M/S. Alectrona Energy Pvt Ltd vs Kerala State Electricity Board ...
2021 Latest Caselaw 6543 Ker

W.A. No. 386/2021                       :1:


                    IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                    PRESENT

            THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR

                                       &

                    THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

     WEDNESDAY, THE 24TH DAY OF FEBRUARY 2021 / 5TH PHALGUNA, 1942

                               WA.No.386 OF 2021

  AGAINST THE JUDGMENT DATED 17.02.2021 IN WP(C) 24907/2020(K) OF HIGH
                          COURT OF KERALA

APPELLANT/PETITIONER IN W.P.(C):

               M/S. ALECTRONA ENERGY PVT LTD.,
               REPRESENTED BY ITS MANAGING DIRECTOR,
               MR. ROHIT RABINDERNATH, S/O. LATE MR. RABINDERNATH,
               AGED 42 YEARS HAVING ITS REGISTERED OFFICE
               AT 3RD FLOOR, BLOCK A, BANNARI AMMAN TOWERS, NO.29,
               DR. RADHAKRISHNAN ROAD, MYLAPORE, CHENNAI - 600 004.

               BY ADVS.
               SRI.M.R.HARIRAJ
               SMT.THANUJA ROSHAN
               SHRI.VISWAJITH C.K
               SMT.GANGA A.SANKAR
               SHRI.CHACKOCHEN VITHAYATHIL
               SMT.GISHA G. RAJ
               SHRI.REJIVUE
               SRI.AKHIL BHANSALI

RESPONDENTS/RESPONDENTS IN W.P.(C):

       1.      KERALA STATE ELECTRICITY BOARD LTD.,
               A GOVT. OF KERALA UNDERTAKING, REPRESENTED BY ITS CHIEF
               ENGINEER, 9TH FLOOR VYDYUTHI BHAVANAM, PATTOM,
               THIRUVANANTHAPURAM - 695 001.

       2       STATE OF KERALA, REPRESENTED BY THE SECRETARY TO
               GOVERNMENT OF KERALA, DEPARTMENT OF ELECTRICITY,
               THIRUVANANTHAPURAM - 695 001.

       3       DCB BANK LTD., HAVING ITS CENTRAL OFFICE AT 601 & 602,
               PENINSULA BUSINESS PARK, 6TH FLOOR, TOWER A, SENAPATHI
 W.A. No. 386/2021                   :2:


               BAPAT MARG, LOWER PAREL, MUMBAI - 400 013, REPRESENTED
               BY ITS MANAGER, NUNGAMBAKKAM BRANCH




               R1 BY SRI.SUDHEER GANESH KUMAR, SC FOR R1,
               R2 BY SRI. ARAVIND KUMAR BABU, SR. GOVERNMENT PLEADER

      THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 24.02.2021, THE
      COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 W.A. No. 386/2021                         :3:


                Dated this the 24th day of February, 2021.

                                         JUDGMENT

SHAJI P. CHALY, J.

The above appeal is preferred by the petitioner in W.P.(C) No.

24907 of 2020, whereby the following relief sought for by the

appellant was declined.

"To issue a writ of certiorari or mandamus or any other appropriate writ

or order or direction to call for the records of the first respondent culminated in Ext. P19 and to quash the same and to direct the respondent to allow the petitioner to complete the execution of the agreement."

2. Brief material facts for the disposal of the appeal are as

follows:

The appellant is a company registered under the Indian

Companies Act engaged in the manufacturing and installation of the

solar photo-voltaic modules, electronic controls, solar inverters and

solar water pumps. The appellant was awarded with a tender by the

Kerala State Electricity Board for the erection of a 1.0 MW solar power

plant at Mylatty, Kasargod District and issued with Ext. P2 work order

on 07.12.2017. The main grievance highlighted by the appellant was in

regard to Ext. P19 order of the KSEB Limited dated 12.11.2020,

whereby the bank guarantee offered by the appellant amounting to Rs

58,20,000/- was sought to be invoked and directed the Bank to credit

the amount to the accounts of the Secretary, KSEB Limited, since the

work was allegedly delayed, in spite of extension of time on several

occasions .

3. The case projected by the appellant was that there were

certain issues relating to the tax structure and its implications on the

price and the said issue delayed the execution of the agreement.

Anyhow, as per Ext. P3 agreement dated 01.03.2018 executed by and

between the parties, the terms and conditions were agreed upon.

According to the appellant, there was no delay or laches on the part of

the appellant in the execution of the agreement, though Ext. P2 work

order was issued on 07.12.2017.

4. The sum and substance of the contentions advanced by the

appellant was that the KSEB Ltd. was not legally right in revoking the

bank guarantee, since there is no breach of contract on the part of the

appellant and further that the bank guarantee offered by the appellant

was against the guarantee of the work executed and therefore, there

was no power vested with the authorities on the basis of the

agreement executed, to invoke the bank guarantee for delay of work

as alleged .

