Delhi High Court
Indrajit Power Private Limited vs Union Of India & Ors on 28 April, 2020
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 13.04.2020
Pronounced on: 28.04.2020
+ W.P.(C) 2957/2020 & CM Nos.10268-70/2020 (URGENT)
INDRAJIT POWER PRIVATE LIMITED ..... Petitioner
Represented by: Mr. Sandeep Sethi, Sr. Adv.
with Ms.Purti Marwaha, Adv.
versus
UNION OF INDIA & ORS. ..... Respondents
Represented by: Ms.Maninder Acharya, ASG
with Mr.Jasmeet Singh, CGSC
for R-1 to 4.
CORAM:
HON'BLE MR. JUSTICE SURESH KUMAR KAIT
JUDGMENT
Crl. M.A.10268-69/2020
1. Allowed, subject to all just exceptions.
2. Applications are disposed of.
W.P.(C) No.2957/2020 & Crl.M.A.10270/2020
3. The instant writ petition under Article 226/227 of the Constitution of
India has been filed praying for issuance of a writ of Certiorari for quashing
the email dated 04.04.2020 received by the petitioner company on
06.04.2020 whereby the respondent no.1 has passed a decision to
appropriate the Bank Guarantee No. 0018215IPG000019 dated 13.04.2015.
Consequently, a writ of Mandamus for direction to the respondent no.1 to
refrain from appropriating the Bank Guarantee dated 13.04.2015. Further, a
writ of Mandamus directing the respondent no.5 to renew the Bank
Guarantee dated 13.04.2015 which is due to expire on 12.04.2020 and a
writ of Mandamus for direction to the respondent no.1 to grant extension to
time to complete the pending 17% milestones to make the mine operational
at Nerad Malegaon Coal Mine, Maharashtra.
4. Hearing of the present petition has been conducted through video
conferencing.
5. Notice issued and accepted by the respective counsel of the
respondents. With the consent of counsel for the parties, the present petition
is being taken up for final disposal.
6. Petitioner is a company incorporated on 20.09.1994 which was
formed to generate thermal and green power. At present, petitioner has a 80
MW coal based thermal power plant based at Wardha, Maharashtra.
7. Respondent no.1 is the Union of India. The respondent no.2 is the
nominated authority, Ministry of Coal, represented through Secretary, that
regulates and deals with availability of coal to meet the demand of various
sectors of the economy in an eco-friendly, sustainable and cost effective
manner. Respondent no.1 also regulates the Coal Mines in the territory of
India. The respondent no.3 is the Scrutiny Committee set up by the Ministry
of Coal. The respondent no.4 is the office of the Coal Controller i.e.
subordinate office of the respondent no.1. The respondent no.5 is Allahabad
Bank which issued the Bank Guarantee on behalf of the petitioner company.
8. On 21.10.2014, respondent no.1 introduced the Coal Mines (Special)
Provisions Ordinance, which provided for allocation of Coal Mines and
vesting right, title and interest in and over the land mine infrastructure
together with mining leases to successful bidders and allottees with a view
of ensure continuity in coal mining operations and production of coal, and
for promoting optimum utilisation of coal resources consistent with the
requirement of the country in national interest and for matters connected
therewith or incidental thereto. It was vide this Ordinance, permission for
commercial mining had been permitted in India and therefore, the bids were
to be invited for re allotment of the mines, after the cancellation of coal
blocks by the Hon'ble Supreme Court of India vide its judgment dated
25.08.2014 in Manohar Lal Sharma vs. Principal Secretary: (2014) 9 SCC
516.
9. On 02.03.2015, the petitioner became the technically qualified bidder,
alongwith 4 other bidders, and on 13.03.2015, the petitioner was declared as
a successful bidder of the electronic auction conducted by the respondent no.
1 for Nerad Malegaon Coal Mine. Thereafter, a Coal Mine Development and
Production Agreement ("CMDPA") dated 16.03.2015 was entered into by
the petitioner and respondent no.1.
10. On 03.03.2015, the Coal Mine (Special Provisions) Act, 2015 was
notified. The CMDPA, laid down the post vesting obligations under Clause
5, which is being reproduced as under:-
"5. POST VESTING OBLIGATIONS
5.1 Commencement Plan
5.1.1 Within 30 Business days of the date of the Vesting
Order, the Successful Bidder shall be required to submit
a detailed plan (the "Commencement Plan") towards
commencement of mining operations of the Coal Mine.
The Commencement Plan shall include all actions that
the Successful Bidder may be required to perform to
commence mining operations at the Coal Mine and shall
include such information as may be required by the
Nominated Authority, including without limitation,
information regarding the following:
(a) The Government Approvals, including Mining
Lease which shall be required for commencement of
mining operations at the Coal Mine and the time within
which the Successful Bidder would make applications for
such Governmental Approvals; and
(b) Revision to the Mine Plan, if any, as may be
proposed by the Successful Bidder.
5.1.2 The Commencement Plan shall be prepared by the
Successful Bidder to ensure strict compliance with the
Efficiency Parameters. (page 15)
5.2 Payment of the Upfront Amount
5.2.1 First Instalment of fifty per cent
The first instalment of fifty per cent of the Upfront
Amount being an amount equal to INR 2,19,26,204
(Indian Rupees Two Crores Nineteen Lakh Twenty Six
Thousand Two Hundred and Four), shall be deposited by
the Successful Bidder in the Designated Bank Account in
the manner provided in Clause 3.1(b) as a Vesting
Condition.
5.2.2. Second Instalment of Twenty Five Per cent
The second instalment of twenty five per cent of the
Upfront Amount being an amount equal to INR
1,09,63,102 (Indian Rupees One Crore Nine Lakh Sixty
Three Thousand One Hundred and Two), shall be
deposited by the Successful Bidder in the Designated
Bank Account, on or prior to expiry of 15 Business Days
from the date of execution of the Mining Lease by the
relevant State Government.
5.2.3 Third Instalment of Twenty Five Per Cent
The third instalment of twenty five per cent of the Upfront
Amount being an amount equal to INR 1,09,63,102
(Indian Rupees One Crore Nine Lakh Sixty Three
Thousand One Hundred and Two), shall be deposited by
the Successful Bidder in the Designated Bank Account, on
or prior to expiry of 15 Business Days from the date of
grant of mine opening permission from the stale pollution
control board of the relevant State where the Coal Mine
is located.
5.2.4 Failure to pay the Upfront Amount
In the event the Successful Bidder fails to pay the second
instalment or the third instalment of the upfront Amount
within the time specified in Clause 5.02.2 or Clause 5.2.3,
respectively, then the Nominated Authority shall be
entitled to appropriate the Performance Security in the
manner stipulated in Clause 6 (PERFORMANCE
SECURITY) and such failure may also result in
termination of this Agreement as provided in Clause 24
(EFFECTIVE DATE, TERM AND TERMINATION) .
