Delhi High Court - Orders
Prl Projects And Infrastructure Ltd vs Airport Authority Of India And Ors on 18 May, 2022
Author: V. Kameswar Rao
Bench: V. Kameswar Rao
$~45
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I)(COMM.) 153/2022, I.As. 7875/2022 & 7876/2022
PRL PROJECTS AND INFRASTRUCTURE LTD
..... Petitioner
Through: Ms. Anusuya Salwan, Mr. Abhishek
Singh Pundir and Mr. Bankim Garg,
Advs.
versus
AIRPORT AUTHORITY OF INDIA AND ORS
..... Respondents
Through: Mr. Digvijay Rai, Mr. Aman Yadav
and Mr. Archit Mishra, Advs. for
AAI/R-1
CORAM:
HON'BLE MR. JUSTICE V. KAMESWAR RAO
ORDER
% 18.05.2022 I.A. 7876/2022 (for exemption) Exemption allowed subject to all just exceptions. Application stands disposed of.
O.M.P.(I)(COMM.) 153/2022, I.A. 7875/2022
1. This petition has been listed vide supplementary list pursuant to mentioning made in the morning.
2. This petition has been filed by the petitioner with the following prayers:
"In view of the above mentioned facts and circumstances, it is most respectfully prayed before this Hon'ble Court that - a. Stay the letter dated 16.05.2022 issued by the Respondent No.1 to the Petitioner.Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00
b. Stay the letter dated 16.05.2022 issued by the Respondent No.1 to Respondent No.2, thereby staying -
i. Encashment of Bank Guarantee No. 40630IGL0005420 dated 16.12.2020 for an amount of Rs.15,00,000/-
ii. Encashment of Bank Guarantee No.40630IGL0004019 dated
03.04.2019 for an amount of Rs.92 95,000/-.
iii. Encashment of Bank Guarantee No.40630IGL0003420 dated 22.07.2020 for an amount of Rs.60,00,000/-. c. Stay the letter dated 16.05.2022 issued by the respondent No.1 to Respondent No.3.
i. Encashment of Bank Guarantee No.6034IPEBG180079 dated 20.12.2019 for an amount of Rs.1,54,00,000/-.
ii. Encashment of Bank Guarantee No.40630IGL0001421 dated 20.02.2021 for an amount of Rs.30,00,000/-.
Pass any further order or relief as this Hon'ble Court may deem fit and appropriate in the interest of justice."
3. The facts as noted from the record are that on August 01, 2018, the respondent No.1 invited tenders for Strengthening of Runway, Taxi Track, Apron and allied works at Airforce Station, Darbhanga. The petitioner was found successful and was accordingly, issued a letter dated September 19, 2018 for the subject work for an amount of ₹64,61,45,533/-. The agreement was executed between the parties. The contractual period was of eight months.
4. It is the case of the petitioner that it mobilized manpower, machinery etc. at site immediately, to start the work. It is the case of the petitioner that 80% of the work has been completed.
Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:005. Ms. Anusuya Salwan, learned counsel for the petitioner states that the petitioner is ready to give an undertaking to complete the balance 20% work as well. There is no dispute that a show cause notice was issued by the respondent No.1 on April 11, 2022. The petitioner responded to the show cause notice vide letters dated April 18, 2022, April 27, 2022 and May 05, 2022. It is also represented by the petitioner that the work shall be completed in time by June 30, 2022. The respondent No.1 had issued letter dated May 16, 2022 to the petitioner rescinding the contract of the subject work.
6. Ms. Anusuya Salwan has drawn my attention to certain letters issued on May 15, 2022. Vide first letter addressed to the Bank it is stated, if the Bank Guarantee (as referred to in the said letter) is not extended / renewed by the petitioner before validity period, i.e., May 19, 2022, then the same be encashed in full amount in favour of the respondent No.1 / Authority.
