Bombay High Court
M/S. Jagson International Ltd vs Oil And Natural Gas Corporation Ltd on 17 August, 2012
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 303 OF 2008
M/s. Jagson International Ltd.,
company having its office at 5, Krishna
Menon Lane, New Delhi 1100110. ......Petitioners
Vs.
Oil and Natural Gas Corporation Ltd.
Jeevan Bharati Building, Tower-II,
Connaught Circus,
New Delhi 110 001 ......Respondents
Mr. D. D. Madon, Senior Advocate with Mr. Mayur Khandeparkar and
Mr. H.S. Khokhawala i/by M/s. Nankani & Associates for the
Petitioners.
Mr. Rajeev Kumar, Senior Advocate with Mr. Aziz Khan i/by
M/s.Divya Shah and Associates for the Respondents.
CORAM :- ANOOP V. MOHTA, J.
JUDGMENT RESERVED ON :- 30 July, 2012.
JUDGMENT PRONOUNCED ON :- 17 August, 2012.
ORAL JUDGMENT:-
The Petitioners/original claimants have challenged Award dated 15 April 2008 passed by the Arbitral Tribunal, whereby dismissed all the claims of the Petitioners.
::: Downloaded on - 09/06/2013 19:00:26 :::2 arbp303.08.sxw ssm 2 On 9 July 2002, the Respondents invited tenders under International Competitive Bidding for Charter Hire of Offshore Rigs of various types such as, slot/mat and cantilever type jack up and floaters (hereinafter referred to as "tender").
3 On 8 October 2002, the Petitioners submitted its bid. On 30 November 2002, the Respondents awarded the tender to the Petitioners for a period of three years. On 6 January 2003, the Respondents issued a firm order for charter hair of rig "Jagson Pioneer" for a firm period of three years.
4 The relevant terms and conditions of the special conditions annexed to the Tender are reproduced for sake of brevity as under :
Clause 1.5.3 : "Contractor shall offer the drilling unit for inspection and complete readiness of rig in all aspects to the satisfaction of operator including conformity to operator tender specification certified by third party inspection agency immediately so that mobilization period of maximum 180 days in hitherto. The Contractor shall offer the rig for inspection within 150 days from the date of firm order".::: Downloaded on - 09/06/2013 19:00:26 :::
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5 The relevant clauses contained in the said firm order are reproduced hereunder :
"4. MOBILIZATION PERIOD.
The contractor shall deploy the drilling unit, within 180 days from the date of this firm order at the designated first drilling location nominated by ONGC anywhere in Indian waters(.) in case the mobilization period of 180 days falls between the monsoon period (i.e. between 15 May and 15 Sept.), the mobilization period of 180 days stands extended upto 30 September.
No request for extension of mobilization period will be entertained. In case the contractor fails to mobilize the rig within the stipulated mobilization period the contract will automatically stand terminated without prejudice to any other rights and remedies available to ONGC as per provisions in ONGC's tender document. Apart from termination, contractor will be put up on holiday of two years from date of cancellation of firm order for bidding IN ONGC AS PER CLAUSE No.1.1 (iii) of the Special Conditions of the Contract.
5 INSPECTION OF RIG.
Contractor shall offer the rig for inspection and complete readiness of rig in all aspects, to the satisfaction of ONGC including conformity to ONGC tender specification certified by third party inspection agency within 150 days the date of this firm order.
ONGC reserves the right to stage inspect the rig during modification/up-gradation. Since the rig is to be deployed after up-gradation, inspection by ONGC team will be carried out before mobilization but after third party inspection. Contractor to submit the various ::: Downloaded on - 09/06/2013 19:00:26 ::: 4 arbp303.08.sxw ssm schedules with respect to up-gradation with all details, offering of inspection of rig and mobilization etc immediately."
6 On 20 January, 2003, the Petitioners submitted a performance Bank Guarantee in favour of the Respondents valid for three for an amount of US $ 10,12,584 in relation to the tender. On 21 February 2003, the Petitioners by its letter informed the Respondents about having employed Mr. Carl Wendenburg as a Project Manager for upgradation and refurbishment of the rig at Dubai/Sharjah from the end of March 2003.
