Delhi High Court
Larsen And Toubro Ltd vs Delhi Metro Rail Corporation Ltd & ... on 30 November, 2018
$~27-28
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 30th November, 2018
+ O.M.P.(I) (COMM.) 443/2018
+ O.M.P.(I) (COMM.) 444/2018
LARSEN AND TOUBRO LTD ..... Petitioner
Through: Mr.Rajiv Nayar, Sr. Adv. with
Mr.Ravi Varma, Mr.S.Kirmani, Mr.Lakshay
Khanna, Mr.Ashutosh Ranjan, Advs.
versus
DELHI METRO RAIL CORPORATION LTD & ANR.
..... Respondents
Through: Mr.Manish Srivastava, Mr.Deboshree
Mukherjee, Mr.Aditya Gupta, Mr.Ashish
Verma, Advs. for R-1.
Ms.Kashish Narang, Ms.Jasleen Budhiraja,
Advs. for R-2.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
I.A. No.16307/ 2018 in O.M.P.(I) (COMM.) 443/2018
I.A. No.16308/ 2018 in O.M.P.(I) (COMM.) 444/2018
Allowed, subject to all just exceptions.
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 1
O.M.P.(I) (COMM.) 443/2018
O.M.P.(I) (COMM.) 444/2018
1. These petitions have been filed under Section 9 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as
the 'Act') challenging the invocation of the Bank Guarantees dated
29.10.2018 for a sum of Rs.11,58,49,347/- in OMP(I)(COMM.)
No.443/2018 and Rs.7,18,33,894/- in OMP(I)(COMM)
No.444/2018 by the respondent no.1.
2. The facts being referred to hereinbelow have been taken
from OMP(I) (Comm.) No.444/2018.
3. The petitioner had been awarded the work of construction
of elevated viaduct, 6 elevated stations viz Aluva, Pulinchodu,
Companypady, Ambattukavu, Muttom, Kalamassery (from
chainage -120.000m to 7055.218m) including architectural
finishing works of stations and connecting elevated viaduct and
ramp to depot at Muttom on Alwaye Petta line of Kochi Metro Rail
Project.
4. The petitioner had submitted the Performance Bank
Guarantee(s) in compliance with the terms of the Agreement
executed between the parties.
5. The time for completion of the project was 24 months from
the commencement date, however, admittedly there was delay in
completion of the work, which the petitioner contends was for
reasons attributable to the respondent no. 1. The respondent no. 1
had granted extension of time, from time to time, for completion of
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 2
the work by various letters, out of which the first extension of time
was granted without levy of liquidated damages, while on the other
three occasions the respondent no. 1 levied the liquidated damages
(in OMP (I) (COMM) 443/2018, the first extension was granted
without levy of liquidated damages while the subsequent two were
granted reserving the right to levy liquidated damages and the last
was with levy of liquidated damages).
6. The respondent no. 1 vide its letter dated 20.06.2018, relying
upon Clause 8.5 of the General Conditions of Contract and
Appendix-2B of Employer's Requirement, levied liquidated
damages of Rs. 14,60,82,088/- on the petitioner. By another letter
of 20.06.2018, the respondent no. 1 called upon the petitioner to
pay a further amount of Rs. 6,98,99,899.37/- as damages on
account of Risk and Cost'.
7. As the respondent no.1 sought to encash the Performance
Bank Guarantee(s) submitted by the petitioner for making
recoveries of the Liquidated Damages and the damages on account
of 'Risk and Cost', the petitioner filed petitions under Section 9 of
the Act, being OMP(I)(Comm.) Nos.328/2018 and 329/2018. The
same were dismissed by this Court vide its order dated 16.08.2018.
The petitioner challenged the above order by filing appeals under
Section 37 of the Act, being FAO(OS) (Comm.) 198/2018 and
FAO(OS)(Comm.) 199/2018.
8. It is the case of the petitioner that while the above appeals
were pending before the Division Bench of this Court, the parties
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 3
met and pursuant to the negotiations, the respondent no.1 withdrew
the invocation letters vide communication dated 30.08.2018
addressed by the respondent no.1 to the bank. In view of the
withdrawal of the invocation, the petitioner withdrew the appeals
on 04.09.2018.
9. The learned senior counsel for the petitioner further submits
that pursuant to the negotiations between the parties, respondent
no.1 vide its letter dated 23.10.2018 called upon the petitioner to
submit separate Bank Guarantees for 'Risk and Cost' and for
Liquidated Damages under the two Contracts. The petitioner gave
its consent to comply with the said requisition vide its letter dated
24.10.2018 and also proposed the values of the Bank Guarantees
including interest.
