Bombay High Court
Apar Industries Limited vs State Bank Of India And Anr on 9 December, 2021
Author: R. I. Chagla
Bench: R. I. Chagla
TAUSEEF
LAIQUEE
FAROOQUI
Digitally signed by
TAUSEEF LAIQUEE
FAROOQUI
Date: 2021.12.10
17:35:42 +0530
Tauseef 502-IA.L.28739.2021.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
INTERIM APPLICATION (L) NO.28739 OF 2021
IN
COMMERCIAL SUIT (L) NO.28738 OF 2021
Apar Industries Ltd. ...Applicant/Plaintiff
Versus
State Bank of India & Anr. ...Defendants
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Mr. Mustafa Doctor, Senior Advocate a/w Mr. Jehangir Jejeebhaj, Mr. Rahul Dwarkadas, Mr. Areez Gazdav and Ms. Juhi Poohirwani i/by Veritas Legal for Applicant/Plaintiff.
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CORAM : R. I. CHAGLA, J
DATE : 9th DECEMBER 2021
P.C.
Heard learned counsel appearing for the Applicant/ Plaintiff.
2. The Affdavit of service dated 9th December 2021 has been tendered which evidences service on the Defendant No.1 who has acknowledged service of the Advocate's letter dated 9th December 2021 informing the Defendant No.1 that the matter will be listed today for urgent ad-interim relief in 1/8 Tauseef 502-IA.L.28739.2021.doc terms of the captioned Interim Application. The Affdavit of service dated 9th December 2021 is taken on record and marked "X" for identifcation.
3. By this Interim Application, the Applicant is seeking order of temporary injunction restraining Defendant No.1 by itself, or through its offcers, servants, agents or otherwise, from in any manner paying, transferring or crediting any amount pursuant to or under the Counter guarantee Nos. 1637614FG0000281 and 1637614FG0000282 dated 6th March, 2014 in favour of Defendant No.2 or any other person or bank, save and except as a consequence of any default committed by the Plaintiff of its obligations under the Supply Contract.
4. The learned senior counsel appearing for the Applicant/Plaintiff has taken this Court through the documents on record including the relevant clause in the agreement, which provides for performance security and which is clause 18.1 under Section VII general condition of contract. It is provided that the supplier i.e. the Applicant/Plaintiff shall within the stipulated period of the notifcation of contract award, provide a performance security for the performance of 2/8 Tauseef 502-IA.L.28739.2021.doc the contract in the amount specifed in the Special Condition of Contract (SCC). This clause was further amended by the Special Conditions of Contract and it was agreed that "A performance security shall be required. Performance Security shall be for an amount of 10% of the contract value, valid upon 60 days after the due date of completion of warranty obligations", "in the event of any correction of defects or replacement of defective material during the warranty period, the warranty of the corrected/replaced material shall be extended to a further period of 12 months and the performance bank guarantees for proportionate value shall be extended 60 days over and above the extended warranty period".
5. The learned senior counsel Applicant/Plaintiff has thereafter taken this Court to the aforementioned counter guarantees issued by Defendant No.1-Bank to secure corresponding performance bank gurantees issued by Defendant No.2 in favour of Nepal Electricity Authority (for short "NEA"). The Counter Guarantees clearly mention that the Defendant No.1 undertakes to pay the sum mentioned upon receipt from Defendant No.2 of its frst demand in writing declaring the Applicant/Plaintiff to be in default under the 3/8 Tauseef 502-IA.L.28739.2021.doc contract. Thereafter, this Court has been taken through the letter dated 1st December 2021 addressed by NEA to Nepal SBI Bank Ltd. invoking the performance guarantees and to honour their demand by arranging to deposit the said amounts to the said bank account which is stated towards the amount payable as per the NEA decision to settle balance 3.5% TDS and associated penalty from the performance guarantees. He has submitted that this invocation of the aforementioned counter guarantees to secure corresponding performance guarantees has nothing to do with the performance of the contract and is thus contrary to the performance security clause under the said agreement between the Applicant/Plaintiff and the Defendant No.2. The Defendant No.1-Bank is well aware that the counter guarantees clearly provided that the amounts payable under the counter guarantees by the Defendant No.1- Bank will be upon receipt from the Defendant No.2 in writing declaring the Applicant/Plaintiff to be in default under the contract. He has submitted that this is not the position in the present case.