7 On 11 and 19 March 2003, the Respondents by its letter sought information in respect of schedule for inspection and mobilization.
On 24 March, 2003, in response to the above letters, the Petitioners stated that the rig would be deployed by 30 September after third party inspection. The Petitioners also mentioned about having reserved a parking space for rig in Sharjah at Hamriyanhy Port from end of March, 2003 and payments in that regard had also been made to the Port authority. On 28 March 2003, the Respondents by its letter unilaterally called upon the Petitioners to offer the drilling unit for inspection or before 4 June, 2003. On 31 March, 2003, the ::: Downloaded on - 09/06/2013 19:00:26 ::: 5 arbp303.08.sxw ssm Petitioners after referring to the last kick of meeting held on 24 March 2003 informed the Respondents about the status of the rig and submitted details of job-work done in relation thereto. The Petitioners were also assured that the rig would be deployed by 30 September after third party inspection.
8 On 25 April, 2003, the Petitioners forwarded the progress report dated 31 March/2 April 2003 to the Respondents stating details in respect of the repair/refurbishment work in respect of the rig. The Petitioners mentioned that the barge on which the rig was loaded could not earlier leave Brazil because of Iraq war as even after leaving America if some eventualities were to happen during the war, there was no land where the barge could stand or be parked safely.
9 On 29 April 2003, the Respondents issued a show cause notice as to why the firm order should not be terminated on account of inter-
alia, not being able to adhere to the date of offering the rig for inspection within 150 days as per the terms and conditions of the firm order. On 30 April, 2003, in response to the aforesaid show cause notice, the Petitioners forwarded a detailed reply stating that by virtue of the mobilization period falling between the monsoon, the ::: Downloaded on - 09/06/2013 19:00:26 ::: 6 arbp303.08.sxw ssm inspection date would also have to stand extended to 30 days prior of the mobilization period.
10 On 1 May, 2003, the Respondents appointed M/s. Oil Field Audit Services Inc. A third party inspecting agency to carry out inspection of the rig in the first week of June, 2003 and furnish details in that regard. On 29 May, 2003, the Petitioners informed the Respondents about the bad weather condition. However, the Petitioners assured the Respondents that it would meet the necessary deadlines stipulated in the contract.
11 On 13 June, 2003, the Petitioners communicated with the Respondents and informed about the refurbishment work being carried out at the Brazilian Porto de niteroi in full swing. The Petitioners requested the Respondents to take appropriate steps to remove anomaly and clarify its position.
12 On 16 June, 2003, the Petitioners by its letter forwarded an opinion sought from a former Chief Justice of India stating that the time reference between inspection and mobilization period should be 30 days. It was also emphasized that as per Clause 1.5.3 of the draft ::: Downloaded on - 09/06/2013 19:00:26 ::: 7 arbp303.08.sxw ssm Contract to be signed between the Petitioners and the Respondents, the time difference between inspection and mobilization period was also 30 days.
13 On 29 July, 2003, the Hon'ble High Court granted stay at the instance of the Petitioners, restraining the Respondents from encashing the Bank Guarantee in Arbitration Petition bearing No. OMP/305/03.
14 On 1 August, 2003, the Petitioners by its letter stated that the insistence on the part of the Respondents for taking inspection four months prior to mobilization was illegal, unreasonable and contrary to the terms of the tender. The Petitioners, therefore, invoked Clause 28 of the tender as differences and disputes had arisen between the parties.
15 On 28 October, 2003, the Respondents terminated the tender by stating that by virtue of clause 5 of the firm order the Petitioners were bound to offer the rig for inspection and complete readiness in all aspects to the satisfaction of the Respondents within 150 days and also was required to deploy the same within 180 days from the date of ::: Downloaded on - 09/06/2013 19:00:26 ::: 8 arbp303.08.sxw ssm the firm order.
16 On 2 and 4 December, 2003, the Petitioners by its letter stated that the failure on the part of the Respondents in taking any decision in relation to its show cause notice had caused a state of uncertainty.
