Somendra Nath Deka vs The Chairman-Cum-Managing ...
2013 Latest Caselaw 4880 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

                                          Reserved on          : 19.08.2013
                                          Pronounced on        : 24.10.2013

+      I.A. No. 4583/2013(u/O 39 R 1 & 2 CPC) in CS(OS) 524/2013

       SOMENDRA NATH DEKA                                         ..... Plaintiff
                   Through                Mr. Rana Ranjit Singh, Advocate

                            versus

       THE CHAIRMAN-CUM-MANAGING DIRECTOR
       NBCC & ANR                                ..... Defendants
                    Through  Mr. Abir Phukan and Ms. Iram
                             Hassan, Advocates for D1
       CORAM:
       HON'BLE MR. JUSTICE JAYANT NATH

JAYANT NATH, J.

I.A. No. 4583/2013

1. This is an application under Order 39 Rule 1 and 2 seeking injunction against encashment of performance bank guarantee for Rs. 49,27,896/- issued by defendant No. 2 at the behest of the plaintiff in favour of defendant No. 1.This application came up for hearing before the Court on 18.3.2013 when an ex parte order was passed restraining defendant No.1 from invoking the Bank Guarantee in question.

2. It is contended by the plaintiff in the plaint that the plaintiff is a class- I (A) Contractor of PWD roads and buildings of the State Government. An advertisement was stated to be issued on 23.01.2010 by defendant No. 1 for proposed housing for urban poor and rehabilitation of slum dwellers at

William Nagar (East Garo Hills) Meghalaya under Integrated Housing and Slum Development Programme of the Government of Meghalaya. The plaintiff made a bid. The tender bid dated 30.01.2010 of the plaintiff was approved by defendant No. 1 and the work of contract value of Rs.9,85,57,921.15/- was awarded to the plaintiff vide Letter of Award dated 07.06.2010. As per clause 13.1 of the Letter of Award /Letter of Intent, the plaintiff was to submit to NBCC a performance bank guarantee of any Nationalised Bank equivalent to 5% of contract value. Hence, the plaintiff furnished the bank guarantee of Rs. 49,27,896/- in favour of defendant No. 1 issued by IDBI Bank-defendant No. 2.

3. The plaintiff claims that he started the work as per the terms and conditions of the Contract Agreement. The site was handed over to the plaintiff on 21.06.2010. It is contended by the plaintiff that in December 2010 there were insurgency problems in the area. It is claimed that the plaintiff went underground in March 2011. Reliance is placed on various communications written by the plaintiff to defendant No. 1 pointing out the insurgency problems. It is stated that despite due intimation to defendant No.1 about the insurgency problems, defendant No. 1 is completely ignoring the problem. Vide letter dated 10th July,2012 the plaintiff has stated that in the facts and circumstances of the case given the ground realities, the plaintiff despite earnest endeavour could not complete the work and had to spend huge amount of money keeping in view the anti social activities including murder, extortion going around in the area. The plaintiff submitted that defendant No.1 may pass an appropriate order to absolve the plaintiff from the responsibilities of completing the work on no conditions.

It is pointed out that despite the above on 17.01.2013, defendant No. 1 sent a 15 days' notice to remedy the default by speeding up the wok and by proceeding with the work with due diligence failing which defendant No. 1 has stated that it will be at liberty to determine the contract. Hence, the plaintiff has filed the present suit seeking, apart from other relief, a decree of declaration that the disruption in execution of the Contract dated 10.06.2010 on account of insurgent activities be not treated as non- performance. Present application for stay of encashment of Bank Guarantee is also filed.

4. The defendants have in their written statement denied the contentions and submissions of the plaintiff. It is contended that the Letter of Award envisaged that the project was to be completed within 12 months. Reliance is placed on Clause 7 of the Letter of Award which stipulates that time is the essence of the Contract and the project should be completed within 12 months. It is also pointed out that a perusal of the various communications written by defendant No. 1 will show that the problem regarding insurgency is only an excuse for not being able to execute the contract. Reliance is placed on letter dated 18.12.2010 written by the plaintiff where the only complaint of the plaintiff was regarding non-availability of certain type of steel. Similarly, reliance is placed on letter dated 24.08.2011 written by the plaintiff to defendant No. 1 where it is stated that the work could not be completed due to the compelling circumstances of the inclement weather. In the said letter, the plaintiff assured that it will endeavour to cover the shortfall of the progress of the work. Plaintiff also reminded defendant No. 1 about non-payment of the bills of the plaintiff. Reference is then made to the

