wherever Railway material such as scrap/steel is handed over to contractors for
refining and conversion work etc., the interest of the Government should be fully safeguarded by
obtaining cash or other securities or bank guarantees from them to cover the cost of material as
would be applicable from time to time till the material is utilised for manufacture. A declaration
that the material will not be utilised for any other purpose should be obtained from the
contractor, in terms of Board's letter No.72/746/Track of 11th May 1972 and in addition,
necessary provisions incorporated in the contract as stipulated in para 4 (i) and 4 (ii) thereof.
Authority: Board's letter No.72/746/Track dated 11th May 1972 – (Annexure VI/3-01)
3.4.2 Where the firms do not agree to furnish Security Deposit / Bank Guarantee etc, to
cover the cost of material handed over to them in the form of chasis for body building, Railway
vehicles and other machinery for repairs, the Railways may obtain Indemnity Bonds to ensure
the safe custody and return of materials as handed over to the firms.
3.4.3 In addition, Railways may also consider obtaining Insurance Policy and arrange such
other safeguards as deemed appropriate in the matter in consultation with the Finance and Legal
Advisers. But these need not be insisted upon as a mater of course.
Authority: Board’s letter No. 73/RS (G)779/51 dated 28.06.1976 --(Annexure VI/3-03)
and 73/RS(G)779/51 dated 27th January 1978 -- (Annexure VI/3-04)
************
ANNEXURE VI/3-01
GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)
No. 72/746/Track
New Delhi, dated 11th May 1972
The General Managers All Zonal Railways (including C. L. W., D. L. W.).
The General Manager, I. C. F., Perambur, Madras.
Sub: Recommendation No. 45 of the 11th Report (1971-72) on Para 17 of Railway
Audit Report, 1970- Loss due to excess supply of Railway scrap to a sleeper
manufacturer at the controlled rates.
Against a contract placed in 1962 for the manufacture of C. I. sleepers, Railway C. I.
scrap was to be supplied to the firm at the then control rate of Rs. 98 per tonne. The firm
obtained C. I. scrap from the railway but did not supply sleepers. The quantity of excess C. I.
scrap received by the firm was subsequently adjusted against a contract placed in 1965. In 1965
the rate of C. I. scrap was Rs. 400 per tonne. Although the scrap issued to the firm was at the
rate of Rs. 98 per tonne, no security was obtained from the firm for the difference in the rates
existing in 1965 and that at which it was issued to the firm in 1962. The firm did not make any
supplies against the contract, placed in 1965 also and shortly afterwards went into liquidation.
2. The matter was included in the Audit Report for the year 1970 and after discussion,
the Public Accounts Committee observed that there was no built-in provision for safe guarding
the monetary interests of the Railways if the firm used the scrap for a purpose other than
manufacturing C. I. sleepers and when a new contract with the firm was entered into in 1965, the
Railways failed to obtain bank guarantee to fully safeguard their interests.
3. With a view to avoiding recurrence of such cases in future, the Board desires that
whenever such railway material is supplied free of cost to manufacturers, the interests of the
Government should be fully safeguarded by obtaining cash or bank guarantees from them, to
cover the cost of material as would be applicable from time to time till the material is utilised for
manufacture. Besides, the following declaration should invariably be obtained from the firms
receiving material from the Railways:“I/we hereby solemnly declare that he………………………..(Material) obtained is
required for the
purpose of manufacturing ………….(finished product) against contract
No.…………………………dated……………The……………………
(material) will not be
utilised for any other purposes or otherwise disposed of without the prior approval of the
purchaser or his nominee”.
4. In addition, the following provisions should be incorporated in the contract: (i) Where any row materials for the execution of the contract are procured with the
assistance of Government either by issue from Government stocks or purchased under
arrangements made or permit(s) or licence(s) issued by Government, the contractor shall hold the
said materials as trustee for Government and use such materials economically and solely for the
purpose of the contract against which they are issued and not dispose of them without the
permission of the Government and return if required by the purchaser all surplus or
unserviceable materials that may be left with him after the completion of the contract or as its
termination for any reason whatsoever, on his being paid such price as Government may fix with
due regard to the condition of the material. The freight charges for the return of the materials
according to the direction of the purchaser shall be borne by the contractor, in the event of the
contract being cancelled, for any default on his part. The decision of Government shall be final
and conclusive; and
(ii) In the event of breach of the aforesaid conditions, the contractor shall, in addition
to throwing himself open to action for contravention of terms of the licence(s) or the permit(s)
and/or for criminal breach of trust, be liable to account to Government for all moneys,
advantages or profits resulting or which in the usual course would have resulted to him by reason
of such breach.
5. The receipt of this letter may please be acknowledged.
Sd/(J. K. MATHUR)
Joint Director, Civil Engineering
Railway Board
ANNEXURE VI/3-02
Copy of letter from Ministry of Railways (Railway Board) No. F(X)I-72/BN/1 dated 23rd
November 1972 addressed to the General Managers, all Indian Railways, C. L. W., D. L. W. and
I. C. F.
Sub: Furnishing of Bank Guarantee in respect of transactions between two
Public Sector Enterprises or between a Public Sector Enterprise and
Government Department
A copy of Ministry of Finance (Bureau of Public Enterprise)'s O. M. No. BPE/1(4)/Adv
(F)/69 dated 3rd November 1972 on the subject noted above is appended for information and
guidance.
Sd/(A. P. CHOPRA)
Deputy Director, Finance (Exp.),
Railway Board.