In view thereof, the Petitioners called upon the Respondents to reinstate the tender as sum of US $ 7.5 million had already been spent by the Petitioners and that it was also ready and willing to make the balance investment to carry out inspection of the rig upon withdrawal of the termination letter. The Respondents nominated Shri A.K. Garde, Former Secretary, CVC as its Arbitrator. Justice T.D. Sugla (Retd.) was nominated by the Petitioners. Both the Arbitrators duly nominated Late former Chief Justice of India, Y.V. Chandrachud (Retd.) as the Presiding Arbitrator.
17 On 16 April 2004, the Petitioners filed its Statement of Claim seeking following reliefs:-
(a) that this Hon'ble Arbitral Tribunal be pleased to declare that the said Firm Order dated 6.1.2003 issued by the Respondent to the Claimant has not been and does not stand automatically terminated under clause 4 thereof. Further, it be declared that ::: Downloaded on - 09/06/2013 19:00:26 ::: 9 arbp303.08.sxw ssm that the purported termination of the said Firm Order by the Respondent's letter dated 28.10.2003 or the treating of the said firm order as terminated is invalid, illegal, null and void, and of no effect whatsoever, and that the said Firm Order dated 6.1.2003 is valid, subsisting, and binding upon the parties;
(b) that the Respondent be ordered and directed specifically to perform the said Firm Order dated 6.1.2003 issued by the Respondent to the Claimant, inter alia, by permitting the Claimant to give sufficient time for again start the refurbishment of the Rig.
(c ) Without prejudice to prayers (a) and (b) above,and strictly in the alternative, and only in the event of the Arbitral Tribunal not directing specific performance of the said Firm Order dated 6.1.2003, the Respondent be ordered and directed to pay, and the Claimant be awarded a sum of US Dollars 14356301 as per the particulars of claim at Annexure B above and also Respondent be ordered and and directed to return the performance Bank Guarantee to the claimant.
(d) That the Respondents be directed to pay interest on all the aforesaid amounts at the rate of 18% per annum from the date hereof till payment and/or realization thereof.
18 On 19 November, 2004, the Arbitral Tribunal by an order passed in an interim application restrained the Respondents from encashing the Bank Guarantee furnished by the Petitioners. The Respondents filed its written statement without suggesting any loss having been ::: Downloaded on - 09/06/2013 19:00:26 ::: 10 arbp303.08.sxw ssm suffered by the same. Neither was any counter claim filed by the Respondents nor any pleading made in support of a claim concerning actual loss and/or damage having been caused to the Respondents.
19 On 18 October 2005, the Petitioners filed an affidavit in lieu of Examination-in-chief of Shri Sunil Arora. The witness was cross examined by the Respondents through their Advocate. The Respondents did not lead any oral evidence.
20 On 15 April, 2008, by the impugned Award, the Arbitral Tribunal dismissed all claims made by the Petitioners and also vacated the interlocutory injunction by directing that it would be opened to the Respondents to encash the Bank Guarantee No.472 of 2003 issued by the State Bank of Hyderabad at the instance of the Petitioners.
Hence the Arbitration Petition.
21 The Petitioners in support of his submission have relied on various judgments stating therein that-
a) "The loss in terms of money can be determined the party claiming compensation must prove the loss suffered by him". The Apex Court observed in that ::: Downloaded on - 09/06/2013 19:00:26 ::: 11 arbp303.08.sxw ssm case, that "The Plaintiff was guilty of breach of the contracts". (Maula Bux Vs. Union of India 1 , Fateh Chand Vs. Balkishan Dass 2 , Oil and Natural Gas Corporation Ltd. Vs. M/s. Rai's Coastal Survey & Consultancy Services Pvt. Ltd. 3 , Board of Trustees of Port Vs. Pioneer Engineer & Anr. 4 )
b) The Apex Court has mentioned that the situation depends upon the terms of the bank guarantee are, material. The Apex Court recorded that if the bank guarantee in unequivocal and unconditional terms undertakes to pay the amount without any demur or objection and irrespective of any dispute, the Court shall refrain from issuing the injunction. But, if bank guarantee is conditional, the situation would be different. Therefore, the terms of the contract and the bank guarantee, are relevant factors including the performance of the bank guarantee. (Hindustan Construction Co. Ltd. Vs. State of Bihar and Ors. 5 )
c) J.G. Engineers Private Limited Vs. Union of India & Anr. 6 The legal position when the award can be set aside.