minutes of the meeting held on 14.06.2011 and a letter written by the plaintiff on 02.09.2011 where the plaintiff requested for more time for completion of the project. It is further submitted that the plaintiff is a resident of Assam, Guwahati and is fully conversant and aware of the local conditions. He was aware about the problems existing at site when he made the bid. Hence, it is contended that the averments regarding insurgency are an afterthought in order to wriggle out of the consequences for breaching the terms and conditions of the Contract. Reliance is also placed on the General Conditions of the Contract wherein Clause 2 states that before tendering the tenderer is advised to visit the site and satisfy himself about the local conditions and other constrains at site including risk, weather conditions, contingencies and other circumstances (insurgencies etc.) which may influence or affect the tender prices. Hence, the plaintiff has failed to comply with Clause 2 of the General Conditions of the Contract and the plaintiff cannot escape its liabilities. In view of the above, it is stated that the present application for stay is liable to be dismissed.

5. I have heard learned counsel for the parties.

6. Learned counsel for the plaintiff has strenuously urged relying on the communications written by the plaintiff to defendant No. 1 that on account of insurgency problems in the State of Meghalaya, the plaintiff has not been able to complete the work. Reliance is placed on the judgment of the Division Bench of this Court in the case of M/s. Punj Lloyd Insulations Ltd. Vs. State Bank of India & Anr., AIR 2006 Delhi 256 to contend that where an applicant is able to establish exceptional or special equities of the

kind which would prick the judicial conscience of the Court, stay of encashment of Bank Guarantee can be granted. It is submitted that in the facts and circumstances of the case, there are sufficient reasons to grant interim injunction.

7. On the other hand, learned counsel for defendant No. 1 has strongly contended that the bank guarantee by the plaintiff is an unconditional bank guarantee. The claim of the plaintiff pertaining to inability to complete the contract on account of insurgency is merely an afterthought. Reliance is placed on the judgment of the Hon'ble Supreme Court in the case of BSES Ltd. Vs. Fenner India Ltd. And Anr., (2006) 2 SCC 728 to contend that the present application is liable to be dismissed. Written submissions have also been filed on behalf of defendant No.1.

8. A perusal of the plaint and the accompanying documents would show that there is no merit in the contention raised by the plaintiff for the purposes of this present application.

9. The Letter of Award was issued to the plaintiff on 07.06.2010. Clause 7.1 of the Letter of Award clearly stipulates that time is the essence of the contract as the work is very important and critical for the project. The work had to be completed within 12 months including monsoon period, if any. The date of start was to be reckoned from the 10th day of issue of Letter of Intent. The plaintiff provided the bank guarantee dated 22.06.2010 for Rs. 49,27,896/-. The bank guarantee provided that defendant No. 2 unconditionally and irrevocably undertakes to pay defendant No. 1-NBCC immediately on demand all monies payable by the contractor/supplier to

NBCC in connection with the execution/supply of and performance of the work inclusive of any loss, damages, charges, expenses and costs caused to suffer by NBCC. Any such demand made by NBCC shall be conclusive evidence of the amount due and payable on demand.

10. Reference may be had to the correspondence exchanged between the parties. Letter of Award was given to the plaintiff on 7.6.2010. The first letter thereafter written by the plaintiff to defendant No.1 is dated 18.12.2010. This letter only mentions about permission to use a particular brand of steel. Thereafter on 3.3.2011 the defendant No.1 sent a telegram to the plaintiff pointing out the poor progress of work. It is only on 10.3.2011 for the first time that the plaintiff has written a letter to defendant No.1 claiming that some alarming situation has developed around the worksite which has made the entire workforce flee. The communication also points out about existence of insurgency problems prevailing and requests defendant No.1 to make arrangements for peaceful and congenial atmosphere. On 14.6.2011 a Meeting took place between the parties. The Minutes note that the plaintiff has completed work valued approximately about Rs.50 lacs and that balance value of work is Rs.935 lacs. It was agreed that the work has to be completed by 31.12.2011 failing which, NBCC is free to take any action to terminate the Contract. On 5.8.2011 the defendant No.1 again wrote to the plaintiff pointing out that from 15.6.2011 till 14.7.2011 the work is almost at a standstill and that the plaintiff has executed work only of about Rs.5 lacs whereas as per revised contract the plaintiff had to execute work of Rs.155 lacs per month. Various other deficiencies were also pointed out. On 23.8.2011 defendant No.1 sent a