5.3 The Mining Lease
5.3.1 Pursuant to Section 8(4)(b) read with Section 8(8)
of the Ordinance, the Successful Bidder shall become
entitled to the mining lease with respect to the Coal Mine
(the "Mining Lease") to be granted by the State
Government upon issuance of the Vesting Order.
5.3.2 the Successful Bidder shall promptly upon issuance
of the Vesting Order make an application to the State
Government for grant of a Mining Lease in the name of
the Successful Bidder."
11. The CMDPA, laid down the details of the petitioners obligation to
submit a Performance Security under Clause 6, which is being reproduced as
under:-
"6. PERFORMANCE SECURITY AND
APPROPRIATION
6.1. Performance Security
6.1.1. The Successful Bidder shall provide an irrevocable
and unconditional revolving guarantee from an
Acceptable Bank payable at Delhi for an amount equal to
INR 30,76,56,000 (Indian Rupees Thirty Crores Seventy
Six Lakh and Fifty Six Thousand) (the "Performance
Security") in substantially the same form as provided in
SCHEDULE F for the performance of its obligations
within such time as specified in Clause 3.2.2.
6.1.2. The Performance Security shall be an amount
which is equal to aggregate of (a) one year royalty, to the
computed on the basis of peak rated capacity of the Coal
Mine as per the approved Mine Plan payable to the
relevant State Government with respect to the Coal Mine;
and (b) the annual approved Mine Plan multiplied by the
Final Price Offer.
6.1.3. In case of any revision in the Mine Plan in
accordance with Clause 14, the amount of Performance
Security shall be revised accordingly.
6.1.4. In such case, bank guarantee constituting the
Performance Security shall be substituted with another
bank guarantee of the enhanced value issued in
accordance with this Clause 6, within a period of 15
Business Days of receipt of approval for revision to the
Mine Plan."
12. Accordingly, the petitioner deposited with the respondents a bank
guarantee dated 13.04.2015 for an amount of Rs.30,76,56,000/- (Rupees
Thirty Crores Seventy Six Lacs Fifty Six Thousand Only) made in favour of
The President of India, acting through the Central Government represented
by the Nominated Authority, under the Schedule F of the Coal Mine
Development and Production Agreement for Nerad Malegaon Coal Mine.
On 14.04.02015, the petitioner also paid the first upfront instalment to the
respondent no.1, and the petitioner received the Vesting order dated
22.04.2015 in its name with regards to Nerad Malegaon Coal Mine and in
view thereof, the petitioner received the approved mining plan dated
22.04.2015 no.104/25/2015/NA.
13. The CMDPA, further laid down the details of the events and the
manner in which the petitioners Performance Security would be
appropriated by the respondents under Clause 6.2 and 6.3, which are being
reproduced as under:-
"6.2. Events for appropriation of the Performance
Security
6.2.1 The Performance Security may be appropriated
by the Nominated Authority upon occurrence of any of
the following events (the "Appropriation Event"), to be
determined by the Nominated Authority in is sole
discretion:
(a) Failure of the Successful Bidder to provide the
duly acknowledged duplicate copy of the Vesting
Order as required under Clause 4.6;
(b) Failure of the Successful Bidder to make
payment of the first instalment second instalment or
the third instalment of the Upfront Amount within
the time specified in Clause 3.1(b), Clause 5.2.2 or
Clause 5.2.3, respectively;
(c) Failure of submission of Commencement Plan
within the time specified in Clause 5.1.1.
(d) Failure of the Successful Bidder to comply with
the Efficiency Parameters as required under Clause
10;
(e) Any change in Control or transfer of right, title
or interest in the Coal Mine which is not in
conformity with Clause 13;
(f) Failure to make payment of the Monthly
Payment in accordance with this Agreement;
(g) Any utilization of coal which is not in conformity
with Clause 8; or
(h) Any other breach or non-compliance of any of
the provisions of this Agreement including in case of
the Warranties being untrue or misleading or
incorrect in any manner whatsoever.
6.2.2 Provided however that in the event an
Appropriation Event has occurred solely on account of an
Event of Force Majeure which could not have been
mitigated by the Successful Bidder through Good
Industry Practice as provided in Clause 23, then the
Performance Security shall not be appropriated for such
specific Appropriation Event.
6.3. Manner of appropriation of the Performance
Security
6.3.1. Upon occurrence of an Appropriation Event, to be
determined by the Nominated Authority, the Nominated
Authority shall have the unconditional right to
appropriate the Performance Security by providing a
written notice to the Successful Bidder in the following
proportion:
# Appropriation Event Amount
1. Failure of the Successful Bidder Entire Performance Security
to provide the duly
acknowledged duplicate copy of
the Vesting order as required
under clause 4.6
2. Failure of the Successful bidder An amount equal to the first
to make payment of the first instalment, and/or second
instalment second instalment or instalment and/or third
the third instalment of the instalment of the Upfront
Upfront Amount within the time Amount together with 12%
specified in Clause 3.1(b), clause per annum simple interest on
5.2.2 or Clause 5.2.3, such amount starting from
respectively. the date on which such
amount was due and until the
date of appropriation of the
Performance Security.
3. Failure of submission of An amount equal to 10% of
Commencement Plan within the the Performance Security
time specified in Clause 5.1.1
4. Failure of the Successful Bidder Such percent of the
to comply with the Efficiency Performance Security for
Parameters as required under each failure to comply with
Clause 10; the Efficiency Parameters as
specified in SCHEDULE E.
5. Any change in Control or Entire Performance Security
transfer of right, title or interest
in the Coal Mine which is not in
conformity with Clause 13
6. Any utilization of coal which is Entire Performance Security.
not in conformity with clauses
7. Failure of the Successful Bidder The amount of Monthly
to make payment of the Monthly Payment due and payable,
Payment along with a simple interest
of twelve per cent per annum
starting from the date on
which such amount was due
and until the date of
appropriation of the
Performance Security.
8. Any other breach or non- Such proportion as may be
compliance of the provisions of determined by the
this Agreement including in case Nominated Authority in its
of the Warranties being untrue or sole discretion.
misleading or incorrect in any
manner whatsoever
6.3.2. Any Appropriation Event resulting in appropriation
of the entire Performance Security shall be o Termination
Event for
the purposes of Clause 24 (EFFECTIVE DATE, TERM
AND TERMINATION).
6.3.3. In the event of a port appropriation of the
Performance Security, the Successful Bidder shay be
required to: (i) rectify the Appropriation Event; and,
(ii) top-up the bank guarantee constituting the
Performance Security within fifteen, Business Days of
receipt of a notice under Clause 6.3.1, failure to do so
shall be a Termination Event for the purposes Clause
24 (EFFECTIVE DATE, TERM AND
TERMINATION). Appropriation Event except as
mentioned in 6.2.1 (d) shall be rectified within seven
Business Days of receipt of a notice under Clause
6.3.1. Appropriation Event mentioned in Clouse 6.2.1
(d) shall be rectified within the time specified in
SCHEDULE E."
