Delhi High Court
V3S Infratech Ltd. vs Nbcc & Ors. on 15 March, 2017
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: January 19, 2017
Date of decision: March 15, 2017
+ CS (OS) 352/2015
V3S INFRATECH LTD. ..... Plaintiff
Through: Mr Sunil Gupta, Senior Advocate with
Mr. Praveen Kumar Singh, Mr. Utkarsh Singh,
Md. Ziauddin Ahmad, Advocates.
versus
NBCC & ORS. ..... Defendants
Through: Mr. Sanjeev Mahajan, Advocate for D-1.
Ms. Archana Gaur, Advocate for Defendant Nos. 2
and 4.
CORAM: JUSTICE S. MURALIDHAR
JUDGMENT
% 15.03.2017
IA No. 2786/2015 (under Order XXXIX Rules 1 and 2 CPC)
IA No. 7330/2015 (Objections filed by the Defendants to the report of
the LC)
IA No. 16470/2015 (under Order XII Rule VI CPC by Plaintiff seeking
decree against admission)
IA No. 24532/2015 (under Section 51 for refraining Defendant No. 1
from encashing the Bank Guarantee)
Background facts
1. The background to these four applications is that the Plaintiff, V3S
Infratech Ltd., which is engaged in the business of civil construction, was
awarded a contract for the work of "Construction of 200 Bedded Referral
Hospital & other facilities for Central Para Military Forces (CPMF) at
Greater Noida" for which a contract was executed between the Plaintiff and
NBCC Ltd. („NBCC‟) (Defendant No. 1) on behalf of the Indo-Tibetan
Border Police („ITBP‟) (Defendant No. 2) on 23rd June, 2011.
2. The estimated price of the work was Rs. 96,00,04,000. This was worked
out on the basis of the rates quoted by the Plaintiff on the Bill of Quantities
(„BOQ‟) of the tendered documents. Pursuant to the contract, the Plaintiff
submitted a Security Deposit-cum-Performance Bank Guarantee in the sum
of Rs.4,80,00,200 (being 5% of the estimated cost) by way of a Performance
Bank Guarantee („PBG‟) dated 5th July, 2011 issued by the Punjab National
Bank („PNB‟) (Defendant No. 3). It may be mentioned herein that the said
PBG has been extended from time to time.
3. The date of commencement of the work was agreed to be the 10th day of
issue of the Letter of Intent („LOI‟) (dated 16th June, 2011) and the works as
detailed in the tender were to be executed and completed within 24 months
from the date of commencement. The stipulated date of completion thus
worked out as 25th June, 2013.
4. The case of the Plaintiff is that it mobilised the site within the described
time and the requisite tool, plant and machinery, labour and staff were
deployed at the site promptly for the timely completion of the works. It is
further stated that on the basis of the Tentative Macro Construction Schedule
submitted to NBCC on 14th May, 2011, the Plaintiff on 25th June, 2011
submitted the Final Good for Construction („GFC‟) Drawing Release
Schedule for the works.
5. According to the Plaintiff, NBCC "miserably failed to adhere to the
timeline" for the release of the GFC drawings. It is submitted that the
schedule of work submitted by the Plaintiff was dependent on timely release
of the drawings. According to the Plaintiff, the drawings which were
requested on 8th July, 2011 were received by the Plaintiff only on 25 th
August, 2011. Likewise, the GFC drawings for the Foundation Level
Column details were received after a delay of 135 days. The Basement Slab
Beam Reinforcement details were received after a delay of 95 days, ramp
details were received on 7th November, 2011 after a delay of 95 days.
6. By letters dated 14th December, 2011 and 20th December 2011, the
Plaintiff reminded NBCC that the authorised layout plans such as light and
power circuit layout plan, T.V., telephone and computer conduit layout plan,
fire alarm layout plan etc. along with certain other working drawings and
details were yet to be received. Further, there were discrepancies in the
working drawings received by the Plaintiff. In some of them, certain
sections, reference numbers etc. were missing and this caused further delay
in the execution of the works. The Plaintiff‟s case is that the delay was
solely attributable to NBCC.
7. By further letters dated 23rd April 2012, 7th September, 2012 and 21st
September 2012, the Plaintiff reminded NBCC that the aforementioned
details pertaining to column schedule of all floors, internal painting, ceiling
plans of all floors, terrace layout for slope, terrace waterproofing, terrace
garden and sections, mumty slab, SS and MS railing details, sanitary and
plumbing details, Machine Room's structural and architectural Drawings,
toilet layout plans etc. were pending with NBCC.
8. It is stated that meetings were held between the Plaintiff NBCC and ITBP
on several dates. On 14th January, 2012, it was pointed out by ITBP that the
progress of work till then was not satisfactory. At a further meeting held on
19th January, 2012, the position was the same. It was further noticed that
various enabling features were not provided at the site. By 23rd January 2012
against a target of Rs.8.93 crores, the Plaintiff had achieved only work of a
value of Rs. 3.60 crores. At the meeting held on 1st June, 2012, NBCC asked
the Plaintiff to complete the work by June 2013.
9. On 19th June, 2012, it was again pointed out by NBCC that the progress of
work was slow. This was reiterated on 26th June, 2012. Against the target of
Rs. 227 lakhs for the said month, work of a value of only Rs. 54 lakhs was
completed. At the meeting on 11th July, 2012, ITBP expressed its
displeasure that between April and June 2012 only a turnover of Rs. 265
lakhs was achieved against a target of Rs. 504 lakhs.
10. At the meeting held on 10th December, 2012, the Plaintiff agreed that the
minimum turnover for December 2012 would be Rs. 2.5 crores and for the
succeeding month it would be Rs. 5 crores. The overall work was agreed to
be completed by 31st July, 2013. It is further agreed that if the Plaintiff failed
to achieve the above targets, ITBP could take action as per the contract. At
the meeting held on 7th November, 2013, ITBP expressed its displeasure at
the poor turnover. While the claimant requested for extension of time
(„EOT‟) up to June 2014, ITBP asked the Plaintiff to finish the work by
March 2014. At the meetings held on 27th November, 2013, 3rd May, 2014,
14th May, 2014 and 14th June, 2014, it was noticed that the progress of work
was still slow.
