Rajiv Gandhi Institute Of ... vs M/S Punj Lioyd Ltd.Punj Lioyd Hous ...
2013 Latest Caselaw 4890 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

Court No.24
 

 
First Appeal No. 99 of 2013
 

 
Rajiv Gandhi Institute of Petroleum 
 
Technology (RGIPT)				........	Appellant
 
Versus
 
M/s Punj Lloyd Ltd. 				            ........	Respondent
 

 
****
 
Hon'ble Rajiv Sharma, J.

Hon'ble Dr. Satish Chandra, J.

Supplementary affidavit and rejoinder affidavit filed today on behalf of the appellant are admitted on record.

With the consent of learned Counsel for the parties, we proceeded to hear the instant appeal finally at the admission stage itself.

Heard Sri Manish Kumar, learned Counsel for the appellant and Sri Prashant Chandra, Senior Advocate, assisted by Sri Amol Kumar, appearing on behalf of the respondent.

Through the instant appeal under Section 37 of the Arbitration and Conciliation Act, 1996, appellant -Rajiv Gandhi Institute of Petroleum Technology [ in short referred to as 'RGIPT' ] has assailed the order dated 13.5.2013 passed in Civil Misc. (Non-Related) Case No. 3 of 2013 :M/s Punj Lloyd Ltd. Vs. Rajiv Gandhi Institute of Petroleum Technology under Section 9 of the Arbitration and Conciliation Act, 1996, by the District Judge, Raebareli, only to the extent of para 52 (2) i.e. "the respondent will be restrained to invoke bank guarantees furnished by the petitioner in favour of the respondents for more than Rs.7,85,77,981/- till 31.7.2013 or taking of affective hearing of the matter before the Arbitrator after exchange of the pleading of the parties, which ever occurs earlier.

Draped in brevity, the facts of the case in short are that in the month of December, 2009, the appellant had invited bids for the civil structural, waterproofing works site development for setting up of Rajiv Gandhi Institute of Petroleum Technology at Jais, Raebareli (U.P.), pursuant to which, respondent along with other persons submitted their bid for the aforesaid project. In the bid, respondent-company was declared successful bidder and as such, it was awarded the aforesaid project by way of LOI/FOI dated 4.6.2010. Subsequently, a detailed letter of acceptance was issued by the appellant on 27.10.2010 and thereafter, an agreement dated 8.11.2010 was entered between the appellant and respondent.

After executing the agreement between the parties, respondent furnished a Performance Bank Guarantee on 18.6.2010 for Rs.17,98,90,433/- as per the terms and conditions of the agreement. Respondent had also furnished a Bank Guarantee on 4.7.2011 for Rs.12,00,000/- against the Mobilization Advance in terms of the agreement.

According to the appellant, though the period prescribed under the contract for completing the civil structural work expired on 3.6.2012 and even after nine months beyond the said agreed date of completion, the respondent could not complete even a single building and only 40% of the contracted work was completed and on the other, on the basis of apprehension, on 21.3.2013, the respondent had filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the District Judge, Raebareli, which was registered as Civil Misc. (Non-related) Case No. 3 of 2013, claiming therein to grant of ex parte ad interim order restraining the appellant from taking any coercive action against the respondent and also prayed that the dispute be referred to the arbitrator in terms of the agreement. The District Judge, vide ex parte interim order dated 21.3.2013, while issuing notice to the defendant/appellant, restrained the defendant/appellant from terminating the contract.

In response to the notice, the appellant appeared before the District Judge and filed his reply, to which respondent had filed objection. Thereafter, the District Judge, vide order dated 13.5.2013, partly allowed the application of the respondent with the following directions :

"1. The respondent is directed to refer all the disputed matter have arisen from the contract for their settlement to the Arbitrator as per Clause-83 of the Contract (Annexure-4 of the petition) at earliest/as per Contract.

2. The Respondent will be restrained to invoke Bank Guarantees furnished by the petitioner in favour of the Respondent for more than Rs.7,85,77,981/- till 31st July, 2013 or taking of effective hearing of the matter before the Arbitrator after exchange of the pleadings of the parties, which ever occurs earlier.

3. Looking to the facts and circumstances of the case, costs of this case will be born by the concerned parties itself."

Feeling aggrieved by the directions contained in para 52 (2) of the order dated 31.5.2013, the appellant has preferred the instant appeal.