14. Subsequently on 24.04.2015, the Petitioner submitted an
application to the MPCM, regarding the transfer of consent to establish and
on 02.05.2015 an application to the MoEF and CC for transfer of
Environmental clearance to the Petitioner. However, an amendment was
carried out in the CMDPA on 06.05.2015 and in the said amendment
Efficiency Parameters were further elaborated and weightage percentages
were given to each Milestone:
a) The percentage for appropriation of performance
security shall be calculated in proportion to the
failure/delay in compliance with the timeline mentioned
for achievement of efficiency parameters which shall be
broadly based on abovementioned weightages.
b)In Case of Non Compliances with the efficiency
parameters mentioned above the successful bidder shall
be required to rectify the same within such time as may
be prescribed by the competent authority after
examination on a case to case basis.
15. Thereafter, the Petitioner submitted the Mining Lease in Form-I
before the Director of Geology and Mines (DGM) Maharashtra on
16.05.2015 and immediately thereafter, on 16.05.2015, the Petitioner
submitted the Mining Lease Application.
16. Since the State of Maharashtra is governed by the Mumbai Tenancy
and Agriculture Land Act (Vidharbha) 1958, the petitioner submitted an
application dated 02.06.2015 to Development Commissioner (Industries),
Government of Maharashtra, Mumbai regarding purchase of Land i.e.
Bombay Tenancy and Agriculture Land, the petitioner was thereafter
granted the Environment Clearance Transfer completed vide letter no. J-
11015/292/2008-lA-II (M) on 06.07.2015. The Petitioner was successfully
granted the Mining Lease order, vide order MMN-0615/C.R. S9/lND-9 from
Industries, Energy and Labour Department of Government of Maharashtra.
17. Accordingly, petitioner began the Process of Execution of Mining
Lease Deed and the District Mining Officer (DMO) Yavatmal issued a letter
dated 26.08.2015 to the DYSLR Wani/Zari Jamni Taluka to execute the
measurement and demarcation of the 450 Hactare lease area of the Nerad
Malegaon Coal Mine. However, vide corrigendum dated 02.09.2015,
Government of the State of Maharashtra, amended the errors apparent in the
Mining Lease dated 16.07.2015 alongwith the coordinates of the Coal Mine.
18. The petitioner was granted permission by the Development
Commissioner (Industries), for purchase of agriculture land vide letter no.
DI/Land/Permission/205(2015)2015/C/6989 dated 04.09.2015 to the extent
of 563.25 Hectares at Villages -- Malegaon, Nerad, Hivadhara, Tal. Wani
and Village --Sindhivadhona, Tal. Zari Jamni, District Yavatmal and the
Petitioner had undertaken to comply With the provisions Section 49(A) of
Mumbai Tenancy and Agriculture Land Act (Vidharbha), 1958 and Section
44A of the Maharashtra Land Revenue Code, 1966.
19. Thereafter, the Director of Geology and Mines, Maharashtra
recommended that the Mining Leased Deed be executed by the petitioner
with stipulated conditions on 19.09.2015 and on the same date the petitioner
was also granted the transfer of consent to establish vide consent No.
BO/JD(APC)TB1/R/CC-372 from Maharashtra pollution Control Board.
20. The petitioner received permission from GSDA vide letter
No.734/2015 dated 29.09.2015 to install 5 numbers of bore well and to start
withdrawing 0.15 MLD of water to initiate the preliminary work required
for making the Coal Mine operational. The Sub Divisional Officer issued an
order dated 30.10.2015, whereby mutation of 61.92 hectares of land was
done in favour of the Petitioner and the Petitioner got completed the DGPS
and topographic Survey for the Coal Mine Operation at Nerad Malegaon
Coal Mine from an empanelled agency which was approved by the
Directorate of Geology and Mining in January 2016.
21. Thereafter, the petitioner was directed to pay a revised stamp duty
amount of Rs. 2,44,80,000/- (Rupees Two Crore Forty Four Lakh Eighty
Thousand only), which the Petitioner duly paid to the Department of
Registration and Stamps, Government of Maharashtra on 13.01.2016.
22. In pursuance of the Petitioner achieving its milestones to be able to
execute the Mining Lease, Petitioner vide letter dated 25.01.2016, submitted
the map along with the vesting order, and requested the Deputy
Superintendent, Land Record, Wani and Zari Jamani to conduct a survey of
the mauzani area under the Villages, Malegaon, near, Hiwardhara and
Sindhiwadhona to enable the petitioner to start acquiring the said lands from
the rightful owners.
23. Accordingly, the petitioner sought a three month extension for
execution of Mining Lease vide its letter dated 10.02.2016, the Petitioner
also received notice dated 03.03.2016 issued by the Talathi Kayar regarding
the payment of Non-Agriculture tax for the Financial year 2015-2016, which
was thereafter paid on 14.03.2016 for the already acquired land of 61.92
Hectare by the Petitioner.
24. Thereafter, the Petitioner made the payment of the Second instalment
of twenty five percent [25%]of the Upfront payment being an amount equal
to INR 1,09,63,102/- (Rupees One Crore Nine Lakh Sixty Three Thousand
One Hundred and Two only) which amount was deposited with the Pay and
Accounts Officer, of the respondent no.1 vide Bank Transaction ref no.
PMCBR92016042800004634, dated 28.04.2016, which was intimated to the
above respondent vide a letter dated 30.04.2016, issued by the petitioner.
25. On 05.04.2016, the petitioner executed the Mining Lease at the DMO
Office, Yavatmal, which was further registered with the office of the Sub-
Registrar, Wani vide registration Number 1109/2016 and thereafter, the
Petitioner's Mine Closure Plan was also approved by Respondent no. 1 vide
letter No. 34011/16/2015/CPAM on 06.04.2016.
26. Thereafter, the DMO issued a letter dated 13.04.2016 to the
Petitioner, regarding the execution of the Mining Lease Deed and
registration of the Nerad Malegaon Coal Mine. On 26.04.2016, the Central
Mine Planning & Design Institute Limited vide its letter dated 26.04.2016
provided the Petitioner the Certification on the Geological Coordinates used
in the preparation of the Mining Plan of the Coal Mine and therefore on
18.05.2016, the Petitioner Submitted necessary payment with DYSLR
WANI/ZARI JAMNI vide Challan MTR Form Number-6 for Malegaon,
Nerad & Hiwardhara respectively. The petitioner again deposited new re-
validated cheque of Rs.1,34,000/- (Cheque no 137528 Dated 29.08.2016)
drawn in favour of Bank of India payable to DYSLR Zari Jamni, since the
earlier cheque deposited issued by the Petitioner for the same on 24.05,2016
was misplaced due to lapses of bank officials of Bank Of India.
27. Thereafter, petitioner received an e-mail dated 09.09.2016 from
respondent no.1 regarding payment of incremental amount towards
compensation of land equivalent to an amount of Rs.52,72,310.86/-.