11. On 22nd August, 2014, a show cause notice („SCN‟) was issued to the
Plaintiff asking it to explain why action to terminate the contract should not
be taken under Clause 72 of the Contract.
12. Meanwhile, the work came to a standstill. The Plaintiff filed CS (OS)
No. 3201 of 2014 in this Court in which an application for interim injunction
was also filed. The prayers in that suit were to restrain ITBP from encashing
the PBG dated 5th July, 2011 and to restrain NBCC from dealing with the
construction work or terminating the contract. An order was passed in the
said suit on 17th October, 2014 initially recording the suggestion made by
the Court to the parties to explore the possibility of a settlement. However,
the Court was, later during the same date, informed by learned counsel
appearing for NBCC that there was no possibility of a settlement. NBCC
was Defendant No. 3 in the said suit. The Court directed deletion of PNB
from the array of parties. It gave time to Union of India represented by
Ministry of Home affairs and ITBP (Defendant No. 2) to file their respective
replies/written submissions and directed listing of the matter on 10 th
November, 2014. However, since by that date, the PBG stood encashed and
no interim order in that regard was passed.
Settlement of 13 December, 2014
13. On 13th December 2014, a settlement was entered into between the
Plaintiff and NBCC. It recorded the fact that the Plaintiff was willing to
complete the project by 15th February, 2015 and that NBCC was agreeable
to the said offer. The terms of the settlement were reduced to writing as
under:
"Now this deed witness:
1. The Contractor agrees and undertakes to execute the entire
scope of work on the same rates and terms as contained in the
original agreement dated 23.06.2011.
2. The contractor agrees to complete the construction of various
buildings at the project by 15.02.2015 as per the following
milestone target agreed hereinbelow:-
(a) Pour No.1 31.01.2015
(b) Pour No.2 l0.02.2015
(c) Pour No.3 31.01.2015
(d) Pour No.4 15.02.2015
(e) Pour No.5 15.02.2015
(f) Pour No.6 15.02.2015
(g) Pour No.7 20.01.2015
(h) Pour No.8 25.01.2015
(i) Pour No.9 31.12.2014
NBCC accept the same subject to the provisions of the contract.
The payments for the works executed shall be released as per
terms and condition mentioned in the contract.
3. The contractor agrees that it will submit new performance
Bank Guarantee(s) for the equal amount of PBG which was
enchased by NBCC on 17.10.2014 and on submission of the
same NBCC shall remit the amount to the contractor within 7
days subject to verification to the submitted BG from the
concerned bank. The said bank guarantee shall be unconditional
and as per the contract agreement. On breach, of the present
Settlement Agreement or as per provisions of the contract,
NBCC shall be entitled to invoke and encash the said bank
guarantee.
4. The contractor agrees that they shall not raise any
dispute/claim towards interest against NBCC in respect of the
encashment of BG(s).
5. That the present settlement shall not be construed in any
manner as waiver of any rights and obligation under the
contract dated 23.06.2011 executed between NBCC and
Contractor and both parties shall remain bound by the terms
and conditions of the contract. The contractor shall execute and
complete the works as per terms of the contract.
6. It is further agreed by both the parties that this Settlement
Agreement will be jointly submitted before the Hon'ble High
Court of Delhi on the next date of hearing on 19.12.2014 in
view of the settlement the Contractor shall unconditionally
withdraw the suit.
In Witness Whereof, the parties through their duly authorized
representatives have executed these presents (executed whereof
has been approved by the competent Authorities of both the
parties) on the day first above mentioned at New Delhi."
14. It must be noted here that on 29th December, 2014, in terms of the
Settlement Agreement, the entire PBG amount that was encashed was
refunded by NBCC to the Plaintiff.
15. At the hearing of CS (OS) No. 3201/2014 on 19th December 2014, the
Court was informed of the aforesaid Settlement Agreement. The Plaintiff
accordingly sought permission to withdraw the suit. The Court directed that
"the suit is dismissed as withdrawn, as settled". The Plaintiff on 29th
December, 2014 submitted a new PBG dated 26 th December, 2014 which
was valid till 14th February, 2016.
16. On 15th January, 2015, the Plaintiff wrote to NBCC stating that after the
Settlement Agreement, it had accelerated the execution of the work and
spent at least Rs. 1.5 crores for the work done thereafter. It is stated that
non-release of payment had hampered the progress of the work. The
Plaintiff drew the attention of NBCC to Clause 2 of the Settlement
Agreement against which "payments for the works executed shall be
released as per terms and condition mentioned in the contract." It requested
for release of payment under 36th & 37th RA Bill.
Interim orders in the present suit
17. When no further payment was made by NBCC, the Plaintiff filed the
present suit in which, as already noticed, NBCC is arrayed as Defendant No.
1, ITBP as Defendant No. 2, PNB as Defendant No. 3 and the Union of
India through the MHA as Defendant No. 4. The prayers in the suit are for:
(i) directions to NBCC to pay to the Plaintiff a sum of Rs. 9,32,81,011/-
along with interest @ 24% per annum;
(ii) restraining NBCC from dealing with the construction of the works and
encashing:
(a) PBG for the sum of Rs. 4,80,00,200 valid till 14th February, 2016;
(b) Rendition Money Bank Guarantee („RMBG‟) dated 30th March,
2013 for Rs. 1,07,00,000;
(c) Bank Guarantee („BG‟) for a sum of Rs.1.29 crores dated 23rd July,
2012; and
(d) BG dated 16th January, 2014 for a sum of Rs. 1 crore; and
(iii) restraining NBCC from dispossessing the Plaintiff from the site of the
said works.