The nature and the purpose of Sections 34 and 28 and the Courts restrictive supervisory and not appellate Court's jurisdiction.
d) Shamsu Suhara Beevi Vs. G. Alex & Anr. 7 It deals with Section 21(5) of the Specific Reliefs Act.
1 1969(2) SCC 554 2 (1964) 1 SCR 515=AIR 1963 SC 1405 3 2005(3) All MR 470 4 2006(5) Bom. C.R. 628 5 (1999) 8 SCC 436 6 (2011) 5 SCC 758 7 (2004) 8 SCC 569 ::: Downloaded on - 09/06/2013 19:00:26 ::: 12 arbp303.08.sxw ssm The importance of proper pleading and the material is emphasised.
e) Bharat Petroleum Corporation Ltd. Vs. Great Eastern Shipping Co. Ltd. 8 It deals with the foundation of the contract including Section 7 of the Arbitration and Conciliation Act, 1996.
f) United India Insurance Co. Ltd. Vs. Pushpalaya Printers 9 It deals with the construction of contract in case of ambiguity and vagueness. The doctrine of contra- proferentem is not applicable in the present case.
22 The Hon'ble Arbitral Tribunal has given clear findings that:-
"15. The contractual provisions are not only unambiguous but, are crystal clear that inspection shall have to be given by 5th June 2003 and mobilization by 30/9/2003. The provision for inspection is independent of the provision for mobilization. Therefore, the revised schedule submitted by the Claimants by their letter dated 24th April 2003 is unfounded. The terms of contract being categorical, specific and clear, the question of reading an implied term in the tender or the contract does not arise.
16 Provisions in the tender and the contract relating to inspection and mobilisation clause show that the rig 8 (2008) 1 SCC 503 9 (2004) 3 SCC 694 ::: Downloaded on - 09/06/2013 19:00:26 ::: 13 arbp303.08.sxw ssm was not required to be brought to India for inspection, though the costs of inspection were to be borne by the Respondents. Since the inspection could have been offered anywhere, the rig remained at the disposal of the Claimants exclusively, even after the inspection was done by the Respondents.
17 The reason why the Claimants belatedly hit upon the changed stance of extension in the date of inspection is not difficult to discover. They could not offer inspection for the simple reason that the rig was not at all ready for inspection. They never intimated the Respondents that the rig is ready for inspection and that respondents should inspect it. The answers given in cross-examination by Sunil Arora, the Claimant's witness, to Questions 14,15, 56 and 57 show that the rig was still in Brazil on 12 th January 2006. The witness has also stated in reply to questions 167, 170, 171, 172 and 173 that the rig was to be taken to Dubai for upgradation, that Hameria Port sharjha was fixed in March, 2003 by the Claimants for upgradation and that it was not known how much time it would nave taken for upgradation. Indeed, the Claimants informed the Respondents by their letter dated 13th June 2003 that refurbishment work on the rig at Brazilian port was in full swing. Thus, even after 150 days, the rig was not ready for inspection. The plea of the Claimants that the rig was in transit to Dubai or that the rig was being loaded on the barge and was ready to leave Brazil is factually incorrect. Since the Claimants failed to mobilize the rig by 30th September 2003, the contract stood terminated, whereupon the Respondents justifiably gave intimation to the Claimants of such termination by their letter dated 28th October 2003.
18 ........We are unable to accept this submission since, the terms of a subsequent or other contracts cannot ::: Downloaded on - 09/06/2013 19:00:26 ::: 14 arbp303.08.sxw ssm control the interpretation of the instant contract. The trade practice could, perhaps, be relevant if a contract is silent on dates of inspection and mobilization. Since, these dates are incorporated and specified in this contract, trade practice cannot have an overriding effect.
19 The cross-examination of Mr. Sunil Arora discloses the following important facets of the case:-
a] The rig Pioneer was not ready for inspection or mobilization during the contractual period from the date of firm order till the close of evidence in these proceedings. Even when these arbitration proceedings were in progress, the rig pioneer was in Brazil.
b] Litigation was pending in Brazil in respect of the rig. The Claimants were called upon to produce relevant papers relating to those legal proceedings but they did not produce the papers.
