Delhi High Court
Emaar Mgf Construction Pvt Ltd vs Delhi Development Authority & Ors on 20 December, 2010
Author: Vipin Sanghi
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 29.11.2010
% Judgment delivered on: 20.12.2010
+ O.M.P. 633/2010 & IA 14210 and 15795/2010
EMAAR MGF CONSTRUCTION PVT LTD ..... Petitioner
Through: Mr. P.V. Kapur, Sr. Adv.
(S.G. Solicitors)- Mr. Sunil Goel,
Dheeraj Singh, Sushil Bhartiya,
Aman Anand and Pranav Sapra,
Advocates
versus
DELHI DEVELOPMENT AUTHORITY & ORS ..... Respondent
Through: Ms. Indira Jaisingh, ASG with Mr.
Ajay Verma and Ms. Sonam Anand,
Advocates
Mr. U.C. Mittal and Mr. Ankur Mittal
for R-3
CORAM:
HON'BLE MR. JUSTICE VIPIN SANGHI
1. Whether the Reporters of local papers may
be allowed to see the judgment? : Yes
2. To be referred to Reporter or not? : Yes
3. Whether the judgment should be reported
in the Digest? : Yes
JUDGMENT
VIPIN SANGHI, J.
1. The petitioner has preferred the present petition under
Section 9 of the Arbitration and Conciliation Act, 1996 to seek an
interim order of injunction against the respondent no.1, DDA to stay
the effect and operation of the notice dated 16.10.2010 issued by it;
to restrain the respondent no.1 from giving effect to the demand as
raised in the said notice; to restrain the respondent no.1 from taking
any steps pursuant to the notice dated 16.10.2010, and; to restrain
the respondent No.1/DDA from invoking the three bank guarantees
aggregating to ` 183.00 crores , as furnished by respondent No.2 State
Bank of Patiala (who have furnished their guarantee for ` 33 crores
being BG No. 5079408BG0000654) and respondent no.3, i.e. State
Bank of India (who have furnished their Guarantee for ` 150 crores
being BG No. 0480308BG0010173), to any extent whatsoever.
2. Corresponding injunction is sought against respondent nos.2
and 3 banks from encashing the aforesaid bank guarantees furnished
by them at the behest of the petitioner in favour of respondent no.1,
DDA.
3. The petitioner company is a real estate developer and claims
to have undertaken various real estate development projects all over
the country. The petitioner states that sometime in 2006, the
respondent DDA invited bids for development and construction of
Commonwealth Games Village on a parcel of land comprising 11
hectares adjacent to Akshardham Temple in NOIDA. The petitioner
was shortlisted along with other 11 bidders, and eventually selected as
the successful bidder. The construction of residential towers of the
Commonwealth Games Village was to be undertaken on Public-Private
Participation (PPP) basis.
4. The parties entered into a Project Development Agreement
(PDA) on 14.09.2007. This agreement contains an arbitration
agreement in clause 17. The petitioner has filed the present petition
under Section 9 of the Act by relying upon the said arbitration clause
contained in the Project Development Agreement.
5. The petitioner claims to have made payment of earnest
money of ` 80.25 crores and also an amount of ` 120.375 crores
towards upfront fee. The petitioner also states that it appointed various
consultants and architects to execute the project.
6. Under the terms of the agreement, "Project Completion Date"
was defined to mean the date when all residential facility are
completely developed in all respects (including landscaping),
technically fit to be occupied and ready to use/livable, with no pending
construction, unfinished work, construction equipments, debris,
construction material etc. on the project site and certified in writing by
the Monitory Committee. (Clause 1.1.20).
7. The petitioner, who acted as a project developer, was obliged
to completely develop the project by 01.04.2010 (Clause 3.11). The
date of completion of the Project is deemed to be the date when all
Residential Apartments are completely developed and are technically
fit to be occupied, including all other associated facilities and amenities
and a completion / occupancy certificate in this regard has been
obtained from NDMC/MCD and DDA.
8. Under clause 3.1, the Project Developer was, inter alia,
obliged to develop the residential facility at the project site within the
time frames as set out in greater detail in Schedule III to the
Agreement. Clause 3.1 reads as follows:
"3.1 The Project Developer shall undertake to develop the
Project Site and construct such capacity of residential
accommodation and meeting such specifications and
requirements as are specified in greater detail in
Schedule II to this Agreement. The Project Developer
shall develop the Residential Facility at the Project Site
within the time frames as set out in greater detail in
Schedule III to this Agreement."
9. Annex III/Schedule III contains the project milestones which
the petitioner was obliged to attain. The same reads as follows:
Annex 3 PROJECT MILESTONE
A. Following are the Project Milestone to ensure timely completion
of the Project.
Milestone Milestone Time from the date of
No. signing of Project
Development
Agreement i.e. D- Day
(estimated at July 15,
2007) including all
holidays/Sundays
1 Foundation Work (including Plinth D+120 days i.e.
Level) upto Plinth Level for 50% November 12, 2007
Blocks and Mock Unit completion
2 Structure work upto G+4 level, with D+240 days i.e.
associated electrical works + November 12, 2007
Foundation work including Plinth
Level for rest of the books
3 Structure Work upto terrace level, D+420 days i.e.
with associated electrical works September 7, 2008
and B.W. upto G+4 level
4 Completion of brick work upto D+600 days i.e March
terrace level and internal plaster, 6, 2009
flooring, etc. for 5 levels, with
associated electrical works
5 Completion of flooring and D+780 days i.e.
finishing, with associated electrical September 2, 2009
works of all blocks all levels upto
terrace level
6 External finish of all blocks and all D+840 days i.e.
levels November 1, 2009
7 Completion of all electric work D+870 days i.e.
including lifts, E.S.S etc and December 1, 2009
completion of U.G.R./ Pump Rooms/
Lifts/ Pump Sets etc.
8 Completion of all development D+900 days i.e.
work including landscaping December 31, 2009
9 Project Completion Date April 1, 2010
Note: No exclusions, including time taken by DDA in giving
approvals/ notifications, will be allowed to be considered in the
calculation of time taken for the achievement of Project Milestone.
B. The liquidated damages amount to be paid by the Project
Developer to DDA in case of non-achievement of each of the
aforesaid Project Milestone shall be calculated as follows:
a. Rs.15,00,000 (Rupees Fifteen Lakhs Only) a day for each day of
delay for the first fifteen (15) days of delay;
b. Rs.25,00,000 (Rupees Twenty Five Lakhs Only) a day for each
day of delay for the next fifteen (15) days of delay;
c. Rs.50,00,000 (Rupees Fifty Lakhs Only) a day for each day of
delay thereafter till the date of achievement of that Project
Milestone or Termination Date, whichever is earlier.
I am also informed that the figure of ` 25 lacs set out in para
B(b) as liquidated damages, stands reduced to ` 20 lacs, by agreement
of parties.
10. Under clause 6 of the agreement, the petitioner was required
to submit performance security for ` 400 crores in the form of
unconditional bank guarantee(s) in accordance with the format
specified in Schedule VI, from scheduled commercial bank acceptable
to the respondent, DDA. Clause 6.2 of the agreement, inter alia,
provides as follows:
"6.2 DDA shall have the rights to invoke the Performance
Security as recourse in the Project Developer Event of
Default including but not limited to on account of an event of
non-compliance to the milestones or persistent delays by
the Project Developer in implementing the Project, in
accordance with the terms of the Performance Security.
Without prejudice to the aforesaid, DDA shall have the right
to invoke the Performance Security under the following
events:
i. In case the Project Developer is unable to deposit the
liquidated damages for delay in achieving any
Milestone the said Performance Security shall be
forfeited for an amount as computed under Schedule
III.
ii. In case of default by the Project Developer in meeting
the defects liability obligations mentioned under
Clause 7 below, to the extent of Rs.5,00,00,000/-
(Rupees Five crores only) in case of water-proofing
defects and Rs.5,00,00,000/- (Rupees Five crores only)
in case of other defects.
iii. In case of default by the Project Developer in meeting
the deficiency charges obligations mentioned under
Clause 8.12.3 to the extent of Rs.5,00,00,000/-
(Rupees Five crores only).
iv. In case of default by the Project Developer in meeting
its obligations mentioned under Clause 8.14.2 below,
to the extent of Rs.2,00,00,000/- (Rupees Two crores
only).
In the event DDA invokes the Performance Security, the
Project Developer shall have to furnish a fresh Performance
Security for the invoked amount from a scheduled
commercial bank, failing which, the DDA shall be entitled to
terminate this Agreement.
The performance security shall be returned in the following
manner: ... ... ..."
11. The admitted position is that in terms of clause 6.2, the
respondent/DDA, from time to time, partially returned the bank
guarantees furnished as performance security and continued to retain
the performance security of ` 183 crores. These performance bank
guarantees are valid till 31.12.2010. Performance security of Rs.17
crores, apart from the aforesaid amount of Rs.183 crores, was also
retained, to be returned in terms of clauses (d), (e) and (f) of clause 6.2
12. The petitioner states that there is no dispute between the
parties that the petitioner achieved milestone nos.1 to 7 on time.
Accordingly, the bank guarantees to the extent of ` 200 crores were
returned by the respondent to the petitioner.
13. The petitioner further states that at the Commonwealth
Games Village, construction/development activity was being carried
out by other agencies/corporations/contractors besides the petitioner,
which included respondent no.1 DDA as well. The scope of work of the
petitioner under the Project Development Agreement did not include
all the construction/development work of the Commonwealth Games
Village. Once the milestone no.7 had been achieved by the petitioner,
the only thing that remained to be completed, on the part of the
petitioner, was external landscaping and connection of intermediaries
from the water/sewage lines and electrical connection after the main
lines had been laid and completed by the respective agencies including
the DDA, DJB, ECIL and BSES.