Copy together with enclosure to all Officers and Branches of Works/ Civil Engineering, D. T. E.,
U. S. (G) and F (X) II Branch, Railway Board for information and necessary action.
Copy of Ministry of Finance (Bureau of Public Enterprise)'s O. M. No. BPE/I (4)/Adv. (F)/69
dated 3rd November 1972 addressed to all Ministries, Government of India etc.
OFFICE MEMORANDUM
Sub: Furnishing of Bank Guarantees in respect of transactions between two
Public Sector Enterprises or between a Public Sector Enterprise and a
Government Department.
The question of furnishing bank guarantees in respect of transaction between two Public
Sector enterprises or between a Public Sector enterprise and a Government Department has been
engaging the attention of the Government for some time. In some cases bank guarantees are
insisted by other Public Sector enterprises or Governments in respect of the following: (1) To cover the advances paid against the order as a measure of security;
(2) In lieu of security deposit for the fulfilment of the contract and
(3) Performance guarantee for the Satisfactory Performance of equipment or the
contract.
The question of furnishing such bank guarantees has been gone into in detail and it has
been decided that(1) There is no need for insisting the bank guarantee in respect of advances paid by Public
Sector enterprises or Government Department to another Public Sector-Enterprise as there is no
risk of the advance being lost,
(2) Since the transactions between two Public Sector enterprises or between Public Sector
enterprises and the Government Department are of commercial nature, it would not be
appropriate, to exempt the Public Undertakings from the bank guarantees in lieu of security
deposit for the fulfilment of the contract. In fact such guarantees show the earnestness of the
Public Sector enterprises for the fulfilment of the contract and in such cases the normal
commercial principles should be followed;
(3) It is necessary that proper bank guarantees are furnished by Public Sector Enterprises for
the satisfactory performance of the equipment and / or prompt action for rectification in case of’
deficiencies noticed in the execution of the contract or detective performance of the equipment.
2. In this connection it may also be mentioned that furnishing of these guarantees would not
involve blocking of cash resources on the part of the enterprises as they can obtain a bond from
L. I. C. on the basis of which the bank will issue a counter guarantee. In order to facilitate the
issuance of bond by L.I.C., Government has agreed that L.I.C. would have a pari passu charge on
the fixed assets of the company vis-à-vis the Government.
3. The Ministry of Industrial Development, etc. is requested to bring the contents of the above
O.M. to the notice of the Public Sector enterprises wider their administrative control.
Sd/(A. N. BANERJI)
Addl. Secretary and Director General
ANNEXURE VI/3-03
GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)
No. 73/RS (G)/779/51
New Delhi, dated 28th June 1976
The General Managers, All Zonal Railways and Production Units.
Sub: Handing over Railway property to outside parties - Furnishing of
Indemnity Bond instead of Bank Guarantee.
Reference Board’s letter of even number dated 9th October 1973 on the subject
indicated above and your reply thereto. After a careful consideration of the matter, the Ministry
of Railways have decided that where the firms do not agree to furnish Security Deposit/Bank
Guarantee etc. to cover the cost of material handed over to them in the form of chassis for body
building, Railway vehicles and other machinery for repairs the Railway may obtain Indemnity
Bonds to ensure the safe custody and return of material as handed over to the firms. A specimen
copy of the Indemnity Bond being adopted by the Board in fabrication of Wagon contracts is
sent herewith. The Railways may make use of the same with appropriate modifications in
consultation with Legal Adviser to suit local conditions.
2. In addition, the Railways may also consider obtaining Insurance Policy and arrange
such other safeguards, as deemed appropriate in the matter in consultation with the Finance and
Legal Adviser.
3. As regards raw materials such as scrap/steel handed over to contractors for refining
and conversion work, the instructions contained in Board's letter No. 72/746/Track dated 11th
May 1972 would continue to apply as before.
4. Please acknowledge receipt.
.
(This also disposes of, the General Manager, Eastern Railway's letter No. 94/72/6089
dated 16th/24th May 1973).
DA: As above.
Sd/(S. N. PANDEY)
Deputy Director, Railway Stores (G),
Railway Board
INDEMNITY BOND
Indemnity for safe Custody of ‘Free supply’ items mentioned in para 1(a) (ii) to (vi) of special
Condition of Contract for Fabrication of wagons in terms of Railway Board's Order No.
…………….. Dated ……………against ………………………… programme.
We ……………………………………hereby undertake that we shall hold at our Works
………………….for and on behalf of the President of India and in trust for him the
stores/articles (mentioned herein below) which may he and/or which has been made over to us,
in connection with the fabrication of wagons against the contract ………………………………..
2. We shall be and remain absolutely responsible for the safe custody and protection of
the said stores and articles against a risks whatsoever till those are assembled in the wagons to be
fabricated against the above mentioned contract and duly delivered to the President of India or to
his representative as he may direct and as such do hereby indemnity the President of India
against any loss or and/or damage to the said stores and articles while in our possession/custody.
The said stores and articles shall however, be at all times open to the inspection by officers who
may be authorised in that behalf by Ministry of Railways or its nominee.
3. Should, however, at any time any loss or damage as aforesaid occur or a refund
become otherwise due to the President of India he or his representative shall be entitled to
recover from us compensation for and in respect of such loss or damage, if any, or the amount to
be so refunded without prejudice to any other remedies which may be otherwise available to the
said President of India by way of deduction from any sum due to/or any sum which at any time
hereafter may become due to us under this or any other contract.
