Abb Limited vs Larsen & Toubro Ltd. & Anr.
2010 Latest Caselaw 944 Del

*            IN THE HIGH COURT OF DELHI AT NEW DELHI

+            IA No. 1638/2010, CAV. No. 19/2010 in OMP NO. 69/2010

                                                     Reserved on : 11.02.2009
                                                  Date of Decision : 18.02.2010

ABB Limited                                                   ...... Petitioner
                                   Through:      Mr. R. K. Singh, Adv.

                                     Versus

Larsen & Toubro Ltd. & Anr.                                 ...... Respondents
                                   Through:      Mr. A. Daisayi, Sr. Adv. with
                                                 Mr. A. K. Bhatnagar, Adv.

CORAM :
HON'BLE MR. JUSTICE V.K. SHALI

1.    Whether Reporters of local papers may be
      allowed to see the judgment?                      Yes
2.    To be referred to the Reporter or not ?           No
3.    Whether the judgment should be reported
      in the Digest ?                                   No

V.K. SHALI, J.

1. This order shall dispose of an application filed by the petitioner under

Order 6 Rule 17 read with section 151 CPC.

2. Briefly stated the facts of the case leading to the filing of the application

are that the petitioner had filed a petition under Section 9 of the

Arbitration and Conciliation Act, 1996. It is stated that petitioner is a

company incorporated under the provisions of the Companies Act, 1956

and having its registered office at Bangalore and one of its office at E-5,

Shyam Nagar, Okhla, Phase-III, New Delhi-110020. It is alleged that

the petitioner had entered into an agreement with the respondent No.1

i.e. Larsen and Toubro Ltd. with regard to erection and commission of

some electrification work at Indira Gandhi International Airport. The

petitioner had accordingly furnished certain bank guarantees to the

respondent. The petitioner is aggrieved by alleged fraudulent, illegal

and unreasonable invocation of the three bank guarantees on 04.02.2010

by the respondent no. 1 and consequently the petitioner has filed the

present petition. The details of the three bank guarantees which were

sought to be invoked by the respondent are as under:

        Particulars of  Head of bank     Amount                     Amount
        claimed bank     guarantee
       guarantee (no.
          and date)
      0002BG00123008 Advance Bank 23,42,41,435/-                23,42,41,435/-
                       Guarantee
      0002BG00088308 Advance Bank 23,42,41,435/-                7,69,02,291/-
                       Guarantee
      0002BG00088208 Performance      31.2 Crores               24,23,21,913/-
                       Bank Guarantee

3. It was alleged that first two of the bank guarantees were sought to be

invoked wrongly and fraudulently because in terms of the guarantee, the

respondent was required to give notice to the branch which had furnished

the guarantee namely the Connaught Place Branch, New Delhi but the

respondent had actually sent the notice of invocation at the bank office at

Bangalore. So far as the third bank guarantee is concerned, it was

alleged that it was a performance guarantee and the same was also not

invoked in terms of the guarantee documents. Reliance was sought to be

placed on the judgments of Hindustan Construction Co. Ltd. Vs. State

of Bihar & Ors. (1999) 8 SCC 436 and Agencia Commercial

International Ltd. & Or. Vs. Custodian of the Branches of Banco

Nacional Ultramarino (1982) 2 SCC 482 to urge that the bank

guarantee is not invoked in terms of the guarantee documents, and

therefore, the respondent no. 2/bank be restrained from transferring the

money to the respondent no. 1.

4. The aforesaid matter was listed before this Court on Saturday i.e.

06.02.2010 and since there was a caveat filed by the respondent no. 1,

accordingly, it was directed that a copy of the petition be served on the

caveator as it was not done. The matter was adjourned to 08.02.2010 on

which date the matter was listed before another Bench firstly and on

account of orders of the Judge In-Charge (Original Side) it was placed

before this Court only at 4.35 P.M.

5. On 08.02.2010, when the matter was taken up, the learned senior counsel

Mr. Ashok Desai appeared on behalf of the caveator and informed the

Court that 6.2.2010 (Saturday) at about 12.30 P.M. itself the respondent

no. 2 had transferred the funds to the respondent no. 1 in pursuance to

the invocation in respect of all the three bank guarantees and accordingly

the petition itself has become infructuous. Time was given to the

respondent No.1 to file reply to the petition so that this stand comes on

record in writing. The matter was adjourned to 11.2.2010.

