Suzlon Energy Limited vs Indian Oil Corporation Limited Through ... on 15 February, 2024

[Cites 3, Cited by 0]

Delhi High Court - Orders

Suzlon Energy Limited vs Indian Oil Corporation Limited Through ... on 15 February, 2024

1. The appellant has filed the present appeal impugning a judgment dated 26.07.2023 (hereafter the impugned judgment) passed by the learned Single Judge in O.M.P.(I)(COMM) 149/2023 captioned Suzlon Energy Limited v. Indian Oil Corporation Limited.

2. The said application was filed by the appellant under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter 'A&C Act'), inter alia, praying that the respondent be restrained from invoking four Performance Bank Guarantees (PBGs), the details of which are as under:

                                                S.          BANK                                     Concerning            AMOUNT
                                                NO.         GUARANTEE NO.                                                  (Rs)




                                                       FAO(OS) (COMM) 166/2023                                                  Page 1 of 7
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01

1. 0999516BG0000596 Design, Manufacture and 12,24,00,000/-

Supply of 25.2 MW wind farm at Bhopalgarh

2. 0999156BG0000597 Installation, Erection & 3,24,88,239/-

Commissioning of 25.2 MW wind farm at Bhopalgarh

3. 0999156BG0000593 Design, Manufacture and 12,21,00,000/-

Supply of 23.1 MW wind farm at Kaladungar

4. 0999156BG0000595 Installation, Erection & 3,58,59,367/-

Commissioning of 23.1 MW wind farm at Kaladungar

3. The appellant had succeeded before the Arbitral Tribunal in respect of the claims for release of the bank guarantees. The contentions advanced by the respondent in this regard were rejected. The relevant extracts of the impugned award as well as the minority opinion are set out below:

Impugned Award (Majority) "99. Issue 2 concerns the release of the Bank Guarantees sought by the Claimant. As pointed out above while. setting out the sequence of events, in terms of Clause 2.0 of the LoAs, the Claimant, on 18.03.2016, furnished four Security Deposit Bank Guarantees as under:

                                                  S.  BANK             Concerning                                          AMOUNT
                                                  NO. GUARANTEE NO.                                                        (Rs)
                                                  1.  0999516BG0000596 Design, Manufacture and                             12,24,00,000/-
                                                                       Supply of 25.2 MW wind
                                                                       farm at Bhopalgarh
                                                  2.  0999156BG0000597 Installation, Erection &                            3,24,88,239/-
                                                                       Commissioning of 25.2
                                                                       MW wind farm at
                                                                       Bhopalgarh
                                                  3.  0999156BG0000593 Design, Manufacture and                             12,21,00,000/-




                                                       FAO(OS) (COMM) 166/2023                                                       Page 2 of 7
This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.

The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01 Supply of 23.1 MW wind farm at Kaladungar

4. 0999156BG0000595 Installation, Erection & 3,58,59,367/-

Commissioning of 23.1 MW wind farm at Kaladungar The said Bank Guarantees were extended from time to time and were continued to be valid till the conclusion of the present proceedings.

100. Clause 2.1.3.0 of the GCC provided that "The Security Deposit shall be held by the OWNER as security for the due performance of the CONTRACTOR'S obligations under the contract." Hence, it was contended on behalf of the Claimant, once the purpose of furnishing the Bank Guarantees, that is, the performance of the Contracts was fulfilled, the same ought to have been released in terms thereof.

101. As per Clause 2.3 .4 of SCC(EPC) the "Bank Guarantee shall be returned to the BIDDER after 03 months from the expiry of defect liability period of and all the obligations of the bidder under the contract have been met".

102. The defect liability period for the works as per Clause 5 .4.1.0 of the GCC as modified by Clause 2.4.0 of SCC(EPC) was specified to be 24 (twenty four) months from the date of completion of stabilization period.

103. It has been pointed out above that on 15.11.2017, the Respondent, in terms of Clause 2.9.0 of SCC(EPC), issued the Completion Certificate for Contract Work Order Nos. 24686705 dated 04.03.2016 (Design, Manufacture and Supply) & 24686706 dated 04.03.2016 (Installation, Erection & Commissioning) in respect of the Bhopalgarh project. From the said Certificate it is, inter alia, evident that the Date of Stabilization was 16.03.2017.

