Delhi High Court - Orders
Vasavi Power Services Pvt Ltd vs Bharat Heavy Electricals Ltd on 10 March, 2021
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~43
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 72/2021
VASAVI POWER SERVICES PVT LTD. ..... Petitioner
Through Mr Rajshekhar Rao, Advocate.
versus
BHARAT HEAVY ELECTRICALS LTD ..... Respondent
Through Mr Kartik Nayar, Advocate
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 10.03.2021 [Hearing held through videoconferencing]
1. The petitioner has filed the present petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereafter 'the A&C Act'), inter alia, praying as under:-
"(A) Allow the petition and restrain the Respondent from insisting on the execution of an absolute 'No Demand Certificate' and unconditional Forms 23- and 24 by the Petitioner as a condition precedent for release of the substantial sum of USD 2,120,838 (Rs. 15,37,81,963.38/-
as on date) which is admittedly due and payable to the Petitioner;
(B) Allow the Petition and, consequently, direct release of the admitted amounts i.e. USD 2,120,838 (Rs.
15,37,81,963.38/- as on date) in favor of the Petitioner;"
Signature Not Verified Digitally Signed By:DUSHYANT RAWAL2. The parties entered into an Agreement for the erection, testing, commissioning and trial operation of TG SETS, ELECTRICAL, C & I AND BOP PACKAGES for 4x125 MW Power Plant in Kosti, Sudan (referred to as 'Package-II') (Contract Document No. 646/2009). It is stated that as per terms of the Contract, the petitioner submitted two Bank Guarantees for securing the respondent (hereafter 'BHEL') to the sum of USD $779,000. In addition, a further sum of USD $684,013 was withheld as security required against the retention amount released to the petitioner.
3. The petitioner claims that the Contract was successfully executed in December, 2018. Thereafter, in January, 2020, the petitioner submitted its final bill to BHEL.
4. The petitioner followed up on this by submitting further documents on 27.07.2020. It is the petitioner's case that BHEL, by its email dated
02.09.2020, admitted that a sum of USD $551,034.04 was payable to the petitioner as per the ledger account of BHEL and the final reconciliation for Package-II. Thereafter, the parties entered into protracted negotiations and discussions for settlement of the amount due by BHEL to the petitioner against completion of Package-II.
5. It is stated that mutual discussions were held for reconciliation of the accounts on 05.11.2020 and 06.11.2020. According to the petitioner, an amount of USD $1,324,346.04 was found due and payable against Package- II.
6. On 12.11.2020, BHEL sent an email, inter alia, calling upon the petitioner to submit (i) an "Absolute No Demand Certificate" and (ii) Signature Not Verified Digitally Signed By:DUSHYANT RAWAL Accepted and Signed Sheet Nos. 2 & 5 for "Memorandum of Payments" and "Entries to be made on accounts office" as per Form WAM-7. BHEL stated that on receipt of the above documents, the Contract closure would be taken up.
7. This was followed by another e-mail dated 07.12.2020, where BHEL stated that the security deposit for retention amount under Contract no. 646 (Package-II) would be released on processing of the Final Bill and the same was pending since the petitioner had not submitted an "Absolute No Demand Certificate" and a "Complete signed Form WAM-7". According to BHEL, the closure of Package-II was held up on account of non-receipt of the said two documents.
8. The petitioner states that a meeting was held between the representatives of the parties on 17.12.2020, wherein it was agreed that BHEL would make payment with "Utmost Priority (upon reconciliation and finalisation of payable)". This was followed by another meeting dated 30.12.2020. The minutes of the said meeting indicate that the Final Bill amount was finalised at USD $ 2,128,420/- (US Dollars Two Million, One Hundred Twenty Eight Thousand Four Hundred and Twenty Only). However, the same was subject to submission of a No Demand/No Claim Certificate and a signed WAM-7 Form. The relevant extract of the said Minutes is set out below:-
"2. For closure of Package I1, M/s. Vasavi has to perform following acts:
a) M/s. Vasavi has to submit a "No demand/No-claim certificate" in line with MOM dated 17.12.2020/as per contract.Signature Not Verified Digitally Signed By:DUSHYANT RAWAL
b) M/s. Vasavi has to submit signed WAM Form No. 7 as per the contract.
c) Final Bill amount subjected to submission of above documents shall be USD $ 2,128,420/- (US Dollars Two Million, One Hundred Twenty-Eight Thousand, Four Hundred and Twenty only)."
9. Thereafter, on 29.01.2021, BHEL sent a letter raising certain issues. However, it also confirmed that a Final Bill for Package-II would be processed since the petitioner had signed the WAM-7 Form.