6. On 10.2.2010, the present application seeking amendment in the OMP

has been filed.

7. The main averment which is sought to be incorporated by way of present

application is that the petitioner wants the change of relief in the petition.

The petitioner was earlier seeking a restraint order which was in the

nature of an injunction against the respondent no. 2, the bank to make

the payment to the respondent no. 1 on the ground that the invocation of

bank guarantee by the respondent no. 1 was not in accordance with the

terms and conditions of the guarantee itself. Now that the bank

guarantee amount having been already transferred by the respondent no.

2 to respondent no. 1 the petitioner wanted the relief to the effect that

either the respondent no. 1 be directed to restore the status quo ante by

transferring the funds to the account of the petitioner or alternatively the

respondent be directed to secure the amount which has been encashed by

the respondent no. 1. The comparison of the two prayers in the

unamended and amended petition is reproduced as under:

Unamended petition Amended petition

(a) issue an ex-parte ad-interim (a)(i) issue an ex parte ad-interim injunction in favour of the mandatory injunction in favour of petitioner and against the the petitioner and against the respondents, restraining the respondent no. 1 thereby directing respondent no. 1 from invoking the respondent no. 1 to refund the and encashing and respondent no. encashed bank guarantee amount 2 from making any payment in any to the petitioner with respect to the manner with respect to the bank bank guarantee bearing no.

      guarantee            bearing              no. 0002BG00123008                    dated
      0002BG00123008                          dated 26.06.2008       for   a     sum         of
      26.06.2008         for     a      sum      of Rs.23,42,41,435/- bank guarantee
      Rs.23,42,41,435/- bank guarantee bearing                 no.     0002BG00088308
      bearing      no.     0002BG00088308 dated 28.04.2008 for a sun of
      dated 28.04.2008 for a sun of Rs.23,42,41,435/-                      and         bank
      Rs.23,42,41,435/-           and         bank guarantee           bearing           no.
      guarantee            bearing              no. 0002BG00088208                    dated
      0002BG00088208                          dated 28.04.2008 for a sum of Rs.31.2

28.04.2008 for a sum of Rs.31.2 crores issued by ICICI Bank Ltd. crores issued by ICICI Bank Ltd. (respondent no. 2). Or in the (respondent no. 2) till conclusion alternatively of the arbitration proceedings, (a) (ii) Direct the respondent no. 1 to forthwith deposit the entire which is going to be initiated by encashed bank guarantee amount the petitioner for adjudication of in this Hon'ble Court. all disputes between the parties.

8. The respondent No.1 has filed the reply to the amendment application

and contested the claim of the petitioner to amend the relief on account

of the actual encashment of the bank guarantee. It was averred by the

respondent No.1 in the reply to the application that the petition itself has

become infructuous in as much as the guarantee amount has already been

transferred, and therefore, nothing survives and the petitioner could not

change the nature of the petition by seeking an amendment to the

petition by praying literally attachment before judgment.

9. I have heard the learned counsel for the plaintiff as well as the learned

senior counsel on behalf of the respondent. I have also gone through the

record.

