High Court of Delhi was dealing with the petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, inter alia, praying that an order be passed restraining the respondent from taking any further action in terms of the letters dated 11.02.2022 and 16.02.2022. In terms of the said letters, the respondent had called upon the petitioner to pay a certain amount, failing which, it would be recovered by encashment of the Bank Guarantees available with the respondent. The petitioner, thus, also prays that an order be passed restraining the respondent from making any claim for payment under the Performance Bank Guarantees submitted by the petitioner.
Brief Facts:
The respondent had issued a Notice Inviting Tender (NIT) for “construction of Behala Bazar, Taratala and Majerhat stations including all related works (architecture, electrical and mechanical (E&M), HVAC, fire detection and fire suppression system and Public health engineering works) in Joka BBD Bag corridor of Kolkata Metro Railway Line (JMS2)”. The petitioner submitted its bid in response to the said NIT. The petitioner was selected as the successful bidder and by a Notice of Award, the respondent awarded the contract to the petitioner for a total value of ₹1,62,66,53,074/-. In terms of the tender conditions, the petitioner was required to deposit 10% of the contract amount, being ₹16,26,65,307/- as performance security as well as an additional performance security of ₹7,26,560/. The petitioner stated that the value of the contract was subsequently reduced to ₹80.76 crores, however, the Bank Guarantees furnished by the petitioner were not correspondingly reduced.
Petitioner’s Contention:
Learned counsel for the petitioner submitted that it was incumbent upon the respondent to reduce the value of the Performance Bank Guarantee, as in terms of the tender conditions, the value of the Performance Bank Guarantee was pegged at 10% of the contract value. Since the contract value had been reduced by removing certain works from the scope of works of the petitioner, commensurate with the reduced value of the contract, the Performance Bank Guarantees were required to be reduced as well.
He further submitted that apart from the fact that the respondent possessed the Performance Bank Guarantees of higher value, there were certain amounts due and payable by the respondent to the petitioner and therefore, there was no question of the respondent invoking any Bank Guarantee. He submitted that the petitioner had made a claim amounting to ₹156.35 crores, which was being considered by the committee constituted for resolving the claims as raised by the petitioner. He submitted that encashment of the Performance Bank Guarantee(s) at this stage would amount to mulcting the petitioner with an additional burden while delaying the resolution of the claims made by the petitioner.
Respondent’s Contention:
Learned Counsel for the respondent submitted that the respondent has since, filed an affidavit clearly stating that no amount is payable to the petitioner. He submitted that the Performance Bank Guarantee will be invoked only for a sum of ₹9,21,22,006.33/- as that is the additional amount incurred by the respondent for executing the works, which were earlier contracted to the petitioner. He submitted that the petitioner could not complete part of the works and therefore, had requested that certain works be removed from its scope of works and awarded to another agency, at its risk and cost. He submitted that the amount of ₹9,21,22,006.33/-, recovery of which is sought by the respondent, is directly relatable to the failure on the part of the petitioner for executing the works in accordance with the contract.
HC’s Observations and Held:
After hearing both the sides Court stated that it is at once clear from the above that there are disputes between the parties in regard to the performance of the contract in question. Both the parties are claiming that certain amounts are due and payable by the other.
HC stated that insofar as the relief regarding interdicting a bank guarantee is concerned, the law relating to the same is well settled. An unconditional bank guarantee cannot be interdicted except on the grounds of egregious fraud and special equities. In the present case, no such ground exists. HC further stated that this Court is unable to accede to the prayer made by the petitioner for interdicting the Performance Bank Guarantee furnished by the petitioner.
Bench: Hon'ble Mr. Justice Vibhu Bakhru
Case Title: Gammon Engineers and Contractors Pvt. Ltd. v. Rail Vikas Nigam Ltd.
Case Details: O.M.P.(I) (COMM.) 68/2022
Read Judgment @Latestlaws.com
Picture Source :