20 Learned Counsel for the Claimants did not press the claim for specific performance of the contract by the Respondents.
21 Since the Claimants have given up the claim for specific performance, their claim for payment of compensation or reimbursement of expenses does not survive.
22 Apart from the position stated above, the expenses incurred on repairs or refurbishment before inspection have to be borne by the Claimants themselves. There is no justification for passing those expenses on to the Respondents. It was the bounden duty and obligation ::: Downloaded on - 09/06/2013 19:00:26 ::: 15 arbp303.08.sxw ssm of the Claimants to offer inspection of the rig in seaworthy condition."
23 Admittedly, the Petitioners have initially filed the claim for specific performance and for the various declaration. Later on, for whatever may be the reasons, not pressed prayer clauses (a) and (b).
Ultimately, they restricted their claim for the compensation as per the particulars of the claim.
24 It is necessary, therefore, to consider the restricted case of the Petitioners for the compensation. The necessary ingredients as required under the requisite Act, just cannot be overlooked. In my view, the burden lies upon the Petitioners that they have performed their part of the contract and it is the Respondents, without performing their part, terminated the contract. The basic burden in this situation, lies upon the Petitioners-claimants. The Petitioners, failed to prove and/or brought on record the sufficient material to justify that they had already performed their part and therefore, the order of termination so passed was null and void and therefore, no case of any compensation.
25 As recorded above, the Respondents, in the present case ::: Downloaded on - 09/06/2013 19:00:26 ::: 16 arbp303.08.sxw ssm terminated the contract by giving commercial reasons. Considering the nature of the contract and the business, it is not possible even otherwise to grant the specific performance of such contract. The Court cannot be in a way insist and/or direct the other party to execute and/or to continue with the contract. The order of specific performance is always depends upon the facts and circumstances of the case, considering the nature of business and the contract. In the present case, though the Petitioners have initially challenged those actions and sought specific performance, but later on not pressed the same, the whole averments and the evidence so led by the Petitioners in the matter, referring to the pleadings, in my view, therefore, definitely affects the case of the Petitioners in all respect. Unless, the Petitioners-claimants proved that the termination was illegal and/or perverse, there is no question of granting either specific performance and/or the compensation so claimed.
26 A clear finding is that the Petitioners never performed this contract, though specifically the project was time bound and/or crystallized in nature. There was no question of waiting further for anything. The material placed on record and as observed by the learned Arbitrator, was contrary.
::: Downloaded on - 09/06/2013 19:00:26 :::17 arbp303.08.sxw ssm 27 The submission, referring and/or revolving around Section 28(3) of the Arbitration and Conciliation Act, 1996 (for short "the Arbitration Act") is also of no assistance. The party need to prove those trade practice in great details. The facts and circumstances in individual case and/or some other cases cannot be stated to be the precedent. There may be various reasons, where, in a given case, the Respondents and/or such party continue and/or allowed such other person to proceed with the contract, provided the case is made out and they should be satisfied based upon the material available on record that the person like the Petitioners would be in a position to continue to perform his part. In the present case, as recorded, the findings are against the Petitioners. They were never in a position to perform their part of contract, admittedly as recorded by the learned Arbitrator.
28 The circumstances so referred, therefore, itself speak that the Petitioners were not in a position to perform their part of contract.
The action of termination, therefore, so initiated, no way stated to be restoreable and/or any compensation is payable.
::: Downloaded on - 09/06/2013 19:00:26 :::18 arbp303.08.sxw ssm 29 The interpretation so given by the Arbitral Tribunal, based upon the clauses so referred and relied by both the parties in part of the contract terms and conditions, in no way can be stated to be perverse and/or bad in law. In such technical type of contract and/or even, otherwise, the Respondents are the best person to understand the situation and therefore, if they take such decision based upon the material available on record and the learned Arbitral Tribunal accepted the same and refused to entertain all the cases of the Petitioners in every aspect, I see there is no reason to say that the award so passed is bad in law.