Show Cause Notice under Clause 72.2 of General Conditions of Contract directing plaintiff to remedy the default by speeding up the work and proceeding with the work with due diligence within seven days. In response to the said letter the plaintiff wrote a letter on 24.8.2011 relevant portion of which reads as follows:-

"That, it is true that I have agreed to complete all works of William Nagar by the end of the year and with that view in mind I have continued the execution of the work under reference with right earnest and great zeal. But as your good office is well aware about the topological circumstances of the place of work site which is severely infested with terrorist problem coupled with the severe down pour of rain this year, the undersigned of course could not achieve its desired progress result of executing the construction work, despite having his best endeavour to do so as promised. Due to the heavy downpour of rain, the workmen both skilled and unskilled had to remain idle for several days, although they are still there and their service can be obtained on minute's call. As stated earlier, the slow progress of the work has happened only due to the compelling circumstances of the inclement weather which is beyond the control of the undersigned and definitely not so happened due to the reason of wilful or deliberate negligence on the part of the undersigned."

11. It may be noted that this is the second communication written by plaintiff complaining about terrorist problem in the area. However, the communication also mentions one of the reasons for slow progress as inclement weather. The communication assures defendant No.1 that earnest endeavour would be made to cover the shortfall of the progress of work.

12. On 2nd September, 2011 the plaintiff in response to the show cause notice dated 23.08.2011 issued by defendant No. 1 has written another

communication to defendant No.1. In this communication, there is no reference to any insurgency problems in the area. The communication only requests that time be granted till March for completion of the aforesaid works.

13. On 2nd November, 2011 defendant No.1 has written to the plaintiff about the slow progress of work. On 6th of November, 2011 plaintiff has again written a communication to defendant No.1 pointing out that the progress of the work is not satisfactory because of continuous insurgency problem and law and order situation including threat to the plaintiff in the event huge amount is not paid to the insurgents. It was requested to defendant No.1 to take up the matter with the local Government so that a congenial atmosphere prevails, around the worksite. It is noteworthy that this is the third communication written by the plaintiff complaining about delay on account of insurgency problems in completion of the contract between June 2010 to November, 2011. Another such letter has been written by the plaintiff on 1st of December, 2011.

14. On 6th March, 2012 defendant No.1 wrote to the plaintiff requesting him to resume the work immediately otherwise the defendant No.1 would have no option but to terminate the contract. On 11.3.2012 the plaintiff replied to the aforesaid letter reiterating the earlier contentions about the area being tremendously disturbed and relying upon certain statements made by the Governor of Meghalaya about certain terrorist organisations posing a serious challenge to peace and development effort and demand notes being served and killing of innocent civilians and abduction of citizens. Request

was made to defendant No.1 not to compel the plaintiff to execute the work.

15. On 10.7.2012 the plaintiff has written again to defendant No.1 pointing out about the insurgency problems in the area. In the letter it is stated that the anti-social elements have demanded several crores of rupees from the plaintiff in the event the plaintiff decides to continue with the work and that he had been advised not to go to the worksite and talk to the anti- social elements. It is also pointed out that on account of the fact that the plaintiff has not made payments to the anti-social elements they got enraged and the anti-social elements have entered the worksite, forcibly assaulted the workers and damaged property. The work force has fled from the area. It is stated that despite several communications to defendant No.1 no security has been provided. Hence, it is stated that in view of the circumstances, the appropriate authority of defendant No.1 may pass necessary orders absolving the plaintiff from responsibilities of completing the work.

16. In this background, it appears that no work is going on at site. Hence on 17.1.2013 defendant No.1 has sent another Show Cause Notice to the plaintiff under Clause 72.2 of the General Conditions of Contract requesting the plaintiff to remedy the default by speeding up of work within 15 days failing which the defendant No.1 would determine the contract. The present suit has been filed thereafter.

