Delhi High Court - Orders
Flsmidth Pvt Limited vs Jaypee Cement Corporation Limited & Ors on 11 September, 2020
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~1(original side)
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P.(I) (COMM.) 276/2020 & I.A. 8064/2020
FLSMIDTH PVT LIMITED ..... Petitioner
Through: Mr. K.V. Mohan and Mr. K.V.
Balakrishnan, Advs.
versus
JAYPEE CEMENT CORPORATION LIMITED & ORS.
..... Respondents
Through: Mr. Pawan R. Upadhyay, Adv.
for R-1
Mr. Devmani Bansal, Adv. for R-3
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
ORDER
% 11.09.2020 I.A. 8064/2020 (for exemption)
1. Allowed subject to all just exceptions.
2. The application is disposed of.
O.M.P.(I) (COMM.) 276/2020
1. This petition under Section 9 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the "1996 Act"), seeks a restraint, against Respondent No. 1 from invoking/encashing the bank guarantee No. 0009BGR0032016 dated 8th March, 2016 and PEBMDR120366 dated 27th March, 2012, issued by Respondent Nos. 2 and 3, and for a direction to forthwith return the said bank guarantees to the petitioner.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 1 of 11 Signing Date:12.09.2020 21:24:182. The prayer clause in this petition reads thus :
"In view of the above submissions, the Petitioner most respectfully prays that this Hon'ble Court may graciously be pleased to:
A. Pass a decree of injunction in favour of the Petitioner and against the Respondents, thereby, restraining the 1st Respondent from invoking the Bank' Guarantee issued by the 2nd Respondent (ICICI Bank Limited) on behalf of the Petitioner vide Bank Guarantee bearing No.0009BGR0032016 dated 08.03.2016 for Rs.6,76,35,700.00 and the renewal dated 24.03.2020.
B. Pass a decree of injunction in favour of the Petitioner and against the Respondents, thereby, restraining the 1st Respondent from invoking the Bank Guarantee issued by the 3rd respondent The Hongkong and Shanghai Banking Limited)on behalf of the Petitioner vide Bank Guarantee bearing no.
PEBMDR120366 dated 27-Mar-2012 for Rs.6,76,35,700 renewal dated 27.03.2020.
C. Directing the 1st Respondent to forthwith return the Bank Guarantees No 0009BGR0032016 dated 08.03.2016 and PEBMDR120366 dated 27-Mar-2012.
D. Award cost of this petition and/or
E. Pass any such further order(s) as this Hon'ble
Court may deem fit and proper in the facts and circumstances of the case and thus render justice."
3. The proceedings emanate from a contract, dated 5 th April, 2010, between the petitioner and Respondent No.1, for supply of cement and mineral process equipments. The contract price was ₹ 71,24,80,000/-.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 2 of 11 Signing Date:12.09.2020 21:24:184. According to the terms of the contract, 10% of the contract value was to be paid as advance, against submission of an advance bank guarantee for an equivalent amount, to be furnished by the petitioner. Provisions for staggered payment of the balance amount were also contained in the contract.
5. As per the covenants in the contract, the bank guarantees, in respect of which this petition has been filed, were furnished by the petitioner.
6. It is alleged, in the petition, that Respondent No. 1, changed the venue of the project from Gujarat to Shahabad in Karnataka and issued an amendment to the contract on 21st October, 2010. Thereafter, as per the petition, the contract had to remain unexecuted for almost 10 years, owing to non-availability of environmental clearance and other reasons, for which, according to the petition, Respondent No. 1 was liable. The price of the contract was reduced and the petitioner submitted the revised bank guarantee.
7. It is submitted that the delay in performance of the contract was attributable to defaults on the part of Respondent No. 1.
8. Apparently, a meeting took place, between the petitioner and Respondent No. 1 on 17th and 18th April, 2015, during which the Respondent No. 1 ensured that the project would be revived shortly. Thereafter, on 29th April, 2015, Respondent No. 1 issued an amendment to the original contract refixing the contract price at ₹ 67,63,57,000/-. According to the petitioner, though the revised Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 3 of 11 Signing Date:12.09.2020 21:24:18 contract terms required mobilisation payment should be made by the first respondent within 30 days of issuance of letter of credit, which, in turn, was to be issued by August, 2015. Even as on date, according to the petitioner, mobilisation in terms of ₹ 44,20,000/- remains to be paid by Respondent No.1.