18. IA No. 2786/2015 was filed under Order XXXIX Rule 1 and 2 CPC
seeking interim reliefs. When the matter came up for hearing on 10th
February 2015 inter alia the following order was passed:
"5. The plaintiff has instituted the accompanying suit against
the defendant No. l/NBCC Ltd., defendants No.2 & 4/ITBP and
the defendant No.3/PNB praying inter alia for passing a decree
for a sum of Rs. 9,32,81,011/- against the defendant No. l along
with interest towards the payment for works executed by it in
respect of a project for construction of a 200 Bedded Referral
Hospital meant for the Central Paramilitary Forces of the
defendant No.2/ITBP at Greater Noida. Apart from the above
relief, the plaintiff has prayed for permanent injunction to
restrain the defendant No. l from invoking the bank guarantees
offered by it for undertaking the construction work.
6. Pursuant to the order dated 9.2.2015, the defendant No. l is
represented through counsel and he confirms that he has
received a complete set of the paper book.
7. In the course of making submissions, counsels for the parties
draw the attention of the Court to the order dated 19.12.2014
passed in CS(OS)No.3201/2014 an earlier suit instituted by the
plaintiff against the defendants in respect of the same project,
which was dismissed as withdrawn in terms of a Settlement
Agreement dated 13.12.2014 executed by the plaintiff and the
defendant No. l/NBCC.(Annexure P-25 at pages 406-410).
8. On enquiring from the counsels for the parties as to why has
the settlement arrived at only a month ago, broken down so
soon. Mr. Chandhiok, learned Senior Advocate appearing for
the plaintiff submits that the defendant No.l/NBCC has illegally
withheld the rightful dues of the plaintiff under the garb of
liquidated damages for the works already executed, as per the
conditions recorded in the settlement.
9. Counsel for the defendant No. l/NBCC disputes the aforesaid
submission and states that the payments were to be released to
the plaintiff only in terms of the contract and the plaintiff has
clearly defaulted in executing the contract. He explains that
while the plaintiff had agreed that it would complete the project
by 15.2.2015, as recorded in para 2 of the Settlement
Agreement dated 13.12.2014, even the first milestone target
that was required to be achieved by 31.12.2014 for Pour No.9,
has not been achieved so far.
10. Mr. Chandhiok, learned Senior Advocate for the plaintiff
disputes the submission made by counsel for the defendant
No.l/NBCC and states that despite the settlement arrived at
between the parties, the defendant No.l/NBCC has failed to
release any amount and even the payment in respect of the
certified bills, i.e. RA 36 & 37 have not been paid by the
defendant No. 1. He further submits that out of the list of
milestone targets recorded in para 2 of the Settlement
Agreement/contract, the plaintiff has completed the work to the
tune of Rs.1.50 crores, but the milestone targets could not be
achieved due to the hindrances created by the defendant No.l
and on account of non-release of the outstanding amounts to the
plaintiff.
11. To resolve the controversy to some extent, counsels for the
parties have been asked if they are agreeable to the appointment
of an independent engineer to visit the site along with their
respective representatives for carrying out the measurement of
the works completed by the plaintiff after 31.8.2014, the date of
RA 37.
12. Both the parties are agreeable to the said suggestion.
13. Accordingly, Mr. H. S. Dogra, Retd. D.G., CPWD (Mobile
No. 9818695335) is appointed as a Local Commissioner to visit
the site on 18.2.2015 so as to carry out the measurement of the
works undertaken by the plaintiff w.e.f. 1.9.2014 till date, along
with the assistance of a person, whom he may deem fit to
engage. The representatives of the plaintiff and the defendant
No. l/NBCC shall remain present at the site on the aforesaid
date at 10.00 AM along with the relevant documents and site
plans to assist the Local Commissioner, who shall submit a
report in respect of the works completed by the plaintiff w.e.f.
1.9.2014, till date.
14. The fees of the Local Commissioner is tentatively fixed as
Rs. 1.00 lac, to be borne equally by both the parties, apart from
the out of pocket expenses.
15. Counsel for the defendant No.l/NBCC states that contrary to
the impression sought to be given by the plaintiff that his clients
have sought to encash the bank guarantees offered by the
plaintiff, they have not taken any such coercive measures till
date and nor shall they do so till the next date of hearing.
16. Having regard to the importance of the project that is being
executed to cater to the requirements of the Paramilitary Forces,
it has been enquired from the learned Senior Advocate
appearing for the plaintiff if the work at the site has been
stopped, as has been claimed by the other side. He assures the
Court that the work has not been stopped and the plaintiff shall
continue executing the contract with despatch.
17. While binding the plaintiff and the defendant No.l to the
aforesaid submissions, list on 18 March, 2015 in the category of
'directions', to await the Local Commissioner's report."
19. According to the Plaintiff, in the meanwhile, it submitted the 38th RA
Bill dated 31st January, 2015 of Rs.1,52,76,913. The 39th RA Bill dated 20th
February, 2015 in the sum of Rs. 28,24,521 was also submitted.
20. The Local Commissioner („LC‟), Mr. H.S. Dogra, Retired Director
General, CPWD visited the site, carried out the measurements, etc. and filed
his report in the Court on 16th March, 2015. On 18th March, 2015 when the
matter came up before the Court, time was granted to the parties to get a
copy of the LC‟s report and make submissions, in particular, in regard to his
observations in Annexure-VII to the Report.
21. At this stage, the Plaintiff filed IA No. 5872/2015 under Order VI Rule
17 CPC to amend the plaint. Later on, another IA No.11185/2015 was filed
by the Plaintiff against under Order VI Rule 17 seeking further amendment
to the plaint. A third application being IA No. 12389/2015 was filed seeking
amendment. When this application came up for hearing on 7 th July 2015, the
Plaintiff withdrew the earlier IAs filed in this regard under Order VI Rule 17
CPC.
22. Subsequently, the Plaintiff filed IA No. 14549/2015 under Order 39 Rule
1 and 2 CPC followed by an IA No. 15392/2015 under Order 39 Rule 1 & 2
CPC, which came up for hearing on 31st July, 2015.