4.
In the event of any loss or damage as aforesaid, the assessment of such loss or
damage and the assessment of the compensation therefore would be made by the President of
India or his authorised nominee and the said assessment would be final and binding upon us.
For ------------------------------------
ANNEXURE VI/3-04
GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)
No. 73/RS (G) /779/51
New Delhi, dated 27th January 1978
The General Manager (S),
All Zonal Railways and Production Units.
Sub: Handing over Railway property to outside parties Furnishing of
Indemnity Bonds instead of Bank Guarantee.
In continuation of Ministry of Railways letter of even number dated 28th June 1976,
it is hereby clarified that the Railways should obtain Indemnity Bond from the firms necessarily
to ensure the safe custody and return of materials, handed over to them. In addition, Railways
may also consider obtaining insurance Policy wherever possible, but need not be insisted upon as
a matter of course.
Please acknowledge receipt.
(This also disposes of General Manager, South Central Railway's letter No. S/7/P/1
dated 2nd December 1977).
Sd/(B. P. MEHTANI)
Deputy Director, Railway Stores (G),
Railway Board.
ANNEXURE VI/3-05
Copy of letter No. 76/RS (G)/753/2 dated 14th April 1978 received from Shri Om Prakash, Jt.
Director, Railway Stores (P), Railway Board, New Delhi addressed to General Managers, All
Zonal Railways.
Sub: Procurement of Non-ferrous metal through Public Sector undertakingsPowers to General Manager for sanction of advance payment thereto.
Reference Ministry of Railways letter of even number dated 9th March 1978 in which
the General Managers were authorised to sanction advance payment up to a maximum of Rs. 25
lakhs to M. M. T. C. at a time for procurement of non-ferrous metals. On further review, the
Ministry of Railways has decided to authorise the General Managers to sanction advance
payment up to a maximum of Rs. 50 lakhs (Rs. Fifty lakhs) to M. M. T. C. Only at a time for the
procurement of non-ferrous metals in relaxation of the provisions contained vide item 49 of
Appendix VII-GII subject to the provision that these powers will not be delegated further to the
lower authorities.
This has the sanction of the President.
This issues with the concurrence of the Finance Directorate of the Ministry of
Railways.
********
ANNEXURE VI/3-06
GOVERNMENT OF INDIA (BHARAT SARKAR)
MINISTRY OF RAILWAYS (RAIL MANTRALAYA)
(RAILWAY BOARD)
No. 79/RS (G)/753/1
New Delhi, dated 21st April 1979
The General Manager (S).
Sub: Stores contract acceptance of conditions for payment of advance along with
Orders Item No. 48, Appendix VII of General Codes Vol. II.
The General Managers have been delegated with powers for acceptance of
conditions for payment of advance along with orders up to Rs. 2 lakhs in each case as per codal
provisions referred to above. However in respect of Stores contracts instructions were issued
under Board's letter No. 74/RS (G) /148/2 dated 19th October 1974 that such requests of the firm
for payment of advances along with orders should be discouraged and not accepted as a rule
except in exceptional circumstances justifying the departure from the rules and only when
adequate safeguards exist in the contract to protect the interests of the Railways. The C.O. I. M.
headed by M. S. R. had also examined this issue and recommended that advances along with
orders should not be normally agreed to as these defeat the policy of Government with regard to
credit squeeze etc.
Recently there had been a few references from Railways for sanctioning such advances
along with the order. Ministry of Railways has therefore re-examined the matter de novo and in
suppression of the instructions contained in Board's letter of 19th October 1974 quoted above the
following guidelines are issued.
(i) Normally conditions stipulating payment of advances along with orders should not be
agreed to for indigenous contracts. Where however it becomes unavoidable and it is
found that procurement cannot be made without accepting those terms of payment of
advances up to 80 per cent of the order may be considered on merits subject to levy of
interest charges at a rate 2 per cent less than the prevailing bank's lending rate of interest
(where the bank lending rate is a variable the upper limit is to be taken as the prevailing
bank's lending rate) and further subject to the contractor furnishing adequate safeguards
such as bank guarantee etc. to protect the interests of Railways.
(ii) In the case of imported contracts i. e., contracts placed on foreign firms and contracts
financed under I.D.A. agreements the standard payment terms adopted by the Railway
should be clearly indicated in the terms and conditions of tender enquiry and it should be
further stipulated that in cases where a variation from the standard payment terms
including advances along with the order were asked for by the tenderer then his quotation
will be loaded for the purpose of comparison of offers with interest charges on the basis
of 12 per cent per annum for such advance payments. Even after such loading if the offer
of the said tenderer becomes competitive and is otherwise acceptable then advance
payment along with order may be agreed to after prescribing necessary safeguards such,
as bank guarantee etc. for protecting the interest of the Railway Administration No
interest charges for advance however need be levied in such cases.
(iii) Each purchase case should be dealt with on merits and in consultation with
FA&CAO and where the value of the advance to be paid is over Rs. 2 lakhs prior
approval of the Board will be necessary except in cases where specific relaxation and
higher powers have been given such as for advances to M. M. T. C. etc.
(This issues with the concurrence of Finance Directorate). This dispose of General
Manager, Wheel and Axle Plant, Bangalore's letter no. W&AP/ PR/12/ 78/ 3084 dated 4th
January 1979).
Sd/(P. S. GOVINDAN)
Deputy Director, Railway Stores (G)
ANNEXURE VI/3-07
Copy of letter from Ministry of Railways (Railway Board), No. 73/RS(G)/779/51 dated 28th June
1979 addressed to General Manager, Wheel and Axle Plant, Bangalore.