17. The letter of Award was given to the plaintiff on 7.6.2010. The above details of the correspondence exchanged between the plaintiff and defendant No. 1 shows that the first communication claiming that the work has been affected by insurgency problems has been written by the plaintiff on

10.3.2011, namely, eight to nine months after the site was handed over to the plaintiff. Thereafter, the next communication where a claim is made about insurgency problems affecting the place of work comes on 24.8.2011. This letter is also written by the plaintiff in response to a letter written by defendant No.1 dated 5.8.2011. One also cannot fail to notice that the letter gives two reasons for the delay, namely, the heavy downpour of rains apart from the contention of the area being infested with terrorist problems. Thereafter, the third and fourth letters of plaintiff written to defendant No.1 about insurgency problems in the area are written by the plaintiff on 6.11.2011 and 1.12.2011.

18. Apart from these four letters written between the period June 2010 to December, 2011, one may also note that plaintiff has written communications dated 18.12.2010 and 2.9.2011 to defendant No.1 where there is no reference whatsoever to any terrorist problem in the concerned area. In fact on 2nd September, 2011 the letter specifically requests for additional time till March (presumably March,2012) for completion of the work and requests defendant No.1 not to take any action in this regard. This letter is written in response to Show Cause Notice issued by defendant No.1 dated 23.8.2011. Similarly, in a meeting held on 14.6.2011 the minutes of which have been placed on record by the plaintiff again there is no reference to any terrorist problem affecting the work. The minutes record that the plaintiff has completed work of approximately Rs.50 lacs. It also records that the work would be completed on 31.12.2011 failing which NBCC is free to take any action or terminate the Contract.

19. The correspondences exchanged between the plaintiff and defendant No.1 show that for the period starting from 21.06.2010 when plaintiff received possession of the site till November, 2011 i.e., 16 months, only three letters have been written by the plaintiff complaining that the work is affected due to terrorist activities. In fact, one of these letters is written only in response to the communication sent by defendant No.1. The work was to be completed within 12 months. There is no averment or correspondence being made with the local police or any other State functionary complaining about plaintiff's work being hampered by insurgency problem or about threat received from insurgents and about looting of goods on account of acts by insurgents. Correspondence made by the plaintiff is extremely sketchy and does not inspire confidence in the contentions raised by the plaintiff.

20. Reference may also be had to the pleadings made in the plaint by the plaintiff. In paragraph 17 of the Plaint it is stated that by this time insurgency problems arose in and around the site of work and the plaintiff started facing problems of local anti-social elements which were informed orally to defendant No.1 at his branch office at Guwahati. The plaintiff claims to be surprised to find such insurgency problems at the place of work inasmuch such facts were never disclosed to the plaintiff at the time of filling tender forms. The date on which this insurgency problem was found by the plaintiff is not mentioned in the Plaint. The plaint, however, mentions that the plaintiff went underground in the month of March, 2011 and informed defendant No.1 about the developments. In paragraph 28 of the Plaint it is stated that labourers employed for execution of the work had

fled away after some days of work and the construction material valued more than Rs.75 lacs stored at the worksite has been looted and even the truckers had refused to carry the goods to the workplace and, therefore, the progress of work is unsatisfactory at the site. In paragraph 34 reliance is placed on Newspaper reports of The Assam Tribune and the comment of Governor of Meghalaya about the activity of terrorist organisations like Garo National Liberation Army in Garo Hills and certain areas of Khasi hills Districts. Reference is made to observations that demand notes have been served and killing and abduction of innocent citizens have taken place. It is further stated in paragraph 36 of the Plaint that under such disturbed circumstances the plaintiff has already coughed up huge amount of money and has lost more than Rs.5 crores in partially executing the work. Reliance is then placed on Clause 58.0 of the General Conditions of Contract to claim that the plaintiff stands absolved from responsibilities of completing the work.

