Karnataka High Court
M/S Geodesic Techniques Pvt Ltd vs M/S Larsen And Toubro Limited on 2 March, 2018
Bench: Raghvendra S.Chauhan, S G Pandit
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 2ND DAY OF MARCH 2018
PRESENT
THE HON'BLE MR.JUSTICE RAGHVENDRA S. CHAUHAN
AND
THE HON'BLE MR. JUSTICE S. G. PANDIT
M. F. A. NO. 5427/2017 (AA)
BETWEEN:
M/S. GEODESIC TECHNIQUES PVT. LTD.,
PLOT NO.4, 4TH CROSS,
PEENYA INDUSTRIAL ESTATE,
PEENYA I STAGE,
BENGALURU-560 058,
REPRESENTED BY ITS
MR. SRINIDHI ANANTHARAMAN,
CHIEF EXECUTIVE OFFICER. ... APPELLANT
(BY SRI M. SHIVAPPA, SENIOR COUNSEL, A/W
SRI S. MAHADEVA SWAMY &
SRI ANIL KUMAR S., ADVOCATES)
AND:
M/S. LARSEN AND TOUBRO LIMITED
(CONSTRUCTION DIVISION),
HAVING ITS REGISTERED OFFICE AT
NO.19, KUMARA KRUPA ROAD,
1ST AND 2ND FLOOR,
BENGALURU-560 020,
BY ITS AUTHORISED REPRESENTATIVE. ... RESPONDENT
(BY SRI R.V.S. NAIK & SRI NITIN PRASAD, ADVOCATES)
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THIS MFA IS FILED UNDER SECTION 37(2)(B) OF THE
ARBITRATION AND CONCILIATION ACT, 1996, AGAINST THE
ORDER DATED 18.04.2017, PASSED ON I.A.IN A.S.NO.80/2016,
ON THE FILE OF THE LXVI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, BENGALURU CITY (CCH.NO.67), REJECTING
I.A. FILED UNDER SECTION 17(2) OF THE ARBITRATION AND
CONCILIATION ACT 1996, READ WITH SECTION 151 OF CPC.
THIS MFA HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON 21.02.2018, AND COMING ON FOR
PRONOUNCEMENT THIS DAY, RAGHVENDRA S. CHAUHAN, J.,
DELIVERED THE FOLLOWING:
JUDGMENT
Aggrieved by the order dated 18.04.2017, passed by the LXVI Additional City Civil and Sessions Judge, Bangalore City, (CCH-67), whereby the learned judge has rejected the application filed by the appellant under Section 17 (2) of the Arbitration and Conciliation Act, 1996, ("the Act", for short) r/w Section 151 of the Code of Civil Procedure, the appellant has approached this court.
2. Briefly the facts of the case are that the respondent, M/s. Larsen and Toubro Limited were awarded the contract by the Bengaluru International 3 Airport Limited for the expansion of Bengaluru International Terminal with the right to sub-contract specified works. Since the respondent had to carry out the specialized work of structural steel works, including design, procurement and fabrication and for construction of a Canopy on the northern side of the International Terminal, and for carrying out the structural steel work in the mezzanine stilt floor, the respondent floated a tender. The respondent accepted the tender submitted by the appellant. A Letter of Intent, dated 29.09.2011, was issued to the appellant. Subsequently, the Letter of Intent was amended on 15.10.2011. In terms of Clause VI of the Letter of Intent, as well as the Tripartite agreement, the appellant was required to furnish a performance bank guarantee in order to ensure timely completion of work and efficient performance of the work order. Consequently, on 28.10.2011, the appellant issued a Performance Bank Guarantee for the value of Rs.5.50 Crores. 4 Moreover, Clause V of the Letter of Intent provided that 5% of the order value could be retained by the respondent. But, in lieu of retention amount from the bills, the appellant could provide bank guarantee. Accordingly, on 19.04.2012, the appellant amended the bank guarantee for a sum of Rs.3.70 Crores. Furthermore, according to the contract, the Performance Bank Guarantee would be in operation until completion of work. Furthermore, the bank guarantee furnished towards the retention amount is required to be given within 90 days of handing over of the project work.