14. Insofar as the external landscaping work is concerned, the
same included hard scape-consisting of road and pathways, and soft
scape consisting of trees, shrubs, grass etc. The petitioner states that
the external landscaping work could not be completed unless and until
all the work of every agency including DJB, BSES, DDA etc. were
completed.
15. It is claimed that these agencies were not working in tandem
with each other. The petitioner states that under Schedule III, there
was a period of only 30 days provided for achieving milestone no.8,
after milestone no.7 had been achieved. The same could be achieved
only if the other agencies had also completed their respective works.
The petitioner also states that it could not have carried out the
landscaping work before the laying of the underground cable,
water/sewage lines etc. by third party agencies had been done, as
these agencies would otherwise have dug up the work done by the
petitioner.
16. The petitioner states that it complied with all its obligations,
which it could, for achieving the milestone no.8 by 01.03.2010 and
made an application in the prescribed format on 29.03.2010 to the
DDA for issuance of the completion certificate. It is stated that the
respondent, DDA was also called upon to take over possession of the
towers. However, the respondent no.1 failed to take over possession.
17. It is averred that respondent no.1 neither issued the
completion certificate to the petitioner, nor refused the same within
the specified period of 7 days as provided in the Project Development
Agreement. On 03.09.2010, the respondent DDA requested the
petitioner to provide certain documents to enable them to process the
request of the petitioner for issuance of occupancy certificate. On the
same day, without waiting for any further documents from the
petitioner, the respondent no.1 issued a temporary occupancy
certificate, and on the same day, it also issued the occupancy
certificate in relation to the Commonwealth Games Village to the
Organising Committee, wherein it was stated that the said occupancy
certificate was being issued on the basis of statutory clearances. The
petitioner states that the factum of issuance of the occupancy
certificate establishes that the project was completed and fit to be
occupied.
18. The respondent no.1, by its letter dated 20.05.2010, alleged
that the milestones had not been met by the petitioner within the time
granted under the agreement, and threatened to levy liquidated
damages on the petitioner on account of the said alleged default. By
letter dated 09.06.2010, the DDA demanded liquidated damages of `
13.45 crores from the petitioner alleging that there were defects and
delays. The petitioner disputed the allegations of delays and defects.
19. The petitioner states that the respondent took over the
possession of the towers constructed by the petitioner much after the
date when they were completed. It is also stated that the respondent
coerced the petitioner for extending the validity of the bank
guarantees/performance securities. The petitioner claims that there
was a lot of negative publicity for the Commonwealth Games Village in
the media. However, after the intervention of Prime Minister's Office,
the other agencies completed their respective obligations. The
petitioner submits that the Commonwealth Games were held
successfully, and the Commonwealth Village was occupied by
thousands of athletes and officials without any complaints. The
Commonwealth Games Village was highly appreciated by everyone,
including the media, and the negative media reports turned positive.
The petitioner also relies on the letter dated 07.10.2010 addressed by
the Lt. Governor of Delhi to the Prime Minister in support of its case
that the petitioner was not guilty of breach of the agreement.
20. After the completion of the Commonwealth Games, the
petitioner received a letter dated 16.10.2010 from the DDA on
20.10.2010. In this communication, the DDA alleged that the project
had not been completed even till 16.10.2010. The DDA by this letter
demanded liquidated damages amounting to ` 83.70 crores on account
of the alleged delay in achieving of milestone nos.8 and 9. The DDA
also threatened that, in case the said amount is not deposited by the
petitioner, the performance bank guarantees submitted by the
petitioner would be encashed to the extent of the aforesaid amount.
21. The petitioner sent a reply dated 20.10.2010 to the DDA
denying that there was any delay in the achieving of any milestones
and repudiated its liability. It was also alleged that the DDA was
seeking to unjustly enrich itself, and that it was acting in an illegal
manner.
22. The respondent DDA invoked the performance bank
guarantees of the petitioner on 23.10.2010 for the entire amount of `
183 crores, i.e. ` 150 crores from the State Bank of India and ` 33
crores from the State Bank of Patiala. The petitioner submits that,
even without waiting for a week from the date of receipt of the letter
dated 16.10.2010 (which was received by the petitioner on
20.10.2010), the said bank guarantees have been invoked.
23. The petitioner submits that the respondent/DDA has played a
fraud of an egregious nature on the petitioner by invoking the said
bank guarantees, in as much as, even though nothing was lacking from
the side of the petitioner, and the petitioner has fulfilled all its
contractual obligations within the stipulated time, the two bank
guarantees have been invoked by the DDA. This is despite the fact
that it is respondent No.1/DDA and other agencies, who have not
fulfilled their obligations within the stipulated time. The petitioner
states that due to the delays and defaults of the DDA and the other
agencies involved in the development work, "the entire landscaping
work, dependent on such performance by respondent No.1 and its
other agencies, could not be completed in time". It is further
submitted that respondent No.1, for its own breach, cannot levy any
liquidated damages on the petitioner. It is yet to be determined as to
who is in breach and in default. It is submitted that respondent No.1
has no right to invoke the bank guarantees for recovery of liquidated
damages.
24. It is further submitted by the petitioner that the Occupancy
Certificate in terms of the Delhi Building Bye-laws has been issued by
the respondent/DDA. Therefore, it is not open to the DDA to contend
that the project, or any part of it, is not complete. The petitioner
submits that respondent No.1 is entitled to retain the bank guarantees
in the sum of ` 17 crores in terms of clause 6.2(d) (e) and (f) of the
Project Development Agreement, including a guarantee of ` 5 crores
towards performance security for rectification of defects. The petitioner
submits that, even if there are any so-called defects in the works done
by the petitioner, the same would not justify the invocation of the
performance bank guarantees for the amount of ` 183 crores.
25. It is further argued that the invocation of the bank guarantees
by the respondent/DDA has been done at the behest of the Ministry of
Urban Development, Government of India. The petitioner has placed
on record a letter dated 20th October, 2010 issued by the Ministry of
Urban Development, Government of India to the Vice Chairman, DDA
stating that the DDA may, inter alia, proceed to invoke the bank
guarantees furnished at the instance of the petitioner. The petitioner
submits that the DDA is an independent entity and it is the DDA which
is a party to the Project Development Agreement. The Ministry of
Urban Development, Government of India has no role to play in the
matter and the invocation of the bank guarantees has been done, not
on account of an independent application of mind by the DDA but,
under the influence of the Ministry of Urban Development. It is argued
that this also shows that the invocation of the bank guarantees is not
bona fide but is fraudulent.
26. Learned Senior Counsel for the petitioner Mr.P.V.Kapur in his
submissions has argued that in their communication dated 16th
October, 2010 the respondent/DDA had primarily made complaints of
"defects" allegedly existing at the site. He submits that the
respondent/DDA had sought to quantify the liquidated damages on
account of the alleged non-completion of milestone Nos.8 and 9, and
quantified the sum at ` 83.70 crores. In this communication, the
demand made by the respondent/DDA was for deposit of ` 83.70
crores only, and it was stated that in case the amount is not deposited
within seven days, "the amount shall be realized after encashing the
performance guarantee equal to the above amount." He, therefore,
submits that, in any event, the invocation of the bank guarantees to
the tune of ` 183 crores is wholly unjustified and fraudulent. He
submits that a party who is aware of the fact that he is not entitled to
recover the entire amount for which the bank guarantee has been
furnished, but still proceeds to invoke the bank guarantee for the
entire amount, acts fraudulently. He refers to the reply filed by the
respondent/DDA in support of this submission. In their reply the DDA
has given a "preliminary estimate" of the amount that the petitioner is
allegedly liable to pay. The said "preliminary estimate" reads as
follows:-
i. Liquidated damages upto 15.10.10 Rs.83.70 crores
ii. Liquidated damages from 16.10.10 till
15.11.10 (filing of this Reply) (@ Rs.20
lakhs per day x 2) Rs. 12.40 crores
iii. Liquidated damages from 16.11.10 @
Rs.20 lakhs per day x 2 till the completion
of the project
iv. Amount spent by Answering Respondent as
payment to various authorities for different
permissions/ services, which were
otherwise the sole liability of Petitioner
(provisional) Rs. 49.11 crores
v. Amount spent by Answering Respondent to
make the Project area operational for the
Commonwealth Games (Provisional) Rs.20.80 crores
v. Damages for loss of goodwill and
reputation of Answering Respondent due to Being
the acts, omissions and breaches of determined
Petitioner.
vi. Other damages and losses Being
determined
27. He submits that the aforesaid estimate shows that as on the
date of invocation of bank guarantees, i.e. 23rd October, 2010,
admittedly, the amount of ` 183 crores was not due as liquidated
damages, even if the computation made by the respondent DDA were
to be accepted for the sake of arguments. He submits that even if the
specific figures stated in the aforesaid tabulation are added up, the
same fall short of ` 183 crores. He further submits that the Heads (v)
and (vi) above are not even covered by the performance bank
guarantees furnished at the behest of the petitioner.