Termination of contract by NBCC
23. In the meanwhile, on 16th April, 2015, NBCC wrote to the Plaintiff
stating that „liquidated damages‟ („LD‟) amounting to Rs. 9.60 crores were
recoverable and that Rs. 5.78 crores had already been recovered from the
works. By reply dated 22nd April, 2015, the Plaintiff protested and pointed
out that NBCC had itself not agreed with ITBP on the question of deduction
of LD from the RA Bills.
24. On 28th April, 2015, a SCN was issued by NBCC proposing to terminate
the contract. On 7th May, 2015, the Plaintiff replied to the SCN.
25. On 8th May, 2015, a letter was written by the Chief General Manager
(„CGM‟) of NBCC to the Plaintiff exercising powers under Clause 72.2 of
the General Conditions of Contract („GCC‟) and terminating the contract
with immediate effect. The security deposit recoverable under the contract
was forfeited. It was stated that the unused material of construction, etc.
would be at the absolute discretion of NBCC and that the entire balance
work would be completed by NBCC at the risk and cost of the Plaintiff. The
excess expenditure would be recovered from the money due to the Plaintiff.
The Plaintiff was further put to notice that the work executed till then would
be measured on 13th May, 2015 at 10:00 hours. The Plaintiff was asked to
depute an authorized representative to record joint measurement in the
absence of which NBCC would undertake a unilateral measurement.
26. On 3rd June, 2015, NBCC issued a 'Notice Inviting Tender' ('NIT‟) for
the balance work. On 20th July, 2015 it issued a Letter of Award („LOA‟) for
the balance work to a new contractor.
Further applications by the Plaintiff
27. The Plaintiff filed IA Nos.14549/2015 and 15392/2015 for staying the
award of the balance work. On 31st July, 2015 when the matter came up for
hearing, the Court directed completion of pleadings on the said application.
The Court noted the submissions on behalf of NBCC that the entire
outstanding amount till RA bill 37 had been paid to the Plaintiff, except
statutory deductions and LD. However, learned counsel for the Plaintiff
stated that no such amount had been received by the Plaintiff and the LD
were also in dispute. The Court in the said order noted that the contract
between the parties had already been terminated on 8 th May, 2015. It was
submitted by learned counsel appearing for NBCC that the balance work had
already been awarded to the third party who had already started the work.
28. IA No. 16470/2015 was filed by the Plaintiff under Order XII Rule 6
CPC in which the main contention was that NBCC had admitted that the
entire amount due to the Plaintiff had been adjusted by it against LD. It was
pointed out that RA Bill No. 36 dated 3rd July, 2014 for Rs. 4,18,72,794/-
and RA Bill No. 37 dated 14th September, 2014 amounting to Rs.
1,27,70,318/- had already been duly certified by NBCC for payment. It was
contended that EOT was also granted for justifiable reasons by NBCC. It
was contended that the levy of LD by NBCC was "arbitrary, unfair, illegal
and contrary to the provisions of the Contract/GCC" and further that the
delay in completion of the project was attributable solely to NBCC and
ITBP. Even the withholding of the amount of Rs.1,35,82,173/- against the
LD up to 35th RA Bill was termed by the Plaintiff to be illegal and arbitrary.
Consequently, in view of that admissions purportedly made by NBCC, the
Plaintiff claimed that a decree should be pronounced for a sum of Rs.6,82,
25,285/- (i.e., Rs. 5,46,43,112/- due and payable to the Plaintiff against RA
Bill No. 36 and 37 + Rs. 1,34,82,173/- being LD adjusted up to 35th RA Bill)
with interest @ 24% per annum.
29. By its order dated 28th September, 2015, this Court allowed IA No.
12389/2015 under Order VI Rule 17 CPC. The Court was of the view that
the said amendments did not change the nature of the suit. The Court
permitted the Defendants to raise all its objections in the written statement to
the amended plaint.
30. On 9th March, 2016, the Court disposed of as infructuous IA Nos.
11761/2015, 14549/2015 and 15392/2015 which had sought stay of the
operation of the SCN dated 28th April, 2015 and termination letter dated 8th
May, 2015; stay of the award of balance work to new contractor and stay of
the letter of award dated 20th July, 2015 to a new contractor. It was made
clear that "whatever rights have accrued to the parties on account of the
aforesaid actions taken by the defendants are preserved".
31. As regards IA Nos. 2786/2015 and 24532/2015, the Court observed that
"these applications, therefore, concern only with the aspect of whether or not
the Plaintiff is entitled to an interim injunction during the pendency of the
suit and encashment of the performance bank guarantee." The Court further
directed that IA No. 7330/2015 (objections to the report of the Local
Commissioner filed by the defendant) and IA No. 16470/2015 (by the
Plaintiff under Order XII Rule 6 CPC) would also be taken up for
consideration on the next date.
Submissions on behalf of the Plaintiff
32. Mr Sunil Gupta, learned Senior Counsel appearing for the Plaintiff,
made the following submissions:
(i) It was only the Engineer-in-charge („EIC‟) of NBCC who was designated
as such under Clause 72.4.1 (a) who was competent to decide the question of
grant of EOT, levy of LD or termination of the contract. ITBP itself had no
jurisdiction to decide any such question. In terms of Clause 72.4.2 (viii), it
was the absolute discretion of the EIC of NBCC and not of any official of
ITBP to decide whether the costs for the delay are beyond the control of the
Plaintiff.
(ii) Under Clause 72.4.3, the EIC was to give a fair and reasonable EOT to
the contractor under Clause 72.2 (ii) in order to be satisfied that the
contractor was unable to complete the work The EIC had to be satisfied that
the contractor has without reasonable cause failed to proceed with the work
with due diligence.
