14th January, 1981


No. SO (L) D. S. (R) – (33) /80. – In exercise of the power conferred on him by section 39 read with section 167 of the Punjab Local Government Ordinance, 1979 (VI of 1979) here in after called the Ordinance, the Governor of the Punjab is pleased to make the following rules, namely: —


1.                  Short title and commencement. –

1.                  These rule may be called the Punjab Local Council (Contract) Rules, 1981.

2.                  They shall come into force at once.


2.                   Definitions. —           

1.      In these rules, unless the subject or context otherwise require, the following expressions shall have the meaning hereby respectively assigned to them, that is to say –

a.                   “agreement” means any kind of undertaking expressed or implied, made between a Local Council and other person for consideration, for the purchase or supply of goods or materials, or for the acquisition, purchase or transfer by grant, gift, sale mortgage, lease exchange or otherwise of any movable or immovable property or for the execution of work or for the performance of any service;

b.                  “Contract” means an agreement enforceable by law;

c.                   “Contractor” means a person entering into a contract with a local council and shall include a person submitting a tender under rule 7;

d.                  “form” means a form appended to these rules;

e.                   “Schedule” means the schedule annexed to these rules;

3    Words and expressions used but not defined in these rules and defined in the       Ordinance shall have the same meanings respectively assigned to them in the Ordinance .


3.                  Local Council not Responsible for unauthorized contract. — No contract shall be binding on a Local Council unless it is made in conformity with the provisions of these rules.


4.                  Authority to make contract. —         

1.                  Subject tot he provisions of the Ordinance and the rules framed there under all contracts shall be made on behalf of a Local Council by its Chairman; provided that if a contract is for an amount exceeding the powers of the Chairman specified in column 2 of Schedule I, it shall no be made without the prior approval of the Local Council.

2.                  All contracts made by the Chairman on his own authority shall be reported to the Local Council in Form C-I at the meeting next following the making of the contract.

3.                  The provisions of this rule shall apply to every variation or discharge of contract to he same extent as to the original contract.


5.                   Manner of making contracts. –

1.                  A formal deed of agreement shall be executed between the local council and the contractor for every contract.

a.                   The performance whereof is subject to such conditions as may be specified;

b.                  Which is to be made after inviting tender; or

c.                   For the acquisition, purchase, lease, sale or transfer to any immovable property.

2.                  All agreements by or on behalf of a local council shall be signed by the Chairman and attested by tow witnesses and shall bear the seal of the local council and shall be executed in such form as would bind him if it were made on his own behalf and may in the like manner and form be varied and discharged.

3.                  All agreements shall be written on a stamped paper of the appropriate value and shall, where necessary, be registered under the law for the time being in force.

4.                  All contracts shall be recorded in a Contract Register to be maintained in Form C-2.

5.                  All agreements and other documents to the contract shall be kept in the custody of the Chairman.


6.                  Personal responsibility of the person approving or making contract. –      The Chairman making or approving a contract shall be personally responsible for ensuring that –

i.                    the contract is made without coercion, under influence, fraud or misrepresentation;

ii.                  the parties are competent to make the contract;

iii.                the contract does not involve any favoritism;

iv.                no official or member or the local council is directly or indirectly interested in the contract;

v.                  the contract s in the best interest of the local council and in making it full advantage has been taken of the comparative rate available in the market; and

vi.                the contract is legally in order.


7.                   Tender when to be invited. –

1.                  Subject to the provisions of sub-rule (2), the Chairman shall, at least seven days before entering into a contract involving an expenditure exceeding rupees twenty five thousand, give public notice n a newspaper inviting tender for such contract and may accept any of the tenders so made which appear to him, upon a view of all the circumstances, to be the most advantageous


Provided that 

i.                    if the rejects the lowest tender or al the tenders made in pursuance of the public notice, the reasons for his so doing shall be recorded;

ii.                  if it is a contract interred into with the approval of the local council, the approval of the local council shall be obtained before rejecting the lowest tender; and

iii.                the Chairman may in case of calamity or any other emergency and with the previous sanction of the local council, dispense with the formality of inviting tender, and enter into a contract with any person for the execution of any work, for the provision of any supplies with due regard to the quality of work or speedy execution of he contract.

Explanation.   The Local Council shall be the sole authority to determine whether there has occurred any calamity or other emergency and its decision in this behalf shall be final.

2.                  Subject to sub-rule (3) a public notice in respect of  a tender for an amount not exceeding the amount referred to in sub-rue (1) shall be pasted or affixed at some conspicuous place at the office of the local council.

3.                  The local Council may, in cases where the question of securing comparative prices or rates is not involved, authorize the Chairman to enter into a contract without inviting tender.


8.                  Provisions as to tender. –

1.                  No tender shall be deemed to be valid unless. –

a.                   it is sealed;

b.                  in the case of a tender submitted by a firm, it is signed by each member of the firm or a person holding a power-of-attorney or their behalf; and

c.                   if is accompanied by earnest money equal to two per cent of the amount of tender, in cash or currency note, or the amount of earnest money is deposited in any other manner specified by the local council .

2.                  A local council may in special case, for reasons to be recorded in writing, waive the condition regarding the deposited of earnest money.  

3.                  All tenders shall be opened by the Chairman at the time and place specified in the public notice issued under rule 7, in the presence of such contractors as may be present and the Chairman, shall affix his initial and date on every tender opened.


9.                   Security for performance of contracts. –

1.                  When a tender has been accepted under the provisions of these rules an agreement, where necessary shall be entered into between the contractor and the local coucil, and the contractor shall be required to deposit, in the specified manner and within the time fixed, such sum as together with the earnest money, if any, will make up a sum equal t one tenth of the amount of his tender, as security for the due performance of the  contract.

2.                  The security shall, on completion of the contract other satisfaction of the Chairman but after the maintenance period, if any prescribed under the agreement, be refunded to the contractor.


10.               Enforcement of contract. –

1.                  The Chairman shall take such steps as may be necessary to enforce the performance of contract in accordance with the terms and conditions thereof and to the best interest other local council.

2.                  Where a contract is not performed according to its terms and conditions, the chairman shall take such action as may be necessary to invoke the penalty clause of the contract and to safeguard the interest to he local council.

3.                  On the completion of the contract, the Chairman shall record a certificate to the  effect, and if the contract was made without approval of the local council, a report regarding its completion shall be submitted to the local council .






[RULE 4]


Value of amount of contract which can be entered into by the chairman.


Category of Local Council

On his own authority

With the approval of the Local Council




1.         Contract for the acquisition, purchase or transfer byegrant, gift, sales mortgage, exchange or otherwise except that of a lease, of immovable property or any interest taken on and right thereto. —

Municipal Corporation



Zila Council



Municipal Committee



Town Committee



Union council



2.         Contract for the lease of immovable property —


Rental value not exceeding Rs.

Municipal Corporation



Zila Council



Municipal Committee



Town Committee



Union Council



3.         Other contracts —

Up to the value


Municipal Corporation an Zila Council

Rs. 3 Lacs



Municipal Committee with estimated annual income exceeding Rs. One Crore.

Rs. 50 Thousand


Town Committee with annual income exceeding Rs. Ten lacs.

Rs. 25 Thousand


Other Municipal Committees

Rs. 30 Thousand


Town Committee

Rs. 10 Thousand


Union Council

Rs. 2 Thousand









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