30 The learned counsel appearing for the Petitioners has further challenged the order of invocation of performance of bank guarantees, as referred in para 29 which reads as under:-
29. The Claimants had filed proceedings (OMP No. 305 of 2003) in the Delhi High Court under Section 9 of the Arbitration and Conciliation Act, 1996. On 29 th July 2003, the High Court issued an injunction restraining the Respondents from encashing the Bank Guarantee. However, the Claimants withdrew those proceedings whereupon, the High Court gave liberty to the Claimants to apply to this Tribunal for relief.
By our order dated 19th November, 2004, we had granted an interim injunction restraining the Respondents from encashing the Bank Guarantee. In ::: Downloaded on - 09/06/2013 19:00:26 ::: 19 arbp303.08.sxw ssm view of our findings recorded above, we vacate the said injunction and direct that it will be open to the Respondents to encash the Bank Guarantee No. 472 of 2003 issued by the State Bank of Hyderabad, K.G. Marg, New Delhi."
31 In such types of contract, it is always necessary to consider the terms and conditions of the contract read with the nature of business and the agreed clauses and the documents on the record. Admittedly, the Petitioners, as referred in para 27, provided unconditional bank guarantee, referring to 7.5 % of contract value. The undertaking was also accordingly signed.
"27 Clause 23, (General Terms and Conditions) of the contract in the instant case relating to performance Bond provides as follows:-
"Performance Bond-
23.1.1 Contractor shall furnish to ONGC within 15 days from the date of issue of firm order in irrecovable and unconditional letter of guarantee from a bank acceptable to ONGC for a sum equivalent to 7.5% of one year's contract value as per proforma enclosed at Annexure IV as security for the satisfactory performance of the contract.
[x] One year contract Value=Effective day rate [EDR]x365"
"23.1.2 This irrevocable letter of guarantee (performance bond) shall be drawn in favour of ONGC and shall be valid upto a date 60 days beyond the last date of ::: Downloaded on - 09/06/2013 19:00:26 ::: 20 arbp303.08.sxw ssm primary term of the contract or any extension thereof".
b] Clause 22.2 provides as follows:
"ONGC will have the unqualified/unconditional option to invoke the bid bond in the event the bidder withdraws his offer or on any grounds during the validity period of tender or any extension thereof and/or bidder fails to enter into contract despite their being selected as a successful bidder against this tender and/or fails to submit performance Bond and/or fails to mobilize the rig at the location within the time as may be prescribed by ONGC in it's firm/fax telex order".
c] Clauses 23.2 provides as follows-
"In the event of the contractor committing breach of any of the terms and conditions under this contract and/or in respect of any amount due from contractor to ONGC, ONGC shall have the unconditional option under the guarantee to invoke the performance bond with the bank and claim the amount from the bank".
32 The Bank guarantee provides as under:-
"We State Bank of Hyderabad Bank, do hereby guarantee and undertake to pay immediately on first demand in writing and any/all monies to the extent of US $10,12,854.00 [U.S. Dollars Ten Lacs Twelve Thousands Eight Hundred and Fifty Four only] without any demur, reservation, recourse, contest or protest and/or without any reference to the contractor. Any such demand made by the Company on the Bank shall be conclusive and binding without any proof on the bank, as regards the amount due ::: Downloaded on - 09/06/2013 19:00:26 ::: 21 arbp303.08.sxw ssm and payable, notwithstanding any disputes pending before any Court, Tribunal, Arbitrator and/or any other matter or thing whatsoever, as liability under these presents being absolute is unequivocal. We agree that the guarantee herein shall be irrevocable and shall continue to be enforceable till it is discharged by the Company in writing. This guarantee shall not be determined, discharged or affected by the liquidation, winding up, dissolution or insolvency of the Contractor and shall remain valid, binding and operate against the bank.
7. The Bank confirms that this Guarantee has been issued with the observance of appropriate laws of the country of issue.
11. The Bank also agrees that, this guarantee shall be governed and construed in accordance with Indian laws and subject to the exclusive jurisdiction of Indian Courts of the place from where tenders have been invited."