9. According to the recitals in the petition, on 2nd March, 2019, Respondent No. 1 wrote to the petitioner, requesting that the advance bank guarantee furnished by the petitioner be extended. The petitioner, vide its response dated 10th April, 2019, highlighted the alleged delays on the part of Respondent No. 1 and also pointed out that the petitioner had incurred expenses to the extent of ₹ 10,75,44,038/-. The petitioner also requested Respondent No. 1 to close the contract and pay the outstanding amount due to the petitioner.
10. Further communications, between the petitioner and Respondent No.1 followed thereafter.
11. On 3rd March, 2020, the Respondent No. 1 addressed the following communication, to the petitioner:
"JCCL/DR/Pyro/FLS/Extn./ ABG/04 March 03, 2020 M/s FLSmidth Pvt. Limited 34 Egatoor. Kelambakkam Chennai. Tamil Nadu- 603103 India Kind Attention: Mr. T R Hari/Mr. Rathina Kumar Joshep.Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 4 of 11 Signing Date:12.09.2020 21:24:18
Sub: Extension of Advance Bank Guarantee for supply of 7100 TPD Clinkerisation Plant (8000 TPD Potential) for Deccan Rose Cement Grinding Project at Shahabad, Karnataka.
Dear Sir, This is with reference to the Contract Agreement, dated 5th April 2010 and subsequent amendment dated 29th April 2015 for Design, Engineering, Manufacture, Supply and Supervision of Erection & Commissioning of Clinkerisation Plant with Precalciner with complete Auxiliaries for our cement project at Shahabad, Karnataka. which is being executed by FLSmidth Pvt. Limited.
1. FLSmidth has submitted the following Bank Guarantee against various clause of the agreement which are expiring on 30.03.2020.
BG No. BG Date Amount Current Required
Validity Extension
Till
0009BGR0032016 08-March- Rs.6,76,35,700/- 30.03.2020 31.08.2020
20 16
2. As per clause of 30 of General condition of contract, you are requested to kindly extend the above Advance Bank Guarantee, in line with MOM dated 4th May 2016 and your mail dated 21st June 2016.
3. You are requested to get the extension of the Bank Guarantee on or before 12.00 Hrs. of 25th March 2020 for the period requested above.
Thanking you Yours faithfully FOR JAYPEE CEMENT CORPORATION LIMITED Sd/-
RPS Rana (Authorized Signatory)"Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 5 of 11 Signing Date:12.09.2020 21:24:18
12. As requested by Respondent No. 1, the petitioner extended the bank guarantees submitted by it, without prejudice to its objections regarding delay, on the part of Respondent No. 1, in adhering to the covenants of the contract between the parties.
13. Again, on 24th August, 2020, the following communication was issued, from Respondent No.1, to the petitioner:
"JCCL/DR/Pyro/FLS/Extn./PBG/04 August 24, 2020 M/s FLSmidth Pvt. Limited 34 Egatoor, Kelambakkam Chennai, Tamil Nadu- 603 103 India & M/s FLSmidth A/S Vigerslev Aile 77 DK-2S00, Valby Copenhagen, Denmark Kind Attention: Mr. T R Hari/Mr. Rathina Joshep.
Sub: Extension of Advance & Performance Bank Guarantees for supply of 7100 TPD Clinkerisation Plant (8000 TPD Potential) for Deccan Rose Cement Grinding Project at Shahabad, Karnataka.
Dear Sir, This is with reference to the Contract Agreement, dated 5th April 2010 and subsequent amendment dated 29th April 2015 for Design, Engineering, Manufacture, Supply and Supervision of Erection & Commissioning of Clinkerisation Plant with Precalciner with complete Auxiliaries for our Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 6 of 11 Signing Date:12.09.2020 21:24:18 cement project at Shahabad, Karnataka, which is being executed by FLSmidth Pvt. Limited and FLSmidth A/S.
1. FLSmidth has submitted the following Bank Guarantees against various clause of the agreement which are expiring on 30.09.2020.
BG No. BG BG Amount Current Required
Type Date Validity Extension
Till
0009BGR0032016 ABG 08- Rs.6,76,35,700/- 30.03.2020 31.08.2020
March-
20 16
796BGG 1 PBG 07 - Eur 4,57,300/- 30.09. 30.09.2021 000659 Jul- 2020 2010 PBG 27 - RS.6,76,35,700/- 30.09. 30.09.2021 PEBMDR 120366 Mar- 2020 2012
2. As per clause of 30 of General condition of contract, you are requested to kindly extend the above Advance & Performance Bank Guarantees, in line with MOM dated 4th May 2016 and your mail dated 21st June 2016.
3. You are requested to get the extension of the Bank Guarantees on or before 12.00 Hrs. of 15th September 2020 for the period requested above.