28. Mr. Kapur submits that the Monitoring Committee constituted
in terms of the agreement is the authority empowered to certify the
completion of the works under the Project. Till date, the Monitoring
Committee has not returned a finding that there has been a delay on
the part of the petitioner in achieving milestone Nos.8 and 9. In this
regard, he refers to the minutes of the 31st meeting of the Monitoring
Committee held on 6th May, 2010. In this meeting, the Monitoring
Committee constituted a Sub Committee for assisting it in recording
the Completion Certificate as per Clause 3.11 of the Agreement. This
Sub-Committee has two representatives of the DDA and two
representatives of the petitioner. He also refers to the minutes of the
32nd meeting of the Monitoring Committee held on 31st July, 2010. The
Monitoring Committee clarified that the Sub Committee constituted, as
aforesaid, had been formed to submit the report of completion on
milestones 8 and 9 and not for recording completion certificate under
Clause 3.11 of the Project Development Agreement. He also refers to
the minutes of the 33rd meeting held on 25th October, 2010 to submit
that the Sub-Committee did not meet due to preoccupation of the
officers of the DDA. He submits that the 1st meeting of the Sub-
Committee constituted, as aforesaid, was held on 28th October, 2010.
Even on that date, the meeting remained inconclusive. By reference to
letter dated 10th November, 2010 stated to have been issued by the
petitioner to the respondent/DDA, the petitioner submits that it is the
officers of the DDA who did not turn up for the meeting of the Sub
Committee scheduled for 9th November, 2010. The submission of
Mr.Kapur is that until and unless the date of achievement of milestone
Nos.8 and 9 is finalized, it cannot be said that the petitioner has not
achieved the said milestones in time. Consequentially,
respondent/DDA cannot invoke the performance bank guarantees as
done by it.
29. Mr. Kapur submits that the respondent/DDA has never
demanded any damages for loss of goodwill or loss of reputation or on
any other account. No notice in this regard was issued to the
petitioner prior to invocation of the bank guarantees. He, therefore,
submits that the aforesaid tabulation prepared by the respondent is an
afterthought to somehow come as close to figure of ` 183 crores as it
could.
30. Mr. Kapur submits that the petitioner communicated the fraud
being played upon by the respondent/DDA to respondent Nos. 2 and 3
banks on 23rd October, 2010. (I may note that the said communication
is contained in the compilation of documents tendered in Court during
the course of arguments). He, therefore, submits that the respondent
Banks had notice of the fraud sought to be played by the respondent
DDA upon the petitioners.
31. Mr. Kapur submits that to permit the respondent/DDA to
encash the bank guarantees in question would also lead to
irretrievable injustice to the petitioner inasmuch, as, under Clause 6.2
of the Project Development Agreement, in the event DDA invokes the
performance security, the petitioner shall have to furnish a fresh
performance security for the invoked amount from a scheduled
commercial bank, failing which, the DDA shall be entitled to terminate
the agreement. Consequently, upon the invocation of the bank
guarantee of ` 183 crores, the petitioner shall become obliged to
furnish a fresh guarantee for the said amount and upon failure to do
so, the agreement may be terminated by the DDA. He submits that if
the agreement is terminated by the DDA, the petitioner would not be
able to enforce its right to sell a part of the total number of flats
developed by the petitioner on its own. He submits that the invocation
of the bank guarantee would be highly unjust and will cause ruination
to the petitioner. Mr.Kapur submits that the petitioner has been made
a scapegoat by the respondent DDA for its own failure in carrying out
its works and responsibilities in completing the works undertaken by it
for holding Commonwealth Games.
32. Mr. Arvind Nigam, learned Senior Advocate has also made his
submissions in support of the petition. He submits that under the
Unified Building Bye-Laws, there is no such thing as "temporary",
"interim" or "conditional" Completion Certificate. He submits that once
the Completion Certificate is granted, the same is final and conclusive
of the fact that the building works have been completed in accordance
with the sanctioned plans. He submits that the notice of completion of
the works had been given on 29th March, 2010 and the respondent
DDA had issued a so called temporary Occupancy Permit on 3rd
September, 2010. On the same day, the Occupancy Permit was issued
by the DDA, valid till completion of Commonwealth Games, 2010. He
submits that under Bye-Law 7.6 of the Unified Building Bye-Laws, the
completion certificate is deemed to be granted after period of sixty
days, unless the application seeking completion certificate is
specifically rejected. He submits that in this case, the said application
had not being rejected.
33. Mr. Kapur has relied upon the following decisions in support of
his submissions:-
(i) Humboldt Wedag India Pvt. Ltd. v. Dalmia Cement Ventures
Ltd., (2010) 4 Arb. L.R 11;
(ii) Regional Manager, Central Bank of India v. Madhulika Guru
Pradad Dahir & Ors., AIR 2008 SC 3266;
(iii) Bhaurao Dagdu Paralkar v. State of Maharashtra & Others,
(2005) 7 SCC 605;
(iv) Hindustan Steelworks Construction Ltd. v. Tatapore & Co.,
AIR 1996 SC 2268.
34. Upon invocation of the aforesaid two bank guarantees on
23.10.2010 of ` 33 crores and ` 150 crores respectively issued by State
Bank of Patiala and State Bank of India, on the same day, the State
Bank of India issued two pay orders in faovur of the respondent DDA
for ` 90 crores and ` 60 crores, and the State Bank of Patiala issued
one pay order for ` 33 crores.
35. When the matter was taken up by this Court on 25.10.2010,
the aforesaid position was brought to the notice of this Court. At that
stage, the Court did not grant any interim injunction in respect of the
pay order of ` 90 crores issued by State Bank of India. However, in
respect of the pay order for ` 60 crores issued by State Bank of India
and the pay order for ` 33 crores issued by State Bank of Patiala, the
following operative order was passed:
"In case the said pay orders have already been encashed,
it is made clear that there would be no interim order.
However, in case the pay order of Rs.33 crores has not
been encashed and the amount not credited to the
account of the respondent/DDA, status quo shall be
maintained in respect thereof.
In relation to the pay orders issued by State Bank of India
aggregating to Rs.150 crores, as aforesaid, in case the
amounts have not been credited to the accounts of DDA,
status quo shall be maintained in respect of the pay order
for Rs.60 crores bearing no.764469 dated 23.10.2010.
However, the pay order for Rs.90 crores may be
encashed".
36. Ms. Indira Jaisingh, learned Additional Solicitor General
appearing on behalf of the respondent DDA, firstly, submits that this
petition has become infructuous as the two bank guarantees issued by
State Bank of India and State Bank of Patiala stood encashed on
23.10.2010 itself.
37. She submits that the encashment of the said bank guarantees
meant that the proceeds were taken out of the bank accounts of the
petitioner, and the petitioners bank accounts were debited by the
concerned bank. In support of her submission, she places reliance on
an order dated 30.04.2010 passed by this Court in Cont. Case (C)
No.281/2010, ACG Hospitality Pvt. Ltd. v. R.K. Sharma & Anr. In this
case, when the matter was taken up for hearing in W.P. (C)
No.696/2010, the Court had granted an interim injunction in favour of
the petitioner by directing that in case the bank guarantee had not
been encashed, the encashment of the guarantee by kept in abeyance
till the next date of hearing. The writ petition was adjourned to
10.02.2010. On that date, counsel for the DDA as well as the counsel
for the bank had submitted that the bank guarantee of the petitioner
stand encashed. On the basis of these statements, the writ petition
was dismissed as infructuous.
38. Thereafter, the writ petitioner preferred the aforesaid
contempt case by placing reliance on the communication dated
16.02.2010 issued by the Bank to show that payment of invoked bank
guarantee had been put in clearing on 13.02.2010, which would show
that on the date of hearing, i.e. 10.02.2010, a false statement was
made. The Court dismissed the contempt case as it was shown that
the bankers cheque in favour of DDA had been prepared on
01.02.2010 by the bank, however, the same was cleared on
13.02.2010. The Court accepted the submission of the bank's counsel
that on preparation of the bankers cheque, the bank guarantee stood
encashed.
39. I would have agreed with the aforesaid submission of learned
ASG, had the order dated 25.10.2010 merely stated that " in case the
bank guarantees have already been encashed, it is made clear that
there would be no interim order". However, while passing the order
dated 25.10.2010, I was conscious of the fact that so far as the
petitioners bank accounts were concerned, they had already been
debited on 23.10.2010, as respondent nos.2 and 3 banks had already
prepared pay orders in favour of the DDA. Details of these pay orders
were also recorded in my order dated 25.10.2010. Pertinently, I had
directed that "in case the said pay orders have already been encashed,
it is made clear that there would be no interim order".
40. The "encashment" referred to by me in the order dated
25.10.2010 pertained to the encashment of the pay orders into the
account of the respondent DDA. The purport of the said order was that
if the monies covered by the bank guarantees/pay orders have already
been credited to the account of the DDA, there would be no interim
order. The aforesaid aspect becomes clear upon reading of the latter
part of the order. The Court had clearly observed that "in case the pay
order of Rs.33 crores has not been encashed and the amount not
credited to the account of the respondent/DDA, status quo shall be
maintained in respect thereof". A similar order was made in respect of
the pay order of ` 60 crores issued by State Bank of India.
41. The aforesaid order was passed on 25.10.2010, whereas the
pay orders had already been made and delivered to the DDA by the
respective banks on 23.10.2010. It was, therefore, not clear at the
time of passing of the order, whether the monies covered by the pay
orders had, or had not, travelled into the account of the respondent
DDA. I may note that on 25.10.2010, upon a query raised by the Court
as to whether any advance notice of the petition had been served on
the respondent DDA, the learned counsel for the petitioner had shown
to the Court a copy of an email communication stated to have been
issued to a standing counsel of DDA. Despite the said advance notice,
there was no appearance on behalf of the DDA on 25.10.2010 before
the Court. Therefore, the aforesaid aspect was not clarified before the
Court. As it transpires, the pay orders had not been encashed into the
account of the respondent DDA on 25.10.2010. I, therefore, reject the
aforesaid submission of learned ASG. It cannot be said that the
present petition has become infructuous, as the pay orders of ` 33
crores and ` 60 crores had not been encashed into the account of the
respondent DDA on 25.10.2010.