Sub: Advances along with the orders
Ref.: FA&CAO’s letter No. WAP/Ac/S/Agreement dated 21st April 1979
In this connection, your attention is invited to Board's letter No. F (X) I/72/BN1 dated
23rd November 1972 (Copy appended) wherein it has been clearly laid down that where
advances against orders are made to Public Sector Undertakings, there is no need for insisting on
bank guarantees as a measure of security for the advance, as there is no risk of such advances
being lost. Bank guarantees should however be invariably taken for satisfactory performance of
equipment and / or contract.
2. In respect of State Government Undertakings however, the above relaxation are not
applicable and in such cases Bank guarantees should be insisted upon for advance payments as
for Private Sector Undertakings. However, in special cases like Westing house Saxby Farmer
etc., where the undertakings are unable to furnish a bank guarantee, there is no objection to
obtaining a guarantee from the State Government concerned as was followed in the case of
Westing house Saxby Farmer, Calcutta vide Board's letter No. RS (Sig.)/06/78/C Reports WSF
dated 21st April 1979 (copy appended).
3. In other cases relating to advances to Private Sector instructions contained in Board's
letter No. 79/ RS (G)/753/1 dated 21st April 1979 will apply.
4. The cases reported by F. A. & C. A. O. in his letter dated 21 at April 1979 should be
taken as an exception and not as a precedent for permitting State Governments Undertakings to
draw advances on Indemnity Bond,
5. This issues with the concurrence of Finance Directorate.
DA: As above
Sd/(R. KRISHNAMURTHY)
Deputy Director, Railway Stores (G)
Railway Board.
Copy to General Managers (S), All Indian Railways/P. Units with a copy to F. A. & C. A. O.
GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)
No. RS(Sig.)06/78/C. Reports/W. S. F.
Dated 21st April 1979
The F. A. & C. A. O.
Eastern Railway Calcutta.
Sub: - Advance payments against Railway Board's contracts
Ref.:- Your D. O. No. E/CB/620/WSF/OB dated 27th May 1978.
The sanction of the President of India is hereby accorded to an advance payment of Rs.
40 lakhs (Rupees Forty lakhs only) to meet up to 90 per cent of the cost of indigenous purchases
of raw materials and component by the firm against the outstanding quantities against the
Railway Board contracts by debit to miscellaneous advance (Capital) to M/s. Westinghouse
Saxby Farmer Ltd., 17, Convent Road, Calcutta adjustable against supplies of stores or works to
be executed for the Railways by M/s. Westinghouse Saxby Ltd., Calcutta, terms of the advance
will be as follows: (i) The advance will be paid to the firm on submission of(a) A Guarantee from the Government of West Bengal as per proforma attached.
(b) A letter from M/s. Westinghouse Saxby Farmer Ltd., authorising the Railways to
adjust the advance against supplies of stores made and/or works executed by the firm.
(c) An undertaking from the firm that the advance would be utilised only for the
purpose of procurement of necessary raw materials and components for the
manufacture of the stores ordered against the Railway Board's contracts and no part
of it would be utilised for clearing statutory liabilities outstanding etc.
(d) An undertaking from the firm that the previous advances totalling Rs. 112 lakhs
would be fully repaid by 31st December 1979.
(e) An undertaking from the firm that the supplies will be fully effected within a
maximum of 18 months from the date of the advance payment, under all the other
terms and conditions of the existing contracts including prices.
(ii) The advance shall be for one year.
(iii) Thereafter the advance shall be adjustable against stores to be supplied and/or works to be
executed by M/s. W. S. F. Ltd., for the Railways at the rate of 15 per cent adjustment against
each bill.
(iv) Interest charges will be levied at the rate the Railways pay Dividend to General Revenues.
During the first year the interest will be recoverable on the full amount advanced. Thereafter the
interest will be recoverable on the average of the amounts of advance outstanding at the
beginning and end of the month.
2. For the present, funds may be found by reappropriation. Additional funds, if any
required may be asked for in the first/final modification.
3. Please acknowledge receipt.
Sd/(N. RAMASWAMI)
Joint Director, Railway Stores (G),
Railway Board
GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)
To
The President of India,
Through the Joint Director, Railways Stores (G),
Ministry of Railways (Railway Board), New Delhi.
WHEREAS M/s. Westinghouse Saxby Farmer Ltd., having their Registered Office
at 17, Convent Road. Entally, Calcutta (hereinafter called the contractor) have agreed to
fabricate and supply to the President of India (hereinafter referred to as the Purchaser) the stores
indicated in the different contracts placed by the Purchaser with the contractor as per the annexed
list, which forms the part of these presents, according to the terms and conditions of the said
contracts.
AND WHEREAS the contractor has requested the purchaser for the grant of advance
equal to 90 per cent of the cost of indigenous raw materials and components purchased by the
contractor for the fabrication of the aforesaid stores against the aforesaid contracts.
AND WHEREAS the Purchaser has agreed, vide his letter No. RS (Sig.)/06/78/EReport/WSF dated 9th October 1978 to grant advance payment equal to 90 per cent cost of the
raw materials and components for the indigenous purchases against the aforesaid contracts
subject to the contractor's furnishing a guarantee from Government of West Bengal in a form
acceptable to the Purchaser valid for the period required for the execution of the said contracts
together with the usual claim period.