What is of high significance is that the Bank Guarantee does not stipulate the amount of US$10,12,854 blandly, roughly or randomly. Clause 23.1.1 of the General Terms and Conditions of the contract fixes the said amount for the rational reason that, it is equivalent to 7.5 per cent of one year's contract value. Thus, the particular amount was specified because, by consensus of parties, it reflected a fair and genuine pre-estimate of the loss which would be caused to the Respondents, as a result of the breach of contract committed by the Claimants. The aforesaid amount is not fixed by way of penalty, considering particularly that both the parties are experts in their fields and both were in an equal bargaining position. Besides, it is undeniable and has not been disputed, that loss would be caused to the Respondents as a result of breach of the contract."
"The Claimants have not even suggested that the amount specified in the Bank Guarantee is not reasonable ::: Downloaded on - 09/06/2013 19:00:26 ::: 22 arbp303.08.sxw ssm compensation, leave alone proving so."
33 The basic principles of law revolving around the invocation of performance bank guarantee also have been considered by the learned Arbitral Tribunal.
34 Having once observed that the Petitioners failed to perform their contract and/or no case is made out and considering the terms and conditions of those performance bank guarantees with bank, any order of encashment of the bank guarantee, in no way can be stated to be bad in law. The legal position/provisions so referred and relied in most of the cases were at interim stage. This is the case, after considering the merits of the matter, at final stage, the Arbitral Tribunal has permitted the Respondents to invoke the bank guarantee.
Admittedly, there was no performance as contemplated and as agreed and provided, the consequences of invocation, I see there is no reason to interfere with the same.
35 The learned Senior counsel appearing for the Petitioners has wrongly submitted and relied upon the various judgments of Supreme Court and also of this Court and thereby contended that the ::: Downloaded on - 09/06/2013 19:00:26 ::: 23 arbp303.08.sxw ssm Respondents ought to have proved the actual loss. Admittedly, there is no such situation in the present case with regard to the proof of the actual damages. All those cases so referred and relied upon, in no way concern and/or deal with the situation like this. The composite agreements, apart from the clauses, the execution of performance bank guarantee read with the undertaking so signed, need to be read together. It cannot be dissected for any reason. It is not the case that the Respondents claiming so called damages by leading evidence to support their case of actual loss. It is not the case even of the Petitioners that such agreement restricting to 7.5 % of total value, as mentioned and/or recorded in the bank guarantee read with the undertaking, is contrary to law and/or impermissible. Both the parties have acted upon the same for long. The learned Arbitrator, after considering and giving clear findings directed to encash the bank guarantee. Admittedly, there was interim relief since long.
36 The learned Arbitrator Tribunal, in my view, therefore, considering the composite documents on record without further dealing with the issue of actual loss to be proved by the Respondents even to claim such damages, rightly considered the settled principle of law, with regard to the performance bank guarantee and basically at ::: Downloaded on - 09/06/2013 19:00:26 ::: 24 arbp303.08.sxw ssm the final stage of the matter. The party having agreed to pay fixed amount in case of failure to perform their part, and accordingly executed the bank guarantee/undertaking, just cannot be now, permitted to say that the Respondents ought to have led the evidence to support the actual loss. The cases so cited by the learned counsel appearing for the Petitioners, no way sufficient to the situation like this, therefore, there is no reason to deal with the aspect based upon the citation, so referred.
37 It is not the case that the Petitioners proved that the contract was illegally terminated. If the action of the Respondents is valid and correct, the order so passed, in my view, in no way stated to be perverse, bad in law and or contrary to the settled position of law. All those cases are totally distinct and distinguishable.
38 Resultantly, the petition is dismissed. There shall be no order as to costs.
39 The learned counsel appearing for the Petitioners, however submitted to continue the injunction/ protection with regard to the encashment of the bank guarantee. The protective order has been in ::: Downloaded on - 09/06/2013 19:00:26 ::: 25 arbp303.08.sxw ssm force till this date, apart from interim order granted by the learned Arbitrator, vacated now. The learned counsel appearing for the Respondents objected to the same. The fact remains that till this date the Respondents unable to encash the bank guarantee because of pendency of Section 34 Petition. As I am dismissing this Section 34 Petition finally, I am inclined to observe that there should be no encashment of bank guarantee for 6 (six) weeks from today.
(ANOOP V. MOHTA, J.) ::: Downloaded on - 09/06/2013 19:00:26 :::