Security Deposit | Refund of Security Deposit | PROFORMA

Security Deposit

The first part of security deposit including the Earnest money already deposited shall be 5% (five per cent) of the contract value. Security deposit will not carry any interest. The contractor shall deposit immediately after receipt of letter of award of work, the balance of 2%(two per cent) of awarded value, if any, after adjustment of the earnest money already paid as Initial Security Deposit before execution of the agreement. In case, where agreements are not required to be executed, balance of initial security deposit deposited within the period to be mentioned in the work order and under no circumstances the period should be prior to commencement of any payment made to the contractor. The balance security deposit shall be recovered from first four or less running on account bills (at the discretion of the Engineer in Charge) of the contractor to be submitted for the work done under the contract. The full security deposit shall remain at the disposal of the Company as Security for the satisfactory execution and completion of the work in accordance with the provisions of the contract.

All running on account bills shall be paid at 95% (ninety-five per cent) of work value. This 5% (five per cent) deduction will be the second part of security deposit. The amount so accrued shall be released after passing of the final bill.

The Bank Guarantee towards security deposit shall be acceptable only for values above Rs.50,000/- and the Bank Guarantee shall be valid for a minimum period of one year or the period of contract plus six months whichever is more. Bank Guarantee is to be submitted in the standard prescribed form duly vetted by Finance and Legal Department of the company. The bid document will contain a list of Banks whose guarantees are acceptable. If it is decided not to accept any bank guarantees from a particular Bank, it may also be mentioned in the Bid document. All foreign Banks’ guarantee will be confirmed by a Bank located in India & acceptable to the company. It will stipulate that the Bank guarantee must be unconditional and should be encash able on presentation to the issuing Bank. A provision will be incorporated in the Bank guarantee for exclusive jurisdiction of a Court at a location convenient to the company for contesting legal cases arising out of encashment of the guarantee.

The company shall be at liberty to deduct/appropriate from the security deposit such sums as are due and payable by the contractor to the company as may be determined in terms of the contract, and the amount appropriated from the security deposit shall have to be made up by further deduction from the contractor’s subsequent on account bills, if any, so that the amount of S/D remains as per the Tender Conditions.

Refund of Security Deposit

The refund of security deposit shall be subject to companies right to deduct/appropriate its dues against the contractor under this contract or under any other contract. On completion of the entire work and certified as such by the Engineer-in-charge and on passing of the final bill by the Civil Engineering Department, one half of the security deposit remaining with the company shall be refunded. The other half shall be refunded to the contractor on the expiry of six months from the date of completion as certified by the Engineer-in-Charge, subject to the following conditions:

Any defect/defects in the work, if detected after issue of completion certificate is/are rectified to the satisfaction of the Engineer-in-Charge within the said period of six months.

In the case of building work or other work of similar nature, the security deposit refund shall be made on the expiry of the said six months period or at the end of one full monsoon period i.e. June to September, whichever is later in point of time and any defects such as leakages in roof, effloresces in walls, dampness, defects in drainage etc. should be rectified to the satisfaction of Engineer-in-Charge.



( Ref. Cl. 4.07.2 )


M/s. company name

Company add




(Name of the Subsidiary Company with address).

Dear Sir,

In consideration of M/s. company name     Subsidiary Company having its Registered Office at …………………… (hereinafter called “the Company” which expression shall unless repugnant to the subject or context includes its successors and assigns) having agreed under the terms and conditions contained in letter No………… dated…………. Issued in favour of M/s……………… for ……………… (hereinafter referred to as “the Contract” to accept the Deed of Guarantee as herein provided for Rs………… from the Schedule/Nationalised Bank in lieu of security deposit to be made by M/s…………… (hereinafter called “the contractor”) or in lieu of deduction to be made from the contractors’ bill, for the due fulfilment of the terms and conditions contained in the said contract by the contractor, we the …………… . we, the …………………. Bank (hereinafter referred to as the said Bank) having its Registered Office at …………………… do hereby undertake and agree to pay the Company to the extent of Rs………………… on demand stating that the amount claimed by the Company is due and payable by the Contractor for the reasons of failure/negligence in performing the terms and conditions contained in the contract by the buyer and to unconditionally pay the amount claimed by the company on demand without any demur to the extent aforesaid.

2. We, the …………. Bank agree that the Company shall be the sole judge as to whether the said Contractor has failed/neglected in performing any of the terms and conditions of the said contract and the decision of the company in this behalf shall be final and binding on us.

3. We, the said Bank further agree that the Guarantee herein contained shall remain in full force and effect upto …………… and any claim received after the said date shall in no case be bind the Bank.

4. The Company shall have the fullest liberty without affecting in any way the liability of the Bank under this guarantee or indemnity from time to time vary any of the terms and conditions of the said contract or to extend the time of performance by the said contractor or to postpone any time and from time to time any of the powers exercisable by it against the said contractor and either to enforce or to forbear from enforcing any of the terms and conditions governing the said contract or securities available to the company and the said Bank shall not be released from its liability under these presents.

5. Notwithstanding anything contained herein the liability of the said Bank under this Guarantee is restricted to Rs………….. and this Guarantee shall come into force from the date hereof and shall remain in full force and effect till ………………… unless the written demand or claim under this Guarantee is made by the Company with us on or before ………………. all the rights of the Company under this guarantee shall cease to have any effect and we shall be relieved and discharged our liabilities hereunder.

6. We, the said Bank lastly undertake not to revoke this Guarantee during its currency except with the previous consent of the company in writing and agree that any change in the constitution of the said contractor or the said Bank shall not discharge our liability hereunder. 7. This guarantee issued by Sri………….. who is authorized by the Bank.

Under jurisdiction of …………………………… court only.

Security Deposit

Reference :-

Manual For Civil Engineering Works – BCCL

2 thoughts on “Security Deposit | Refund of Security Deposit | PROFORMA”

  1. Pingback: Tender | Necessity | Types of tender –

  2. Pingback: Tender | Necessity | Types of tender -

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top