7. According to her, on the same day, the respondent No.1 has sent a similar letters whereby the respondent No.1 had sought to invoke five more Bank Guarantees for the amounts of ₹15,00,000/-, ₹92,95,000/-, ₹60,00,000/, ₹40,00,000/- and ₹1,54,00,000/-. She states that the petitioner had sent a communication dated April 25, 2022 to Banks calling upon them to extend the validity of the Bank Guarantees which demonstrate the intention of the petitioner to keep the validity of the Bank Guarantees intact.
8. According to her, on a reading of reply to the show cause notice and decision to extend the validity of the Bank Guarantees, it is clear, that the petitioner had the intension to complete the work and as such, there was no reason for the respondent No.1 to rescind the contract and invoke the Bank Guarantees. She states, the invocation of the Bank Guarantees shall Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 financially destroy the petitioner. In fact, the petitioner is ready to sit with the officers off the Authority and workout modalities to finish the work.
9. On the other hand, Mr. Digvijay Rai, learned counsel appearing for the respondent No.1 states that the work which was to be completed within eight months, has been delayed for more than three years. He also states that the work is of great public importance, being (at Darbhanga, Bihar) an airport to be operated by the Air Force. He states, the work which was to be completed in eight months has still not been completed as is clear from the submission of Ms. Salwan, who conceded only 80% work is completed. There is every reason for the respondent No.1 to rescind the contract and invoke the Bank Guarantees.
10. He states that the terms of the Bank Guarantees being unconditional, the respondent No.1 was within its right to invoke the same and there is no illegality. That apart, he states that once the contract has been rescinded, the petitioner cannot be granted time to complete the contract by June 30, 2022. In support of his submission, he has relied upon the judgment of the Coordinate Bench of this Court in SMS Limited v. Oil & Naturall Gas Limited, OMP (I) (COMM) 428/2020, decided on January 12, 2021 and also the Division Bench in CRSC Research and Design Institute Group Co. Ltd. v. Dedicated Freight Corridor Corporation of India Limited & Ors., FAO(OS)(COMM) 123/2020, decided on December 03, 2020. He seeks the dismissal of the petition.
11. Having heard the learned counsel for the parties, it is a conceded position that the contract between the parties for which the Bank Guarantees were issued has been terminated on May 16, 2022. The terms of the Bank Guarantees at pages 162 and 203 as highlighted by Mr. Rai inter alia read as Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 under:
"2. We, Bank of India do hereby undertake to pay the amounts due and payable under this Guarantee without any demure, merely on a demand from AAI stating that the amount claimed is required to meet the recoveries due or likely to be due from the said contractor(s). Any such demand made on the Bank shall be conclusive as regards the amount due and payable by the Bank under this Guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs.1,54,00,000/- (Rupees One Crore Fifty Four Lakh Only).
3. We, the said Bank, further undertake to pay to the Chairman, AAI any money so demanded notwithstanding any dispute or disputes raised by the contractor(s) in any suit or proceeding pending before any court or tribunal relating thereto, our liability under this present being absolute and unequivocal. The payment so made by us under his bond shall be a valid discharge of our liability for payment there under and the contractor(s) shall have no claim against us for making such payment."
xxx xxx xxx "xxx xxx xxx We, the Union Bank of India of having our registered office at 239, Union Bank Bhawan, Vidhan Bhawan Marg, Nariman Point, Mumbai-400021, Maharashtra and branch office at 38, Central Market, Punjabi Bagh (West), New Delhi-110026 (hereinafter referred to as "the said Bank" and having our registered office at do hereby undertake and agree Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 to indemnify and keep indemnified AAI from time to time to the extent of Rs 40,00,000/- (Rupees Forty Lakh Only) against any loss or damage, costs, charges and expenses caused to or suffered by or that may be caused to or suffered by AAI by reason of any breach or breaches by the said Contractor of any of the terms and conditions contained in the said contract and to unconditionally pay the amount claimed by AAI on demand and without demur to the extent aforesaid.