(iii) On at least 3 occasions, EIC and NBCC found that the grant of EOT
was justified. Although the letters dated 17th September, 2013, 4th
December, 2013 and 16th April, 2014 termed the EOT as „provisional‟ that
terminology was not to be found in the contract. Therefore, the EOT should
be held to have been granted voluntarily under Clauses 72.4.2 and 72.4.3
and treated as complete and final.
(iv) There was no occasion for NBCC to submit its decision regarding grant
of EOT for approval to ITBP by its letter dated 4 th December, 2013. Still the
technical expert of the Chief Engineer (DIG), ITBP found NBCC‟s
recommendations for EOT to be justified to the extent of 253 days. Mr.
Gupta referred to the decision dated 16th January 2014 of ITBP as being
within the purview of paras 9.1 and 19.6 of the Memorandum of
Understanding („MOU‟) between ITBP and NBCC. However, the decision
of the Chief Engineer (DIG), ITBP was arbitrarily overruled by the IFA of
ITBP vide letter dated 11th July, 2014.
(v) In the minutes of meeting („MOM‟) dated 21st March, 2014 and the
letters dated 5th August, 2014, 10th September, 2014 etc., NBCC rightly and
legitimately protested about the long delays by ITBP in its approvals in the
matters of IT Networking, CCTV etc. because of which the false ceiling
work of the entire building was held up for more than one to one-and-a -half
years. NBCC also protested against the long delays by ITBP in its approvals
and levying compensation (LD) even though, even according to NBCC, the
hindrances were beyond its control mainly due to delay in payment of
running bills beyond 30 days as per the MOU. However, on each occasion,
the IFA and other officials of ITBP prevailed over NBCC.
(vi) Ultimately, NBCC had to give in to the pressure of ITBP regardless of
the contractual and legal rights of the Plaintiff to EOT. Even when it was
found to be „fair and reasonable‟ under para 72.4.3, NBCC lacked the
courage to face ITBP and object to the illegal acts of withholding payments,
imposition of LD etc. Accordingly, NBCC, as a cascading effect of ITBP‟s
behaviour, sought to minimize its own loss by maltreating the Plaintiff by
invocation of its BG, issuance of SCN, termination of the contract etc.
(vii) The Plaintiff earned its legal and contractual right to EOT for a fair
and reasonable period of 300 days without deduction of any compensation
or LD as per the decision of EIC and NBCC under Para 72.4.3 of the
Contract. NBCC was, therefore, guilty of abdication of its legal and
contractual duties and subordination of its discretion and decision-making
power under the Contract to the extra-legal dictates of ITBP. The Plaintiff
had reason to believe that NBCC had been making an excuse and deducting
LD from and withholding payment of the RA bills arbitrary without any
formal order of ITBP. Consequently, the acts of NBCC and ITBP were
arbitrary and untenable. Reliance is placed on the decision of Kailash Nath
Associates v. DDA (2015) 4 SCC 136.
(viii) The actions of NBCC were also violative of the orders passed by this
Court. The recommendations of the LC in Annexure-VII were constructive.
The matter could not be taken up in the Court for various reasons. Mere
absence of an interim order did not mean that NBCC had been permitted, in
the meanwhile, to take action like issuance of SCN, terminating the contract,
etc.
(ix) As regards IA No. 16470/2015 under Order XII Rule 6 CPC, it was
pointed out that NBCC had itself granted EOT and in turn sought the same
from NBCC without compensation/LD. In fact, NBCC had itself protested
to ITBP as regards the imposition of LD.
(x) The payment of Rs. 6,82,25,285/- was wrongfully and illegally withheld
by NBCC from the Plaintiff. The decisions in Raveesh Chand Jain v. Raj
Rani Jain (2015) 8 SCC 428 and Uttam Singh Duggal & Co. Ltd. v. Union
of India & Ors. (2000) 7 SCC 120 were relied upon. As regard the plea for
stay of encashment of the BG, the decisions in Hindustan Construction Co.
Ltd. v. State of Bihar (1999) 8 SCC 436; Gangotri Enterprises Limited v.
Union of India & Ors. 2016 11 SCC 720 and the decisions of this Court in
P.D. Alkarma Pvt. Ltd. v. Canara Bank 1998 (45) DRJ 423; Hindustan
Construction Co. Ltd. v. Satluj Jal Vidyut Nigam Ltd. AIR 2006 Del 169
and State Trading Corporation of India Ltd. v. State Bank of India & Ors.
(2013) SCC Online Del 935 were relied upon.
Submissions on behalf of NBCC
33. Mr Sanjeev Mahajan, learned counsel appearing for NBCC referred to
Clause 72 of the Contract which provides for compensation for delay in
execution of the work. He referred to SCN dated 7th August, 2012 which
pointed out that instead of 85% of construction having to be completed by
them, only 49% was completed. Under the revised plan, the Plaintiff was to
complete construction by 15th December, 2012.
34. Mr. Mahajan also referred to the SCN dated 16th November, 2012 which
showed that only Rs. 32 crores worth of work had been done till then. That
SCN was dropped after the Plaintiff gave an assurance vide letter dated 6 th
December, 2012 that it would complete Rs. 5 crores‟ value of work per
month. The third SCN was issued on 17th May, 2013 wherein it was pointed
out that only 51% of the work was completed.
35. Mr Mahajan pointed out that even after the settlement dated 13 th
December, 2014, which extended the period of completion of work up to
15th February, 2015, the right to impose LD remained. However, again the
Plaintiff was unable to complete it by 15th February, 2015.
36. As regards the report of the LC submitted on 16 th March, 2015, Mr.
Mahajan referred to the interpolation which had been made in the chart
annexed as Annexure V, which itself demonstrated the huge difference
between what was claimed by the Plaintiff and that claimed by NBCC. He
also referred to the interpolations made in the LC‟s report in various
columns on pages 9, 11 and 14. For instance, at internal page 14, the rate
was altered from 90% to 95% by hand. Likewise, the value of the work done
was altered by hand. Annexure-IV concerned the material at the site and
significantly, this was not signed by NBCC. He submitted that this was also
outside the scope of the mandate of the LC. He pointed out that the LC‟s
report was not supplemented by photographs or documents. He submitted
that whole of Annexure-VII i.e., additional information for the Court was
entirely outside the mandate of the LC.