Sri Manish Kumar, learned Counsel for the appellant submits that Bank Guarantees were given in favour of RGIPT by the Bankers in terms of the contract entered into between the appellant/RGIPT and the respondent/PLL. The said bank guarantees are bipartite documents between RGIPT and Bankers. The Bankers had agreed that if default is made by PLL/respondent in performing any of the terms and conditions of the tender or in payment of any money payable by RGIPT, the Banker shall on demand pay to RGIPT, in such manner as RGIPT may direct, the sum specified in the said guarantee. Submission is that invocation of Bank guarantee can be restrained only if there is fraud or misrepresentation and not otherwise but in the instant case, in the application under Section 9 of the Act filed by the respondent in Arbitration Petition No. 3 of 2013 before the District Judge, Raebareli, the respondent did not allege that the Bank Guarantees given by the Bankers, at the request of PLL/respondent was obtained by fraud or misrepresentation. Therefore, the impugned order dated 13.5.2013 so far it relates to order restraining RGIPT to invoke Bank Guarantee for more than Rs.7,85,77,981 till 31.7.2013 or taking of effective hearing of the matter before Arbitrator after exchange of the pleadings, whichever is earlier, is contrary to law.

Elaborating his submission, Sri Manish Kumar submits that the Bank Guarantees are governed independently as per terms and conditions prescribed therein and is independent to the contract agreement entered into between RGIPT and PLL which is considered as security for the due performance of the respondent/PLL's obligation under the contract with appellant/RGIPT. Therefore, the injunction restraining invocation of Bank Guarantee on an application under Section 9 of the Act is not proper and legal.

Sri Manish Kumar has further submitted that admittedly, the time was essence of the contract and while passing the impugned order, a specific finding was recorded by the District Judge that due to non-compliance of project by the respondent, the appellant is under compulsion to pay huge amount of rent. He further submits that in the impugned order, it has specifically been mentioned that the appellant cannot be deprived and prevented from exercising its power but even then, the District Judge by passing the impugned order, restrained the appellant from invoking the Performance Guarantee given by the respondent.

Lastly, Sri Manish Kumar has submitted that during the pendency of the instant appeal, respondent filed an application under Section 17 of the Arbitration and Conciliation Act, 1996, praying for the continuation of the interim order granted by the learned District Judge, Rae Bareli dated 13th May, 2013 on the ground that the same expires of 31.7.2013. On this application, the sole Arbitrator has passed two orders on 30.7.2013; one on the application for adjournment fixing the next date as 9.10.2013 and by another order, restraining the present appellant to invoke Bank Guarantee until further orders should be continued either till the Hon'ble High Court passes any order in the appeal now or till next date of hearing by the Tribunal.

To strengthen the above arguments, Sri Manish Kumar, learned Counsel for the appellant has relied upon the judgment of the Hon'ble Supreme Court in M/s G.S. Atwal & Co.(Engineers) Pvt. Ltd. Vs. National Projects Constructions Ltd. [AIR 1988 Delhi 243] and Hindustan Construction Co. Ltd. Vs. State of Bihar and others [(1999) 8 SCC 436]

Refuting the submissions advanced by the Counsel for the appellant, Sri Prashant Chandra, Senior Advocate, appearing on behalf of the respondent submits that appellant has not come with clean hands either before this Hon'ble Court or before the sole Arbitrator insofar as during the first hearing held on 1.7.2013 before the learned sole Arbitrator, while the procedure as regards the arbitration proceedings along with procedure qua application under Section 17 of the Act was being laid down by the learned Arbitrator, neither the appellant had disclosed the fact that the appeal under Section 37 of the Act is pending before this Hon'ble High Court nor had they put forth any such objection that the acceptance of the procedure laid down by the learned Arbitrator qua Section 17 application would be subject to the order passed by this Hon'ble Court in the present appeal. He submits that the appellant was under an obligation to apprise the learned Arbitrator of the factual position that the appeal against the order passed by the learned District Judge has been filed by the appellant, which was likely to come up for hearing before this Hon'ble Court. Per contra, the appellant, while appearing before the learned Arbitrator had agreed to the procedure laid down by the learned Arbitrator without any reservation. Similarly, the appellant in the present appeal before this Hon'ble Court has not even disclosed that the parties, in terms of the direction of the learned District Judge, have proceeded with the appointments of the arbitrator in order to resolve the disputes or differences through the mechanism of arbitration as envisaged under Arbitration clause as contained in Clause 83 of the agreement between the appellant and the respondent.

Sri Chandra further submits that, admittedly, respondent could not perform the contractual obligations due to lapses, non-performance, breaches by the appellant. The said breaches, delays and lacunae were pointed out by the respondent during the execution of the project by way of its several letters addressed to the appellant as well as Project Management Consultant for the project. Therefore, if the present appeal is allowed and consequently the appellant goes ahead and invokes Bank Guarantee submitted by the respondent, it would amount to becoming a judge of its own cause by the appellant and would lead to severe loss and grave prejudice to the respondent.