Subsequently, on 27.09.2016, petitioner was also intimated by the DYSLR
Wani that there is an upward revision in fees which need to be paid towards
Village Nerad, Malegaon and Hiwardhara and in view thereof, the Petitioner
received letters dated 13.10.2016 from office of DYSLR informed vide
letter no 941, 942 & 943 that as per online measurement fee for Hiwardhara,
Malegaon & Nerad Village have been revised and instructed to deposit the
difference amount of revised fees of Rs.19,000/-, Rs.60,000/- &
Rs.1,76,000/-. Accordingly, petitioner on 28.10.2016 deposited necessary
incremental amount towards Taluka Inspector of Land Record Survey of
Nerad, Malegaon and Hiwardhara villages vide cheque nos. 164213, 164314
& 164315 drawn in favour of Union Bank of India WARDHA Branch.
28. The DYSLR issued Notice for commencement of Taluka Inspector Of
Land Record survey of Sindhiwadona Village of Zari Jamni Taluka from
18.11.2016, which survey was successfully completed on 01.12.2016 and
further Notices were issued by DYSL Wani on 02.12.2016 for
commencement of Taluka Inspector of Land Record survey of Malegaon
Village vide notice Number 1486-1558, which Survey field work started for
Malegaon Village on 06.12.2016 and successfully completed on 20.12.2016.
After completion of Talukå Inspector of Land Record survey of
Sindhwadona and Malegaon Taluka Inspector of Land Record the office of
the DYSLR started Survey Plan Preparation Of the said Villages on
21.12.2016.
29. A Second Amendment to the Coal Mine Development and Production
Agreement was carried out between the petitioner and the respondent no.1
on 26.12.2016. Thereafter, a notice dated 25.01.2017 was issued by the
Talathi Malegaon regarding Land Revenue Tax for the financial year 2016-
2017 for already acquired land of 61.92 in Malegaon Village, which demand
was cleared by the Petitioner on 21.03.2017 by depositing the yearly Non-
Agricultural Revenue tax of Rs.8,35,920.00/- for the acquired land.
30. The DYSLR Wani issued notice dated 05.04.2017 for commencement
of Taluka Inspector of Land Record Survey of Hiwardhara Village from
24.04.2017 and the petitioner submitted letter to DYSLR office (Wani &
Zari Jamni ) marking copies to SLR (Yavatmat) requesting to provide duly
approved signed copies of Taluka Inspector Of Land Record survey plans Of
village Malegaon and Sindhiwadona vide letter number IPPL/Coal/NM-
DYSLR/2017-18/001 & 002 respectively and on 12.04.2017 petitioner
received the duly approved and signed copy Of Taluka Inspector Of Land
Record survey plans for Sindhiwadona village from DYSLR Zari Zamni
Office vide letter no Bhumapan/Mauzani/Sindhivadona/2017 and the same
was also sent to DMO office Vavatmal by DSLR Zari Jamni office and
further on 18.04.2017 the petitioner received duly approved and signed copy
of Taluka Inspector of Land Record survey plans for Malegaon Village on
18.04.2017 from DYSLR office Wani and Yavatmal. The Taluka Inspector
of Land Record survey field work for Hiwardhara commenced on
24.04.2017 and was successfully completed on 29.04.2017. The Petitioner
submitted letter dated 21.08.2017 to DYSLR to request for expediting the
process of plan preparation work of Hiwardhara village and also to start the
work of Nerad Village Taluka Inspector of Land Record Survey, marking a
copy to the Superintendent of Land Record Yavatmal for information and
records and therefore DYSLR Wani issued Notice for commencement of
TALUKA INSPECTOR OF LAND RECORD survey of Nerad Village from
15.11.2017 till its completion.
31. The Petitioner submitted the land schedule for Nerad village as per
approved mining lease deed agreement to DSLR Wani vide letter dated
06.11.2017, as required by DYSLR office Wani and further requested to
expedite Taluka Inspector Of Land Record Survey at Nerad Village.
32. The Petitioner on 07.11.2017 deposited the incremental fee towards
lands for Nerad Malegaon Coal Block equivalent to an amount of
Rs.52,72,311/- (Fifty Two Lakh Seventy Two Thousand and Three Hundred
Eleven Only) through RTGS and intimated the Nominated, Authority
accordingly.
33. The Taluka Inspector of Land Record had conducted survey for Nerad
Village commenced from 15.11.2017, however after the field visit, the
surveyor of DVSLR Wani office had declined to carry out the survey on
grounds of obstructions on the sites due to the field being fully covered with
Cotton & Tur, which were hindering the normal target visibility for survey
at Nerad Village and hence, the survey was temporarily stopped. Thereafter,
on 20.11.2017, the petitioner again requested the DYSLR Wani and
Yavatmal, to re- commence the Taluka Inspector of Land Record Survey of
Nerad Village in the month of December 2017. However, the Petitioner on
24.11.2017 received a notice issued by Talathi Malegaon regarding Land
Revenue Tax for the financial year 2017-2018 for already acquired land of
61.92 Hactare in Malegaon Village and the Petitioner on 22.01.2018
deposited a part payment of the Land Revenue Tax and balance of the Land
Revenue Tax was deposited by the Petitioner on 14.03.2018. In the
meanwhile, the petitioner received notice regarding the commencement of
the Taluka Inspector Of Land Record Survey on 06.03.2018, however,
thereafter received intimation, that the Survey was stopped for want of a
Surveyor and therefore on 08.03.2018, the Petitioner vide its letter dated
08.03.2018 requested that the Survey be completed by arranging an
alternative surveyor.
34. Vide letters dated 27.03,2018, the petitioner submitted a monthly pre-
commencement report to the Director of Geology and Mining, Government
of Maharashtra as well as the status of the Taluka Inspector of Land Record
Survey of Nerad Malegaon Coal Mines to the Deputy Secretary, Industries
& Labour Department, Government of Maharashtra.
35. The Petitioner submitted a letter dated 16.05.2018 before the DYSLR
Wani, for making available the ETS instrument and also requested for an
expedited survey at the Nerad Village. The petitioner also submitted an
update report to the Nominated Authority vide its letter dated 22.06.2018.
36. Mr. Sandeep Sethi, learned Senior Advocate appearing on behalf of
the petitioner submitted that the petitioner runs a captive power plant for the
company called Uttam Value Steels Limited (UVSL), which has been closed
down because of lockdown in the country due to spread of COVID-19
pandemic. In these circumstances, the petitioner has no immediate source of
revenue and has only limited funds in its bank account to pay the salaries of
around 500 employees for 1-2 months. However, if the amount is
appropriated in the instant case, the Company will have to pay
Rs.5,23,01,520/- to the Bank and the same would be from the working
capital account of the petitioner company and shall lead to non-payment of
salaries of the employees. The company shall be pushed into default and
effectively towards being declared as NPA.