AND WHEREAS the contractor has approached the Government of West Bengal to
give the requisite guarantee on his behalf in favour of the Purchaser for an amount of Rs.
40,00,000 (Rupees Forty lakhs) equivalent to 90 per cent of Ro. 44,39,000 (Rupees Forty-four
lakhs and thirty nine thousand) being the cost of raw materials and components for the
indigenous purchases made by the contractor for executing the aforesaid contracts.
Now in consideration of the Purchaser, having agreed to advance a sum of Rs. 40,00,000
(Rupees Forty lakhs) to the contractor, the Government of West Bengal (hereinafter called the
State Government) both hereby guarantee to the purchaser the due payment and discharge
without demur on demand of all amounts paid by the purchaser as advance to the contractor
together with interest and undertakes to hold the Purchaser safe, harmless and indemnified from
and against all losses and damages, claims and costs, charges and expenses whatsoever arising
out of or in connection with the failure of the contractor to pay back the aforesaid amount
including interest at the prevailing rate of dividend payable by the Railways to the General
Revenues from the date of payment of advance till the date of supply of finished stores under the
aforesaid contracts or repayment of the advance as the case may be and/or on account of any
default of the contractor in the performance, observance or discharge of the terms and conditions
of the aforesaid contracts. The State Government both hereby further agrees with the Purchaser
as follows: -
(1) This guarantee shall be in addition to any other indemnity or securities that the
Purchaser may have from the contractor or from any other person or persons in respect of his
claim or any part thereof. THE INTENTION BEING that notwithstanding any other indemnity,
security or securities that the Purchaser may have as aforesaid, the State Governments liability
shall stand independently and shall extend to all aforesaid moneys payable by the contractor to
the Purchaser.
(2) The Purchaser shall have full authority to take recourse to or enforce this guarantee
at his sole and absolute discretion after the expiry of 60 days of the service of notice in writing to
the State Government with regard to any default committed by the contractor in the performance,
observance or discharge of the terms and conditions of the aforesaid contracts and had demanded
payment as a result thereof.
(3) The decision of the Purchaser whether any default has occurred or has been
committed by the contractor in the performance, observance or discharge of the terms and
conditions of the aforesaid contracts shall be conclusive and binding on the State Government.
(4) The Purchaser shall be at liberty without knowledge or consent of the State
Government to grant or allow extension of delivery period from time-to-time to the contractor or
give indulgence to the contractor or to modify the terms and conditions of the aforesaid contracts
without affecting or impairing the guarantee or the liability of the State Government hereunder.
(5) The advance payment given to the contractor will be adjusted by the purchaser on
pro rata basis out of the bills submitted by the contractor claiming 90/95/98 per cent of the cost
of stores supplied to the Purchaser on proof of despatch or delivery of the respective
consignments of stores under the aforesaid contracts.
(6) The purchaser shall be at liberty to take other securities for the said amount of
advance or any part thereof or to release or forbear to enforce all or any of his remedies on such
securities and any collateral security or securities held by the purchaser and that no such release
or forbearance as aforesaid shall have the effect of releasing the State Government from its
liability or prejudicing the purchaser's right and remedies against the State Government and that
the State Government shall have no right to the benefit of any other security that may be held by
the purchaser until the claim of the Purchaser against the contractor in respect of the aforesaid
advance together with the aforesaid interest shall have been fully satisfied and then in so far only
as such security shall not have been exhausted for the purpose of realising the amount of the
Purchaser's claim.
(7) This guarantee is a continuing guarantee during the period of its validity and will
not be revised during such period if except with the prior written consent of the Purchaser.
(8) The guarantee herein before contained shall not be effected by any change in the
constitution of the contract.
(9) Not withstanding anything stated above, the liability of the State Government under
this guarantee shall be valid till such time all the contracts as listed in the enclosed list are fully
executed by the contractor and/or the entire amount of advance together with the interest as
aforesaid has been fully recovered by the Purchaser from the contractor and a discharge
certificate has been issued by the Purchaser to that effect.
Signed, Sealed and Delivered for and on behalf of
Governor of West Bengal
…. ……………………
Signature
By………………………………………………
(Name and Designation)
(i) Witness…………………………………..
To the Government of West Bengal, Department of
Public Undertakings, Calcutta, in the presence of
(Name and Address)
(ii) Witness...........................................……..
(Name and Address)
Statement showing outstanding supplies against Railway Board contracts with
Westinghouse Saxby Farmer Ltd., Calcutta.
Sl.
No
Contract No. and
Date
Description of Stores
1.
70/363/Sig.30/RS/Si
g. II/555dated 4th
March 1972
74/363/Sig.
87/RS/Sig./620dated
18th November1974
75/363/Sig.90/RS/Si
g./ 630 …
…
RS (Sig.)
06/5001/635 dated
29th March 1978.
RE(S)II/76/8401/7/
30012 dated 17th
September 1976.
2.
3.
4.
5.
Extension
granted up
to
Relays
Delivery
period in
original
contract
6-7-1974
--do--
17-11-1976
3-7-1979
-do--
4- 3-1979
Electric point
operating machine
28- 9-1979
….
Relays
28- 2-1979
….
10-8-1979
….
M/ S.
ANNEXURE VI/3-08
Copy of letter No. 64/RS(G)/385/1 dated 7th September 1979 received from the Dy. Director
Railway Stores (G) Railway Board, New Delhi and addressed to the General Managers of All
Indian Railways including L C F.
Sub: Delegation of powers to Controller of Stores.