10. In addition to the above, BHEL also insisted on the petitioner signing Form 23 and 24 in the prescribed form, which the petitioner claims it was compelled to do for release of the payments due to it.
11. Notwithstanding the above, the admitted amount due to the petitioner has not been released. The petitioner claims that the controversy, essentially, is that the said No Demand Certificate was not signed unconditionally but was signed by the petitioner without prejudice to its rights and contentions.
12. Mr. Rao, learned counsel appearing for the petitioner contended that the petitioner has been compelled to issue a 'No Demand Certificate' and other Forms for release of the amount, which is admittedly due to it. He contends that if the said documents are executed, as insisted by BHEL, BHEL would use the same for preventing the petitioner from pursuing its legitimate claims. He further points out that the petitioner is facing a financial crisis and owes a large sum against sums borrowed from its bank.
13. He submits that the petitioner had entered into a One Time Settlement (OTS) with its bank. However, the petitioner has been unable to pay the Signature Not Verified Digitally Signed By:DUSHYANT RAWAL amounts due, as BHEL has not released its legitimate dues. He states that if the amount as admitted is not released then the OTS granted by the bank would be withdrawn and the petitioner is likely to be liquidated. He submits that in the aforesaid mitigating circumstances, the petitioner has been compelled to approach this Court seeking the release of its legitimate dues without forfeiting its right for pursuing its other legitimate claims against BHEL.
14. The aforesaid petition is contested by BHEL, essentially, on the ground that the amount, as admittedly due to the petitioner against Package- II, is also liable to be adjusted against BHEL's claims in regard to other contracts. Mr Nayar, learned counsel appearing for BHEL particularly referred to a letter dated 02.02.2021, whereby BHEL claims that an amount of approximately ₹7,38,90,188 is due from the petitioner to BHEL against another contract (the RFL Ramagundam Project). The said letter indicates that the said amount is claimed against risk and cost as well as liquidated damages. Mr Nayar, also referred to the reply filed by BHEL, wherein it has claimed that a further amount of ₹2,01,56,660 is also recoverable from the petitioner in respect of another Project referred to as "Sterlite - Tuticorin Site". Thus, according to BHEL, a total amount of ₹9,40,46,848/- is recoverable from the petitioner against the two aforementioned contracts.
15. It also appears from a plain reading of BHEL's reply that it is BHEL's case that a No Dues/No Demand Certificate is required to obviate any frivolous claims. However, BHEL also claims that, notwithstanding the above, the petitioner would be entitled to pursue its legitimate claims.
16. Mr Nayar points out that the petitioner has filed an application under Signature Not Verified Digitally Signed By:DUSHYANT RAWAL Section 9 of the A&C Act before the District Court at Nagpur (bearing Civil Application No. 99/2021) challenging the demand raised by the letter dated 02.02.2021. He submits that in view of the above, the petitioner is precluded from raising any issue regarding BHEL's claim of ₹7,38,90,188 in respect of the RFL Ramagundam Project.
17. It is apparent from the above that it is admitted that a sum of USD $2,120,838/- is due and payable to the petitioner by BHEL in respect of Package-II. The release of the said amount has been withheld on two grounds (i) the insistence of BHEL to issue a "No Demand Certificate" or an "Unconditional discharge" in Forms 23 and 24; and (ii) BHEL's claims aggregating about ₹ 9,40,46,848/- allegedly recoverable from the petitioner in respect of other contracts.
18. Plainly, BHEL cannot insist on the issuance of a "No Demand Certificate" or any document recording a discharge in a case where the petitioner seeks to pursue its claims. It is also not permissible for BHEL to withhold legitimate dues to economically coerce the petitioner to issue such "No Demand Certificate".
19. Insofar as BHEL's claim for adjustment of the amount of ₹ 9,40,46,848/- (₹7,38,90,188/- plus ₹2,01,56,660 ) is concerned, this Court does not consider it apposite to examine this issue in these proceedings. Particularly, because the petitioner has already filed an application under Section 9 of the A&C Act pertaining to the Contract against which the amount of ₹7,38,90,188/- is claimed by BHEL.
20. In view of the above, the present petition is disposed of by directing Signature Not Verified Digitally Signed By:DUSHYANT RAWAL BHEL to forthwith release the balance amount, that is, US$ 2,120,838 less the sum of ₹ 9,40,46,848/-.
21. It is clarified that all rights and contentions of the parties - including the right to move an appropriate application under Section 17 of the A&C Act in regard to release of the said amount as and when the Arbitral Tribunal is constituted - are reserved.
22. The petition is disposed of in the aforesaid terms.
VIBHU BAKHRU, J MARCH 10, 2021 pkv Signature Not Verified Digitally Signed By:DUSHYANT RAWAL