42. During the course of hearing, another grievance raised by the
learned ASG was that the respondent no.3 State Bank of India had
acted in collusion and connivance with the petitioner. The grievance is
that when there was a single bank guarantee of ` 150 crores issued by
respondent no.3 State Bank of India, there was no justification for
making two pay orders of ` 90 crores and ` 60 crores. She submits
that the State Bank of India should have prepared only one pay order
of ` 150 crores in response to the invocation of the bank guarantee by
the respondent DDA on 23.10.2010.
43. She had submitted that the respondent DDA had deposited
both the pay orders issued by the State Bank of India for ` 90 crores
and ` 60 crores simultaneously. However, only the pay order for ` 90
crores had been encashed and credited into the account of the
respondent DDA, and the second pay order for ` 60 crores had not
been encashed and credited into the account of the respondent DDA.
44. Upon the aforesaid grievance being raised, vide order dated
11.11.2010, this Court had directed the State Bank of India to file a
specific affidavit to explain its conduct in issuing two pay orders for `
90 crores and ` 60 crores upon invocation of a single bank guarantee
of ` 150 crores, and also to explain as to how the pay order of ` 90
crores was credited into the account of the DDA, whereas the second
pay order of ` 60 crores was not so credited, even though both of them
had been deposited at the same time.
45. Sh. Dinesh Chandra Mamgain, the Chief Manager, State Bank
of India, B.O. Overseas, STC Building, Janpath, New Delhi has filed his
affidavit dated 16.11.2010 in compliance of the said order. So far as
the aspect of issuance of two pay orders of ` 90 crores and ` 60 crores
is concerned, it is explained that the computer software of State Bank
of India does not permit issuance of a single bankers cheque in excess
of ` 99,99,999.99. Therefore, a single pay order for ` 150 crores could
not have been issued. Accordingly, two pay orders for ` 90 crores and
` 60 crores were issued on 23.10.2010. It is further explained that the
court order dated 25.10.2010 was served upon the State Bank of India
on 25.10.2010 itself. By that time, neither of the aforesaid two pay
orders had been cleared for payment in the normal course of business.
Accordingly, upon receipt of the Court order, the State Bank of India
had marked "stop payment" in respect of the bankers cheque/pay
order of ` 60 crores, while the other bankers cheque/pay order for ` 90
crores was cleared in due course of banking business on 26.10.2010. It
was further stated that the account of the respondent DDA was
credited with the proceeds of the pay order of ` 90 crores on
26.10.2010. The respondent State Bank of India has, therefore, stated
that it has acted in compliance of the court order dated 25.10.2010. It
has further been disclosed that the amount of ` 60 crores is still lying
outstanding in the bank office account, pending further instructions
from this Court.
46. The affidavit filed by the Chief Manager, State Bank of India
has not been disputed/controverted by the DDA. Therefore, the
explanation furnished by State Bank of India is accepted and the
grievance made by the respondent DDA in this regard is rejected.
47. The submission of the learned Additional Solicitor General Ms.
Indira Jaisingh is that the petitioner had not completed the project
within the specified time. She submits that in its communication dated
16.10.2010 the respondent/DDA had not only complained about the
defects existing at the site but had specifically stated that "the
basement flooring at the places and waterproofing of the lift wells have
not been completed till date." It was further stated in this
communication that an amount of ` 83.70 crores "....has become due
to be paid to DDA on a/c of non-completion of milestone No.8 and 9."
She submits that the contention of the petitioner that the only stand of
the DDA is with regard to existing defects, and not with regard to non-
completion of the work is incorrect.
48. She further submits that liquidated damages have been
provided under the PDA in Annexure-3 as extracted hereinabove.
These liquidated damages accrue on day-to-day basis. The respondent
had earlier quantified the liquidated damages in its communication
dated 9.6.2010 at ` 13.45 crores. Since then, with the passage of time
and non-completion of the works under the Project Development
Agreement, further liquidated damages had accrued and,
consequently, on 16.10.2000 the respondent/DDA had made a demand
of ` 83.70 crores. She submits that even thereafter, liquidated
damages have been accruing at the rate indicated in Annex 3.
49. She further submits that under clause 1.1.20 of the Project
Development Agreement, the project completion date is required to be
certified by the Monitoring Committee constituted under the said
agreement. The Monitoring Committee has representatives of the
petitioner, the respondent and independent members. The Monitoring
Committee has till date not recorded the project completion date, even
though, the project had to be completed by 1.4.2010. The Sub-
Committee referred to by the petitioner, as per the petitioners own
showing, is not concerned with the certification of the project
completion date. She further submits that even the achievement of
the 8th and 9th milestones as per Annexure-3 has not been recorded by
the Monitoring Committee.
50. She submits that the petitioner has admitted the said position
in its letter dated 20.10.2010. By reference to the tabulation filed by
the petitioner as Annexure P-18 which tabulates the dates on which
the towers were delivered to the DDA, she submits that Tower no.T-34
was delivered by the petitioner only on 24.07.2010, even as per its
own showing. However, in terms of Annexure-3 of the Project
Development Agreement, the same should have been delivered by
1.4.2010. She points out that in its rejoinder the petitioner admits that
only the residential flats have been delivered by it, and that too
belatedly. However, the definition of the expression "Project"
contained in the Project Development Agreement is much wider to
mean complete construction and development of the ready-to-use
residential facility at the project site (see clause 1.1.19). "Residential
Facility" means all use, building blocks, common areas, parking base,
roads, parks, landscaping etc. and other associated facilities like
sewerage, water, power, internet, telephone arrangements etc. at the
project site (see clause 1.1.22).
51. She submits that the temporary occupancy permit granted by
the respondent/DDA on 3.9.2010 cannot be used by the petitioner to
contend that the works under the project had been completed. She
submits that perusal of the letter dated 3.9.2010 issued by the DDA
granting temporary occupancy permit itself shows that according to
DDA "the completion certificate cannot be issued at this stage due to
non-compliance of the provisions of the Building Bye-Laws, 1983".
However, with a view to facilitate use and occupation of the flats
during Commonwealth Games 2010, temporary occupancy permit was
granted which was to remain valid till Commonwealth Games Village
was handed back by the Organizing Committee after the
Commonwealth Games, 2010. This communication made it clear that
the temporary occupancy permit was being issued without prejudice to
the show cause notice dated 22.7.2010 and the sealing-cum-
demolition order dated 20.8.2010 issued under Sections 30 and 31 of
the Delhi Development Act, 1957 and other communications issued in
that regard. The issuance of temporary occupancy permit expressly did
not create any right or basis whatsoever for processing of completion
certificate under clause 7.6 of the Building Bye-Laws.
52. She submits that the nation was faced with a serious situation
due to delays and defaults on the part of the petitioner in failing to
complete the project on time. There was immense adverse publicity
for the DDA and for the nation as a whole in India, and abroad. The
respondent/DDA had no option at that stage but to carry out some of
the works which the petitioner was obliged to undertake under the
Project Development Agreement. Thousands of athletes and officials
who were scheduled to attend the Commonwealth Games, 2010 had to
be put up in the Commonwealth Games Village, and it was necessary
to issue the temporary occupancy permit even though the project was
not completed by the petitioner. She places reliance on the
photographs filed along with the reply of the DDA to show the state of
affairs as existing at the site as on 7.8.2000. These photographs show
that there was large scale collection of garbage/malba at the site
which had not been cleared. No landscaping work had been
undertaken and there was collection of water in the basement floors of
the Apartment Blocks. She submits by reference to these photographs
that the water had collected in the basement floors of the Apartment
Blocks as the petitioner failed to carry out water proofing work and the
said situation has continued even till after the conclusion of the games.
Photographs taken as late as on 29th and 30th October, 2010 by the
respondent DDA of the apartment blocks have been placed on record
in support of the aforesaid submission.
53. Ms. Jaisingh submits that the present is not a case of a fraud
being played upon by the respondent/DDA upon the petitioner or the
issuing banks. She submits that the existence of disputes between the
parties with regard to the breach of the contract by one or the other
party, and the invocation of the bank guarantee in said circumstances,
does not tantamount to a fraud by the beneficiary. The allegations of
the petitioner do not relate to a fraud committed by the DDA in the
making of the bank guarantee or in its invocation. The allegation is
merely that it is the DDA which is in default. She submits that the
issue relating to default of one or the other party is an arbitral dispute.
However, the right of the respondent/DDA to invoke the performance
bank guarantee/security cannot be interdicted merely because the said
issue has not been resolved as of now. She further submits that the
fraud should pertain to the making of the bank guarantee. It is not
even the petitioner's case that the said bank guarantees were
obtained by the respondent by playing a fraud on the petitioner or
respondents No.2 and 3 banks. She submits that neither respondent
No.2 nor respondent No.3 have found the invocation of the bank
guarantees in question to be fraudulent, and this is evident from the
fact that they have honoured the said invocation and prepared pay
orders in favour of the respondent/DDA for the amount of the bank
guarantees and delivered the same to the DDA.
54. She submits that it is not even the petitioner's case that the
project is complete as per the Project Development Agreement. Even
if it is partially incomplete, it cannot be said that the same is complete.