6. The learned senior counsel appearing for the Applicant/Plaintiff has further submitted that urgent ad- 4/8
Tauseef 502-IA.L.28739.2021.doc interim relief is required to be granted in the present case to restrain the Defendant No.1-Bank making payment under the aforementioned counter guarantees, pursuant to invocation of the performance guarantees by NEA. The payment under the aforementioned counter guarantees by Defendant No.1 is imminent and therefore the urgency for passing such ad- interim order.
7. Having considered the submissions of the learned senior counsel appearing for the Applicant/Plaintiff, I am prima facie satisfed that a case is made out for urgent ad-interim relief. It is noted that the Defendant No.1-Bank is not present, inspite of service of the proceedings on them including notice of the Application for urgent ad-interim relief that will be made by the Applicant/Plaintiff, today at 2.30 p.m.
8. It is clear from the documents on record which include the performance security under clause 18.1 of Section VII the General Condition of Contract as well as the amended clause 18.1 of the Special Conditions of Contract, that such performance security is only in the event of correction of defects or replacement of defective material during the warranty period. The performance guarantees has been 5/8 Tauseef 502-IA.L.28739.2021.doc provided and to secure the performance guarantees issued by Defendant No.2 in favour of NEA, the aforementioned counter guarantees have been provided by Defendant No.1-Bank. It is further clear from the counter guarantees that the amounts payable under the counter guarantees by the Bank is only upon the receipt by the Bank of the frst demand of the Defendant No.2 invoking the counter performance guarantees which shall be in writing, declaring, the Applicant/Plaintiff to be in default under the contract.
9. Having perused the notice dated 1st December 2021 invoking the performance guarantees, it is clear that the declaration in the frst demand of Defendant No.2 invoking the performance guarantees declaring the Applicant/Plaintiff supplier to be in default under the contract has not been made. The invocation of the performance guarantees is for settling the balance 3.5% TDS and associated penally under NEA decision as mentioned in the notice invoking the performance guarantees.
10. The Applicant/Plaintiff has also addressed the letter to the NEA dated 8th December 2021 wherein they have stated that the Applicant/Plaintiff is ready and willing to make 6/8 Tauseef 502-IA.L.28739.2021.doc payment of the balance 3.5% TDS to NEA by way of demand draft within a period of 30 days.
11. Thus, the Defendant No.1-Bank is required to be injuncted from making any payments, transfering or crediting any amount pursuant to or under the counter guarantees mentioned in prayer clause (a) of the Interim Application. Hence the following order:-
(i). Till the next date, ad-interim relief is granted in prayer clause (a) which read thus:
That pending the hearing and fnal disposal of this Suit, this Hon'ble Court be pleased to issue an Order of temporary injunction restraining Defendant No.1 by itself, or through its offcers, servants, agents or otherwise, from in any manner paying, transferring or creating any amount pursuant to or under the Counter guarantee Nos.1637614FG0000281 and 1637614FG0000282 dated 6th March, 2014 (at Exhibit-"E" hereto) in favour of Defendant No.2 or any other person or bank, save and except as a consequence of any default committed by the Plaintiff of its obligations under the Supply Contract;7/8
Tauseef 502-IA.L.28739.2021.doc
(ii). The notice of this order shall be served on the Defendants by the Advocates for the Applicant/Plaintiff forthwith.
(iii). The Interim Application shall be placed on 5 th January 2022.
12. All concerned to act on an authenticated copy of this order.
[R. I. CHAGLA J.] 8/8