Delhi High Court
Gangotri Enterprises Ltd. vs National Thermal Power ... on 24 December, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Delivered on: December 24, 2016
+ FAO(OS) COMM 149/2016
GANGOTRI ENTERPRISES LTD. ..... Appellant
Through Ms. Chetna Bhalla, Advocate.
versus
NATIONAL THERMAL POWER CORPORATION LTD.
..... Respondent
Through None
CORAM:
HON'BLE MS. JUSTICE INDIRA BANERJEE
HON'BLE MR. JUSTICE ANIL KUMAR CHAWLA
JUDGMENT
INDIRA BANERJEE, J (ORAL)
1. This appeal under Section 37 (1) (b) of the Arbitration and
Conciliation Act 1996, hereinafter referred to as the 1996 Act,
is against an order dated 22.12.2016 passed by the learned
Single Judge dismissing the application being OMP (1)
(COMM) No. 60/2015, filed by the appellant under Section 9 of
the 1996 Act.
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2. The respondent issued a Notice Inviting Tender (NIT) dated
16.02.2007 for Raw Water Reservoir Civil Works for National
Thermal Power Corporation (NTPC), Stage-II at Dadri in
Gautam Budh Nagar District in Uttar Pradesh.
3. In response to the said Notice Inviting Tender, the appellant
submitted its bid on 09.05.2007. The petitioner was declared
successful, after which a Letter of Award No. CS- 6130-319A-
9-CS-LOA-5053 dated 21.01.2008 was issued to the petitioner
for execution of the project for a total consideration of Rs
46,81,98,550/-.
4. A formal contract was executed between the petitioner and the
respondent on 12.03.2008. The Notice Inviting Tender, the
General Conditions of Contract of NTPC for civil works along
with its amendment, the Special Conditions of Contract and
other specified documents were made part of the contract.
5. In terms of the contract executed by and between the appellant
and the respondent, and in particular, clause 7 of the Letter of
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Award, the project was to be completed within 24 months from
the date of receipt of the Letter of Award.
6. Clause 8.1.0 of the Letter of Award required the appellant to
make a security deposit Rs. 68,31000 by way of bank
guarantee. Accordingly, under cover of a forwarding letter
dated 12.03.2008, the Petitioner Furnished a Bank Guarantee
being BG No.4/08 dated 11.03.2008 issued by Canara Bank,
Hazratganj, Lucknow to the respondent. The Said Bank
Guarantee, was from time to time renewed, the last renewal
being till 10.12.2015.
7. Clause 14.1.0 of the Special Conditions of Contract required the
petitioner to deposit a Performance Guarantee security of Rs.
1,00,00,000/- by way of Bank Guarantee. Accordingly, the
petitioner, under cover of a forwarding letter dated 27.03.2008,
furnished a bank guarantee being BG No. 26/2008 dated
25.3.2008, issued by a Corporation Bank, Kaiserbagh,
Lucknow, to the respondent. The said bank guarantee was, from
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time to time renewed. The bank guarantee being BG
No.26/2008 is valid till 22.06.2017.
8. As per the Special Conditions of Contract the appellant was
also required to deposit a bank guarantee of Rs. 30,00,000/-
against material to be issued by the respondent. The appellant
accordingly furnished a Bank Guarantee being BG No. 39/2009
dated 17.12.2009 issued by Corporation Bank kaiserbag,
Lucknow, which was forwarded to the respondent under cover
of a forwarding letter dated 21.12.2009. The bank guarantee
was initially valid till 6.12.2010, but later renewed from time to
time. The bank guarantee is valid till 14.06.2017.
9. As per clause 13 of the General Conditions of Contract, the
execution of the project work was to commence on the 15th day
of the date of issuance by the respondent of written orders to
commence work. The appellant contends that no such notice or
order as contemplated in Clause 13 of the General Conditions
of Contract was issued to the appellant.
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10. It is alleged by the appellant, that the project work could not be
completed due to breaches and lapses on the part of the
respondent in performing its obligations under the contract.
According to the appellant, the appellant would have completed
the project within the stipulated time, but for the breaches and
lapses on the part of the respondent.
11. The appellant sought extension of time for completing the
work, and the respondent granted such extension. In the
meanwhile, by a letter dated 13.03.2010, the appellant penned
down its grievances with regard to failure of the respondents to
supply layout plan, construction drawings etc.
12. On 03.02.2011, the appellant again wrote to the respondents
explaining why the project work could not even be started.