55. With regard to the grievance of the petitioner that the bank
guarantees had been invoked even prior to expiry of seven days from
the date of receipt of the notice dated 16.10.2010, she submits that
the respondent was justified in invoking the said guarantees upon
receipt of the communication dated 20.10.2010 of the petitioner. In the
said communication the petitioner had denied any liability whatsoever,
and had even gone to the extent of demanding return of the bank
guarantees. The petitioner did not admit any part of the liability
towards liquidated damages or other damages, and repudiated the
right of the respondent to impose liquidated damages and invoke the
performance securities/bank guarantees. She also submits that the
petitioner, from the very beginning, was in default and did not even
have the resources to complete the works under the Project
Development Agreement. The petitioner had been pleading that due
to economic slowdown and the existing court cases they were not able
to raise the required funds for the completion of the project by
selling/booking their share of the apartments. They sought financial
assistance from the respondent/DDA to complete the project. To bail
out the petitioner and to ensure that the project is completed before
the Commonwealth Games, 2010, the respondent/DDA had agreed to
purchase a large number of flats which fell to the share of the
petitioner. She places reliance on the minutes of the meeting called by
the Lt. Governor on 24.4.2009, where the decision to purchase the flats
from the petitioner was taken. She further submits that disputes had
arisen between the petitioner and its sub-contractors during the
execution of the works, which also resulted in delays and defaults on
the part of the petitioner.
56. Ms.Jaisingh submits that right to invoke the performance
security is available to DDA upon the occurrence of an event of default.
It is not limited only to the non-compliance of the milestones or
persistent delays by the Project Developer in implementation of the
project. It can be invoked for other reasons as well. She places
reliance on language of Clause 6.2 in this regard which uses the
expression "including but not limited to ........" while dealing with the
reasons for which the Bank Guarantees may be invoked. The said right
to invoke the performance security is not limited to the four specific
instances mentioned in Clause 6.2 as extracted hereinabove as those
instances are mere illustrations. She points out that under Clause 12.1
the failure to achieve completion within the time period set out under
the agreement is an event of default.
57. Without prejudice to the aforesaid submissions, Ms. Jaisingh
also submits that the bank guarantee of ` 150 crores issued by the
State Bank of India could not have been successively encashed for
varying amounts. She submits that the DDA was, therefore, entitled to
invoke the same for the entire amount of ` 150 crores, as invoking the
said guarantee for a lesser amount would have resulted in the bank
guarantee for the remaining balance amount lapsing.
58. She further submits that the balance of convenience is in
favour of the DDA, as DDA is a statutory corporation and its solvency
cannot be doubted. In case the petitioner succeeds in the arbitral
proceedings that may be initiated between the parties, the respondent
would restitute the amount. She further submits that so far as the
petitioner is concerned, it bank accounts have already been debited
and, therefore, no prejudice would be suffered by it if the amounts are
credited to the account of the respondent/DDA. She further offered
that this Court may subject the respondent/DDA to such terms and
conditions as may be deemed just and equitable in relation to the
amount covered by the bank guarantees.
59. In support of her submissions she has placed reliance upon
the following decisions:-
(i) Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering
Works Pvt. Ltd., 1997 (6) SCC 450;
(ii) BSES Ltd. (Now Reliance Energy Ltd.) v. Fenner India Ltd. &
Anr., 2006 (2) SCC 728; and
(iii) U.P. State Sugar Corporation v. Sumac International Ltd., 1997
(1) SCC 568
60. In his rejoinder, Mr. Kapur has submitted that since the bank
guarantees in question are valid till 31.12.2010 and they can be
invoked for an amount upto ` 33 crores and ` 150 crores respectively,
the respondent/DDA is wrong in contending that if the said guarantees
had been invoked for lesser amount, the same could not have been re-
invoked in parts for the remaining balance amounts during their
currency. He further submits that if that was the apprehension in the
mind of the respondent/DDA, then the invocation of the bank
guarantee of ` 33 crores furnished by the respondent No.2/Bank can
not been explained, as the amount claimed in the communication
dated 16.10.2010 was only ` 83.70 crores. He also submits that the
learned ASG is not right in her submission that the fraud has to
necessarily pertain to the making of the bank guarantee, and does not
relate to its invocation. He further submits that the petitioner should
not be required to furnish a fresh bank guarantee in terms of clause
6.2, as it would cause irretrievable injustice to the petitioner.
61. Having heard learned counsel for the parties, considered their
respective submissions, and in view of the settled position of the law
on the subject, I am of the view that the petitioner is not entitled to
seek a restraint on the encashment of the bank guarantees in question
for the amount of ` 183 crores, or to any other relief as prayed for.
62. I may first deal with the submission of learned ASG that the
bank guarantees in question could not have been invoked partially and
repeatedly, and that if a partial invocation had been resorted to by the
respondent DDA, the same would have lapsed for the remaining
balance amounts even before the expiry of the period of currency of
the said guarantees.
63. On this submission being made, learned counsel for the
respondent State Bank of India was asked by the Court to specifically
take instructions as to the normal banking practice in such situations.
Learned counsel for the State Bank of India has stated that a bank
guarantee, unless there is a limitation contained in its terms that it
could be invoked only once, could be invoked repeatedly during its
currency, partially, so that the aggregate amount invoked by the
beneficiary does not exceed the maximum amount payable under the
bank guarantee.
64. A perusal of the bank guarantees in question dated
12.06.2008 (issued by State Bank of Patiala), the validity whereof was
extended vide extension dated 27.09.2010; and the bank guarantee
dated 11.06.2008 (issued by State Bank of India), the validity whereof
was extended vide extension dated 27.09.2010 upto 31.12.2010, does
not support the submission made by Ms. Jaisingh. The said bank
guarantees, inter alia, state that the said banks "do hereby
unconditionally and irrevocably undertake to pay to DDA an amount
not exceeding ... ... without any demur or merely on a demand in
writing from DDA, received by the bank on or before ... ... stating that
the amount claimed is due and payable by project developer. Any
such demand received by the bank on or before ... ... shall be
conclusive as regards the amount due and payable by the bank under
this guarantee. However, the banks liability to this guarantee shall be
restricted to an amount not exceeding ... ... ...". The bank guarantees
further recite "our liability under this agreement shall not exceed ... ....
..." It further states "we shall be liable to pay guaranteed amount or
any part thereof only and only if you serve upon us a written claim or
demanded on or before ... ... ...".
65. From the aforesaid language used in the bank guarantees in
question, it cannot be inferred that there is any limitation therein that
they could be invoked only once. The upper limit of the amounts for
which these bank guarantees were furnished, have been indicated in
the respective guarantees. Therefore, up to the upper limit/ceiling
fixed in the said bank guarantees, the beneficiary could invoke the
guarantees repeatedly during their currency, such that the total
amount invoked/drawn on the bank guarantees does not exceed the
upper limit/ceiling amount for which they are furnished.
66. Therefore, the alternate submission of Ms. Jaisingh that the
DDA had no option, but to invoke the entire amount of bank guarantee
of ` 183 crores cannot be accepted. As pointed out by Mr. Kapur, if the
apprehension of the DDA was that partial invocation was not
permissible in respect of the two bank guarantees in question, the DDA
should have invoked only one bank guarantee issued by State Bank of
India, which was for an amount of ` 150 crores, and there was no need
to invoke bank guarantee issued by State Bank of Patiala for ` 33
crores.
67. I may now deal with the submission of Ms. Jaisingh that it is
only a fraud in the making of the bank guarantee that would justify the
grant of an injunction against its invocation, and that the fraud in the
invocation of the bank guarantee would not justify the grant of
injunction against its invocation. The aforesaid submission of Ms.
Jaisingh is not supported by the case law placed on record. In
Hindustan Steel Works Construction Ltd. (supra), the Supreme
Court observed as follows:
"A demand by the beneficiary under the bank guarantee
may become fraudulent not because of any fraud
committed by the beneficiary while executing the
underlying contract but it may become so because of
subsequent events or circumstances. We see no good
reason why the courts should not restrain a person making
such a fraudulent demand from enforcing a bank
guarantee."
This argument has also been rejected by the Division Bench of
this Court in Humboldt Wedag India P. Ltd. (supra) in paragraph 18.
Therefore, the aforesaid submission of Ms. Jaisingh cannot be
accepted, and is rejected.
68. The law with regard to enforcement of an irrevocable and
unconditional bank guarantee payable on demand without demur, and
the circumstances in which the courts may grant an injunction against
the encashment of such a bank guarantee has been the subject matter
of various decisions of the Supreme Court from time to time.
69. I may first refer to the decision of the Supreme Court in U.P.
State Sugar Corporation v. Sumac International Limited, 1997
(1) SCC 568. In this case, the appellant corporation entered into a
contract with the respondent company for setting up a complete sugar
plant. The contract contained the stipulation regarding time for
completion of the work. The respondent was also required to furnish
bank guarantees for due delivery and for advance price to be paid by
the appellant to the respondent. The guarantees were irrevocable in
nature, payable by the guarantor to the appellant beneficiary on
demand, without demur. It was provided that the appellant shall be
the sole judge of whether, and to what extent, the amount had become
recoverable from the respondent, or whether the respondent had
committed any breach of the terms of the agreement. The bank
guarantee further provided that the right of the appellant to recover
from the guarantor any amount shall not be affected or suspended by
reason of any disputes that might be raised by the respondent as
regard its liability or on the ground that proceedings were pending
before any tribunal/arbitrator/court with regard to such dispute.