1. Reference is invited to the Railway Ministry's letter no. F (X) I/77/PW/5 dated 7th
December 1977 where with the revised Appendix VII to the Indian Railway General Code,
Volume II has been circulated. In terms of item 48 of the aforementioned Appendix VII the
General Managers have been delegated with powers to sanction advances to any single
contractor up to Rs. 2 lakhs in all.
2. In view of the representations received from some of the Railways and production
units in the matter and the present day market conditions, the Ministry of Railways have now
decided to delegate powers to the Controller of Stores for allowing 100 per cent advance
payment, with Finance concurrence, in respect of orders up to the value of Rs. 10,000 in each
single case. The powers now delegated should, however, be used sparingly and will not be redelegated to lower authorities. It should be ensured that sufficient safeguards are provided so
that interests of Government are protected in the case of defective supplies and/or short receipts.
This issues with the concurrence of Finance Directorate in the Ministry of
Railways.
Sd/(R. KRISHNAMURTHY)
Dy. Director, Railway Stores (G),
Railway Board.
ANNEXURE VI/3-09
Copy of letter No. 79/RS (G)/753/1 dated 24th October 1980 received from Shri S. C Jain, Dy.
Director Railway stores (G), addressed to General Manager(s) All Indian Railways, I. C F. etc.
Sub: Acceptance of conditions for payment of advance along with the order
and charging of interest thereof.
Ref: Ministry of Railways letter of even number dated 21st April 1979.
Some Railways have sought clarification in regard to the manner in which the interest
charges are to be calculated by them on the advances paid /to be paid to the firms under the
provisions of stores contracts. The matter has been examined by the Ministry of Railways and it
has been decided that the calculation of the interest on the advances paid/to be paid to the firms
may be made on reducing balance basis through a demand for payment of interest raised at the
end of every quarter. In other words, the interest may be calculated on the amount outstanding at
various points of time during the quarter.
This issues with the concurrence of Finance Directorate of the Ministry of Railways.
*******
ANNEXURE VI/3-10
Copy of letter No. 64/RS (G) 385/1 dated 25th October 1980 addressed to General Managers
(Stores), All Indian Railways including I. C. F. and others.
Sub: Delegation of powers to Controller of Stores.
The question of enhancing the limits of Controller of Stores in regard to 100 per cent
advance payment as provided in para 2 of this Ministry's letter of even number dated 7th
September 1979 has been engaging the attention of the Ministry of Railways for sometime past.
After a careful consideration, it has now been decided to enhance the powers of Controller of
Stores for allowing 100 per cent advance payment from the existing " orders up to the value of
Rs. 10,000 ", to orders up to the value of Rs. 50,000 in each single case with Concurrence of the
Associated Finance.
2. The above powers should be sparingly used. If, however, situations arise for resorting
to the utilisation of the above powers, it should be ensured that sufficient safeguards like Bank
Guarantee etc. are provided so that the interest of the Government is protected in the event of
failure of supplies, defective supplies and short receipt etc.
3. The above powers are not to be redelegated to the lower authorities.
4. This issues with the concurrence of the Finance Directorate of the Ministry of
Railways.
**********
ANNEXURE VI/3-11
Copy of letter No. 76/RS(G)/753/2 dated 15th November 1980 received from Shri S. C. Jain Dy.
Director, Railway Stores (G), Railway Board, New Delhi, addressed to General Managers. All
Indian Railways, I. C. F. etc.
Sub: Advance Payments to Public Sector undertakings
Further to earlier instructions on the above subject, the following clarifications are
issued: -(1) Bank Guarantee for advances to be made with the order: - Against the
advances to be paid to the Public Sector undertakings, no Bank Guarantee need be insisted upon.
(2) Waival of interest charges on the advances made: - interest charges against the
advances to be paid to the Public Sector undertakings may be waived in individual cases in
consultation with Associated Finance if the merits of the case so warrant. For this purpose, the
offer may be evaluated by loading 12 per cent interest charges on the bid amount. In case of
monopoly items, the offer may be evaluated by loading interest charges on the rates quoted and
comparing in with the last purchase rates from the same source.
(3) Bank Guarantee for Security Deposits: - Normally, the question of submission of
Bank Guarantee for Security Deposit may be dealt with in terms of the conditions of the contract.
The question of exemption from furnishing Bank Guarantee where considered necessary may be
dealt with under the General Manager's powers to accept unusual conditions of the contract.
(4) Bank Guarantee for warranty obligations: - The question of submission of Bank
Guarantee for warranty clause should be dealt with in terms of the conditions of the contract.
Where tenders do not stipulate Bank Guarantee for warrantee obligations, Bank Guarantee need
not be insisted upon. In the case of tenders which stipulate Bank Guarantee to cover the
warranty for supplies needing such a monetary safeguard, it may be insisted upon from Public
Sector Undertakings also.
This issues with the concurrence of the Finance Directorate of Ministry of Railways.
.
*********
ANNEXURE VI/3-12
GOVERNMENT OF INDIA
MINISTRY OF RAILWAYS
(RAILWAY BOARD)
No. 76/RS (G)/ 753/2
New Delhi, dated 14th December 1981
The General Manager.
All Indian Railways / P. Units,
M. T. P. (Railways) Calcutta. W. & A. Plant, Bangalore
The Chief Administrative Officer.
M. T. P. (Railways).
Bombay-Delhi-Madras.
Sub: Procurement of Non-ferrous metal through Public Sector UndertakingsPowers to General Manager for sanction of Advance payment thereto.