10. In the meantime, the petitioner also invoked the Arbitration
Agreement between the parties vide its letter dated 24.10.2018.
11. The respondent no.1 by its letter dated 25.10.2018 accepted
the proposal of the petitioner to submit separate Bank Guarantees
Contract wise for 'Risk and Cost' and for the Liquidated Damages
and also specified the corrected amounts including interest for
Bank Guarantees pertaining to 'Risk and Cost'.
12. The petitioner, complied with the direction of the respondent
no.1 and submitted separate Bank Guarantees for the two contracts
towards 'Risk and Cost' and Liquidated Damages under cover of
its letter dated 30.10.2018.
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 4
13. Learned senior counsel for the petitioner submits that in
spite of complying with the said condition, the respondent no.1
first threatened to invoke the Bank Guarantee(s) vide its letter
dated 09.11.2018 and has thereafter, proceeded to invoke the bank
Guarantees by a communication addressed on 29.11.2018. He
submits that such invocation of the Bank Guarantees is against the
terms settled between the parties pursuant to which the petitioner
had submitted fresh Bank Guarantees.
14. On the other hand, the counsel for the respondent has
brought to my attention the letter dated 31.08.2018 addressed by
the respondent no.1 to the petitioner. He submits that the terms of
the settlement were that the petitioner shall make payment of the
'Risk and Cost' amount to the respondent no.1 by 15.10.2018.
This period was thereafter extended from time to time, however, as
the petitioner failed to pay the said amount, the respondent no1 had
no option but to proceed to invoke the Bank Guarantees.
15. I have considered the submissions made by the learned
counsels for the parties. Letter dated 31.08.2018 addressed by the
respondent no.1 to the petitioner reads as under:-
"As requested vide your letter cited above based on
the discussion you had with Principal Advisor/DMRC, the
encashment of Bank Guarantees under reference 1 and 2 for
the projects KC02 and KC03 is being withdrawn, duly
advising the Bank.
Arrangements may please be made to extend the Bank
Guarantees as per the conditions of the contract for both
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 5
KC02 and KC03. As per the discussion we had today and as
committed by you to the Principal Advisor arrangements
may please be made to pay the risk amount of
Rs.6,98,99,899.37 and Rs.11,27,30,318.00 respectively for
the contracts KC02 and KC03 on or before 15/10/2018."
(Emphasis added)
16. The said letter clearly records the demand made by the
respondent no.1 regarding the payment of the 'Risk and Cost'
amount to be paid by the petitioner to the respondent no.1 on or
before 15.10.2018.
17. Letter dated 23.10.2018 relied upon by the petitioner also
states that incase the payment of 'Risk and Cost' amount is not
made before 01.11.2018, the Bank Guarantees covering such
amount shall be encashed by the respondent no.1. By the
subsequent letter dated 09.11.2018, respondent no.1 again advised
the petitioner to make payment against the 'Risk and Cost'amount
by 30.11.2018.
18. The demand made by respondent no.1 in the
abovementioned letters has never been contested by the petitioner.
There is no correspondence placed on record by the petitioner
stating that the offer to make such payment was never made by the
petitioner.
19. In view of the above, it must be held that the Bank
Guarantees are being invoked by the respondent no.1 in terms of
the settlement arrived at between the parties.
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 6
20. Be that as it may, the Bank Guarantees in question are
unconditional and unequivocal in nature. There is no allegation of
fraud or irrevitable injustice being caused to the petitioner due to
such invocation of the Bank Guarantees by respondent no.1. The
law in relation to the Bank Guarantees is no longer res integra and
has been settled and reiterated by the Supreme Court in a large
number of judgments. I made reference to them in my previous
order dated 16.08.2018 passed in OMP(I)(Comm.) 328/2018 and
329/2018.
21. Curiously, this order has not even been filed on record along
with present petitions. Neither is the order passed by the Division
Bench, by which the appeals had been withdrawn, filed on record
along with the present petitions. This is most important because
the appeals were withdrawn after the letter dated 31.08.2018
addressed by respondent no.1 to the petitioner which clearly stated
that the petitioner had undertaken to make the payment of 'Risk
and Cost' amount on or before 15.10.2018. If this was not the
understanding between the parties, the petitioner would not have
proceeded to withdraw its appeals pending before the Division
Bench.
22. In view of the above, I find no merit in the present petitions
and the same are dismissed, with no order as to costs.
NAVIN CHAWLA, J
NOVEMBER 30, 2018
RN
O.M.P.(I)(COMM) Nos.443 & 444/2018 Page 7