70. The contract was terminated by the appellant on the ground
of the respondents failure to complete the work within the time
granted under the contract as extended. The appellant also invoked
the bank guarantees furnished by the respondent. The respondent
filed a petition under section 20 of the Arbitration Act, 1940 for
appointment of an arbitrator and also filed applications for interim
relief under section 41(b) of the Arbitration Act, 1940 to seek stay
against encashment of the bank guarantees. The Civil Judge dismissed
the application, but in revision, the High Court allowed the same and
granted injunction restraining the appellant from enforcing the bank
guarantee. The Supreme Court allowed the appeal preferred by the
beneficiary, UP State Sugar Corporation.
71. The Supreme Court in this decision referred to its earlier
decisions and observed as follows:
"12. The law relating to invocation of such bank
guarantees is by now well settled. When in the course of
commercial dealings an unconditional bank guarantee is
given or accepted, the beneficiary is entitled to realize
such a bank guarantee in terms thereof irrespective of any
pending disputes. The bank giving such a guarantee is
bound to honour it as per its terms irrespective of any
dispute raised by its customer. The very purpose of giving
such a bank guarantee would otherwise be defeated. The
courts should, therefore, be slow in granting an injunction
to restrain the realization of such a bank guarantee. The
courts have carved out only two exceptions. A fraud
in connection with such a bank guarantee would
vitiate the very foundation of such a bank
guarantee. Hence if there is such a fraud of which
the beneficiary seeks to take advantage, he can be
restrained from doing so. The second exception
relates to cases where allowing the encashment of
an unconditional bank guarantee would result in
irretrievable harm or injustice to one of the parties
concerned. Since in most cases payment of money
under such a bank guarantee would adversely affect
the bank and its customer at whose instance the
guarantee is given, the harm or injustice
contemplated under this head must be of such an
exceptional and irretrievable nature as would
override the terms of the guarantee and the adverse
effect of such an injunction on commercial dealings
in the country. The two grounds are not necessarily
connected, though both may coexist in some cases. In the
case of U.P. Coop. Federation Ltd. v. Singh
Consultants and Engineers (P) Ltd. [(1988) 1 SCC 174]
which was the case of a works contract where the
performance guarantee given under the contract was
sought to be invoked, this Court, after referring extensively
to English and Indian cases on the subject, said that the
guarantee must be honoured in accordance with its terms.
The bank which gives the guarantee is not concerned in
the least with the relations between the supplier and the
customer; nor with the question whether the supplier has
performed his contractual obligation or not, nor with the
question whether the supplier is in default or not. The bank
must pay according to the tenor of its guarantee on
demand without proof or condition. There are only two
exceptions to this rule. The first exception is a case when
there is a clear fraud of which the bank has notice. The
fraud must be of an egregious nature such as to
vitiate the entire underlying transaction. Explaining
the kind of fraud that may absolve a bank from honouring
its guarantee, this Court in the above case quoted with
approval the observations of Sir John Donaldson, M.R. in
Bolivinter Oil SA v. Chase Manhattan Bank [(1984) 1 All ER
at p.351).
"The wholly exceptional case where an injunction
may be granted is where it is proved that the bank
knows that any demand for payment already made
or which may thereafter be made will clearly be
fraudulent. But the evidence must be clear both as
to the fact of fraud and as to the bank's knowledge.
It would certainly not normally be sufficient that this
rests on the uncorroborated statement of the
customer, for irreparable damage can be done to a
bank's credit in the relatively brief time which must
elapse between the granting of such an injunction
and an application by the bank to have it charged."
This Court set aside an injunction granted by the High
Court to restrain the realisation of the bank guarantee.
13. The same question came up for consideration before
this Court in Svenska Handelsbanken v. Indian Charge
Chrome [(1994) 1 SCC 502]. This Court once again
reiterated that a confirmed bank guarantee/irrevocable
letter of credit cannot be interfered with unless there is
established fraud or irretrievable injustice involved in the
case. Irretrievable injury has to be of the nature noticed in
the case of Itek Corpn. v. First National Bank of Boston
[566 Fed. Supp. 1210]. On the question of fraud this Court
confirmed the observations made in the case of U.P.
Coop. Federation Ltd. and stated that the fraud must be
that of the beneficiary, and not the fraud of anyone else.
14. On the question of irretrievable injury which is
the second exception to the rule against granting of
injunctions when unconditional bank guarantees are
sought to be realised the court said in the above
case that the irretrievable injury must be of the kind
which was the subject-matter of the decision in the
Itek Corpn. case. In that case an exporter in USA entered
into an agreement with the Imperial Government of Iran
and sought an order terminating its liability on stand by
letters of credit issued by an American Bank in favour of an
Iranian Bank as part of the contract. The relief was sought
on account of the situation created after the Iranian
revolution when the American Government cancelled the
export licences in relation to Iran and the Iranian
Government had forcibly taken 52 American citizens as
hostages. The US Government had blocked all Iranian
assets under the jurisdiction of United States and had
cancelled the export contract. The Court upheld the
contention of the exporter that any claim for damages
against the purchaser if decreed by the American Courts
would not be executable in Iran under these circumstances
and realisation of the bank guarantee/letters of credit
would cause irreparable harm to the plaintiff. This
contention was upheld. To avail of this exception,
therefore, exceptional circumstances which make it
impossible for the guarantor to reimburse himself if he
ultimately succeeds, will have to be decisively established.
Clearly, a mere apprehension that the other party will not
be able to pay, is not enough. In Itek case there was a
certainty on this issue. Secondly, there was good reason, in
that case for the Court to be prima facie satisfied that the
guarantors i.e. the bank and its customer would be found
entitled to receive the amount paid under the guarantee."
(emphasis supplied)
72. The Supreme Court also quoted from its decision in State of
Maharashtra v. National Construction Company, 1996 (1) SCC
735 the following passage:
"The rule is well established that a bank issuing a
guarantee is not concerned with the underlying contract
between the parties to the contract. The duty of the bank
under a performance guarantee is created by the
document itself. Once the documents are in order the bank
giving the guarantee must honour the same and make
payment ordinarily unless there is an allegation of fraud or
the like. The courts will not interfere directly or indirectly to
withhold payment, otherwise trust in commerce internal
and international would be irreparably damaged. But that
does not mean that the parties to the underlying contract
cannot settle the disputes with respect to allegations of
breach by resorting to litigation or arbitration as stipulated
in the contract. The remedy arising ex contractu is not
barred and the cause of action for the same is independent
of enforcement of the guarantee."
73. After referring to the aforesaid decision, the Supreme Court,
in para 16, observed as follows:
"16. Clearly, therefore, the existence of any dispute
between the parties to the contract is not a ground
for issuing an injunction to restrain the enforcement
of bank guarantees. There must be a fraud in
connection with the bank guarantee. In the present
case we fail to see any such fraud. The High Court
seems to have come to the conclusion that the
termination of the contract by the appellant and his
claim that time was of the essence of the contract,
are not based on the terms of the contract and,
therefore, there is a fraud in the invocation of the
bank guarantee. This is an erroneous view. The
disputes between the parties relating to the
termination of the contract cannot make invocation
of the bank guarantees fraudulent."
74. Pertinently, in UP State Sugar Corporation (supra), the
appellant/beneficiary was a sick industrial company in respect of which
a reference was pending before the Board For Industrial and Financial
Reconstruction (BIFR) under the Sick Industrial Companies (Special
Provisions) Act, 1985 (SICA). It was contended that if the appellant
were to encash the bank guarantees and receive the amounts, and the
respondent were to eventually succeed in the arbitration proceedings,
it may still not be able to realize its claim from the appellant. The
Supreme Court, however, rejected the said submission by observing
that the mere fact that a reference under SICA is pending before the
BIFR is not sufficient to bring the case in the ambit of "irretrievable
injustice" exception. The Supreme Court held that merely because the
case of the appellant was before the BIFR, it could not be presumed
that the appellant will, in no circumstance, be able to discharge its
obligations. The Supreme Court further held that this was not a
situation of the kind envisaged in the case of Itec Corporation, where
there was no possibility of recovery of any amount from the purchaser.
75. A comparison of the terms of the bank guarantee considered
by the Supreme Court in the case of UP State Sugar Corporation
(supra), with the terms of the bank guarantees in question (as
extracted herein above) shows that there is marked similarity between
them. In the present case as well, the bank guarantees in question are
unconditional and irrevocable and the respective banks have
undertaken to pay to the DDA without any demur, merely on a demand
in writing from DDA, stating that the amount claimed is due and
payable by the petitioner project developer. The banks have further
undertaken to pay the amounts under the bank guarantees in question
notwithstanding any dispute raised by the petitioner in any manner
whatsoever. The banks have clearly held out in their respective
guarantees that their liability under the guarantees is absolute,
unconditional, unequivocal and irrevocable.
76. A perusal of the petition and the submissions of the learned
senior counsels for the petitioner shows that the petitioner's primary
grievance is that the default has been on the part of the DDA and other
agencies which had led to the present situation, and that the
respondent DDA is unfairly seeking to put the blame on the petitioner
and making the same as a ground for invocation of the bank
guarantees. This is a dispute arising under the PDA, which would have
to be determined in arbitration. The invocation of the bank guarantee
by the DDA, merely because the petitioner raises the aforesaid
disputes, cannot be said to be fraudulent. On their very terms, the
bank guarantees do not require the respondent nos.2 and 3 banks to,
in any way, get embroiled in the claims and counter claims of the
parties with regard to the breach of the PDA by one or the other party.
