ssm
sm IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (LODGING) NO.366 OF 2009
Maytas Infra Limited ...Petitioner.
V/s.
Utility Energytech and Engineers
Pvt. Ltd. & Ors. ...Respondents.
Mr.N.H.Seervai, Sr. Advocate with Mr.Chetan Kapadia
i/b.Mr. Ashu V. Thakur for the Petitioner.
Mr.J.J.Bhatt, Sr. Counsel with Ms. Anjali Chandurkar
i/b.M/s.Mulla & Mulla for the Respondents.
ig CORAM : ANOOP V. MOHTA,J.
DATED : 29th April, 2009
P.C.
1. The Petitioner has invoked Section 9 of the
Arbitration and Conciliation Act, 1996 (for short,
"the Arbitration Act"). There is an arbitration
clause in the construction agreement dated 19th
February, 2008 between the Petitioner and Respondent
No.1. The contract was for the construction of
existing carriageway of about 62 km., on Salem
Ulundurpet section of National Highway No. 68 in the
State of Tamil Nadu.
2. Respondent No.1 had advanced to the Petitioner
total sum of Rs.39,39,98,000/- (Rupees thirty nine
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crore thirty nine lacs ninty eight thousand only).
The Petitioner had furnished (A) Mobilization Advance
Bank Guarantee (B) Performance Bank Guarantee to
Respondent No.1, for an aggregate amount of
Rs.39,39,98,000/-.
3. The contract provides the reciprocal obligations
with object to complete the project in time. There is
also a provision for extension of time. There are
various details provided in for the performance of
their respective obligations in time.
4. On 31/03/2009, the Petitioner placed on record
various problems and developments. Therefore, on
02/04/2009, a meeting took place, apart from earlier
correspondence and discussion between the parties to
settle the disputes and differences. Respondent No.1
after this sent drawings for minor bridges on
03/04/2009. The Petitioner has raised bills also on
the ground of delays.
5. On 06/04/2009, Respondent No.1 invoked
Mobilization Bank Guarantee of Rs.39,39,98,000/-
(Rupees thirty nine crores thirty nine lacs ninty
eight thousand only) and encashed the same.
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6. By letter dated 10/04/2009 Respondent No.1 alleges
even stoppage/ abandonment of work by the Petitioner
since 02/04/2009 which according to them affecting the
project.
7. The Petitioner on 15/04/2009 received a
termination notice dated 13/04/2009 issued by
Respondent No.1. There are various reasons/ grounds
mentioned in the said termination notice. There is a
clause
26.3.4. of
in the notice based upon the terms of
the construction agreement
Article
which is
reproduced as under:-
“4. Therefore, this notice is issued in terms
of Art 26.3.4 of the Construction
Agreement calling upon you to remedy the
breaches/defaults within one month from
the date of receipt hereof. Please note
that failure to cure each of the
breaches/ defaults (Specified Events) to
our complete satisfaction within the said
period of one month, the Construction
Agreement shall stand terminated.”
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8. The Petitioner has resisted and replied the same
by notice dated 27/04/2009.
9. Therefore, if the Petitioner failed to remedy the
breaches / defaults within one month from the date of
the receipt of the notice, the construction agreement
in question shall stand terminated. If that is so,
the various consequences should follow, which also
means revocation of the remaining Performance Bank
Guarantee. Respondent No.1 has not yet invoked or
given notice to invoke the said Bank Guarantee by this
termination letter.
10. This termination letter itself is intended to
give one month time pursuance to the agreement to
remove or remedy the breaches/ defaults.
11. The submission of the learned Senior counsel
appearing for Respondent No.1 based upon the various
Judgments of the Supreme Court including (i) (2008) 1
S.C.C. 544, Vinitec Electronics Private Ltd. Vs.
HCL Infosystems Ltd. (ii) (2006) 2 S.C.C. 728, BSES
Ltd. (Now Reliance Energy Ltd.) Vs. Fenner India
Ltd. & Anr. (iii) (1997) 6 S.C.C. 450, Dwarikesh
Sugar Industries Ltd. Vs. Prem Heavy Engineering
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Works (P) Ltd. & Anr. and (iv) (1994) 1 S.C.C. 502,
Svenska Handelesbanken Vs. M/s. Indian Charge Chrome
and Ors. The contention is that in absence of any
averments and or material on record, at this stage, to
support the case of “irreparable injury”,
“irretrievable injustice” and or “fraud”, in the
present facts and circumstances of the case, no relief
can be granted in favour of the Petitioner. The
encashment of irrevocable unconditional performance
Bank Guarantee just cannot be nullify by the
injunction order against the Respondents.
12. The contractual clauses cannot be read into the
clauses of the Bank Guarantee. Both these documents
are independent though such Bank Guarantees are
executed after execution of the agreement in question.
The parties are also entered into such Bank Guarantees
only after full understanding of the clauses of the
contract. Once the terms and conditions of
unconditional irrevocable Bank Guarantees are signed,
it is binding on the parties, even if there is any
breach of any contract committed by the person like
Respondent No.1 who had already invoked the Bank
Guarantee and now entitled to invoke the Performance
Bank Guarantee in view of agreed terms of this Bank
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guarantees.
13. There are allegations and counter allegations.
Both the parties are blaming each other for their
respective defaults. The facts on record shows that
there is a clear contract termination notice Though
replied by the Petitioner yet at this stage, the merit
or de-merit of the differences and disputes cannot be
gone into in detail, which is a matter of detailed
enquiry before the Arbitral Tribunal.
