Earnest Money, Security

Deposit and Retention

Money
By-
Charu Shroff (M030)
Sameer Siddique (M031)
Shresth Suneja (M032)
Earnest Money
• Assurance or guarantee in form of cash
• By the contractor to keep his offer open for
consideration
• Confirm his intentions to take up the accepted work as
per terms and conditions in the tender
• In case of failure, amount forfeited to government
• No interest is payable to the contractors
Earnest Money
• If < Rs. 250/-, cash deposit in Divisional or Sub-
divisional office
• If > Rs. 250/-, deposit in Treasury/Bank
• Or deposit in form of ‘Deposit at call Receipt’ of a
scheduled bank duly guaranteed by RBI.
• Works upto Rs. 5,00,000/- @ 2-1/2% of estimated cost
as earnest money, max of Rs. 10,000/-
• Works above Rs. 5,00,000/- @ 2% of estimated cost as
earnest money, max of Rs. 20,000/-
Return of earnest money
• Except three lowest tenderes should be returned within
a week from date of receipt of the tenders
• Second and third lowest tenderes should be returned
within 15 days od acceptance of tender, if offer is not
considered
• Earnest money of lowest tenderer whose tender is
accepted is retained as security deposit for due
performance of contract
Security Deposit
• Money that should be deposited by the contractor
whose tender has been accepted
• It renders himself liable to the department
• If work is not carried out according to the specifications,
time limit & condition of contract it pays for the
compensation amounting part/whole of his security.
• Earnest money deposited at the time of tender is
treated as security money.
Security Deposit
• Additional money of security money is deducted from
progressive bills.
• Above 1 lakh (10% on 1st lakh & 7.5% on the balance)
• Above 2 lakh (10% on 1st lakh, 7.5% on 2nd lakh & 5% on
balance)
• Subject to a max of 1 lakh only is deducted from the
progressive bill.
• Security deposit is refundable after prescribed
maintenance period
• In order to relief to the contractor a percentage
(normally 50%) of the security money is refunded for
Retention Money
• When any claim for payment arises out of or under the
contract against the contractor.
• Engineer in-charge is entitled to withhold & also have
lien to retain sum or sums in whole or in part from
security deposit till finalization or adjustment of any
such claim
• If security deposit is insufficient to cover the claim, the
engineer in-charge is entitled to withhold and have lien
to retain from any sum or sums found payable to the
contractor under the same contract or any other
contract pending finalisation or adjustment of any such
claim.
Security Deposit Vs Retention
Money