Delhi High Court - Orders
Oil And Natural Gas Corporation Ltd vs Consolidated Construction Consortium ... on 6 December, 2021
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~6(2021)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB. A. (COMM.) 74/2021 & IA No.16110/2021
OIL AND NATURAL GAS CORPORATION LTD..... Appellant
Through Mr. N. Venkataraman, ASG with Mr.
Abhishek Puri, Ms. Surbhi Gupta, Mr.
V. Siddharth & Mr. Shaurya
Dhoundiyal, Advs.
Versus
CONSOLIDATED CONSTRUCTION
CONSORTIUM LTD ..... Respondent
Through Mr. Dinesh Aganani, Sr. Adv. with Mr.
L.B. Rai, Mr. Kartik Rai & Brig V.K.
Sawhney (Retd), Advs.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 06.12.2021 IA Nos.16109/2021 & 16111/2021 (both for exemption)
1. Exemption is allowed, subject to all just exceptions.
2. The applications are disposed of.
ARB. A. (COMM.) 74/2021
3. The appellant has filed the present appeal under Section 37(2) of the Arbitration & Conciliation Act, 1996 (hereafter the 'A&C Act'), inter alia, impugning the order dated 14.08.2021 passed by the Arbitral Tribunal whereby, the Arbitral Tribunal had condoned the delay of two days on the part of the respondent in extending the Bank Guarantee.
4. Paragraph 2 of the order dated 14.08.2021, which contains the impugned directions is set out below:
"2. Mr. Agnani, Ld. Sr. Counsel for the RP makes an oral request that the delay in furnishing the Extended Bank Guarantee be condoned. The Extended Bank Guarantee had been furnished Signature Not Verified Digitally Signed By:DUSHYANT RAWAL on 30.07.2021 when it should have been furnished on 28.07.2021. The delay is condoned and the Claimant / RP is directed to ensure compliance with the direction given by the Tribunal on 28.09.2020. In these circumstances, the Respondent, who had issued a letter for encashment of bank guarantee, will not pursue the same."
5. Mr. Venkataraman, learned ASG appearing on behalf of the appellant submits that the order passed by the Arbitral Tribunal is contrary to the well settled principle regarding interdiction of the Bank Guarantee. He mentioned the decision of the Supreme Court in Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company: (2007) 8 SCC 110 and submitted that the Bank Guarantee cannot be interdicted. He further states that the aforesaid legal principle has been violated. The appellant had already invoked the Bank Guarantee because the respondent had not extended the same.
6. He states that the Bank Guarantee was interdicted by an order passed by the Tribunal on 27.09.2018 which was subsequently extended on 22.10.2018. The relevant extract of the order dated 27.09.2018 reads as under:
"Mr. Agnani, Ld. Sr. Counsel for the Claimant submitted that he would be filing an affidavit which would contain the terms of offer for the consideration of the Respondent. This Would be in connection with the relief sought in the present application vis-à-vis the bank guarantee No.20103801BG0084 dated 09.02.2010 extended upto 31st October, 2018 and the offer indicated in the application including para 6 regarding the punch points / snag list / defects. The affidavit shall also address the points of defects pointed out in the reply as well as the admitted punch list. The said affidavit shall be filed within one week with a copy to the Respondent. The Ld. Counsel for the Respondent shall take instructions on the said offer and revert to the Tribunal on the next date of hearing.Signature Not Verified Digitally Signed By:DUSHYANT RAWAL
The offer to be made by the Claimant as above shall be without prejudice to any claims that the parties may have against each other.
The Claimant shall extend the validity of the above mentioned bank guarantee as also the bank guarantees relating to liquidated damages and interest by a further period of one year from the respective dates of expiration. It is made clear that in case the bank guarantees relating to liquidated damages which are expiring on 30.09.2018 are not extended on or by 28.09.2018 then the Respondent shall be entitled to encash the said bank guarantees. However, the encashed amount shall be subject to further orders of the Tribunal."
7. It is pointed out that the said order was extended from time to time, however, the condition that the Bank Guarantee in question that the same would be extended prior to its expiry, continued. Mr. Venkataraman, submits that in terms of the said order, the appellant was entitled to encash the Bank Guarantee in the event it was not extended. In the aforesaid circumstances, the impugned order runs contrary to the Arbitral Tribunal's earlier order dated 14.08.2021 which was extended from time to time.
8. This Court finds no merit in the aforesaid appeal.
9. The reference to the decision of the Supreme Court in Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company (supra) is misplaced. It is clear from the facts of this case that the appellant is not challenging the order whereby, the encashment of the Bank Guarantee was interdicted [that order was passed on 27.09.2018]. The law relating to interdiction or encashment of Bank Guarantee is now well settled by a series of judgments. Such an order cannot be passed except in cases of egregious Signature Not Verified Digitally Signed By:DUSHYANT RAWAL fraud and on special equities [See Sevenska Handelsbanken v. M/s Indian Charge Chrome and Ors.: (1994) 1 SCC 502 and Larsen & Toubro Ltd. Vs. Maharashtra State Electricity and Ors.: (1995) 6 SCC 68]. However, as noticed above, the order dated 27.09.2018 is not the subject matter of challenge in this appeal. What has essentially been challenged in this appeal is the decision of the Arbitral Tribunal to condone the two days delay in extending the Bank Guarantee. The procedural orders passed by the Arbitral Tribunal indicates that the Arbitral Tribunal was conscious of the mitigating circumstances and disruption caused due to outbreak of Covid-19. It has exercised its discretion to condone the delay of two days.
10. It is also well settled that in these proceeding, the Court is not required to interfere with the discretion exercised by the Arbitral Tribunal unless it finds that such exercise is patently illegal. In this view of the matter, this Court declines to interfere with the impugned order passed by the Arbitral Tribunal condoning the delay of two days in extending the Bank Guarantee.
11. Having stated the above, this Court also clarifies that this order would not preclude the appellant from approaching the Arbitral Tribunal for seeking a recall / modification of the order dated 27.09.2018 as it is apparent that the said order was an ad interim order which was passed in view of the statement made by the learned senior counsel appearing for the respondent.
12. The appeal is dismissed with the aforesaid observations.
VIBHU BAKHRU, J DECEMBER 6, 2021 'gsr' Click here to check corrigendum, if any Signature Not Verified Digitally Signed By:DUSHYANT RAWAL