5. The KSEB Ltd. has filed a detailed counter affidavit disputing

the allegations raised by the appellant and justifying the stand adopted

by it in regard to the bank guarantee. The KSEB has also produced

Ext. R1A Performance Bank Guarantee executed by and between the

parties to substantiate that whenever there was violation of the

agreement conditions and the work order, the KSEB was entitled to

invoke the bank guarantee. According to it, the appellant furnished

two bank guarantees, one for Rs.20,00,000/- and another for

Rs.38,28,000/- as performance security guarantee. Even though no

termination notice has been issued by the KSEB, by virtue of the

covenants of the performance guarantees extended by the appellant,

the KSEB directed to invoke the Bank guarantees and for the purpose

of invoking the Bank guarantees, the termination of the contract was

not mandatory. It was also submitted that the appellant, as per letter

dated 19.12.2017, e-mail dated 05.01.2018 and another letter dated

05.02.2018, had requested time for executing the agreement pointing

out various reasons, which is produced by the Board as Ext. R1B

series. Therefore, according to the Board, the cause of delay in

executing the agreement was attributable only to the appellant.

6. It was also submitted that in spite of the execution of the

agreement on 01.03.2018, the site was taken over by the appellant

only on 14.08.2018 i.e., more than 5 months after the date of

execution of the agreement. Again, it was submitted that a meeting

was conducted on 22.11.2018 by the KSEB to review the progress of

the work and in the said meeting, the appellant assured to complete

the work in time. That apart, though the project should have been

completed on 13.02.2019, the progress of the project was virtually nil.

Anyhow, at the request of the appellant, a meeting was conducted on

21.02.2019 and in the meeting the appellant informed about the

dispute by and between the shareholders of the company which

crippled their operations throughout the year 2018 and it was, assured

that the project would be completed within 15.05.2019 from the

aforesaid date and requested to grant extension till such date. Even

though KSEB Limited imposed penalty due to the liquidated damages,

the appellant expressed its willingness to continue with the project, if

time extension was granted and further informed that they are not

much concerned about the profit through the execution of the project,

but are only concerned with the valuable experience achieved through

executing the project and maintaining the good terms with the KSEB

Ltd. Anyway, time extension for the completion of the project was

granted for a period of three months from 01.06.2019 to 31.08.2019

without any financial obligations to KSEB Ltd. as per letter dated

23.05.2019, however based on certain conditions like, a fresh realistic

implementation schedule/chart showing activities from 01.06.2019 to

31.08.2019.

7. According to the KSEB, there was no progress of work and the

appellant has failed to comply with the contractual obligations and

therefore, as per Ext. P7 letter dated 02.07.2019, the board was

constrained to proceed with the termination of the project. On receipt

of the said letter, appellant approached this Court by filing W.P.(C) No.

2009 of 2019. However, the said writ petition was dismissed holding

that Ext. P7 was only a communication issued by the Board and

therefore, no interference is possible under Article 226 of the

Constitution of India.

8. Whatever that be, the Board has constituted a Dispute

Resolution Committee in accordance with Article XII of Ext. P3

agreement, evident from Ext. R1C and the committee meeting held on

04.02.2020 decided to extend the time by 4 months, and as per Ext.

R1D, the time was extended from 01.04.2020 to 31.07.2020 and the

same was communicated to the appellant as per Ext. R1E letter dated

01.04.2020. According to the Board, in spite of due diligence shown by

the Board, there was no concerted and dedicated efforts from the side

of the appellant to complete the work and the Board had no other

option than to invoke the Bank guarantee.

9. The appellant had filed a reply refuting the allegations and

producing certain documents to justify the stand adopted by the

appellant.

10. Anyhow, the learned single Judge, after considering the

issues raised by the parties elaborately, justified the stand adopted by

the Board and found that there was delay and laches on the part of the

appellant in executing the work in spite of the extension of time period

by the Board on several occasions and accordingly, dismissed the writ

petition.

11. We have heard Sri. Akhil Bhansali, learned counsel

representing the learned counsel for the appellant and Sri. G. Pramod

representing the learned Standing Counsel for the KSEB Ltd., and

perused the pleadings and materials on record.