Breaches and lapses were attributed to the respondents. The
respondents also raised claims to the tune of Rs. 41.67 crores
upon the respondent on account of alleged breaches and lapses
committed by the respondents.
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13. On 09.10.2012, the appellant invoked Clause 56 of the General
Conditions of Contract, that is, the arbitration clause, and
sought appointment of an independent arbitrator. The Chairman
and Managing Director of the respondent appointed an
arbitrator. The arbitrator entered into the reference.
14. By a letter dated 11.05.2015, the respondent alleged that the
project work had been stalled since 20.6.2014 and had not been
resumed by the appellant despite repeated requests informed
that after some investigation, it had been found that Rs. 139.50
lakhs was recoverable from the bills of the appellant. Thereafter
communication ensued between the parties
15. On 04.11.2015, the respondent served final notice to the
appellant in terms of Clause 41 of the General Conditions of
Contract, to resume the project work within 7 days, failing
which, the respondent would get the same executed at the risk
and cost of the appellant.
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16. The appellant has alleged that that the respondent all of a
sudden invoked the Bank Guarantees being BG Nos. 04/08,
26/2008 and 39/2009 by three letters issued on 07.12.2015 and
09.12.2015 respectively. The bankers of the appellant put the
appellant to notice of the demand and requested the appellant to
arrange funds to liquidate the bank guarantee amount
17. In the aforesaid circumstances, the petitioner filed an
application being OMP (1) (Comm) No. 60/2015 under Section
9 (1) of the 1996 Act, seeking an interim order restraining the
respondent from encashing the Bank Guarantees, or realising
the proceeds thereof. However, while the application was
pending, counsel for the respondent informed the Court that the
bank guarantee being BG No. 04/08 Rs. 4,68,31,000/- had
already been encashed.
18. On 14/12/2015, Counsel for the respondent submitted that the
Bank Guarantee being BG No. 26/2008 had not till then been
invoked. Insofar as BG No. 39/2009 was concerned the learned
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Judge granted stay and directed that the amount of Rs.
30,00,000/- should not be remitted to the respondent till the
next date of hearing
19. On 26.11.2016, the respondent terminated the contract in
question, as per Clause 41 of the General Conditions of
Contract. On 30 08/11/2016 an application of the appellant
being OMP (1) (Comm.) 10/2016 under Section 14(2) 0f the
1996 Act, questioning the authority of the sole arbitrator to
proceed with the reference, as also the application under
Section 9 of the 1996 Act being OMP (1) (Comm.) No. 60/2015
were heard by the learned Single Bench. The application under
Section 9 was directed to be listed on 22.12.2016 and the
interim orders were directed to continue till the next date of
hearing. On 22.12.2016, the learned Single Judge passed the
order under appeal, dismissing the application of the appellant
under Section 9 of the 1996 Act. It is not in dispute that the
Bank Guarantees in question were unconditional bank
guarantees invocable on demand
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20. It is well settled that a Bank Guarantee constitutes an
independent contract between the bank which issues the Bank
Guarantee and the beneficiary of the Bank Guarantee. In the
matter of invocation of a bank guarantee, the merits of the
underlying disputes between the party at whose instance the
Bank Guarantee was furnished and the beneficiary of the Bank
Guarantee are of no relevance. It is only in exceptional cases of
egregious fraud or irretrievable injustice and/or special equity
that an injunction restraining the invocation of a Bank
Guarantee might be granted.
21. It is also well settled that if the bank cannot be restrained from
honouring a Bank Guarantee, the beneficiary of the Bank
Guarantee cannot also be restrained from invoking the Bank
Guarantee, for one cannot do indirectly, what one is not free to
do directly. This proposition is settled by the judgement of the
Supreme Court in UP Cooperative Federation Ltd. Vs. Singh
Consultants and Engineers Private Limited reported in (1988)
1 SCC 174.
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22. The bank was/is bound to honour its commitment under the
Bank Guarantees, irrespective of the merits of the disputes
between the appellant and the respondent. It is reiterated that
the Bank Guarantee is unconditional. It is not the case of the
appellant that the invocation was/is not in terms of the Bank
Guarantee. No case of fraud or special equity has been made
out.
23. The learned Single Judge rightly dismissed the application
under Section 9 of the 1996 Act. The appeal is without merit
and the same is dismissed. The appellant may proceed to press
its claim if any against the respondents in the arbitral
proceedings.
INDIRA BANERJEE, J
ANIL KUMAR CHAWLA, J
December 24, 2016/ n
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