77. I had the occasion to deal with the law on the subject in CDS
Money Exchange Bureau Pvt. Ltd. v. Thomas Cook & Others,
2007 (95) DRJ 369. In this case, the buyer had got the documentary
credit furnished in favour of the seller. The analysis of the law on the
subject contained in the said decision may usefully be reproduced:
"21. The law with regard to grant or refusal of injunction
on encashment of bank guarantees, at the instance of the
party at whose behest the bank guarantees have been
issued, is well settled. In Federal Bank Ltd. v. V.M. Jog
Engineering Ltd. and Ors. (2001) 1 SCC 663 the Hon'ble
Supreme Court, after reviewing the earlier decisions,
observed that courts ought not to grant injunction to
restrain encashment of bank guarantees or letters of
credit. There are, however, two exceptions to this rule, viz,
fraud and irretrievable damage. The contract of bank
guarantee or letter of credit is independent of the main
contract between the seller and the buyer. In case of an
irrevocable bank guarantee or letter of credit, the buyer
cannot obtain injunction against the final payment on the
ground that there was a breach of the contract by the
seller. The bank is to honour the demand for encashment if
the seller prima facie complies with the terms of the bank
guarantee or the letter of credit, namely, if the seller
produces the documents enumerated in the bank
guarantee or the letter of credit. If the bank is satisfied on
the basis of the documents that they are in conformity with
the list of documents mentioned in the bank guarantee or
the letter of credit and there is no discrepancy, it is bound
to honour the demand of the seller for encashment. It is
not permissible for the bank to refuse the demand on the
ground that the buyer is claiming that there is a breach of
contract. This obligation of the bank under the documents
has nothing to do with any dispute as to breach of contract
between the seller and the buyer.
22. The Supreme Court also observed that in order to
obtain injunction against the issuing bank, it is necessary
to prove that the bank had knowledge of the fraud. Hon'ble
Supreme Court relied on the observations of Kerr, J. in R.D.
Harbottle (mercantile) Ltd. v. National Westminister Bank
Ltd. (1978) QB 146 : (1977) 2 All ER 862 to state that
irrevocable Letters of Credit are "the lifeblood of
international commerce" and also observed:
Except possibly in clear cases of fraud of which the banks
have notice, the courts will leave the merchants to settle
their disputes under the contracts by litigation or
arbitration.... Otherwise, trust in international commerce
could be irreparably damages.
Quoting from the several other English decisions, the
Hon'ble Supreme Court observed:
Denning M.R. stated in Edward and Owen Engg. Ltd. v.
Barclays Bank International Ltd. that "the only exception is
where there is a clear fraud of which the bank had notice".
Browne, L.J. said in the same case: "but it is certainly not
enough to allege fraud, it must be established and in such
circumstances, I should say, very clearly established". In
Bolivinter Oil S.A. v. Chase Manhattan Bank AII ER at p.
352, it was said
where it is proved that the bank knows that any demand
for payment already made or which may thereafter be
made will clearly be fraudulent. But the evidence must be
clear, both as to the fact of fraud and as to the bank's
knowledge. It would certainly not normally be sufficient
that this rests on the uncorroborated statement of the
customer, for irreparable damage can be done to a bank's
credit in the relatively brief time 'before the injunction is
vacated.
Thus, not only must "fraud" be clearly proved but so far as
the bank is concerned, it must prove that it had knowledge
of the fraud. In United Trading Corporation S.A. v. Allied
Arab Bank it was stated that there must be proof of
knowledge of fraud on the part of the bank at any time
before payment."
78. In the facts as pleaded by the parties, it cannot be said that
the fraud pleaded by the petitioner is an established fraud, or even a
prima facie established fraud to the knowledge of the issuing bank. It
certainly cannot be said to be a fraud of an egregious nature, i.e. a
fraud which can be said to be outstandingly bad or shocking.
79. The same issue rose before the Supreme Court in BSES
Limited (supra). On a reading of para 2 of the said decision, I am
reminded of the submission made by Mr. Kapur that the invocation of
the bank guarantee is not in good faith and that the petitioner has
been made a scapegoat by the DDA. Para 2 of the decision reads as
follows:
"2. This is one more instance of an injunction being
sought against a beneficiary seeking to enforce
his/her rights under a bank guarantee, albeit with a
novel averment that "lack of good faith" or
"enforcing with an oblique purpose" constituted
further exceptions to the general rule against
intervention."
80. In this case, the appellant and the respondent entered into a
"wrap-around agreement", under which the respondent undertook to
perform the contractual obligation of the appellant in relation to the
contract awarded to it by M/s Godawari Sugars Ltd. on a turn key basis.
Clause 4 of the agreement provided that in case of any material
breach of any or all the contracts, BSES shall have the right to embark
upon the retentions and encashment of bank guarantees of all the
contracts. The bank guarantees were encashed and the respondent
invoked the arbitration agreement contained in the work/purchase
orders.
81. A petition under section 9 of the Act was preferred to seek a
declaration that the appellant shall not be entitled to invoke the bank
guarantees. Eventually, the matter travelled to the Supreme Court.
The Supreme Court, inter alia, held as follows:
"26. Accordingly, we are prima facie not satisfied that
performance had been duly and satisfactorily certified. Under
the terms of the "wrap-around agreement", the appellant was
entitled to encash all or any of the bank guarantees for
breach of the first respondent‟s obligations under any one of
the contracts. In our view, it is the case of the appellant
that there was no satisfactory performance of the
contract, as a result of which, the appellant was
justified in encashing the bank guarantee concerned.
Indeed, as per the terms of the bank guarantee itself,
the appellant is the best judge to decide as to when
and for what reason the bank guarantees should be
encashed. Further, it is no function of the second
respondent Bank, nor of this Court, to enquire as to
whether due performance had actually happened
when, under the terms of the guarantee, the second
respondent Bank was obliged to make payment when
the guarantee was called in, irrespective of any
contractual dispute between the appellant and the first
respondent. Indeed, in similar circumstances, this Court in
General Electric Technical Services Co. Inc. v. Punj Sons (P)
Ltd.,[(1991) 4 SCC 230] held:
"The Bank must honour the bank guarantee free from
interference by the courts. Otherwise, trust in commerce
internal and international would be irreparably damaged. It
is only in exceptional cases that is to say in case of fraud or
in case of irretrievable injustice, the court should interfere.
... The nature of the fraud that the courts talk about is
fraud of an „egregious nature as to vitiate the entire
underlying transaction‟. It is fraud of the beneficiary, not
the fraud of somebody else."
29. There is no dispute that arbitral proceedings are pending.
In fact, we were shown that one of the disputes referred to
arbitration is whether the bank guarantees are null and void.
Further, one of the substantive prayers in the arbitration
made on behalf of the first respondent, is to make an award
declaring the four bank guarantees unenforceable, illegal,
void and liable to be discharged. Further, there is also a
prayer for permanent injunction to restrain the appellant from
encashing the bank guarantees. Therefore, since this prayer is
already pending before the Arbitral Tribunal, we see no
situation of "irretrievable injustice" if, at the present moment,
the appellant is allowed to encash the bank guarantees. For
justice can always be rendered to the first respondent, if it
succeeds before the arbitrators. Nor do we see any special
equity in favour of the first respondent, when there is in fact a
dispute that performance was prima facie not satisfactory,
which enabled the appellant to encash all or any of the four
bank guarantees." (emphasis supplied)
82. In the light of the aforesaid decision, the submission of Mr.
Kapur that neither the monitoring committee, nor the sub-committee
have till date returned a finding with regard to the attainment of
milestone nos.8 and 9, is neither here nor there. The respondent
banks, under the terms of their respective guarantees, are not
concerned as to whether or not the said milestones have, in fact, been
achieved or not. Even if they have been achieved, as contended by
the petitioner, the invocation of the bank guarantees would not
tantamount to playing a fraud of an egregious nature by the
respondent DDA either upon the petitioner or the respondent banks.
The respondent DDA has been left to judge as to when, and for what
reasons, the bank guarantee should be invoked. It is not the function
of the respondent banks or even of this Court to enquire as to whether
due performance of the contractual obligations had actually taken
place or not, as, under the terms of the guarantees, the respondent
banks are obliged to make payment when the guarantee is called in,
irrespective of any contractual disputes between the petitioner and the
respondent no.1.
83. The submission of Mr. Kapur that the invocation of the bank
guarantees for Rs.183 crores is fraudulent because the respondent had
itself quantified its liquidated damages @ Rs.83.70 crores in its
communication dated 16.10.2010 also has no merit. Firstly, the said
communication shows that the demand for Rs.83.70 crores as
liquidated damages was made not only on account of defects, but on
account of non completion of the project.
84. As pointed out by the learned ASG, the liquidated damages
were arising on a day to day basis in terms of Annex III Schedule III to
the Project Development Agreement. The performance security could
be invoked by the DDA under clause 6.2, upon the occurrence of an
event of default. The exercise of the right to invoke the performance
security was not limited to an event of non compliance of the
milestones or persistent delays by the project developer in the
implementation of the project. The contract merely recites, as an
instance, that the performance security may be invoked, if the project
developer is unable to deposit the liquidated damages for delay in
achieving any milestone for the amount as computed under Schedule
III. Apparently, the communication dated 16.10.2010 was issued by
the DDA to the petitioner in the light of clause 6.2(i). However, the
respondent was entitled to invoke the said performance security to
claim not just the liquidated damages, but all other amounts that it
may claim.
85. The submission of Mr. Kapur that the DDA, on the date of
invocation of the performance security, was not entitled to recover the
sum of Rs.183 crores, by reference to the tabulation set out in the
reply of the DDA, misses the point that the said performance security
could be invoked upon occurrence of an event of default. The amount
that could be recovered from the said performance security was not
limited merely to the liquidated damages provided under the contract.
