Krofta Engineering Ltd. vs Hermes Properties Ltd. & Ors.
2013 Latest Caselaw 1173 Del

          *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                         Date of decision: 8th March, 2013

+                          CS(OS) No.2737/2011

       KROFTA ENGINEERING LTD.                ..... Plaintiff
                   Through: Mr. Akhil Sibal with Mr. Salil Seth &
                            Mr. Debarshi Dutta, Advs.

                                   Versus

    HERMES PROPERTIES LTD. & ORS.          ..... Respondents

Through: Mr. Gyanendra Agarwal, Adv. for D-4.

CORAM :-

HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

RAJIV SAHAI ENDLAW, J

1. The plaintiff has sued for declaration that the invocation by the

defendants of the Performance Bank Guarantee (PBG) dated 03.09.2008 is

invalid, illegal, null and void and for permanent injunction restraining the

defendants from taking any steps in pursuance to the said invocation. A

decree for recovery of Rs.1,42,363/- along with interest at 12% per annum is

also sought jointly and severally against the defendants.

2. Summons of the suit and notice of the application for interim relief

were issued and vide ex parte ad-interim order dated 08.11.2011, on the

condition of the plaintiff depositing an amount of Rs.9,00,000/- by way of an

FDR in the name of the Registrar of this Court, the defendant No.4 Union

Bank of India (UBI), Nehru Place Branch, New Delhi was restrained from

remitting the amount of Bank Guarantee dated 03.09.2008 to the defendant

No.3 Bank of Cyprus Public Company Ltd., Limassol (Lemesos).

3. The defendants No.1 Hermes Properties Ltd., Limassol, Cyprus and

the defendant No.2 Velpa Trade, Bulgaria, were reported to be served by e-

mail. They were vide order dated 08.12.2012 also directed to be served

through DHL courier and were so served but failed to appear and were

proceeded against ex parte vide order dated 22.01.2013. Similarly, the

defendant No.3 also failed to appear inspite of service and was also

proceeded against ex parte. The defendant No.4 UBI has filed its written

statement. The plaintiff led its ex parte evidence and the counsel for the

plaintiff has been heard.

4. The counsel for the plaintiff has stated that the subject Bank

Guarantee has since lapsed and thus the relief claimed of declaration has

become infructuous. He, under instructions, further states that the plaintiff is

not pressing for the relief of recovery of Rs.1,42,363/- which was earlier

claimed towards charges incurred by the plaintiff for keeping the Bank

Guarantee alive beyond the period for which it was required to be kept alive

and at the asking of the defendants No.1 & 2. He has argued that thus the

only question which remains for consideration in the present case is qua the

amount of Rs.9,00,000/- which was got deposited in this Court as a

condition for grant of interim order. Besides arguing on merits on the said

aspect, the counsel has also contended that the defendants No.1 to 3 having

failed to contest the suit, the FDR of Rs.9,00,000/- together with interest

accrued thereon ought to be returned to the plaintiff.

5. The plaintiff had furnished the aforesaid PBG in terms of the order

placed by the defendant No.1 on the plaintiff for supply of Effluent

Treatment Plant (ETP) for the defendant No.2's paper mill in Bulgaria. The

plaintiff in the ex parte evidence of its Managing Director has proved, that

the defendants No.1&2 were entitled to invoke the said Bank Guarantee for

payment of USD18,500, only if the plaintiff failed to rectify at its own costs

any defects in the equipment due to faulty design, defective material and / or

workmanship that may be discovered by the purchaser at any time during the

defective liability period of 12 months after the erection of the goods or 18

months from the date of shipment of the goods; that the materials reached

the defendants in December, 2008 and the installation thereof was completed

prior to September, 2009; that the defendants No.1&2 delayed the

commissioning of the plant and sought extension of the PBG which was to

expire on 20.02.2010 and the plaintiff in good faith and as a gesture of

goodwill extended the validity of the PBG successively to 05.05.2010,

05.08.2010, 05.02.2011, 05.05.2011, 05.08.2011 and 11.11.2011; that

though the defective liability period had expired on 20.02.2010 and there

was no faulty design or defective material or workmanship in the ETP

supplied and no grievance with respect thereto was made but the defendants

No.1&2 thereafter cited frivolous issues in operating the ETP; that the

defendant No.2 had in fact failed to adhere to the inlet parameters of the ETP

provided by the plaintiff and owing whereto the desired result of the finally

treated water was not being achieved; that the plaintiff was not liable to

change the goods owing to variation in inlet parameters by the defendants

No.1&2; that the defendants No.1&2 desired further extension of the PBG

and only because of refusal of the plaintiff to oblige the defendants No.1&2

was the PBG invoked as a threat; that the said invocation was thus for

oblique reasons and not in terms of the Bank Guarantee; that the defendants

No.1&2 had also never called upon the plaintiff to rectify the defects within

the time provided therefor.

6. The aforesaid ex parte evidence of the plaintiff has gone unrebutted.

7. The concerned defendants having not contested the claim of the

plaintiff, I have no reason to disbelieve the version of the plaintiff and as per

which the invocation of the Bank Guarantee by the defendants was wrong

and the defendants are found to be not entitled to the amount of the Bank

Guarantee.

8. On enquiry, the counsel for the plaintiff has informed that the

defendants No.1&2 have not initiated any proceedings for recovery of any

amounts from the plaintiff.

9. The invocation of the Bank Guarantee by the defendants is thus found

to suffer from a fraud of the egregious nature and without following the

conditions prescribed for invocation of the Bank Guarantee.

10. The plaintiff is thus entitled to return of the FDR of Rs.9,00,000/-

deposited in this Court as a condition for the interim relief granted to the

plaintiff.

11. The suit is accordingly decreed, restraining the defendant No.4 UBI

by a decree of payment injunction from making any payment to the

defendant No.3 Bank of Cyprus Public Company Ltd., Limassol (Lemesos)

in pursuance of the Bank Guarantee dated 03.09.2008 and by further

restraining the defendants No.1&2 viz. Hermes Properties Ltd., Limassol,

Cyprus and Velpa Trade, Bulgaria by a decree of permanent injunction from

making any claim under the said Bank Guarantee.

12. Costs as per schedule.

13. Decree sheet be drawn up.

RAJIV SAHAI ENDLAW, J MARCH 08, 2013 'gsr'..