12. The sole question emerges for consideration is whether any

manner of interference is required to the judgment of the learned

single Judge. The paramount contention advanced by the learned

counsel for the appellant was that the learned single Judge did not

consider or appreciate the legal issues involved in the writ petition and

failed to consider whether the encashment of the bank guarantee

without the termination of the agreement or without any show cause

notice was a legalistic approach on the part of the KSEB Ltd. It was

also submitted that since the legal circumstances with respect to the

invocation of the bank guarantee was raised vis-a-vis the agreement

executed, the learned single Judge egregiously failed by dismissing the

writ petition on the ground of delay and holding that the appellant

alone was attributable for the same. It was also submitted that there

was no justifiable reasons for not permitting the appellant to proceed

with the contract, especially taking into account the final extended

time period as per the decision of the Dispute Resolution Board due to

the lock down restrictions of the pandemic Covid-19 and therefore,

there was no possibility for executing the work, and taking into

account the said unavoidable situation, the KSEB ought to have made

a pragmatic approach and should have provided with sufficient time for

the execution of the work.

13. That apart, it was predominantly contended that the bank

guarantee was a performance guarantee intended for the purpose of

compelling the Contractor to honour all the conditions stipulated in the

original agreement and therefore, the intention of the parties was to

bind the appellant to the original agreement and the performance

guarantee stipulated in the agreement was for post commissioning

obligations and not prior to the commissioning of the project.

14. The learned Standing Counsel for the KSEB, on the other

hand, has taken us through the work order, the agreement and the

performance guarantee and submitted that the action of the KSEB was

in terms of the agreements executed by and between the parties and

the rest of the aspects are disputed factual circumstances, which could

not be deciphered in a proceeding under Article 226 of the Constitution

of India.

15. We have appreciated the rival submissions made across the

Bar. The factual circumstances with respect to the award of the

contract, execution of the agreements, taking over of the site, grant of

extended period etc. are all undisputed facts. It is also an undisputed

fact that consequent to the time lag in completing the contract, a

dispute arose and consequent to which the dispute was referred to the

Dispute Resolution Committee constituted by the KSEB in terms of

Article XII of Ext. P3 agreement. From Ext. P11 Minutes of the Dispute

Resolution Committee, it is clear that the appellant and his Advocate

participated in the meeting and the Dispute Resolution Committee has

taken note of the delay in execution of the work. However, it agreed to

the request of the Contractor for extension of time, subject to the

condition that the Contractor shall pay the Board an amount equal to

the generation loss (deemed) during the period of such extension. The

amount equal to generation loss per year was calculated to

Rs.50,57,500/- and the generation loss amount was agreed to be

deducted by calculating the loss from the date of issue of letter by the

Board to the Contractor and to the date on which the Contractor

completes his work.

16. It was also agreed that if the project is not successfully

completed and handed over to the Board as agreed, the said

generation loss will be deducted from the bank guarantee executed in

favour of the Board by the Contractor along with the other dues and

amounts borne out of the contract in terms of the agreement already

executed by and between the parties. The appellant was also asked to

extend the validity period of the Bank guarantee in order to enable the

Board to extend the further time as proposed by the Contractor. It is

relevant to note that the proceedings of the conciliation meeting is

dated 04.02.2020, which was prior to the lock-down restrictions. The

proceedings of the conciliation committee is accepted by the appellant,

since it is not under challenge. Therefore, the factual circumstances

arrived at by the learned single Judge to dismiss the writ petition, thus

declining the relief for protection of the bank guarantee, cannot be

said to be bad on factual aspects, since the appellant failed to adhere

to the commitment made before the Dispute resolution committee and

even within in the period up to the invocation of the Bank Guarantee.

However, the appellant has raised a contention that the bank

guarantee can be invoked only under the circumstances made in

Article XIII of Ext. P3 agreement and in order to appreciate the said

contention, it is extracted hereunder:

"ARTICLE XIIl - PERFORMANCE SECURITY DEPOSIT GUARANTEE:

During the performance security deposit guarantee period of 5 years from the date of commissioning, the Contractor shall repair free of charge, any defect noticed in the works and /or any damage or defects or functional failure noticed in any accessory transported or installed by the Contractor which falls or proves unsatisfactory under normal operations due to his faulty material handling or workmanship.

However, during the guarantee period, if the Contractor fails to rectify the defects, if any, in reasonable time, the Board shall arrange to make good the defects in works, accessories etc. and the amount incurred by the Board on this account will be recovered together with 21% of the expenses from the amounts payable to the Contractor.

On the expiry of the guarantee period, the amount kept for ensuring performance security deposit guarantee will be released after deducting the amount as above, if any."

17. On an analysis of the said covenant, we find that the

guarantee period of 5 years is from the date of commissioning and the

appellant Contractor is liable to repair free of charge, any defect

noticed in the works and/or any damage or defects or functional

failure noticed in any accessory transported or installed by the

Contractor, which fails or proves unsatisfactory under normal

operations due to his faulty material handling or workmanship.