Sri Chandra further submits that the contract between the parties under Clause 23 of GCC provides that appellant would have the right to recover any amount by forfeiting the security only in case where it has any claim against the respondent but during the pendency of the proceedings under Section 9 of the Arbitration & Conciliation Act, 1996 before the learned District Judge, Raebareli, the appellant had come up with a defence that it had provided mobilization advance to the respondent and an amount of Rs.7,85,77,981/- was still to be recovered from the respondent. Even at that stage, appellant did not have any claim beyond the said amount though the said claim stands denied by the respondent. In the light of such specific averments made by the appellant, the learned District Judge had granted stay for invocation of Bank Guarantee beyond the said amount of Rs.7,85,77,981/-. Therefore, the order passed by the learned District Judge is justified and does not call for any interference at this stage. Even otherwise, the Bank Guarantee submitted by the respondent is a conditional Bank Guarantee, wherein it has been mentioned that the payment under the guarantee would be due and payable in case of default by the respondent in performance of any of the terms and conditions of the tender or the default in payment of any money payable to the appeal. No such eventuality had occurred and hence, the appellant does not have a case for invocation of Bank Guarantee in question.

To strengthen his arguments, Sri Chandra has relied upon the judgment of the Hon'ble Supreme Court in Bhaskar Laxman Jadhav and others Vs. Karamveer Kakasaheb Wagh Education Society and others [AIR 2013 SC 523], J.G. Engineers Private Ltd. Vs. Union of India and another [2011 (5) SCC 758], Gail India Limited Vs. Bal Kishan Agarwal Glass Industries Ltd. [(2008) 8 SCC 161], Shrishti Infrastructure Development Corporation Ltd. Vs. Sunway Construction SDN BHD [2008 (5) SCC 222], Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals (P) Ltd. [2007 (7) SCC 125] and State of Haryana and others Vs. Continental Construction Ltd. [(2002) 10 SCC 508].

We have carefully gone through the impugned order dated 13.5.2013. The question whether the appellant was responsible or the respondents were responsible for the delay in execution of the work, is arbitrable. However, the pleas as raised and the number of decisions relied upon by the appellant have already been dealt with by the District Judge and the court below refused the prayer of the respondent-company regarding grant of any prohibitory order against the appellant in respect of termination of contract as the respondent-company failed to establish that it will face injury, which could not be properly compensated in terms of money. The Court below rightly assessed the difficulties in completion of project together with the risk of rising cost of the project.

In Adhunik Steels ltd. v Orissa managese and Minerals (P) Ltd (2007)SCC 124 the Apex Court has held that it is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and concept of just and convenient while passing interim measures under Section 9 of the Act.

The demonstration of irreparable or perhaps substantial harm is also necessary for the grant of a measure. This is because it is not appropriate to grant a measure where no irreparable or substantial harm comes to the movant in the event the measure is not granted.

In the instant case, so far as limited prohibitory order restraining the appellant from invoking Bank guarantee is concerned, there is no dispute to the fact that respondent-company has furnished a Bank Guarantee of Rs.39 crores in favour of the appellant. The Court below has observed in para 46 of the impugned order that the appellant has only established claim of Rs.7,85,77,981/-. Therefore, the Court below after considering all relevant factors including prima facie case and balance of convenience rightly came to the conclusion that limited prohibitory order is necessary to secure the ends of justice and consequently passed a limited restraint order to the effect that bank guarantee for more than its claim at Sl. No.'5' of the table indicated in the order dated 13.5.2013, i.e. Rs.7,85,77,981/- shall not be invoked.

We would like to add that a perusal of the impugned order also shows that as both the parties were blaming each other for the delay caused in the execution of contract, therefore, the court below directed the parties to sit together for reaching to an amicable settlement of the dispute but it could not be achieved as they have lost faith on each other perhaps, on account of ineluctable circumstances and even at one place, the Court below has observed in unequivocal words that the approach adopted by the appellant shows its highhandedness and unethical attitude. Therefore, the learned Court below after evaluating each factor has reached to just and reasonable conclusion, which needs no interference.

It may be noted that the learned District Judge in its order dated 13.5.2013 has restrained the appellant from invoking the Bank Guarantee furnished by the respondent-company for more than Rs. 7,85,77,981 till 311st July, 2013 or taking of effective hearing of the matter before the learned Arbitrator after exchange of the pleading of the parties, which ever occurs earlier. It also comes out from the record that the parties have already reached to the learned Arbitrator and it is always open for the appellant to raise counter-claims, if any, in respect of damages.

Taking the holistic view of the matter, we are of the considered opinion that there is no infirmity or illegality in the impugned order. The Court below has passed a detailed order running into several pages and has recorded sound and cogent reasonings and as such we find no good ground to interfere in the matter. However, we hope and trust that the parties will cooperate the learned Arbitrator so that the proceedings may reach to its logical conclusion expeditiously.

For the reasons aforesaid, the instant appeal is dismissed. Costs easy.

Dated: 5.8. 2013

Ajit/-