Delhi High Court - Orders
M/S Vista Information Systems Pvt Ltd vs M/S Beijing National Railway Research ... on 16 February, 2021
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~18 (original side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP(I)(COMM) 57/2021 & I.A. 2284/2021
M/S VISTA INFORMATION SYSTEMS PVT LTD..Petitioner
Through: Mr. Muneesh Malhotra, Ms.
Manpreet Kaur and Mr. Aditya
Malhotra, Advs.
versus
M/S BEIJING NATIONAL RAILWAY RESEARCH AND
DESIGN INSTITUTE OF SINGAL AND
COMMUNICATION GROUP CO LTD & ANR. ..Respondents
Through: Mr. Ateev Mathur, Ms. Jagriti
Ahuja and Mr. Amol Sharma,
Adv. for Respondent No.
2/HDFC Bank.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
ORDER
% 16.02.2021
(Video-Conferencing)
I.A. 2284/2021 in OMP(I)(COMM) 57/2021
1. Exemption allowed, subject to all just exceptions.
2. The application stands disposed of.
OMP(I)(COMM) 57/2021
1. This is a petition under Section 9 of the Arbitration & Conciliation Act, 1996.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 1 of 7 Signing Date:20.02.2021 18:08:262. The dispute emanates from a contract, dated 20th June, 2018, executed between the petitioner and Respondent No. 1, whereunder the petitioner was required to supply various products to Respondent No. 1, against payment. The petitioner was also required to provide the documents and support the Respondent No. 1 for approval from the Project Management Consultancy for the project on preliminary design of the equipment. Respondent No. 1 was to support and coordinate with the PMC as and when required.
3. The petition asserts that requisite compliances and obligations, under the contract, were fulfilled by the petitioner.
4. Clause 16.1 of the contract required Respondent No.1 to pay mobilization advance, equivalent to 10% of the contract value within two weeks of signing of the and receipt of advance bank guarantee of 10% from the petitioner.
5. The bank guarantees were to be returned after work, equivalent to the value covered by bank guarantee, was complete. In accordance with the said requirement, the petitioner claims to have advanced bank guarantees No. 003GT05183480001 for USD 288,708.00 and No. 003GT01183490002 ₹ 1,56,43,843/-, both valid upto 11th July, 2021.
6. Notice of no objection was issued by the PMC on 9th April, 2019. In view thereof, the petitioner, vide communication dated 16th May, 2019, raised a claim for 5% of the contract value in accordance with Clause 16.3 of the contract. The petition asserts that Respondent Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 2 of 7 Signing Date:20.02.2021 18:08:26 No. 1 was under obligation to clear payments within 30 days of submission of the invoice alongwith supporting documents.
7. The petition alleges that, on the false pretext of comments from the PMC being awaited, Respondent No. 1 has been withholding the legitimate claim of the petitioner. In this regard, communications have been exchanged between petitioner and the respondent in this regard, inter alia, in September, 2019, January, 2020 and March, 2020. The grievance, regarding non-payment of 5% of the contract value to the petitioner, in accordance with Clause 16.3 of the contract, was further emphasised by the petitioner in its communications dated 13th April, 2020, 2nd June, 2020 and 24th June, 2020.
8. The petitioner also relies on communication dated 3rd July, 2020, from Respondent No. 1 to the PMC, in which it was acknowledged that out of twenty comments of the PMC only six related to the scope of work allotted to the petitioner.
9. This, essentially, constitutes the nub of the dispute between the petitioner and Respondent No. 1.
10. The contract between the petitioner and Respondent No. 1 provides for arbitration, for resolution of disputes between them. Sub Clause 10.2 of the contract, in this regard, read as under:
"Sub Clause 10.2 The formal mechanism for the resolution of disputes shall be as follows:Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 3 of 7 Signing Date:20.02.2021 18:08:26
All disputes arising out of or in connection with the Agreement, including any question regarding its existence, validity or termination, shall, unless amicably settled between the parties, be finally settled by arbitration conducted in accordance with Arbitration and Conciliation Act 1996. The Arbitration Panel shall consist of three arbitrators; one each appointed by each party and together the two arbitrators shall appoint the third arbitrator. The venue of arbitration shall be New Delhi. The arbitration proceedings shall be conducted in English. The award shall be final and binding on the parties hereto and enforceable in any court of competent jurisdiction."