Thanking you Yours faithfully FOR JAYPEE CEMENT CORPORATION LIMITED Sd/-
RPS Rana (Authorized Signatory)"Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 7 of 11 Signing Date:12.09.2020 21:24:18
14. The bank guarantees, furnished by the petitioner, are, consequent to the earlier extension, now alive till 30 th September, 2020.
15. Mr. Devmani Bansal, appearing for Respondent No. 3 confirms the fact that Respondent No. 1 has written, to the Respondent No. 3- Bank, seeking to invoke the bank guarantee furnished by the petitioner.
16. It is in these circumstances that the present petition has been filed by the petitioner, before this Court, seeking a restraint against Respondent No. 1 from invoking the bank guarantees furnished by the petitioner and a consequent direction to Respondent Nos. 2 and 3, being the banks which have issued the bank guarantees.
17. Mr. Pawan Upadhyay, learned Counsel appearing for Respondent No. 1 strenuously opposes the prayer. He submits that the petition portrays an entirely erroneous picture, as the dispute between the parties is quite different from that which is made out in the petition.
18. For the purposes of the order which is passed today, I do not deem it necessary to enter into that controversy. A reading of the letter dated 24th August, 2020, reveals that the petitioner was requested, by Respondent No. 1, to extend the bank guarantees, furnished by it, till 30th September, 2021. Mr. K.V. Mohan, learned Counsel for the petitioner submits on instructions, that his client is willing to extend the aforesaid bank guarantees for the present, as the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 8 of 11 Signing Date:12.09.2020 21:24:18 petitioner intends to invoke the provision for arbitration, contained in the agreement between the parties.
19. It is apparent, on a reading of the letter dated 24 th August, 2020, that, had the petitioner extended the bank guarantee, as requested, this litigation might not have ensued.
20. In view thereof, without, for the present, entering into the merits of the stand by either of the parties, regarding the disputes between them, as the petitioner is willing to extend the bank guarantees, for the present, and in view of the letter dated 24th August, 2020, issued by Respondent No. 1, prima facie, no case for invocation/encashment of the bank guarantees can be said to exist.
21. In view thereof, till the next date of hearing, there shall be an ad interim stay of invocation/encashment of the aforesaid bank guarantees no. 0009BGR0032016 and PEBMDR120366, furnished by the petitioner, subject to the petitioner extending the bank guarantees on or before 14th September, 2020, and providing proof of such extension to Respondent No. 1. Stay of invocation/encashment would not, therefore, continue beyond the period for which the bank guarantees are extended. The Respondent Nos. 2 and 3 banks are restrained from invoking/encashing the bank guarantees, furnished by the petitioner, till the next date of hearing.
22. It is observed that, in this petition, there is no prayer for ad interim relief. Ordinarily in a petition under Section 9 of the 1996 Act, a prayer for ad interim relief ought to be incorporated or, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 9 of 11 Signing Date:12.09.2020 21:24:18 otherwise, a separate application for ad interim relief is required to be filed.
23. On this aspect being brought to the notice of Mr. Mohan, he submits that this was possibly an oversight on the part of learned Counsel, for which the petitioner should not be put to prejudice.
24. In view of the said submission, the aforesaid interim directions would be applicable subject to the petitioner filing, during the course of the day, in this Court, an amended petition, incorporating a prayer for ad interim relief. A copy of the amended petition would also be emailed to learned Counsel for the respondents.
25. Given the constraints under which the Court is operating at present the petitioner is permitted to file the amended petition without the affidavits accompanying the petition and sans fresh copies of the annexures.
26. Issue notice.
27. Notice is accepted on behalf of Respondent No. 1 by Mr. Pawan Upadhyay and on behalf of Respondent No. 3 by Mr. Devmani Bansal.
28. Notice shall issue to Respondent No. 2 by ordinary process as well as by email at the email id of Respondent No. 2. Proof/affidavit of service shall be placed on record prior to the next date of hearing.
Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 10 of 11 Signing Date:12.09.2020 21:24:1829. Counter affidavit, in response to the petition, be filed within a period of four weeks with advance copy to the petitioner who may file rejoinder thereto, if any, within two weeks thereof.
30. Renotify on 2nd November, 2020.
31. It is made clear that the interim order, against invocation of the bank guarantees, passed today, shall continue to remain in force only till the next date of hearing, and it shall be examined, on the next date of hearing, as to whether the order requires to be extended further or not.
C. HARI SHANKAR, J.
SEPTEMBER 11, 2020/kr Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI OMP (I) (COMM.) 276/2020 Page 11 of 11 Signing Date:12.09.2020 21:24:18