Bjcl-Brite(Jv) Through Its Lead ... vs National Highway Authority Of ...
2009 Latest Caselaw 96 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 OMP.No.17/2009

%15.01.2009                         Date of decision: 15.01.2009

BJCL-BRITE(JV) through ITS LEAD ... Petitioner
PARTNER M/S BHOLASINGH JAIPRAKASH
CONSTRUCTION LIMITED (BJCL)
                        Through:    Mr Ashish Bhagat with Mr Abdhish
                                   Chaudhary and Ms Manisha Suri,
                                   Advocates.

                               Versus

NATIONAL HIGHWAY AUTHORITY                        .... Respondent
OF INDIA (NHAI)
                        Through: Mr Chetan Sharma, Sr Advocate with
                                 Mr Ashim Bhatt and Mr Ranjit Sharma,
                                 Advocates.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   No

2.    To be referred to the reporter or not? No

3.    Whether the judgment should be reported
      in the Digest?                        No


RAJIV SAHAI ENDLAW, J. (ORAL)

1. The petition under Section 9 of the Arbitration Act, 1996 was

got listed yesterday post lunch. Finding no case for the grant of ex

parte order and on the submission of the counsel for the petitioner

that if the notice for a longer date is issued, the petition would

become infructuous, notice of the petition was issued to the

respondent for today. The counsel for the petitioner today in the

morning informed that some of the banks had, in pursuance to the

invocation of the bank guarantee by the respondent No.1, already

issued and delivered cheques thereunder to the respondent. It was

also informed that notice of termination of contract had also been

received from respondent. The senior counsel for the respondent

also confirmed the said fact and stated that he had been unable to go

through the voluminous paper book in the short time and requested

the matter to be taken up later in the day. It was agreed that the

cheques already received by the respondent shall not be encashed

till then.

2. The counsel for the parties have been heard. The petitioner in

this petition has claimed three reliefs. Firstly, of a direction to the

respondent to constitute Dispute Review Board (DRB) under clause

67.1 of the contract; secondly for restraining the respondent from

encashing and/or receiving payments under the bank guarantees and

lastly for a direction to the respondent not to terminate the contract.

3. The senior counsel for the respondent has urged that since the

contract has already been terminated, the DRB also cannot be

constituted. However, I do not consider it necessary to adjudicate

the said aspect since in my view the relief claimed of constitution of

DRB does not fall within the ambit of Section 9 of the Act.

4. As far as the third relief claimed is concerned, the senior

counsel for the respondent has urged that the same has become

infructuous, the notice of termination of contract having been

already served on the petitioner. The counsel for the petitioner

controverts, arguing that the notice is not effective as yet and

termination will come into effect on 14th day from the said notice

dated 13th January 2009 and as such the said relief can still be

granted. A copy of the notice has been handed over in court. Clause

63.1 of the contract enables the respondent to terminate the

contract in the eventualities prescribed therein, upon giving 14 days

notice to the petitioner and in certain other eventuality, immediately.

In my view, the 14 days time is to expel the contractor from the

project site. The said time is to enable the contractor i.e., the

petitioner, to remove itself and its goods and equipment from the

site, whereafter the respondent becomes entitled to expel. It cannot

be said that the termination does not come into effect till expiry of 14

days.

5. The grant of interim orders by the court, in relation to

arbitration proceedings, under Section 9, in my view, is to be

governed by the provisions to grant of prohibitory, mandatory and

other interim reliefs in the suits. Section 41(e) of the Specific Relief

Act bars the grant of permanent injunction to prevent the breach of

contract the performance of which would not be specifically

enforced. The contract in the present case was for the construction

of the balance work for 8-laning of 16.500 to 29.300 km of NH-1 in

the State of Delhi. The counsel for the petitioner has also, fairly not

urged that the said contract is specifically enforceable. He has,

however, urged that the work is in national interest and the disputes

had arisen between the respondent and the contractor earlier

engaged for the said work, and the respondent took a fairly long time

thereafter in assigning the work to the petitioner. It is stated that if

the respondent is permitted to terminate the agreement with the

petitioner also, it would not be in the interest of the work and would

lead to further delays in completion of the works. It is urged that the

petitioner is in a position to complete the works within the next six

months provided the respondent complies with its obligations under

the agreement and does not cause any hindrance as has been doing

till now. It is stated that the disputes, in fact, are not between the

petitioner and the respondent but of the petitioner with one

particular official of the respondent and this court should intervene

and refer the parties to a committee or to the mediation cell for the

purpose of ensuring and in the interest of timely execution and

completion of the works. The petitioner is stated to be willing in all

respects to ensure the same. It is further urged that the delays were

not attributable to the petitioner but owing to running traffic, of

flooding and caused by villagers and delays in obtaining change of

land use. The senior counsel for the respondent has, of course,

controverted the aforesaid. He has argued that it is the utter failure

on the part of the petitioner to complete the work inspite of

opportunities which has led to the notice of termination and there is

no possibility of the petitioner completing the works and if mediation

is attempted or further opportunity given to the petitioner, it would

lead to further delays. Various factors in this regard have been

mentioned but opportunity for filing the counter affidavit having not

been granted, I do not deem it necessary to record the same. Suffice

it is to state that this court at this stage is not equipped to or to go

into such disputed facts. The completion of work, as per the

petitioner, is still dependent upon performance of certain tasks by

the respondent.