14. The Court
ig needs to consider the facts and
circumstances of the case while dealing with the
aspect of granting any injunction or any such order
from encashing the Bank Guarantee, though law in this
regard is settled and crystalised. The judgment so
cited above itself shows that in most of the matters,
the Court has considered the facts and circumstances
of the case including the nature of Bank Guarantee and
also the basic agreement between the parties.
15. In the present case, as noted, there is no
dispute about the contents of the Bank Guarantee in
question. Admittedly, there is no reference to any
particular clause of the agreement between the parties
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in the Bank Guarantee. Even otherwise the clause of
Bank Guarantee in the present case, are unconditional
and irrevocable. This document being a separate and
independent needs to be considered from the commercial
point of view in all respects.
16. The submission that there are various breaches
and/or failure on the part of the parties to perform
their respective agreements/obligations need detail
inquiry and trial. The construction “agreement” of
this
is
nature where the vast land/area of about 62 kms.
involved and the requirement to complete the
project within stipulated time, just cannot be
overlooked. The delay in handing over the site and/or
drawings and/or other compliances on the part of
respondent no.1 cannot be gone into at this stage of
the proceeding. The termination notice and the
correspondences reflect reasons for such delay and
defaults. On 2nd April, 2009 inspite of letter dated
31.03.2009, the parties tried to resolve the dispute,
but failed to do so, though after 2nd April, 2009
respondent no.1 sent some more drawings for the small
bridges and yet immediately without due notice invoked
the Bank Guarantee. The said invocation of Bank
Guarantee, as contended, is in breach of various
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clauses of the agreement. Therefore, as alleged the
whole action of the respondents including termination
notice in question is illegal and unlawful, that again
needs detail trial.
17. The submission with regard to clause 1.5.4
whereby it is necessary for the parties to give one
month’s notice to remedy or cure such defects is again
a part of the basic agreement between the parties.
The termination notice itself provides a clause based
upon this, whereby respondent no.1 has granted time of
one month to the petitioner to comply or cure the said
defects. By the said termination notice, respondent
no.1 has not invoked specifically this performance
Bank Guarantee. There is no reference made about the
same. In a commercial contract of this nature, it is
the concerned party who should decide and take
appropriate action or decision. Whether the action of
the respondent is right or wrong in the absence of
clinching material, it is difficult for the court to
decide in favour of the aggrieved party, at such
interlocutory stage. This is again a matter of trial
and discussion.
18. The petitioner, after receipt of the termination
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notice, has replied the same by notice dated
27.04.2009 and basically re-iterated their submissions
and their case as already referred in their notice
dated 31.03.2009. Both these notices show that there
are various disputed facts and submissions raised
based upon the material available with both the
parties. It also means that there is serious dispute
about the various facets covering the delay in handing
over the land, plan, drawings, maps and about other
requisite details. The reason for termination based
upon
material
the
agreement
available
between
with
the
respondent
parties
no.1
and
including
the
their assessment based upon various admitted position
on record, which includes the invocation of force
majeure clause under clause 43.1(a), the recession in
the market, the respondents assessment of capacity or
ability of the petitioner to complete the project
within time, need detail trial, to justify their
termination of the contract. The fact that the
parties unable to settle or resolve the differences
inspite of meeting dated 2.4.2009 is also a relevant
factor.
19. Lastly, the allegations with regard to the
petitioner’s case that they have already invoked the
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Bank Guarantee that itself amounts to fraudulent act
and that they will suffer irretrievable injury or
injustice, for want of convincing material on record,
[(2007) 6 SCC 470, Mahatma Gandhi Sahakra Sakkare
Karkhane v. National Heavy Engg.Coop.Ltd. & anr.], I
am of the view that the petitioner has not made out a
case of exception as contemplated for granting the
relief also in view of the judgments cited and
referred above. Having once come to a conclusion that
both the contracts are different, independent and
there
unconditional
is a clear performance Bank Guarantee which
and irrevocable, therefore no case
is
is
made out by the petitioner to grant any relief as
prayed. Resultantly, the petitioner is not entitled
for any ad interim reliefs in terms of prayers (f),
(g) and (h). There is no question even to grant
refund of amount as already encashed in a petition
under Section of the Act.
20. By order dated 17.04.2009 this Court has granted
an exparte ad-inteim relief observing not to encash
the Performance Bank Guarantee, if not already
encashed, till next date. This order has been
continued by further order dated 24.04.2009. Now, in
view of above, the interim order so granted also
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stands vacated.
21. The learned counsel for the petitioner seeks
continuation of interim order dated 17.04.2009 for
some reasonable time.
22. In the present case, admittedly, respondent no.1
has not yet invoked the said Bank Guarantee pursuance
to clause 1.5.4 and in fact granted the petitioner one
month’s time to comply with or cure or remedy the
13.04.2009
defects and defaults. The termination notice is dated
and received on 15.04.2009. Therefore, I
am inclined to grant or continue this interim
order/protection till 15th May, 2009, though objected
by the learned counsel for respondent no.1
23. In view of above reasoning, nothing left in the
petition. However, as submitted, S.O. to 18th June,
2009 for disposal at admission stage.
[ANOOP V. MOHTA, J.]
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