37. Mr. Mahajan pointed out that there was no admission as regards the
MOM dated 21st March, 2014 and the meeting held between NBCC and
ITBP. The contract between the NHAI and ITBP was separate and the
Plaintiff could not take advantage of any of the clauses therein to avoid
liability arising out of the escalation for NBCC.
38. As regards the encashment of the PBG, Mr. Mahajan pointed out that
there can be only two exceptions to the rule that a Court will not interfere
with the encashment of the BG: one was egregious fraud and the other
irretrievable injustice. He placed reliance on the decisions in Dwarikesh
Sugar Industries Ltd v. Prem Heavy Engineering Work (P) Ltd. & Anr.
(1997) 6 SCC 450 and BSES Ltd. (Now Reliance Energy Ltd.) v. Fenner
India Ltd. & Anr. (2006) 2 SCC 728. He submitted that no case was made
out for passing of a decree on admissions under Order XII Rule 6 CPC.
Law in relation to stay of encashment of BGs
39. At the outset, the Court would like to consider whether any case was
made out by the Plaintiff for stay of encashment of the BGs in question.
The law in this regard is well settled. In State Trading Corpn. of India Ltd.
v. Jainsons Clothing Corpn.(1994) 6 SCC 597, although fraud was pleaded
by the Plaintiff, the Court held that it was at best a case of cancellation of the
contract by the appellant-principal supplier. The Court then proceeded to
explain the law in relation to the scope of judicial review in the matter of
encashment of BG as under:
"8. The grant of injunction is a discretionary power in equity
jurisdiction. The contract of guarantee is a trilateral contract
which the bank has undertaken to unconditionally and
unequivocally abide by the terms of the contract. It is an act of
trust with full faith to facilitate free flow of trade and commerce
in internal or international trade or business. It creates an
irrevocable obligation to perform the contract in terms thereof.
On the occurrence of the events mentioned therein the bank
guarantee becomes enforceable. The subsequent disputes in the
performance of the contract does not give rise to a cause nor is
the court justified on that basis, to issue an injunction from
enforcing the contract, i.e., bank guarantee. The parties are not
left with no remedy. In the event of the dispute in the main
contract ends in the party's favour, he/it is entitled to damages
or other consequential reliefs.
9. It is settled law that the court before issuing the injunction
under Order 39 Rules 1 and 2, CPC should prima facie be
satisfied that there is triable issue strong prima facie case of
fraud or irretrievable injury and balance of convenience is in
favour of issuing injunction to prevent irremediable injury. The
court should normally insist upon enforcement of the bank
guarantee and the court should not interfere with the
enforcement of the contract of guarantee unless there is a
specific plea of fraud or special equities in favour of the
plaintiff. He must necessarily plead and produce all the
necessary evidence in proof of the fraud in execution-of the
contract of the guarantee, but not the contract either of the
original contract or any of the subsequent events that may
happen as a ground for fraud."
40. The above decision was followed by the much cited case of U.P. State
Sugar Corporation v. Sumac International Limited (1997) 1 SCC 568
where the Court again explained the law as under:
"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 co-
exist in some cases."
41. The Court explained that there must be a clear case of fraud in the
underlying transaction of which bank has notice. The fraud must be of an
egregious nature such as to vitiate the entire underlying transaction. As
regards irretrievable injustice, reference was made to the decision in Itek
Corporation v. First National Bank of Boston 566 Fed Supp. 1210, where
it was held that to avail of this exception, certain 'exceptional circumstances'
which make it impossible for the guarantor to reimburse himself if he
ultimately succeeds will have to be decisively established.
42. In Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works
(P) Ltd. & Anr. (supra), the Supreme Court observed that, "in the absence
of established fraud and not a mere allegation of fraud and that also having
been made only in the injunction application, the court could not, in the
present case, have granted an injunction relating to the encashment of the
bank guarantees".
43.1 In BSES Limited v. Fenner India Limited & Anr. (supra) the two
exceptions were again explained as under:
"There are, however, two exceptions to this rule. The first is
when there is a clear fraud of which the bank has notice and a
fraud of the beneficiary from which it seeks to benefit. The
fraud must be of an egregious nature as to vitiate the entire
underlying transaction. The second exception to the general rule
of non-intervention is when there are "special equities" in
favour of injunction, such as when "irretrievable injury" or
"irretrievable injustice" would occur if such an injunction were
not granted. The general rule and its exceptions has been
reiterated in so many judgments of this Court, that in U.P. State
Sugar Corporation v. Sumac International Ltd., (hereinafter
"U.P. State Sugar Corporation") this Court, correctly declared
that the law was "settled" .
43.2 In BSES Limited v. Fenner India Limited & Anr. (supra), an argument
was made that the invocation of BG for oblique purposes was not
permissible and that, "the unconscionable calling of a bank guarantee was an
exception independent of fraud". This was, however, rejected by the
Supreme Court and it was observed as under:
"We are afraid that in the face of the law succinctly laid down
in U.P. Cooperative Federation (supra) and reiterated in
numerous judgments of this Court referred to earlier, we are
unable to accept the wide proposition of law laid down in the
foreign judgments cited by Mr. Sorabjee. Whatever may be the
law, as to the encashment of bank guarantees in other
jurisdictions, when the law in India is clear, settled and without
any deviation whatsoever, there is no occasion to rely upon
foreign case law."
43.3 In BSES Limited v. Fenner India Limited & Anr. (supra), the Court
further explained that it was beneficiary in whose favour the BG is issued
which is the best judge to decide as to when and for what the BG should be
encashed. It was held as under:
"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 Company Inc. v. Punj Sons (P) Ltd., 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."