10. It was contended by the learned counsel for the petitioner that on

06.02.2010 when the petitioner came to the Court till that time he had

not received any notice of caveat nor was the payment made by the

respondent No.2 to respondent No.1 though the bank guarantee was

invoked by the respondent No.1. It was alleged that so far as the first

two bank guarantees are concerned, the same was invoked by sending a

notice to the office of the petitioner in Bangalore while as according to

the term and conditions of the bank guarantee the valid invocation could

be done only by sending a notice to the branch which had furnished the

bank guarantee. So far as the third bank guarantee which was a

performance guarantee is concerned, it was contended that this was also

not invoked according to the terms and conditions of the guarantee. It

was further contended that since all the three bank guarantees have been

illegally and unjustifiably invoked by the respondent the Court may

direct the respondent No.1 to restore the status quo ante which means

that respondent No.1 must either transfer the funds in the account of the

petitioner or alternatively secure the said amount which has been so

released so that the decree which the petitioner may get from the Court

or from the arbitrator in terms of the agreement between the parties does

not become only a paper decree and thus the petitioner had sought

amendment of the OMP. The learned counsel also relied upon a

judgment in Ragu Thilak D. John Vs. S. Rayappan & Ors. AIR 2001

SC 699

11. As against this, the learned senior counsel for the respondent has

vehemently opposed the prayer of the petitioner. It was contended that

the invocation of bank guarantee by the respondent herein was perfectly

in accordance with the terms and conditions of the bank guarantee. It

was invoked on 04.02.2010 and on 06.02.2010 the funds were

transferred to the account of respondent No.1 which have been further

appropriated by it. It was contended that once the amount is realized and

merged in the account of the respondent No.1, it is not possible to say

which amount was transferred and from where and if at all the petitioner

succeeds in the arbitration proceedings the respondent is solvent enough

to discharge the liability so fastened.

12. The learned senior counsel also referred to the Master Circular issued by

the Reserve Bank of India wherein under Clause 1.4 with regard to the

question of payment under the bank guarantee. It was observed that the

settlement of account should be done expeditiously in the commercial

transactions. It was also pointed out that the Apex Court in BSES LTd.

Vs. Fenner India Ltd. and Anr. 2006 (2) SCC 728 had categorically

observed that the bank guarantee is an independent contract and

ordinarily there should be no stay of the invocation of the said bank

guarantee or payment thereof unless and until there is an allegation of

fraud having been committed in obtaining such a bank guarantee or there

was a case of special equity in favour of the petitioner which warranted

that the bank guarantee should not be permitted to be invoked.

13. I have carefully considered the submissions made by the respective

sides. I have also gone through the record.

14. There is no dispute about the fact that Section 9 of the Arbitration and

Conciliation Act, 1996 only deals with interim measures by the Court.

The interim measures which the petitioner wanted to be passed when it

came to the Court on 6th February, 2010 was that the bank guarantee has

been wrongly and illegally invoked in a fraudulent manner and therefore,

the bank/respondent No.2 be restrained from making payment to the

respondent No.1. On 6th February, 2010 no effective order could be

passed as the petitioner himself had not served a copy of the petition on

the Caveator despite the caveat having been lodged, as a consequence of

which the matter had to be adjourned to 8th February, 2010. On 8th

February, 2010, the learned senior counsel for the respondent No.1

informed that the funds in pursuance to the invocation of guarantee by

the respondent No.1 have already been transferred to them by the

respondent No.2 on 6th February, 2010 itself. Therefore, the petition

itself had become infructuous and the Court could not be called upon to

pass an order which in fact could not be implemented. The petitioner by

seeking an amendment is now trying to change the nature of the main

petition itself in as much as his earlier prayer was seeking a restraint

order against the payment by the respondent No.2 to 1 and now he by

virtue of the present application of amendment is seeking either the

retransfer of funds from the account of the respondent No.1 to their own

account or alternatively securing the said amount by keeping it either in

the account of the respondent No.1 itself or directing them to deposit the

same in Court. The amended prayer of the petitioner is in the nature of

literally an attachment before judgment or restoration of status quo ante

which is totally different than the one which was the original prayer.

The judgment which has been relied upon by the learned counsel for the

petitioner in Raghu Tilak's case is not applicable to the facts of the case

in hand for the simple reason that was not a case dealing with the

realization of a money pursuant to the bank guarantee. Therefore,

neither an analogy between the two cases can be drawn nor can any help

be obtained from the said judgment that amendment must be allowed in

the present case.

15. The applications under Section 9 are in the nature of interim measures

which are treated as OMPs. Normally speaking, these kind of

applications even if have become infructuous on account of subsequent

events does not foreclose the right of the party to file a fresh

application/petition but to permit an amendment of such an

application/petition seeking interim relief would go against the very

basic fundamentals of amendment of pleadings which is based on the

principle that such amendment should not result in change of nature of

the case itself. In the instant case the very nature of the petition of the

petitioner from prohibitive injunction is being changed to attachment

before judgment which in my opinion cannot be permitted to be done. I,

therefore, feel that the application of the petitioner cannot be allowed

and accordingly, the same is dismissed. Since the application for

amendment has itself been dismissed and it has already come on record

that the amount of bank guarantee has already been transferred to the

account of the respondent No.1, the main petition itself has become

infructuous. Therefore, the petition itself is also dismissed.

V.K. SHALI, J.

FEBRUARY 18, 2010 KP