37. Further submitted that a series of interim orders have been passed
restraining the invocation of bank guarantees in coal mine matters, which
were issued prior to the spread of pandemic Covid-19, which is evident from
the order dated 24.08.2015 in W.P.(C) No. 8087/2015 titled as M/s Arcelor
Mittal India Private Limited vs. Union of India & Ors. Therefore, on the
ground of parity, similar interim order may be passed in favour of the
petitioner herein.
38. Ld. Senior counsel further submitted that the order dated 17.07.2018
passed by this Court in W.P. No. 7268/2018 being Rajasthan Rajya Vidyut
Utpadan Nigam Limited Vs. Union of India, Ministry of Coal & Anr.,
relied upon by the Ld. ASJ is not applicable to the present case since relief
of representation was given in the said matter. Further, the said
representation might have been accepted or the matter might not have been
pursued. Accordingly, the reliance placed on the said matter is misplaced. In
the instant case, it is evident from the Minutes of the Review Committee
Meeting held on 03.01.2020 that the matter had to be examined by the
Scrutiny Committee. However, the Scrutiny Committee examined the matter
but passed a non-speaking order. Thus, the invocation of the Bank
Guarantee is unfair and inequitable. The decision invoking the Bank
Guarantee is unreasoned and it does not consider the submissions made by
the petitioner in the reply to show cause notice and the said decision is in
gross violation of principles of natural justice. Accordingly, submitted that
an unreasoned administrative order affecting the right of the parties, is
contrary to law lay down in case of Kranti Associates Private Limited &
Anr. Vs. Masood Ahmed Khan & Ors.: (2010) 9 SCC 496.
39. Ld. senior counsel submitted that the said committee examined the
matters of 12 other companies, which have not taken the basic steps and are
in much more delay than the petitioner company, however, no action has
been taken against them. The names of these parties are mentioned in the
Minutes of Scrutiny Committee Meeting dated 05.02.2020/06.02.2020.
40. It is further submitted, since the issue of invocation of Bank
Guarantee is involved and only the petitioner company is being penalized,
giving reasons for rejection of submission is all the more essential.
Accordingly, relied upon the case of Mekaster Trading Corporation vs.
Union of India & Ors.: 2003 (71) DRJ 376 and Prakash Atlanta JV & Ors.
vs. National Highways Authority of India & Ors.: 2010 (5) ILR (Del) 38.
41. Mr. Sethi, learned senior advocate argued that the government cannot
allege non-seriousness on the part of the petitioner company as admittedly,
the petitioner has completed 83% of the steps required to be taken by it and
the balance steps could not be taken timely because of civil commotion at
the acquisition site, which is also a force majeure exemption under clause
23.1(iii) in the Agreement dated 16.03.2015. Therefore, no action has been
taken against the other 12 parties and only petitioner has been penalized,
thus conduct of the Government is inequitable and violative of Right of
Equality. Moreover, no written notice was received by the petitioner
regarding the invocation of bank guarantee as stipulated under Clause 6.3.1
read with 1.2.11 of the Coal Mine Development and Production Agreement
dated 16.03.2015 and the invocation is being done behind the back of the
petitioner company.
42. Further, it is submitted that in the present matter, the invocation of
Bank Guarantee is barred in view of the prevailing situation of spread of
Covid-19, which has been declared as pandemic by World Health
Organization on 11.03.2020. The pandemic is covered under Force Majeure
at clause 23.1 (ii) of the agreement dated 16.03.2015. However, as per para
15 on invocation of Bank Guarantee, the petitioner will have to pay the
Bank and also replenish itself, but as aforesaid, the Company does not have
adequate amounts to do the same and the company shall not be able to
revive even after the situation becomes normal.
43. Learned senior counsel submitted that the ground of COVID-19 is
independent of the merits of the matter because various businesses and
banking activities are under severe stress. Therefore, at this stage, the Bank
Guarantee ought not to have been invoked and interim order passed by this
Court in various other similar matters, be passed in present case also on the
principle of parity.
44. Lastly, learned senior counsel submitted that it may be noted that the
Courts have been inclined to grant relief regarding payment of instalments to
the bank and declaration of NPA during this period of lockdown as evident
from the order dated 06.04.2020 passed by this Court in W.P. (C) Urgent
No.5/2020 being Anant Raj Limited Vs. Yes bank and order dated
03.04.2020 in W.P. (C) Urgent No. 7/2020 being India Bulls Housing
Finance Ltd. Vs. Securities Exchange Board of India & Ors. Therefore,
on the principle of pari materia treatment, in the instant case, the encashment
and appropriation of Bank Guarantee may be stayed and the petitioner may
be permitted to renew the Bank Guarantee from 12.04.2020 within two
weeks from the lifting of lockdown.
45. On the other hand, Ms. Maninder Acharya, Senior Advocate and Ld.
Additional Solicitor appearing on behalf of UOI submitted that the petitioner
failed to comply with the Efficiency Parameters, therefore, the Nominated
Authority was constrained to issue 1st Show Cause Notice 24.07.2018 for
non-compliance with the timelines of various Milestones listed in Schedule
E of CMDPA in respect of Nerad Malegaon Coal mine, as detailed below:
Time
Weightage
Sl Limit Date of
assigned for the
from Due date of Completion
Milestones appropriation of
No Zero Completion (only in Date
Performance
Date (in format)
Security
months)
Land
Acquisition
1 36 22.04.2018 Still Pending 5%
(to reach
rated
capacity)
Opening of
2 37 22.05.2018 Still Pending 8%
Escrow
Account
Application
3 37 22.05.2018 Still Pending 2%
of Opening
Permission
Grant of
4 38 22.06.2018 Still Pending 2%
Opening
Permission
46. The petitioner replied to the abovesaid show cause vide reply dated
02.08.2016 stating that the delay in meeting parameters was beyond its
control and requested to withdraw the show cause and grant an extension of
12 months w.e.f. 21.06.2018 to commence the Mine Operation. However,
petitioner's said request was accepted. As the petitioner continued to be in
the breach of Efficiency Parameters despite lapse of more than a year, the
Nominated Authority issued 2nd Show cause dt. 26.07.2019. The petitioner
replied to the show cause vide letter dated 05.08.2019 and again sought an
extension of 12 months. Accordingly, a Scrutiny Committee under the
Chairmanship of Ex- Chairman, Coal India Limited comprising of Officers
from the Nominated Authority/Ministry of Coal has been constituted to
consider/examine the submissions/replies made by the Successful Bidders/
Parameter as mentioned in the Coal Mine Development and Production
Agreement. The reply to the said Show Cause Notice(s) submitted by the
various Allocates including the petitioner were placed before the Scrutiny
Committee Meeting held on 05.02.2020 & 06.02.2020. The petitioner was
also given the opportunity to present its case before the Committee and was
represented through its E.D., V.P. & Manager on 06.02.2020. After due
deliberations of the submissions in respect of the said coal mine, the
observation of the Committee for non compliance with the Milestones in
respect of Nerad Malegaon is as follows:-
S.No Show Cause Reason Observation of the Committee
1. Land Acquisition (to reach Allocattee stated that partial
rated capacity) acquisition of land has been done and
2. Opening of Escrow 75 Hectare land is yet to be acquired
and mine working is to start from this
Account left out land. Allocattee also
mentioned that one of its partner
company having 36% shareholding is
under NCLT. Committee member are
not satisfied with the reply given by
the Allocattee and find lack of
seriousness of effort of Allocatee and
observes that due penalty should be
imposed on them.