44. In Himadri Chemicals Industries Limited v. Coal Tar Refining
Company (2007) 8 SCC 110, the legal position was reiterated as under:
"14...(i) While dealing with an application for injunction in the
course of commercial dealings, and when an unconditional
Bank Guarantee or Letter of Credit is given or accepted, the
Beneficiary is entitled to realize such a Bank Guarantee or a
Letter of Credit in terms thereof irrespective of any pending
disputes relating to the terms of the contract.
(ii) The Bank giving such guarantee is bound to honour it as per
its terms irrespective of any dispute raised by its customer.
(iii) The Courts should be slow in granting an order of
injunction to restrain the realization of a Bank Guarantee or a
Letter of Credit.
(iv) Since a Bank Guarantee or a Letter of Credit is an
independent and a separate contract and is absolute in nature,
the existence of any dispute between the parties to the contract
is not a ground for issuing an order of injunction to restrain
enforcement of Bank Guarantees or Letters of Credit.
(v) Fraud of an egregious nature which would vitiate the very
foundation of such a Bank Guarantee or Letter of Credit and the
beneficiary seeks to take advantage of the situation.
(vi) Allowing encashment of an unconditional Bank Guarantee
or a Letter of Credit would result in irretrievable harm or
injustice to one of the parties concerned."
45. This Court in Consortium of Deepak Cable India Limited v.
Teestavalley Power Transmission Limited 2014 215 DLT 246 (DB)
succinctly summarised the law thus:
"145. ... That certain amounts have been recovered under
running bills and have to be adjusted for is of no concern in
matters relating to invocation of bank guarantee. That there are
serious disputes on questions as to who committed the breach
of the contract are no circumstances justifying granting an
injunction pertaining to a bank guarantee. Plea of lack of good
faith and/or enforcing the guarantee with an oblique purpose or
that the bank guarantee is being invoked as a bargaining chip, a
deterrent or in an abusive manner are all irrelevant and hence
have to be ignored. There are only two well recognized
exceptions to the rule against permitting payment under a bank
guarantee. The same are:
A. A fraud of egregious nature;
B. Encashment of the bank guarantee would result in
irretrievable harm or injustice of an irreversible kind to one of
the parties.
146. The irretrievable harm or injustice of an irreversible kind
must relate to a situation akin to the one found in Itek
Corporation's case (supra) or of the kind or in Elian's case
(supra).
147. There is no separate third exception of a special equity
justifying grant of an injunction to restrain the beneficiary from
receiving under an unconditional bank guarantee and if there
exists any third exception of a special equity the same has to be
of a kind akin to irretrievable injustice or putting a party in an
irretrievable situation."
No case made out for stay of encashment of BGs
46. In the above background, the Court proceeds to consider whether there
exists any prima facie case in favour of Plaintiff for grant of stay of
encashment of the BG in question.
47. The submission that it is only the EIC, NBCC who is authorized to take
a decision regarding grant of EOT and not ITBP pertains to the legality of
the invocation of the BG. This is a disputed question which cannot possibly
be examined at this stage. Even the plea that NBCC induced the Plaintiff
into withdrawing the earlier suit CS (OS) No. 3201/2014 in order to deprive
the Plaintiff of the over-due payments is a disputed question. This is not the
kind of 'egregious fraud' spoken of in the decisions of the Supreme Court
discussed hereinbefore.
48. As regards the plea of irretrievable injustice, the factors pointed out by
Mr. Gupta are not uncontroverted and would essentially be matters for
evidence. Under Clause 72.4, time was to be the essence of the contract.
Where the contractor commits default in the execution of the work, NBCC is
at liberty to forfeit the earnest money absolutely. Further, under clause
72.4.1, the compensation for the delay as per clause 72.1 shall be leviable at
intermediate stages also, in case the required progress is not achieved to
meet the time deadlines for completion. Compensation for the delay shall
not exceed 10% of the tendered value of work. The grant of EOT is
governed by Clause 72.4.3. The clause does say that non-application by the
contractor for EOT shall not be a bar for the EIC to grant a fair and
reasonable extension. The question whether the action of NBCC in
recovering LD was justified is a disputed question which cannot be
examined by this Court at the present stage. The materials on record do not
enable the Court to even come to a prima facie conclusion in that regard.
49. The Court is unable to agree with the submissions of Mr. Gupta that the
provisional EOT granted by NBCC should be taken to be final EOT. That,
again, is a matter of interpretation and no final view can be expressed by the
Court at this stage. What should be the inference drawn from the MOM
dated 21st March, 2014 between NBCC and ITBP and the letters dated 5 th
August, 2014 and 10th September, 2014 is, again, is a matter in dispute. As
pointed out by Mr. Mahajan, NBCC itself has made a counter-claim of
Rs.13,30,24,908/- It is the case of NBCC that even by the first deadline of
31st December, 2014, the requisite target was not achieved. As to who was
responsible for the delay is again a disputed matter and it is not possible, on
the basis of what is available on record, to even come to a prima facie
conclusion in favour of the Plaintiff at this stage.
50. Mr. Gupta's submission that the progress of work was hampered o
account of NBCC anticipating approval of work of the IT network and
CCTV work by ITBP has been contested by Mr. Mahajan by pointing out
that the IT network and CCTV were not even part of the scope of the
Plaintiff‟s work.
51. The above factors, in the view of the Court, do not even pima facie show
that irretrievable injustice would be caused to the Plaintiff in the event of
encashment of the BGs in question.
52. Turning to the decisions cited by Mr. Gupta, in Hindustan Construction
Company Limited v. State of Bihar (supra), the Court there interfered with
the enforcement of the BG only because of the particular wording of the
BGs involved which required certain conditions to be fulfilled. In Gangotri
Enterprises Limited v. Union of India & Ors. (supra), the facts were held to
be more or less similar to the facts in Union of India v. Raman Iron
Foundry (1974) 2 SCC 231. Certain circumstances were noticed in para 42
of the said decision which justified the grant of injunction in the facts and
circumstances of that case. None of the said factors exist in the instant case.