Reference Ministry of Railway’s letter of even number dated 9th March 1978 and 14th
April 1978 in which General Managers, were authorised to sanction advance payment up to a
maximum limit of Rs. 50 lakhs to M. M. T. C. and Rs.10 lakhs to other Public Sector
Undertaking at a time for procurement of non-ferrous metals. On further review, the Ministry of
Railways have decided to authorise the General Managers to sanction advance payments up to a
maximum limit of Rs. 50 lakhs for purchase of non-ferrous metals from other Public Sector
Undertakings, as in the case of M. M. T. C. These powers may also be allowed to be delegated to
Controller of Stores for sanctioning advance payments up to Rs. 10 lakhs including acceptance
of unusual terms and conditions quoted by M. M. T. C. and other Public Sector Undertakings in
their offers for the supply of non-ferrous metals.
This has the sanction of the President.
This issues with the concurrence of the Finance Directorate of the Ministry of Railways.
Sd/(R. KRISHNAMURTHY)
Joint Director Railway Stores (P)
Railway Board.
ANNEXURE VI/3-13
Copy of Board's letter No. 79/RS (G)/752/1 dated 17th August 1982 received from Sri R..
Krishnamurthy, JDRS (P) Railway Board New Delhi addressed to the General Managers All
Indian Railways, P. Units etc.
Sub: Stores Contract- Acceptance of Conditions payment of advance along with
the orders
It is noticed that the proposals submitted by the various administrations seeking Board's
sanction for the payment of advance along with the orders are not accompanied with the relevant
papers i e. Tender Committee proceedings etc. Ministry of Railways desire that in future all
proposals on the said subject to be submitted to them should be accompanied with Tender
Committee proceedings, F. A. & C. A. O’s comments and other relevant papers to enable them
to issue the sanction in time.
Sd/(R. KRISHNAMOORTHY)
Jt. Director, Railway Stores (P)
ANNEXURE VI/3-14
Copy of Board’s letter No.86/RS (G)/753/2 dated 21st May 1986 addressed to General
Managers, All Indian Railways and others
Sub: Stores contract --Acceptance of condition for payment of advance
along with orders.
In partial modification of their letter No. 79/RS (G)/753/1 dated 16th January
1982, Department of Railway (Railway Board) have decided that advance payment to the extent
of 25 percent of the ordered value may to be made to M/s. I. T. I. Bangalore without any ceiling
limit. This will however, apply to all non-competitive products of M/s. I T. I. for which they are
the sole suppliers.
This issues with the concurrence of Finance.
.
**********
ANNEXURE VI/3-15
Copy of Board's letter no. F(X) 1-86/19/1 dated 23rd February 1987 addressed to General
Managers All Indian Railways and others.
Sub: Furnishing of Bank Guarantees in respect of transactions between two Public Sector
Enterprises or between a Public Sector Enterprise and Government Department.
In the 41st C. O. Ss. meeting held in Board's Office in October 1985 one of the
Railways had suggested that no Security Deposit need be obtained from Public Sector and
Government of India Undertakings and also from firms from whom Stores of proprietary nature
are purchased. In this connection, attention is invited to Board’s letter No. F (X) 1-72/BN/I dated
23rd November 1972 wherewith a copy of Ministry of Finance (B.P.E.)'s O. M. No. BPE/
1(4)/Adv (F)/69 dated 3rd November 1972 which deals with the procedure to be followed in
such dealings was circulated to the Railways for information and guidance (copy enclosed for
ready reference). The matter has again been takenup with the Bureau of Public Enterprises
(Ministry of Industry) to ascertain as to whether there has been any change in this procedure and
whether they have issued any fresh guidelines on the subject. The B. P. E. have since advised
that the instructions contained in their O.M. dated 3rd November 1972 referred to above still
hold good.
**********
ANNEXURE I
Copy of Ministry of Finance (Bureau of Public Enterprises)' O. M. No. BPE/1(4) Adv (F)/69
dated 23rd 1972 addressed to all Ministries Government of India etc.
OFFICE MEMORANDUM
Sub: Furnishing of Bank Guarantees In respect of transactions between two Public Sector
Enterprises or between a Public Sector Enterprise and Government Department.
The question of furnishing Bank Guarantees in respect of transaction between two Public
Sector Enterprises or between a Public Sector Enterprise and Government Department has been
engaging the attention of the Government for some time. In some cases Bank Guarantees are
insisted by other Public Sector Enterprises or Government in respect of the following.
(1) To cover the advances paid against the order as a measure of Security.
(2) In lieu of Security Deposit for the fulfilment of the contract and,
(3) Performance guarantee for the satisfactory performance of equipment or the contract.
The question of furnishing such Bank Guarantees has been gone into detail and it has been
decided that;
(1) There is no need for insisting the Bank Guarantee in respect of advance paid by
Public Sector Enterprises or Government Department to another Public Sector
Enterprises, as there is no risk of the advance being lost.
(2) Since the transactions between two Public Sector Enterprises or between Public
Sector Enterprises and the Government Department are of commercial nature it would
not be appropriate to exempt the Public Undertakings from the Bank Guarantees in lieu
of Security Deposit for the fulfilment of the contract. In fact such Guarantees show the
earnestness of the Public Sector Enterprises for the fulfilment of the contract and in such
cases the normal commercial principles should be followed.