3. According to the appellant, it had completed the project work, assigned to it, in the year 2013. It had handed over the project to the respondent. In turn, the respondent handed over the completed work to the Bengaluru International Airport Limited, that too, without any complaint whatsoever. Since the appellant had completed the work without any complaint, 5 therefore, the bank guarantee provided towards performance valued at Rs.5.50 Crores was required to be returned to the appellant. Likewise, the bank guarantee furnished for Rs.3.70 Crores, in lieu of the retention amount, was also required to be returned to the appellant.
4. Having completed the entire project, the appellant submitted a final bill to the respondent. However, the respondent disputed certain amounts claimed in the final bill. The respondent refused to pay the final bill amount. Initially, the appellant tried to negotiate a settlement with the respondent. However, as the negotiations failed, the appellant invoked the Arbitration clause and initiated arbitration proceedings against the respondent. When the arbitration proceedings were initiated, the respondent tried to encash the bank guarantees. Since the appellant was apprehensive that the respondent may encash the bank guarantees, it filed an arbitration application, namely 6 A.A. No.150/2014, under Section 9 of the Act before the City Civil Judge (CCH-15). The appellant sought an interim order restraining the respondent from enforcing and realising the bank guarantees. The learned Civil Court directed the parties to maintain a status quo. Thus, the respondent was prevented from enforcing the bank guarantees.
5. Since the respondent was aggrieved by the said status quo order, it filed an appeal before this court, namely MFA No.4961/2015. Before this court, the appellant gave an undertaking that it will continue to renew the bank guarantees till the arbitration application, namely A.A.No.150/2014, continues to be pending before the learned Civil Court.
6. On an application for appointment of an Arbitrator by the appellant, this court was pleased to appoint Hon'ble Mr. Justice R. V. Raveendra, a former Judge of the Hon'ble Supreme Court, as the Sole 7 Arbitrator. Before the learned Arbitrator, while the appellant filed its claim, the respondent filed its counter claim. After hearing both the parties, by award dated 06.02.2016, the learned Arbitrator held that the respondent is liable to pay an amount of Rs.7,51,93,930/- with interest at 18% per annum, along with the cost of Rs.12 Lakhs and stamp duty payable on the award. Meanwhile, the learned Arbitrator rejected most of the counterclaims, but did allow certain small sums to be deducted from the amount payable to the appellant.
7. Since the respondent was aggrieved by the award dated 06.02.2016, it challenged the same under Section 34 of the Act before the LXVI Additional City Civil and Sessions Judge, Bengaluru, in the form of A.S.No.80/2016. Presently the appeal is pending before the said court.
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8. Since the learned Arbitrator had directed in the award that any amount which the respondent may have received from the Bank by way of encashment of bank guarantee, the said amount has to be returned to the appellant, therefore the appellant filed an application under Section 17 (2) and Section 9 of the Act r/w Section 151 CPC, seeking a direction to the respondent to return the bank guarantees furnished by it to the respondent. For, according to the appellant, once the arbitral award had been passed, the respondent cannot retain the bank guarantees. However, notwithstanding the contention raised by the appellant, by order dated 18.04.2107, the learned Civil Court has rejected the stay application filed by the appellant. Hence, this appeal before this court.
9. Mr. M. Shivappa, the learned Senior Counsel for the appellant, has vehemently contended that according to the Letter of Intent, and the Tripartite agreement, the respondent was entitled to retain the 9 bank guarantee till the project was completed by the appellant. Once the project was completed and handed over to the respondent, the respondent does not have the right to retain the bank guarantees with it.