3. Application for grant of Committee members are not satisfied
opening permission with the reply given by the Allocattee
and is of the view that serious effort
has not been done by the Allocattee
and observes that due penalty should
be imposed on them.
47. Ld. Additional Solicitor submitted that the recommendation of the
Scrutiny Committee has been deliberated by the Competent Authority and it
has been decided to impose a penalty of an amount equal to 17% of
Performance Security amounting to Rs.5,23,01,520/- INR for deviation from
the timelines of Milestones as stated above. Thus, it is manifest that email
dt. 04.04.2020 intimating the Concerned Bank to invoke the Performance
Security, was issued after due compliance of natural justice and provisions
of CMDPA. The petitioner who is in noncompliance of Milestones since
April-June 2018 (approx. 2 years) was issued 2 show cause notices and was
also represented before the Scrutiny Committee on 06.02.2020, thus the
petition is devoid of merits and unfounded and liable to be rejected by this
Hon'ble Court. Further, a bare perusal of the email dated 04.04.2020 reveals
that it contains reasons for invocation of the performance security.
48. Further submitted, pertinently, Cl. 25 provides Governing Law &
Dispute Resolution and Cl. 25.3- provides for dispute resolution as per S. 27
and Cl. 25.4 provides that existence of dispute doesn't affect right of
Nominated Authority to appropriate Performance Security or terminate the
agreement.
49. Ms. Acharya, Ld. Additional Solicitor General also submitted that in a
similar case being W.P.(C) 7268/ 2018 (Rajasthan Rajya Vidyut Utpadan
Nigam Ltd. vs. UOI & Ors.) on the first day of hearing on 16.07.2018 the
Hon'ble Court granted time to Respondent to take instructions whether the
order/recommendations of the Scrutiny Committee were communicated to
the petitioner and further confirm whether any of the representatives of the
petitioner had participated in the oral hearing before the Scrutiny
Committee. The Court, in the meanwhile, ordered to maintain status quo in
respect of the bank guarantee. On the next date of hearing on 17.07.2018,
after hearing the parties the Hon'ble Single Judge disposed of the petition
while declining to interdict with the invocation of Bank Guarantee. The
court granted liberty to the petitioner to make representation to the
Respondents or to file appropriate application before the Tribunal under
section 27 of the Coal Mines (Special Provisions) Act, 2015. The order dt.
17.07.2018 was taken in appeal being LPA 382/2018 which was dismissed
as withdrawn and thus the order dt. 17.07.2018 attained finality. In another
similar case being W.P.(C) 7277/ 2018 (Damodar Valley Corporation vs.
UoI & Ors.) the Hon'ble Court vide order 16.07.2018 issued notice and
granted time to file reply to the Respondent. However, did not restrict the
invocation of bank guarantee and only directed that amount of bank
guarantee deducted shall be subject to outcome of the case.
50. Accordingly, learned Additional Solicitor General submitted that the
subject Bank Guarantee is unconditional and irrevocable and there can be no
fetters upon encashment of the same and is liable to be invoked on demand
by the Respondents. It is settled law that Court in writ jurisdiction do not
interfere or interdict in the cases of invocation of bank guarantee unless in
exceptional cases of (i) irretrievable injustice, or (ii) fraud. Irretrievable
injustice should be of a kind arising in irretrievable situation. The irreparable
harm should not be speculative. It should be genuine and immediate as well
as irreversible. It should be a case where the party seeking restraint on
invocation of bank guarantee has no adequate remedy in law at all and the
harm to him would be irreparable. Thus, present petition deserves to be
dismissed.
51. I have heard learned counsel for the parties and perused the material
available on record.
52. Mr. Sandeep Sethi, learned senior counsel appearing for petitioner
has relied upon the following judgments:-
Sl. Particulars Date of
No. order
Title W.P. No.
1. Jindal Steel and Power W.P.(C) 7818/2015 18.08.2015
Limited and Anr. Vs.
Union of India & Anr.
2. JSW Steel Limited Vs. W.P.(C) 7863/2015 18.08.2015
Union of India & Ors.
3. Ambuja Cements Limited W.P.(C) 7987/2015 21.08.2015
Vs. Union of India & Ors.
4. Maharashtra Seamless W.P.(C) 7988/2015 21.08.2015
Limited Vs. Union of India
& Ors.
5. Jindal Steel & Power W.P.(C) 7990/2015 21.08.2015
Limited & Anr. Vs. Union
of India & Ors.
6. M/s. Lafarge India Private W.P.(C) 7991/2015 21.08.2015
Limited Vs. Union of India
& Ors.
7. Jindal Stainless Ltd. Vs. W.P.(C) 7992/2015 21.08.2015
UOI & Ors.
8. M/s. DB Power Limited Vs. W.P.(C) 7998/2015 21.08.2015
Union of India & Anr.
9. Bhushan Steel Ltd. & Ors. W.P.(C) 8000/2015 21.08.2015
Vs. UOI & Ors.
10. JSW Energy Limited Vs. W.P.(C) 8002/2015 21.08.2015
Union of India & Ors.
11. M/S. Arcelor Mittal India W.P.(C) 8087/2015 24.08.2015
Private Limited & Anr. Vs.
Union of India & Anr.
12. IST Steel and Power Ltd. W.P.(C) 8111/2015 24.08.2015
Vs. Union of India & Ors.
13. M/s. Kesoram Industries W.P.(C) 8163/2015 28.08.2015
Limited Vs. Union of India
& Ors.
14. Steel Authority of India W.P.(C) 8432/2015 02.09.2015
Ltd. Vs. Union of India &
Ors.
15. Uttar Pradesh Rajya Vidyut W.P.(C) 8529/2015 04.09.2015
Utpadan Nigam Ltd. And
Ors. Vs. Union of India &
Ors.
16. SKS Ispat And Power W.P.(C) 8144/2015 22.09.2015
Limited & Anr Vs. Union
of India & Ors.
17. Rohne Coal Co. Ltd. Vs. W.P.(C) 11.12.2015
Union of India & Ors. 11551/2015 & CM
No. 30596/2015
18. Rajasthan Rajya Vidyut W.P.(C) 4040/2016 06.05.2016
Utpadan Nigam Limited Vs.
Union of India & Anr.
19. Sunflag Iron And Steel W.P.(C) 5174/2016 30.05.2016
Company Ltd. Vs. The
Union of India & Ors.