(3) It is necessary that proper Bank Guarantees are furnished by Public Sector Enterprises
for the satisfactory performance of the equipment and or prompt action for rectification in
case of deficiencies noticed in the execution of the contract or defective performance of
the equipment.
2. In this connection it may also be mentioned that furnishing of these Guarantees would not
involve any blocking of cash resources on the part of the enterprises as they can obtain a bond
from L.I.C. on the basis of which the Bank will issue a counter guarantee. In order to facilitate
the issuance of bond by L I. C. Government have agreed that L I. C. would have a peripassu
charge on the fixed assets of the company vis-à-vis the Government.
ANNEXURE VI/3-16
Copy of Board’s letter No. 87/RS (G)/779/21 dated 13th January 1988 addressed to General
Managers, A11 Indian Railways and others.
Sub: Stores contracts --acceptance of conditions for payment of advance along with
Orders item No. 48 App. VII of General Code Vol.II.
In partial modification of para 2 (iii) of their letter No. 79/RS (G)/753/1 dated
21st April 1979, Ministry of Railways (Railway Board) have decided to enhance the existing
limit from Rs. 2 lakhs, to Rs. 3 lakhs or 30 percent of the value of orders whichever is less for
acceptance of conditions for payment of advance long With orders.
This issues with the concurrence of the Finance Directorate of this Ministry
.
*********
ANNEXURE VI/3-17
Copy of Board's letter No. 85/RS (G)/779/21 dated 27th January 1988 addressed to General
Managers All Indian Railways and others.
Sub: Payment terms for Plant and Machinery contract involving erection and
commissioning.
Further to Board’s letter of even number dated 2nd June 1987, a copy of the
proforma of Bank Guarantee to cover Warranty obligations of the firm, which is used widely by
the COFMOW in their Global and indigenous contracts, is appended for adoption on the
Railways. It may, however, be stated that a reference to the Ministry of Supply on the above
subject has been made. If any modification in the procedure and proforma is considered
necessary, Railways will be advised accordingly.
2. This issues with the concurrence of Finance and Mechanical Directorates of this Ministry.
*******
ANNEXURE I
ANNEXURE 13
(Please see clause 13 of instruction to Tenderers)
PROFORMA FOR WARRANTY GUARANTEE BOND
To
THE PRESIDENT OF INDIA
acting through the Controller of Stores
Central Organisation for Modernisation of Workshops,
Railway Offices Complex
New Delhi- 110 002, India.
Sub: Guarantee No--------------for------------------- (Amount) Covering Machine(s)
Serial No----------------supplied to (Consignee/s) -------------------------------------Ref: Contract No---------------dated----------------Placed on M/ s -----------------------
1. WHEREAS M/s ------------------------- one of our constituents, hereinafter called the
“Sellers” have agreed to sell to you (hereinafter referred to as the “ Government”) -------------Nos. of --------------------- (give description) as per contract No ------------- dated -------------(hereinafter called “the said contract”).
2. AND WHEREAS according to the terms of said contract, it has been stipulated that payment
of 10 per cent of the value of the stores would be made, provided that the Sellers furnish to the
Purchaser a Bank Guarantee from a recognised Bank, acceptable to the Purchaser for 10 per cent
of the value of the said contract valid for a period covering in full the Guarantee Period as per the
Warranty clause of the said conditions of the contract, being the conditions attached to and
forming part of the said contract.
3. AND WHEREAS the Sellers have approached us to give the said Bank Guarantee on their
behalf in your favour for an amount representing 10 per cent of the value of the contract which
you have agreed to accept.
4. That in consideration of the promises and at the request, of the said Sellers, we hereby
irrevocably undertake and guarantee to pay to the Government of India or at such other place as
may be determined by you forthwith on demand and without any demur, any sum upto a
maximum amount of -------------- (Rs. ----------) representing 10 per cent of the value of the
Stores despatched under the said contract in case the Sellers make default in paying the said sum
or make any default in the performance observance or discharge of the guarantee contained in
the said contract.
5. We agree that the decision of the Government whether any default has occurred our has been
committed by the Sellers in the performance, observance or discharge of the guarantee aforesaid
shall be, conclusive and binding on us.
6. Government shall be at liberty, from time-to-time, to grant or allow extension of time or give
other indulgence to the said Sellers or to modify the terms and conditions of the contract with the
said Sellers without affecting or imparing this guarantee or our liability hereunder.
7. We undertake to pay to the Government any money so demanded notwithstanding any dispute
or disputes raised by the Sellers in any suit or proceeding pending before any Court or Tribunal
relating there to our liability under this present being absolute and unequivocal.
The payment so made by us under this bond shall be a valid discharge to our liability
for payment thereunder and the Sellers shall have no claim against us for making such payment.
8. This Bank guarantee comes in to force when the balance ten percent of the value of the stores
shipped per Vessel ------------- vide Bill of Lading No. --------------dated -------------- or R/ R No.
------------------dated ------------------ (in the case of indigenous contracts) under the said contract,
has been paid and will remain in full force and effect up to -------------i.e. for ------ months
counted from the date of placing the stores in services, and shall continue to be enforceable for
further six months i e. upto ---------- (date), hereinafter called the said date.
9. This guarantee will not be discharged due to the change in the constitution of the Bank or the
Sellers
10. That no claim under this guarantee shall be entertained by us unless the same has been
preferred by the Government within the said date.
Date ---------------
Signature --------------------------------
Place -------------
Printed Name ----------------------------
Witness ------------------------
--------------------------------------------(Designation)
(Banks common Seal)

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