The decision in P. D. Alkarma Pvt. Ltd. v. Canara Bank (supra) turned on
its facts and is distinguishable.
LC's Report
53. Mr. Gupta relied upon the report of the LC and, in particular, on
Annexure - VII thereto. NBCC has filed objections to the LC‟s report.
54. A perusal of the report of the LC shows, as noted earlier, that the LC had
gone beyond the scope of reference by the Court. It must be recalled at this
stage that all that the LC was required to do in terms of the order dated 18 th
May, 2015 was "to carry out measurement and whatever undertaken by the
Plaintiff with effect from 1st September, 2014 till date, along with assistance
of person, whom he may deem fit to engage".
55. Nonetheless, the Court has proceeded to consider the entire Annexure-
VII which is in the form of suggestions. The Court is of the view that the LC
has indeed exceeded his mandate in giving those suggestions which are at
best his opinion which cannot obviously be binding on the parties, much less
the Court. In the considered view of the Court, the entire Annexure-VII
titled "additional information for the Court" should be ignored as it was not
called for by the Court.
56. As far as Annexure-IV is concerned, there is no explanation as to why
the LC failed to obtain signatures of the AR of NBCC on that sheet which is
titled as „stock balance‟. It is in fact on the letterhead of the Plaintiff. Since
the attendance sheets show that the representative of NBCC was present, the
absence of the signature of the AR of NBCC thereon leads to the inevitable
result of Annexure-IV also having to be kept out of reckoning while
considering the issue of how much work was done by the Plaintiff up to 1 st
September, 2014.
57. The criticism of NBCC as regards interpolation on the report of the LC
also appears to be justified. There are interpolations on important parts of
the Annexures. The dispute was essentially with regard to the extent of the
work which was to be done between 1st September, 2014 and the date of the
termination of the contract i.e., 18th February, 2015. It is pointed out how the
GFRC Jali which was claimed by the Plaintiff to be 205 sq. meters, was on
measurement found to be 74.63 sq. meters. The LC in his report has
indicated the same to be of 100 sq. meters without giving any reasons.
Likewise, the measurement of the quantity of granite appears to be increased
by the LC from 305.4 sq. meters from 2015.17 sq. meters without indicating
the basis. In fact, the Plaintiff claimed the quantity to be 305.04 sq. m.
58. Likewise, in respect of structural glazing, the Plaintiff claimed the
quantity as 207.62 and NBCC found it as 107.62 sq. meters. This, again, has
been arbitrarily raised to 207.62 sq. meters. Even as regards the rates, there
are problems. For work done prior to 1st September, 2014 in respect of
HBAC, 95% the full rate has been released by the LC contrary to the CPWD
specifications. In respect of 750 KVA DG, the LC released 90% rates
whereas NBCC had released 85% rates as per CPWD guidelines.
59. Photographs have been enclosed by NBCC with its objections to show
that the DG sets were simply placed on the foundation and not installed. The
photographs at Annexure-V show that even the UPS on the site was not
installed.
60. The Court, therefore, upholds the objections of NBCC to the report of
the LC.
No decree on admissions
61. The Court now proposes to deal with the prayer of the Plaintiff for a
decree on admissions. In its decision in Himani Alloys Limited v Tata Steel
Limited (2011) 15 SCC 273, the Supreme Court has explained that in order
to succeed in such an application, the Plaintiff has to show that the
admission is unambiguous and categorical. It should be a conscious and
deliberate act of the party making it, showing an intention to be bound by it.
As far as the Court is concerned, Order XII Rule 6 being an enabling
provision, it is neither mandatory nor peremptory but discretionary. The
Court, on examination of the facts and circumstances, has to exercise its
judicial discretion keeping in mind that a judgment on admission is a
judgment without trial which permanently denies any remedy to the
Defendant by way of an appeal on merits. Therefore, unless the admission is
clear, unambiguous and unconditional, the discretion of the Court should not
be exercised to deny the valuable right of a Defendant to contest the claim.
In short, the discretion should be used only when there is a clear „admission‟
which can be acted upon.
62. To the same effect is the decision of this Court in Vijay Gupta & Ors. v.
Ashok Kumar Gupta 2007 VII AD (Delhi) 266. Turning to the decision
relied upon by Mr Gupta in Raveesh Chand Jain vs Raj Rani Jain (supra),
on facts, it was found that the requirement of Order XII Rule 6 CPC was
indeed not satisfied.
63. Turning to the facts on hand, the recovery of LD from the RA bills of the
Plaintiff cannot be construed to be a categorical and unequivocal admission
by NBCC that the said amount was due to the Plaintiff. If that were so, it
would not explain the considerable amount claimed by NBCC against the
Plaintiff as counter-claim. In the considered view of the Court, none of the
conditions for applicability of Order XII Rule 6 stand satisfied in the present
case.
64. The Court, accordingly, dismisses IA Nos. 16740/2015, under Order XII
Rule 6 CPC.
65. IA No. 2786/2015 is also dismissed. It will be open to NBCC to proceed
to invoke and encash the BGs in question. A specific direction is issued to
the Plaintiff not to frustrate the invocation and encashment of such BGs by
failing to extend them as required by the orders of this Court from time to
time.
66. IA No. 7330/2015 i.e., the objections filed by NBCC to the report of the
LC, is allowed.
67. IA No. 24532/2015 filed by NBCC for permitting it to encash the BGs is
also allowed.
68. It is clarified that the observations on merits by the Court in this order
will not influence the independent decision thereon to be arrived at finally in
the suit.
IA No. 2787/2015 (Seeking leave to dispense with the compliance of
Section 80(1) of CPC)
69. In view of the order passed above, this application does not survive and
is disposed of as such.
CS (OS) 352/2015
70. List before the Roster Bench for further steps on 10th April, 2017.
S. MURALIDHAR, J
MARCH 15, 2017
dn/rd