20 Electrosteel Castings W.P.(C) 6727/2016 03.08.2016
Limited and Anr. Vs. Union
of India & Anr.
53. It is pertinent to mention here that all the judgments/orders referred
above are of the year 2015 and 2016. However, thereafter this Court and
Hon'ble the Supreme Court of India have taken different view, which will
be discussed hereinafter.
54. Mr.Sethi, further relied upon the orders passed during Lockdown due
to COVID-19 regarding payment of installments to Banks and declaration of
NPA, in W.P.(C) Urgent No. 5/2020 being Anant Raj Limited Vs. Yes
Bank, order dated 06.04.2020 and order dated 03.04.2020 in W.P. (C)
Urgent No. 7/2020 being India Bulls Housing Finance Ltd. Vs. Securities
Exchange Board of India & Ors.
55. However, fact remains that petitioner company is in non-compliance
of Milestones since April-June, 2018 and further despite extension of 12
months, its position remained the same. Thus, the orders passed mentioned
above during Lockdown are not applicable in the present case for the simple
reason that Lockdown came into force in India w.e.f. 24.03.2020, however,
the petitioner despite the extension of 12 months, could not fulfil its
obligation.
56. Admitted case of the petitioner is that the Taluka Inspector of Land
Record had conducted survey for the land in question i.e. Nerad village and
commenced the same from 15.11.2017, however, after the field visit,
Surveyor of DYSLR Wani Office had declined to carry out the survey on
grounds of obstructions on the sites due to the field being fully occupied
with Cotton and Tur, which were hindering the normal target visibility for
survey and hence, the survey was stopped. Accordingly, on 20.11.2017 the
petitioner again requested to re-commence the survey in the month of
December, 2017. However, on 24.11.2017 the petitioner received a notice
issued by Talathi Malegaon regarding Land Revenue Tax for the financial
year 2017-2018 for already acquired land of 61.92 hectares in Malegaon
village. Accordingly, petitioner deposited part payment on 22.01.2018 and
balance tax was deposited on 14.03.2018. Thereafter, on 16.05.2018,
petitioner submitted a letter before DYSLR Wani, for making available the
ETS instrument and also requested for an expedited survey at Nerad village.
57. Whereas, the CMDPA laid down the details of the events and the
manner in which the petitioner's Performance Security would be
appropriated by the respondents under clause 6.2 and 6.3 mentioned above.
It is not in dispute that on 30.03.2015, the Coal Mine (Special Provisions)
Act, 2015 was notified and the CMDPA, laid down the post vesting
obligations under Clause 5 as mentioned above.
58. It is pertinent to mention here that petitioner failed to comply with the
Efficiency Parameters, therefore, the Nominated Authority had issued 1 st
Show Cause notice dated 24.07.2018 for non-compliance with the timelines
of various Milestones listed in Schedule E of CMDPA in respect of Nerad
Malegaon Coal mine, as detailed below:
Time Weightage
Sl Date of
Limit assigned for the
Due date of Completion
Milestones from Zero appropriation of
No Completion (only in Date
Date (in Performance
format)
months) Security
Land
Acquisition
1 36 22.04.2018 Still Pending 5 %
(to reach
rated
capacity)
Opening of
2 37 22.05.2018 Still Pending 8%
Escrow
Account
Application
3 37 22.05.2018 Still Pending 2%
of Opening
Permission
Grant of
4 38 22.06.2018 Still Pending 2%
Opening
Permission
59. Accordingly, petitioner replied to the abovesaid Show Cause Notice
vide reply dated 02.08.2016 and requested to withdraw the Show Cause
Notice by granting an extension of 12 months w.e.f. 21.06.2018 to
commence the Mine Operation. Accordingly, on this request, 12 month time
was extended. Despite this, petitioner continued to be in breach of
Efficiency Parameters. Therefore, after lapse of more than one year, the
Nominated Authority issued 2nd Show Case Notice dated 26.07.2019. On
receipt of the same, in its reply dated 05.08.2019, petitioner again sought an
extension of 12 months. Accordingly, a Scrutiny Committee under the
Chairmanship of Ex. Chairman, Coal India Ltd comprising of Officers from
the Nominated Authority/Ministry of Coal was constituted to
consider/examine the submissions/replies made by the Successful
Bidders/Parameter as mentioned in the Coal Mine Development and
Production Agreement. The Scrutiny Committee Meeting was held on
05.02.2020 and 06.02.2020 wherein the petitioner was also given the
opportunity to present its case before the Committee, accordingly, petitioner
was represented through its E.D., V.P. and Manager on 06.02.2020. After
due deliberations of the submissions in respect of the Coal Mine in question,
the observations of the Committee for non-compliance with the Milestones
in respect of Nerad Malegaon were made inter-alia that the Allottee stated
that partial acquisition has been done and 75 Hectare land is yet to be
acquired and Mine working is to start from its left out land. The Allottee
also has mentioned that one of its partner companies having 36%
shareholding is under NCLT.
60. In view of above submissions in reply to 2nd show cause notice, it is
not possible for the petitioner to commence the Mine Operation in near
future. Therefore, request of the petitioner for further extension of 12
months has rightly been rejected and it was decided to impose a penalty of
an amount equal to 17 % of Performance Security amounting to
Rs.5,23,01,250/- INR for deviation from the timelines of Milestones as
stated above.
61. It is pertinent to mention here that clause 25 provides Governing Law
& dispute Resolution and Clause 25.3 provides for dispute resolution as per
5.27 and Clause 25.4 provides that existence of dispute does not affect right
of Nominated Authority to appropriate Performance Security or terminate
the agreement.
62. In similar case of Rajasthan Rajya Vidyut Utpadan (Supra), this
Court has already taken view in para-5 which is reproduced as under :-
"Insofar as the interdiction of the subject bank
guarantee furnished by the petitioner is
concerned, this Court is not persuaded to
accede to the said prayer. The law relating to
the bank guarantee is well settled and the
same cannot be interdicted on account of any
contractual disputes. It is an admitted case
that the petitioner has not achieved the
efficiency norms. The only question to be
examined is whether the petitioner's failure to
do so is for justifiable reasons beyond the
control of the petitioner."
63. Above order was challenged in LPA 382/2018, however, same was
dismissed as withdrawn on 24.07.2018. Thus, order dated 17.07.2018 passed
in W.P. (C) 7268/2018 attained finality.
64. In addition, similar issue came before Hon'ble the Supreme Court of
India in Dwarikesh Sugar Industries Ltd. Vs. Prem Heavy Engineering
Works (P) Ltd. And Another: (1997) 6 SCC 450, whereby held as under:-
"21.Numerous decisions of this Court rendered over a
span of nearly two decades have laid down and reiterated
the principles which the Courts must apply which
considering the question whether to grant an injunction
which has the effect of restraining the encashment of a
bank guarantee. We do not think it necessary to burden
this judgment by referring to all of them. Some of the
more recent pronouncements on this point where the
earlier decisions have been considered and reiterated are
Svenska Handelsbanken Vs. Indian Charge Chrome,
Larsen & Toubro Ltd. Vs. Maharashtra SEB, Hindustan
Steel Works Construction Ltd. Vs. G.S. Atwal & Co.