Secondly, any dispute that may have existed between the parties has been decided by the learned Arbitrator by the award dated 06.02.2016. According to the said award, it is the respondent who is legally bound to pay the compensation amount to the appellant. Therefore, the respondent is not justified in retaining the bank guarantees. Hence, the learned Civil Court should have allowed the application filed under Section 17 (2) r/w Section 9 of the Act. Thus, the impugned order deserves to be interfered by this Court.
10. On the other hand, Mr. R.V.S. Naik, the learned counsel for the respondent, has pleaded that the appellant has filed the application under Section 17 (2) r/w Section 9 as a subterfuge to circumvent the 10 guarantee given by the appellant before this court. Therefore, the application amounts to abuse of the process of the court and the law.
Secondly, once the appellant has given an undertaking before this court that it will continue to renew the bank guarantees, in favour of the respondent, the appellant could not have and should not have filed the application under Section under Sections 17 (2) and 9 of the Act before the learned Civil Court.
Thirdly, even if an arbitration award has been passed in favour of the appellant, the said arbitration award has been challenged before the learned Civil court. Thus, the dispute continues to exist between the parties. Till the dispute is finally settled, the respondent is entitled to retain the bank guarantee. Hence, the learned Civil Judge was justified in rejecting the 11 application filed by the appellant. Therefore, the learned counsel has supported the impugned order.
11. Heard the learned counsels, perused the impugned order, and examined the record.
12. Admittedly, the award passed by the learned Arbitrator is under challenge before the learned Civil Court. Undoubtedly, during the pendency of the arbitral proceedings, the respondent had tried to encash the bank guarantees. The appellant had filed an arbitration application, namely A.A. No.150/2014. In the said application, the learned Civil Judge had directed the parties to maintain status quo. The said arbitration application is pending even presently. Thus, the parties are really bound to maintain status quo.
13. Since the respondent was aggrieved by the status quo order, it challenged the same in MFA No.4161/2015 before this court. Admittedly, the appellant has given an undertaking before this court 12 that it shall continue to renew the bank guarantees during the pendency of A.A.No.150/2014. Therefore, the appellant is legally bound to adhere to its undertaking even before this Court.
14. Considering the fact that there is a status quo order passed by the learned Civil court, considering the fact that the appellant has given an undertaking before this court, the appellant is unjustified in filing an application under Section 17 (2) of the Act seeking return of bank guarantees. Naturally, by filing such an application, the appellant is trying to over-reach the learned Civil Court and this Court. The learned Civil Court has notice the clever ploy used by the appellant. Thus, the learned Civil Court was justified in rejecting the application filed by the appellant.
15. The appellant cannot be permitted to blow hot and cold simultaneously: on the one hand, to give an undertaking before this court, and yet on the other 13 hand, to seek a direction from the learned Civil Court that the bank guarantees should be returned to it. Such a course of action tantamount to playing fraud with the court, and is certainly an abuse of process of the court and process of law.
16. It is, indeed, a settled principle of law that what cannot be achieved directly, cannot be permitted to be achieved indirectly. Faced with the status quo order passed by the learned Civil Court, bound by the undertaking given before this court, the appellant cannot be permitted to indirectly seek the return of bank guarantees by surreptitiously filing the application under Section 17 (2) r/w Section 9 of the Act.
Lastly, in case the application filed by the appellant were to be allowed, it would create a rather anomalous situation. For, on the one hand, the order of status quo passed by the learned Civil Court continues to exist. The said order prevents the appellant from 14 receiving back the bank guarantees. Yet, on the other hand, there would be a direction of the Court to return the bank guarantees. Obviously two contradictory judicial orders cannot co-exist. Hence, the learned Civil court was legally justified in rejecting the application filed by the appellant.
17. For the reasons stated above, this court does not find any illegality, or perversity in the impugned order. Therefore, the present appeal is hereby dismissed.
SD/-
JUDGE SD/-
JUDGE Np/-