6. The fact remains that there are serious disputes and

differences between the parties and it does not appear that there is

possibility of mediation or conciliation, when the counsel for the

respondent upon instructions has communicated that the respondent

knowing the past conduct of the petitioner is not willing for the

same. In my opinion no purpose would be served in giving an

opportunity to the respondent to file a counter affidavit or a reply to

the petition. In my view, owing to the bar contained in Section 41(e),

the interim measure of restraining termination of contract which is

not specifically enforceable cannot be granted. The Apex Court in

Cotton Corporation of India Ltd v United Industrial Bank AIR

1983 SC 1272 has held that when the relief of permanent injunction

cannot be granted owing to bar in Specific Relief Act, the question of

granting interim relief does not arise.

7. The only other relief remaining is of the stay of the encashment

of the bank guarantees or of receiving payments thereunder. The

bank guarantees are of two kinds i.e., performance bank guarantees

and bank guarantees against retention money. The bank guarantees

are unconditional, whereunder the bank which had furnished the

guarantees at the instance of the petitioner in favour of the

respondent had agreed to make payments to the respondent

thereunder upon the respondent's first written demand and without

any cavil or argument and without the respondent being required to

prove or to show grounds or reasons for the demand for the sum

specified therein.

8. The petition does not even plead fraud in the obtaining of the

bank guarantees of the nature on which ground alone it has been

held that the courts can intervene in the encashment of the bank

guarantees.

9. A faint attempt was made to urge that where cheques have

already been issued, the relief sought is of restraining encashment

thereof and the principles of injunction relating to bank guarantees

shall not apply. The argument does not even deserve a discussion

and is rejected.

10. It is the case of the petitioner that the encashment of the bank

guarantees is malafide. It is averred that the respondent spurred

into invoking the said bank guarantees immediately on receiving

notice of stay by this court of encashment of the bank guarantees for

Rs 3 crores against mobilization advance. It is further argued that

the petitioner has already applied to the respondent for constitution

of DRB and it is the DRB which is to make efforts for settlement of

disputes which have arisen between the parties and till then the

bank guarantees cannot be encashed. It is next contended that if the

stay of the bank guarantee is given, the respondent shall not suffer

adversely in as much as the respondent has provided in the contract

that if the encashment of the bank guarantee is interfered with by

the court, the respondent would be liable for interest for the delay at

12% per annum. It is also contended that the delays in execution of

the work have been occasioned by the respondent or for the reasons

attributable to the respondent. It is urged that the said delays on the

part of the respondent are admitted in the termination notice even.

It is further urged that the earlier contractor had obtained a stay

from this court and of which the petitioner was not informed and

therefore a fraud was committed by the petitioner in obtaining the

bank guarantees from the respondent. The counsel for the petitioner

had also argued that the action of the respondent is malafide, the

respondent had forwarded to the petitioner a supplementary

agreement as signed by the respondent with Nagarjuna Construction

company and which is contrary to the existing contract between the

parties. It was urged that the respondent has invoked the bank

guarantee to coerce the petitioner into signing the said

supplementary agreement. It is also argued that the retention money

bank guarantees cannot be invoked because the question of

appropriating retention money would arise only after the specified

period.

11. The aforesaid averments again are controverted by the senior

counsel for the respondent. It is argued that the contract

commenced from 29th December, 2005 and was to be completed

within 18 months and which time was of the essence of the

agreement. It is further argued that the petitioner was granted

extension of time without any damages from 28th June, 2007 to 24th

July, 2008 and thereafter till 31st December, 2008 with liquidated

damages.

12. The documents filed disclose that the various aspects of the

project were fully in the know of the petitioner. Whether the delay is

attributable to the respondent or not has to be determined in the

arbitration proceedings between the parties. The petitioner at the

time of taking the work was aware of and/or was expected to be

aware of nature thereof. The petitioner knew of disputes of

respondent with earlier contractor. The petitioner raised various

queries before executing the agreement and which were answered

by the respondent. No case of fraud of the egregious nature so as to

vitiate the underlying transaction is made out. Disputes of such

nature are there in all cases of bank guarantee and have not been

held sufficient to grant injunction.

13. As aforesaid the contract being of a nature not specifically

enforceable if the respondent is found to be in the wrong, the

petitioner would be entitled to damages from the respondent. At this

stage, the bank guarantees being unconditional and the Apex Court

having deprecated the practice of the courts interfering in the bank

guarantees in spite of the law having been laid down repeatedly by

the Apex Court with respect thereto, no case for interference in the

bank guarantees is made out. The clause of the contract regarding

the constitution of the DRB and/or regarding payment of interest for

delay in payment of bank guarantee would not justify this court in

interfering with the bank guarantees. Similarly, merely because the

DRB has not been constituted would not entitle the petitioner to have

the stay of the termination or of bank guarantees. If the intent had

been that till the DRB is constituted and/or is in session, the parties

would not take action which they were otherwise entitled to take

under the agreement, the contract would have so provided.

14. The retention money was to be retained by the respondent out

of payments made to the petitioner under the contract. Only as a

facility to the petitioner, it was permitted to furnish bank guarantee

against the same. The petitioner thus is not entitled to restrain the

respondent under the bank guarantee receiving the said money.

Moreover the terms of the bank guarantee, which alone are to be

seen at this stage, do not merit the submission of petitioner.

15. I therefore do not find any merit in the petition. The same is

dismissed. The respondent shall be entitled to encash the cheques

which on the suggestion of the court were ordered to be not

encashed till now.

RAJIV SAHAI ENDLAW (JUDGE) January 15, 2009 M