(Engineers) (P) Ltd. and U.P. State Sugar Corporation
Vs. Sumac International Ltd. The general principle which
has been laid down by this court has been summarised in
the case of U.P. State Sugar Corporation's as follows:
"The law relating to invocation of such bank guarantees
in 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 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 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 the 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 of the guarantee and the adverse effect of
such an injunction on commercial dealings in the
country."
Dealing with the question of fraud it has been held that
fraud has to be an established fraud. The following
observation of Sir John Donaldson, M.R. in Bolivinter Oil
SA V. Chase Manhattan Bank (1984) 1 All ER 351, CA
are apposite:
"The wholly exceptional case where an injunction may be
granted is where it is proved that the bank knows that any
demand for payment already made or which may
thereafter be made will clearly be fraudulent. But the
evidence must be clear, both as to the fact of fraud and as
to the bank's knowledge. It would certainly not normally
be sufficient this rests on the uncorroborated statement of
the customer, for irreparable damage can be done to a
bank's credit in the relatively brief time which must
elapse between the granting of such an injunction and an
application by the bank to have it charged."
(emphasis supplied)
The aforesaid passage was approved and followed by this
court in U.P. Coop. Federation Ltd. Vs. Singh consultants
and Engineers (P) Ltd. (1988) 1 SCC 174.
22.The secondly exception to the rule of granting
injunction, i.e., the resulting of irretrievable injury, has to
be such a circumstance which would make it impossible
for the guarantor to reimburse himself, if he ultimately
succeeds. This will have to be decisively established and
it must be proved to the satisfaction of due Court that
there would be no possibility whatsoever of the recovery
of the amount from the beneficiary. by way of
restitution."
65. Further, this Court in case of NHPC Ltd. Vs. HCC Ltd.: 2018 SCC
Online Del 11469, observed as under:-
"17. The law in relation to the Bank Guarantee is no
longer res integra and infact has been reiterated by the
Supreme Court in a number of decisions. In Dwarikesh
Sugar Industries Ltd. (supra), the Supreme Court has
held as under:-
"21. Numerous decisions of this Court rendered over a
span of nearly two decades have laid down and reiterated
the principles which the courts must apply while
considering the question whether to grant an injunction
which has the effect of restraining the encashment of a
bank guarantee. We do not think it necessary to burden
this judgment by referring to all of them. Some of the
more recent pronouncements on this point where the
earlier decisions have been considered and reiterated
are Svenska Handelsbanken v. Indian Charge Chrome,
Larsen & Toubro Ltd. v. Maharashtra SEB, Hindustan
Steel Workers Construction Ltd. v. G.S. Atwal & Co.
(Engineers) (P) Ltd. and U.P. State Sugar Corpn. v.
Sumac International Ltd. The general principle which has
been laid down by this Court has been summarised in the
case of U.P. State Sugar Corpn. as follows:
"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 the
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."
Dealing with the question of fraud it has been held that
fraud has to be an established fraud. The following
observations of Sir John Donaldson, M.R. in Bolivinter
Oil SA v. Chase Manhattan Bank are apposite:
".... The wholly exceptional case where an injunction may
be granted is where it is proved that the bank knows that
any demand for payment already made or which may
thereafter be made will clearly be fraudulent. But the
evidence must be clear, both as to the fact of fraud and as
to the bank's knowledge. It would certainly not normally
be sufficient that this rests on the uncorroborated
statement of the customer, for irreparable damage can be
done to a bank's credit in the relatively brief time which
must elapse between the granting of such an injunction
and an application by the bank to have it discharged."
(emphasis supplied)
The aforesaid passage was approved and followed by this
Court in U.P. Coop. Federation Ltd. v. Singh Consultants
and Engineers (P) Ltd.
22. The second exception to the rule of granting
injunction, i.e., the resulting of irretrievable injury, has to
be such a circumstance which would make it impossible
for the guarantor to reimburse himself, if he ultimately
succeeds. This will have to be decisively established and
it must be proved to the satisfaction of the court that there
would be no possibility whatsoever of the recovery of the
amount from the beneficiary, by way of restitution."
18. The Supreme Court further held that the principle of
unjust enrichment would have no application in case of
encashment of the Bank Guarantee.
19. In BSES Ltd. (supra), the Supreme Court held that the
ground of irretrievable injustice cannot be said to have
been made out only because the arbitral proceedings
were pending.
20. In Vinitec Electronics Private Ltd v HCL Infosystems
Ltd. (2008) 1 SCC 544 it was reiterated that:-
"11. The law relating to invocation of bank guarantees is
by now well settled by a catena of decisions of this court.
The bank guarantees which provided that they are
payable by the guarantor on demand is considered to be
an unconditional bank guarantee. When in the course of
commercial dealings, unconditional guarantees have
been given or accepted the beneficiary is entitled to
realize such a bank guarantee in terms thereof
irrespective of any pending disputes."
21. On pendency of arbitration proceedings it was held
that:-
"29. There is no dispute that arbitral proceedings are
pending. The appellant can always get the relief provided
he makes his case before the Arbitral Tribunal. There is
no allegation that it would be difficult to realize the
amounts from the respondent in case the appellant
succeeds before the Arbitral Tribunal."
22. In Rail Vikas Nigam Ltd. (supra), this Court has held
that merely because the Arbitral Tribunal considers that
it would be able to adjudicate on the disputes pending
before it expeditiously, is no ground for injuncting the
invocation/encashment of the Bank Guarantee. It was
held that the harm or injustice contemplated under the
head of irretrievable injury or injustice must be of such
an exceptional and irretrievable nature as would override
the terms of the guarantee."
66. Also this Court in Umaxe Projects Pvt. Ltd. Vs. Air Force Naval
Housing Board & Anr.: 2019 SCC Online Del 9126, while relying upon
another judgment of this Court in Classic KSM Bashir JV Vs. Rites Ltd. &
Ors.: 2018 SCC Online Del 8888 wherein law related to invocation of Bank
Guarantee has been analyzed in detail and concluded that merely because
invocation will cause financial distress is not a ground of stay, however,
exception of irrevocable injury should be invoked.
67. Regarding the issue of parity, why the respondents have granted
extension to other 12 allottees, the details of those cases are not before this
Court, therefore, this Court has not given any opinion on this issue.
Undisputedly, one extension for 12 months has already been granted to
petitioner and after proper hearing, the respondents have passed impugned
order which is neither illegal nor perverse or discriminatory.
68. In view of above discussion and settled position of law, this Court is
of the view that there is no merit in the present petition.
69. Accordingly, the writ petition is dismissed with no order as to costs.
70. Pending application also stands disposed of.
(SURESH KUMAR KAIT)
JUDGE
APRIL 28, 2020/ms/ab
