In a petition u/s 9 of Arbitration & Conciliation Act, 1996 (the Act) seeking restraint against the Respondent from invoking and/or encashing and/or seeking extension of Bank Guarantees furnished by the Petitioners, the Delhi High Court stayed, in exercise of jurisdiction under Section 9 of the Act, that invocation of Bank Guarantees by a losing party to an arbitration in the post-Award stage, and the Bank Guarantees were directed to be returned.
A Petrochemical Complex (the Respondent) consisting of several interdependent units (Dual Fee Cracker Units (‘DFCU’), the Polyethylene Unit (‘PE unit’) the Polypropylene Unit (‘PP unit’) to name a few) selected petitioner as the successful bidder for construction of PP & PE, for which two separate contracts were entered into. The construction was to be completed within 28 months of its execution. The General Clause laid an obligation on the Petitioner to deposit performance and advance Bank Guarantee to secure mobilization advance paid by the Respondent, and Petition did so. The commission was envisaged to be completed before October 2013 but it was actually commissioned in February & April, 2017, respectively for PP & PE.
There are certain disputed facts which are claimed by the Petitioner but averred by the Respondent. One such fact is the inclusion of several stages in the Contract, namely Construction and Commissioning of PE & PP Units to carry out Performance Guarantee Test Runs (‘PGTR’, for short), post commissioning services for six months, providing as built drawings, supply of test reports, fulfilling of all warranty obligations. The fact that the Contractual terms provided for issuance of Certificate of Completion, Acceptance of Works and Discharge Certificates, for completion of Contract was averred by the Respondent, and so was the Petitioner’s claim of issuance of Arbitration Notice ‘before’ mechanical completion, pre-commission and commissioning of the project on May 18, 2015 (Arbitration Proceedings were not carried on until Commissioning in 2017).
The petitioner’s primary claim was for damages on account of delay on the part of the respondent in the completion and commissioning of the project while the Respondent’s case was that it is entitled to liquidated damages for the delay in commissioning of both PE and PP units attributable to the petitioners and also for the losses and damages incurred by the respondent on account of defects and damages discovered in the PE unit.
The Arbitration proceedings continued for four days in September 2017, during which the Bank Guarantees were alive, and the Petitioner also extended validity of some of these in 2019 in response a representation made to this effect by the Respondent. In January 2020, the Arbitral Award was passed but, again dispute governing the amount of amount, so applications seeking clarifications were filed. The Award was challenged by the Respondent u/s 34 of the Act. In the meanwhile the Bank Guarantees were expiring and representations for extension were by the Respondent, but to no avail. Due this the Respondent invoked the Bank Guarantees by making representations through emails. This invocation was thus challenged by the Petitioner before the Delhi High Court. The Court disposed of the matter with directions to the petitioner to extend validity of Bank Guarantee for one month, during which the Respondent was to get his matter u/s 34 listed. Again, applications for clarification were submitted by the petitioner, but were dismissed by the Court. Thereafter, an appeal was preferred by the Petitioner before the Division Bench, which was disposed of to the effect that the Bank Guarantee issued by IDBI was valid till Dec 2020, therefore, the Respondent was covered.
Again, the Respondent wrote to the Petitioner for extension of Bank Guarantees other than the ones issued by IDBI, to which the Petitioner responded that it was supposed to be extended only for a month as per the Court’s order. The Respondent thus wrote for invocation of the Bank Guarantees, which was challenged before the Delhi High Court. While allowing the petition, the Court held that restrained the respondent from invoking / encashing the bank guarantees. It is also directed the respondent to return to the petitioners the said bank guarantees. The direction to return the bank guarantees by the respondent to the petitioners was directed to be not given effect till June 29, 2020 (including the said date).
Case Details
Before: The Hon’ble High Court of Delhi
Bench: Hon’ble Mr. Justice V Kameswar Rao
Case Title: Technimont Pvt. Ltm & Ors v ONGC Petro Additions Ltd
Case No O.M.P. (I) (COMM)87/2020
Date of Judgement: June 20, 2020
Read Judgement @LatestLaws.com