However, if during the guarantee period, if the Contractor fails to

rectify the defects, if any, within a reasonable time, the Board shall

arrange to make good the defects in works, accessories etc. and the

amount incurred by the Board as agreed to be recovered with 21% of

the expenses from the amount payable to the Contractor. It was

agreed by and between the parties to realise 5% of the contract

amount in the performance security deposit and the bank guarantee

will be released on proving the specified capacity of the plant within

one year of commission and the remaining 5% of the contract amount

in the performance guarantee furnished by the contractor will be

released only after 5 years from the date of commissioning of the

project and by appropriate certification by the agreement authority.

But, it is also significant to note that Article X of the agreement

dealing with 'breach of contract', stipulates that if the Contractor

commits breach of all or any of the terms or conditions of contract,

the KSEBL shall be entitled to recover from the Contractor all the

damages it might suffer thereby and the amount thus due could be

recovered from the Contractor in any manner the KSEBL chooses,

including recovery by Revenue Recovery Proceedings.

18. Therefore, in our considered opinion, though the

performance security deposit guarantee dealt with under Ext. P3

agreement has its own features and consequences, when read

together with Article X, it is clear that the Board was vested with

powers to proceed with to recover the damages suffered by the Board

in any manner the Board chooses. It is an admitted fact that the work

was not completed within the agreed or extended period which is an

essential condition agreed upon by the parties to meet up with the

requirements of the board to generate power. That apart, the issue is

guided also by Ext. R1A performance guarantee agreement executed

by and between the parties having guarantee cover from 03.02.2018

to 31.01.2020 for an amount of Rs.38,20,000/- in accordance with the

terms and conditions of the letter of award/ work order dated

07.12.2017. As per the performance guarantee, the appellant

unconditionally and irrevocably undertook to pay to the purchaser, on

an immediate basis, upon receipt of first written demand from the said

purchaser and without any cavil or argument or delaying tactics or

reference by the Contractor and without any need for the purchaser to

convey to the Contractor any reasons for invocation of the bank

guarantee OR to prove the failure to perform on the part of the

supplier/Contractor(s) OR to show grounds OR reasons for the demand

OR the sum specified therein, the entire sum or sums within the limits

of Rs.38,20,000/-.

19. A reading of the said unconditional undertaking under clause

(b) of the performance agreement along with clause (f) of the said

guarantee agreeing unconditionally and irrevocably to pay to the KSEB

any amounts so demanded not exceeding Rs.38,20,000/-,

notwithstanding any dispute or disputes raised by the supplier or

anyone else in any suit or proceedings etc., would make it clear that

there was sufficient authority vested with the Board on the basis of the

terms and conditions executed by and between the parties to invoke

the bank guarantee. Therefore, the question raised with respect to the

authority of the KSEB to invoke the bank guarantee, in our view,

cannot be sustained under law, being a part of the Contract executed

by and between the parties.

20. Moreover, whatever documents executed, letters issued and

the agreements executed by and between the parties cannot be read

in isolation and they will have to be read together for the purpose of

understanding the situations that arose consequent to the contract

entered into by and between the appellant and the KSEB Limited.

Moreover, it is very well settled in law that whenever there are clear

terms and conditions in the contract executed by and between the

parties in regard to the performance of the parties and the action to be

taken, the parties are not at liberty to resile from the contract and

canvass for any other proposition to suit their convenience. Though

learned counsel for the appellant relied upon the Judgment of the Apex

court in Hindustan Construction Co Ltd. Vs State of Bihar [(1999)

8 SCC 436], a judgment rendered in an appeal from a suit proceeding

in regard to invocation of a Bank Guarantee, we feel, it may not be

suitable to be applied as a binding precedent in a writ proceeding,

since the facts raised by the appellant are stoutly disputed by the

respondent board in the instant writ petition .

21. That apart, the discussion of facts, and the disputes raised

by the appellant would clearly show that the entire aspects were

centered around various factual disputes and therefore, it could not be

resolved in a proceeding under Article 226 of the Constitution of India.

Moreover, the appellant has not established any case of mala fides or

illegality or unfairness so perverse on the part of the KSEB Limited in

regard to the invocation of the bank guarantee, to exercise the power

of judicial review conferred on a writ court; but on the contrary we find

that the KSEB Ltd. was cooperating with the agreement executed, and

the time was extended for the completion of the work on various

occasions at the request of the appellant as an attempt to protect the

interest of both parties. Thus, what we intend to convey is that there

was no palpable or grave circumstances justifying interference of a

writ court in a contractual matter, which is a well settled legal position.

The factual and legal circumstances so discussed persuade us to think

that the appellant was not entitled to get any relief and further that

the appellant has not made out any case for interference with the

judgment of the learned single Judge in an intra court appeal preferred

under Section 5 of the Kerala High Court Act, 1958, there being no

jurisdictional error or other legal infirmities .

Needless to say, appeal fails and accordingly, it is dismissed.

sd/-

S. MANIKUMAR, CHIEF JUSTICE.

sd/-

SHAJI P. CHALY, JUDGE.

Rv