Even according to the petitioner, the delay in the completion of the
project (for which the petitioner holds the respondent DDA and other
agencies responsible) had indeed resulted in negative publicity for the
organizers including the respondent DDA. If, in the estimation of the
DDA, it was entitled to invoke the entire performance security
furnished by the petitioner, that is the business/commercial decision of
the DDA, with which the Court cannot interfere in these proceedings.
As the bank guarantees in question are unconditional; the banks have
undertaken to make payment of the amounts demanded
unconditionally; without any demur; without getting embroiled in the
disputes between the parties (including the dispute as to whether the
respondent DDA should have limited the invocation of the bank
guarantees in question to claim only the liquidated damages claimed
to have been suffered as on the date of the invocation), the court
cannot go into these aspects in these proceedings. That decision has
to be left to the wisdom of the DDA, as the parties have so agreed. If,
eventually, the arbitral tribunal finds that the invocation of the bank
guarantees was not partly, or wholly, justified, the arbitral tribunal can
always direct restitution of the amount with or without interest and/or
damages.
86. I may now deal with the judgments relied upon by Mr. Kapur
in the course of his arguments. In Humboldt (supra), the Division
Bench of this Court examined the various precedents on the subject of
invocation of bank guarantees/letters of credit and reiterated the
position that the fraud claimed to have been perpetuated by the
beneficiary upon the petitioner and the bank must be of an egregious
nature, meaning that the fraud should lead to gross injustice which
shakes the conscience of the Court, and that the fraud should be
known to the parties and the concerned bank. In this case, the
respondent beneficiary had cancelled the contract partly, and kept the
other part in abeyance. The terms of the bank guarantee, inter alia,
provided that the bank would pay the amount provided that the
beneficiary confirms to the bank at the same time in writing that the
supplier (at whose instance the bank guarantee had been furnished)
had not fulfilled all or any of his contractual obligations as stipulated in
the contract, including but not limited to, delivery of the agreed
quantity and/or the shipment of the product on the date agreed upon
with the purchaser. It further provided that "the liability of the bank as
contained herein shall automatically get reduced proportionately to the
value of such parts of the product (including all machineries and
equipments) that may have been successfully delivered as certified by
the purchaser based on which the advance or on account amount paid
by the purchaser have been adjusted in the corresponding invoices of
the supplier raised with respect to the contract".
87. The beneficiary/purchaser cancelled the order placed upon
the supplier. The reason for the cancellation was stated to be the
unforeseen financial crisis across the world, leading to difficulties in
financial closures of projects. Despite the aforesaid, the purchaser
respondent no.1 sought to invoke the bank guarantee by stating "we
confirm that the supplier has not fulfilled its contractual obligations".
The Division Bench, in view of the aforesaid position, observed "prima
facie, therefore, it was incorrect and fraudulent for respondent no.1 to
state to its banker/respondent no.2 that the appellant had not fulfilled
its contractual obligation".
88. The fact situation in the case in hand, as already discussed, is
starkly different from that dealt with by the Division Bench in
Humboldt (supra). The issue as to who is in breach of the contract,
and other related issues are matters which would need determination
by the arbitral tribunal. Prima facie, it cannot be said that the
petitioner is not in breach of the agreement. It certainly cannot be
said that the invocation of the bank guarantee is a result of a fraud
perpetuated by the DDA on the petitioner and the banks of an
egregious nature, meaning that the fraud would lead to gross injustice
which shakes the conscience of the Court. The decision in Humboldt
(supra) therefore, does not advance the case of the petitioner. I may
note that in paragraph 17 of its decision, upon analysis of the various
case laws, the Division Bench also conclude "that there is no room for
debate that the courts are not to interfere with the encashment of the
letter of credit or the bank guarantee unless the case falls within the
purview of the exceptions laid down by the Apex Court. The first
exception which has been carved out by the courts is that the fraud
perpetrated must be of egregious nature meaning that the said fraud
would lead to gross injustice which shakes the conscience of the court
and the said fraud should be known to the parties and the concerned
bank. If the said fraud is manifest or evident, the court can restrain
the encashment of the bank guarantee".
89. Mr. Kapur has relied upon Regional Manager, Central Bank
of India (supra) to emphasise that the conduct of the respondent, DDA
in invoking the bank guarantee for the entire amount of Rs.183 crores
is fraudulent, as, even according to it, liquidated damages suffered by
it were to the tune of Rs.83.70 crores. The Supreme Court in this case
in paragraph 13 observed that:
"13. ... ... ....
He who comes to the Court with a claim based on falsity
and deception cannot plead equity nor the Court would
be justified to exercise equity jurisdiction in his favour.
An act of deliberate deception with a design to secure
something, which is otherwise not due, tantamount to
fraud. Fraud is a conduct either by letter or words,
which induces the other person or authority to take a
definite determinative stand as a response to the
conduct of the former either by words or letter. .. ... ..."
90. I cannot appreciate the relevance of the decision in Regional
Manager, Central Bank of India (supra). I have already held, prima
facie that it cannot be said that the respondent has played a fraud of
an egregious nature either upon the petitioner or the respondent bank.
Consequently, in my view, this decision has no bearing in the facts of
this case. For the same reason, the decision in Bhaurao Dagdu
Paralkar (supra), has no relevance.
91. Mr. Kapur has relied upon Hindustan Steel Works
Corporation Ltd. (supra). However, this decision does not advance
the case of the petitioner, except to the extent that it holds that the
demand made by the beneficiary under the bank guarantee may
become fraudulent not because of any fraud committed by the
beneficiary while executing the underlying contract, but it may become
so because of subsequent events or circumstances.
92. The submission of Mr. Kapur that it would cause irretrievable
injustice to the petitioner, if the bank guarantees are permitted to be
encashed in their entirety, as the petitioner would then be obliged to
provide fresh guarantees for the equivalent amount of Rs.183 crores,
or to face termination of the contract under Clause 6.2 of the PDA, has
no merit. The irretrievable injustice, the Supreme Court holds, should
of the kind dealt with in the case of Itek Corporation. That was a
case, where, if the letter of credit had been permitted to be encahsed,
would have made it impossible for the plaintiff to seek restitution
because of the hostility between United States of America and the
State of Iran, as a result of 52 American citizens being hostaged by the
Iranian Government. The US Government had blocked all Iranian
assets under the jurisdiction of United States and had cancelled the
export contracts. The Court upheld the contention of the American
exporter that any claim for damages against the Iranian purchaser,
even if decreed by the American Courts, would not be executable in
Iran under these circumstances and realization of the bank
guarantees/letter of credit would cause irreparable harm to the
plaintiff. Reference may also be made to the quotation extracted
herein above from the decision in U.P. State Sugar Corporation
(supra).
93. The respondent, DDA is a statutory corporation and there can
be no doubt that in case the petitioner succeeds in establishing its
claims before the arbitral tribunal, the respondent DDA would be in a
position to restitute not only the amount of the bank guarantees, if and
when directed, either in full or in part, but also to pay the damages, if
any, levied upon it. Therefore, it cannot be said that merely because
the petitioner would be required to furnish fresh bank guarantees to
the tune of Rs.183 crores upon encashment of the bank guarantee in
question, the petitioner would suffer irretrievable injustice. The
enforcement of the contractual obligation against a party would not,
normally amount to "irretrievable injustice".
94. The submission that as the completion certificate had been
issued, the respondent is precluded from claiming that the project was
incomplete has absolutely no merit. A perusal of the communication
dated 03.09.2010 issued by the DDA shows that in the opening line
itself, it was stated that "the completion certificate cannot be issued at
this stage due to non-compliance of the provisions of the Building Bye
Laws, 1980 as already communicated to you earlier". The temporary
occupancy permit was granted only to facilitate the use and
occupation of the flats during the Commonwealth Games, 2010. This
was done due to the extraordinary situation, as the nation was faced
with the prospect of not being able to successfully hold the games as
thousands of athletes and officials who would participate in the games
could not have been accommodated, had the games village complex
not been granted the temporary occupancy permit.
95. I also find no merit in the submission of Mr. Kapur that the
invocation was at the behest of the Ministry of Urban Development and
that the DDA has not applied its own independent mind. Merely
because the DDA may have kept the Ministry of Urban Development
informed of the status and may have called for its advice, it does not
mean that the decision to invoke the bank guarantees in question is
not that of the DDA. Eventually, it is the DDA, who is the beneficiary
under the guarantees, who has invoked the guarantees. The
respondent Banks are not required to go behind these letters of
invocation to find out, whether or not, these have been issued at the
behest of another entity.
96. The submission that even seven days time was not granted by
the respondent in its communication dated 16.10.2010 also does not
have any merit. The petitioner in its communication dated 20.10.2010
had sought withdrawal of the letter dated 16.10.2010 issued by the
DDA and had also sought release of its bank guarantees. After the
stand of the petitioner had become known to the respondent DDA, that
the petitioner was not willing to deposit the amount of Rs.83.70 crores,
there was no need for the DDA to wait any further for the expiry of the
week, and there was nothing to prevent the DDA to invoke the bank
guarantees in question on 23.10.2010 itself.
97. The other reliefs prayed for by the petitioner are also not
made out as the petitioner has not even pressed for them, and the
petitioner has not been able to establish a prima facie case in its
favour.
98. For all the aforesaid reasons, I find no merit in this petition
and dismiss the same. It is, however, made clear that no observation
made by me in this order shall come in the way of either party at the
time of determination of the their inter se disputes, claims and counter
claims through arbitration.
Parties are left to bear their respective costs.
(VIPIN SANGHI)
JUDGE
DECEMBER 20, 2010
sr