21. The averments in the plaint also show that they are bereft of relevant and material details and particulars. No details are given as to when the plaintiff first realised about insurgency problem. There are no details given of when threats to the plaintiff were given, in what manner the threats were communicated, when the attacks at site took place. No dates are mentioned. Plaint is again completely silent about steps taken by the plaintiff to approach the local police or State Authorities and Functionaries pursuant to receipt of threats, or attack at the site and loss of material. A contractor who is keen to complete the job would surely be expected to make much better efforts to persuade the State Authorities for proper protection or would

strenuously urge to defendant No.1 to the said effect. The project which is the subject matter of the present suit was being carried out for the State Government. If the plaintiff was finding it difficult or impossible to carry on the project on account of insurgency problems as claimed, it was obvious that attempt should have been made to reach out to the State Government/Government Functionaries seeking appropriate police protection to help in completion of the project. Alternatively, it was expected of the plaintiff to rigorously follow up with defendant No.1 to take up the issue with the State Authorities about providing protection at the work place to enable completion of the project. The contentions and pleadings of the plaintiff cannot be accepted on the basis of sketchy pleadings and correspondence placed on record.

22. It is also noteworthy that the plaintiff is admittedly a resident of Guwahati. It is not possible to believe the contention that the plaintiff was completely unaware about the law and order problem in the area when he made the tender bid.

23. Reference may also be had to Clause 2 of the General Conditions of Contract which reads as follows:-

"Before tendering the tenderer is advised to visit the site, its surroundings to assess and satisfy themselves about the local conditions such as the working and other constraints at site, approach roads to the site, availability of water & power supply, application of taxes, duties and levies as applicable, nature of ground, soil and sub- soil condition, underground water table level, accommodations they may require etc., river regime, river water levels, other details of river, streams and any other relevant information required by them to execute complete scope of work. The tenderer may obtain all

necessary information as to risks, weather conditions, contingencies & other circumstances (insurgencies etc.) which may influence or affect their tender prices. Tenderer shall be deemed to have considered site conditions whether he has inspected it or not and not to have satisfied himself in all respect before quoting his rates and no claim or extra charges whatsoever in this regard shall be entertained/payable by the NBCC at a later date."

24. There is merit in the contention of learned counsel for the defendant that in terms of the said Clause the plaintiff was advised before tendering to obtain necessary information regarding the local area including about problems of terrorism. The plaintiff is admittedly a resident of Assam and would be familiar with the local conditions.

25. In view of the above, the conclusion would clearly follow that the existence of insurgency problems in the local area is an excuse being made by the plaintiff for the failure of the plaintiff to complete the terms and conditions of the Contract. It appears doubtful that this was the real cause for the non-performance of the contract by the plaintiff.

26. Reliance of learned counsel for the plaintiff on the judgment of this Court in the case of M/s. Punj Lloyd Insulations Ltd. Vs. State Bank of India & Anr. (supra), is misconceived inasmuch as the plaintiff has not been able to establish any exceptional or special equities which would prick the conscience of the Court.

27. Learned counsel for the plaintiff has placed strong reliance on letter dated 20.7.2012 written by defendant No.1 to Director of the Government of

Meghalaya, Shillong, relevant portion of which reads as follows:-

"It is a matter of serious concern that in spite of our all earnest effort, the work could not be executed as per our targeted plan and programme. Time and again the construction was hampered severely and the targeted plan and programme were upset due to unnecessary interference of the local miscreants, underground elements, etc. As informed by the contractor, the hooliganism reached its highest altitude when these miscreants demanded huge illegal ransom and the contractor was compelled to suspend all of his activities, otherwise, he had to face the dire consequences as the demands could not be entertained at all. As the area is highly insurgency prone, the contractor could not approach to the local authorities for necessary protection and thus no official document can be produced in support of the above statement. However, we are submitting herewith a few paper cuttings and a Report of the activities of GNLA which are quite self explanatory."

In my view, the above communication by defendant No.1 to the Government of Meghalaya is only an explanation given by defendant No.1 to the Government of Meghalaya on whose behalf the present project is being completed by defendant No.1 to try to cover the lapses of the plaintiff. The above does not prove the contentions of the plaintiff.

28. In fact, as of now, defendant No.1 has neither terminated the contract nor invoked the Bank Guarantee in question. The present application is devoid of merits and is dismissed.

29. It is clarified that the observations made herein are only for the purposes of disposal of the present injunction application. Nothing stated herein shall, in any way, prevent the parties from making their submissions

and contentions in accordance with law at the time of final adjudication of the present suit.

CS(OS) 524/2013 List on 3rd December,2013 before Joint Registrar for further proceedings.

JAYANT NATH, J OCTOBER 24, 2013 Rb/ 'raj'