2. We, Union Bank of India, further agree that AAI shall be the sole judge of and as to whether the said Contractor has committed any breach or breaches of any of the terms and conditions of the said contract and the extent of loss, damage, costs, charges and expenses caused to or suffered by or that may be caused to or suffered by AAI on account thereof and the decision of AAI that the said Contractor has committed such breach or breaches and as to the amount or amounts of loss, damage, costs, charges and expenses caused to or suffered by or that may be caused to or suffered by AAI from time to time shall be final and binding on us."
12. The law with regard to the invocation of the Bank Guarantee is quite well settled. Mr. Rai is justified in relying upon the judgment of the Division Bench in the case of CRSC Research and Design Institute Group Co. Ltd. (supra) wherein paragraph 5 the Court has held as under:
"5. The BGs are thus, unequivocal, absolute and unconditional, whereunder the respondents No.2&3 Banks have undertaken to pay the amount not exceeding the amount of the BGs, to the Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 respondent No.1, on demand and without any demur, without reference to the appellant and notwithstanding the disputes between the appellant and the respondent No.1."
13. Similarly, the position with regard to the judgment in the case of SMS Limited (supra) wherein in paragraphs 71, the Court had referred to the relevant Bank Guarantees with which the Court was concerned in that petition. The Court has also in paragraph 72 to 74 stated as under:
"72. A bare reading of para 2 of the Bank Guarantees makes it clear that the bank has obligated itself to pay, to ONGC, the amounts covered by the Bank Guarantees,
(i) "immediately on first demand in writing",
(ii) "without any demur, reservation, contest or protest",
(iii) "without any reference to the Contractor", and has further covenanted that any such demand served, on the bank by ONGC by a written notice,
(i) "shall be conclusive and binding, without any proof",
(ii) "notwithstanding any dispute/disputes pending before any Court, Tribunal, Arbitrator or any other authority and/or any other matter or things whatsoever", and that the liability of the bank in that regard is absolute and unequivocal.
73. In the face of this recital, to which SMS has been a willing signatory, it can hardly be contended that the Bank Guarantees are conditional. The only conditions, subject to which the banks are required to honour the Bank Guarantees, as is contained in para 2, have already been set out hereinabove. The specific Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 stipulation to the effect that the Bank Guarantees would be honoured "without any reference to the Contractor" is particularly reflective of the intent, of the Bank Guarantees, to remain totally aloof from the inter se dispute between ONGC and SMS.
74. The recital, at the conclusion of para 1 of the Bank Guarantees, to the effect that guarantees were being furnished by SMS to cover the liquidated damages, as per Clauses 6.3.2 and 6.3.3 of the contract, in my view, can, therefore, neither result in incorporation, by reference, bodily or otherwise, of the said Clauses in the Bank Guarantees, nor result in the exigencies, contemplated under the said Clauses, becoming conditions of the Bank Guarantees, fulfilment of which is necessary before the Bank Guarantees can be invoked. The Bank Guarantees furnished by SMS are therefore, in my view, absolute and unconditional, making the Bank liable to pay "immediately and on demand" by ONGC, without equivocation and "without any reference to the contractor".
14. In view of the clear stipulations in the Bank Guarantees which I have reproduced, I do not see any scope for interference with the impugned action relatable to the invocation of the Bank Guarantees. The Supreme Court in the case of Hindustan Construction Company Ltd. v. State of Bihar, (1998) 8 SCC 436 has also held as under:
"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 Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 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 realise such a bank guarantee in terms thereof irrespective of any pending disputes. In U.P. State Sugar Corpn. v. Sumac International Ltd, (1997) 1 SCC 568, this Court observed that: (SCC p. 574, para 12) "12. 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 realise 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 realisation 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 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 Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00 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. The two grounds are not necessarily connected, though both may coexist in some cases."
(Emphasis supplied)
15. In view of my above discussion including the fact that the contract has been rescinded, I do not see any reason to entertain this petition for the reliefs sought for. The petition is dismissed.
I.A. 7875/2022Dismissed as infructuous.
V. KAMESWAR RAO, J MAY 18, 2022/aky Signature Not Verified Digitally Signed By:ANIL KUMAR YADAV Signing Date:18.05.2022 19:05:00