11. The petitioner has sought to justify moving this Court urgently, invoking its jurisdiction under Section 9, on the ground that,
(i) on 18th June, 2020, the petitioner had been made aware that, the Government of India, through the Dedicated Freight Corridor Corporation of India Ltd. (hereinafter referred to as "the DFCCIL") had terminated the contract between Respondent No. 1 and DFCCIL on account of non-performance of contract by Respondent No. 1,
(ii) a formal termination notice was issued by DFCCIL to Respondent No. 1 on 3rd July, 2020,
(iii) though no formal notice of termination of the contract between the petitioner and Respondent No. 1 was issued by Respondent No. 1, the petitioner received a communication, dated 18th July, 2020, from Respondent No.1, calling on the petitioner to stop all work and
(iv) vide communication dated 5th August, 2020, Respondent No.1 refuted the petitioner's claim for 5% of the contract value under Clause 16.3 of the contract.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 4 of 7 Signing Date:20.02.2021 18:08:2612. The petition also states that attempts, to reach out to Respondent No. 1 and arrive at an amicable settlement of disputes, proved futile.
13. Mr. Muneesh Malhotra, learned counsel for the petitioner, submits that his client is in the course of initiating the arbitral proceedings in accordance with Clause 10.2 (supra), but that, given the precarious financial position in which the Respondent No. 1 is admittedly placed, as also the fact that it is a foreign company, if interim protection is not granted by this Court, and Respondent No. 1 is permitted to invoke and encash the bank guarantees furnished by the petitioner and credit the amount to its account, it would be a Herculean task to recover the said amount at a later point, and the arbitrarily proceedings may itself stand frustrated at an incipient stage.
14. While it is true that, once the beneficiary of a bank guarantee seeks to invoke the bank guarantee by communicating with the bank, a court can interdict such invocation only if the bank guarantee itself contains a stipulation making the invocation thereof conditional to the breach of the contract, or if there is egregious default, irretrievable injustice or special equities in favour of the parties seeking injunction. It is also settled the "special equities" have to be in the nature of irretrievable injustice in CRSC Research and Design Institute Group Co. Ltd v. Dedicated Freight Corridor Corporation of India Limited and Others1
15. In this case, however, Mr. Ateev Mathur, learned counsel 1 2020 SCC OnLine Del 1526 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 5 of 7 Signing Date:20.02.2021 18:08:26 appearing for the Respondent No. 2 bank, confirms that Respondent No.1 has yet to invoke the bank guarantee or communicate with the Bank in that regard.
16. As such, the court is not faced with the situation of interdicting the invocation of the bank guarantee, once invocation has been initiated by the beneficiary of the bank guarantee.
17. In view thereof, given the aforesaid facts and keeping in mind the fact that Respondent No. 1 is a foreign company, as well as the other circumstances noted hereinabove, and in order to ensure that the arbitral proceedings are not frustrated before they take off, this Court deems it appropriate to grant a limited ad interim protection at this stage.
18. Accordingly, issue notice, returnable on 27th April, 2021.
19. Notice is accepted by Mr. Ateev Mathur, learned counsel, on behalf of Respondent No. 2.
20. Counter affidavit, if any, be filed within four weeks, with advance copy to learned counsel for the petitioner, who may file rejoinder thereto, if any, within two weeks thereof.
21. Till the next date of hearing, the Respondent No. 1 is restrained from invoking the aforesaid Bank Guarantee No. 003GT05183480001 for USD 288,708.00 and No. 003GT01183490002 for ₹ 1,56,43,843/-, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 6 of 7 Signing Date:20.02.2021 18:08:26 submitted by the petitioner. As already noted hereinabove, both the bank guarantees are alive till July, 2021.
22. It is made clear that this Court is passing this direction only because it is confirmed from the Bank that no attempt of invocation of the bank guarantees has taken place thus far and, therefore, this Court is not coming between Respondent No. 1 and the Bank.
C. HARI SHANKAR, J.
FEBRUARY 16, 2021 dsn Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP(I)(COMM) 57/2021 Page 7 of 7 Signing Date:20.02.2021 18:08:26