104. Similarly, on 15.11.2017 itself: the Respondent, in terms of Clause 2.9 .0 of SCC(EPC), issued the Completion Certificate for Contract Work Order Nos. 24686618 dated 04.03.2016 (Design, Manufacture and Supply) & 24686656 dated FAO(OS) (COMM) 166/2023 Page 3 of 7 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01 04.03.2016 (Installation, Erection & Commissioning) in respect of the Kaladungar project. From this Certificate it is, inter alia, evident that the Date of Stabilization was 18.03.2017.

105. So, the defect liability periods in respect of Bhopalgarh and Kaladungar would end on 16.03.2019 and 18.03.201.9, respectively. And consequently, in terms of Clause 2.3 .4 of SCC(EPC), the Bank Guarantees were liable to be returned to the Claimant three (03) months thereafter, that is, on 16.06.2019 and 18.06.2019 for Bhopalgarh and Kaladungar, respectively.

106. In its defence, it was pleaded by the Respondent that it had issued a Defect Liability Notice to the Claimant on 04.02.2019 in respect of the non-compliances on part of the Claimant. Through that notice, the Claimant was intimated by the Respondent about the failures of the Claimant (i) on account of non-extension of the PP As; and (ii) not meeting certain performance parameters.

107. We have already held that the Claimant cannot be held responsible for the non-extension of the PPAs. As regards the failure of meeting the performance parameters, it is pertinent to note that in the Claimant's response dated 01.08.2019 to the Respondent's said Defect Liability Notice, the Claimant had clearly acknowledged the same and had agreed to compensate the Respondent for the same as under:

"With regard to compensation charges on account of nonachievement of performance parameters, our OMS BD team have vide our email dated 09.10.2018, already given consent to IOCL to deduct the same from our due payments."

(emphasis supplied)

108. This aspect of compensation will be dealt under Issue 9.

109. In these circumstances, we hold that the Claimant is entitled to the release of the aforesaid four (04) Bank Guarantees. Issue 2 is decided accordingly.

Minority Award ll.(iii). Issue No.2 pertains to claim No.2. The claim is in respect of release of the Performance Bank Guarantees bearing Nos.

FAO(OS) (COMM) 166/2023 Page 4 of 7

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01 0999516BG0000596, 0999516BG06Q6597, 0999516BG0000 593 and 0999516BG0000595 in sum of INR. 12,24,00,000.00, INR. 3,24,88,239.00, INR. 12,21,00,000.00 and INR. 3,58,59,367.00, totalling INR. 31,28,47,606.00 which were submitted to the respondent on 18.03.2016 and has been extended. from time to time and 11 have been kept alive by the claimant till date. The PBGs were submitted to the respondent by way of security for performance of Supply and E&C works for setting up, commission in and handing over the two Projects at Kaladungar and Bhopalgarh. The deposit of security in the form of Performance Bank Guarantees was an obligation of the claimant under Clause 2.0 of the letters of award, requiring the claimant to deposit/furnish the PBGs from a nationalised bank in the proforma attached with the letters of award. Clause 2.3 .4 of the Special Conditions of Contract for Supply, Erection & Commissioning specifies that "bank Guarantee shall be returned to the BIDDER after 03 months from the expiry· of defect liability period of and all the obligations of the bidder under the contract have been met." That the defect liability period as per Clause 5.4.1.0 of the GCC, has to be calculated for 24 months from the date of completion of stabilization period. As clearly stated in the completion certificate issued by the respondent, the stabilization period got over on 16.03.2017 and accordingly the defect liability period got over on 16.03.2019 i.e. 24 months from the date of stabilization. It is undisputed that the Power Plants became fully operational on the said dates and were supplying power to the Grid continuously post commissioning and stabilization. Thus, the claimant completed its obligation under the contract as regards performance under the Erection and Commissioning Parts, making the claimant entitled to the release of the bank guarantees submitted by it towards the Performance of these Contracts."

4. Notwithstanding the unambiguous decision holding that the respondent is liable to release the bank guarantees, the respondent did not release the same as required in terms of the impugned award. It is in these circumstances that the appellant had approached the Court by filing an application for interim measure under Section 9 of the A&C Act.

FAO(OS) (COMM) 166/2023 Page 5 of 7

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01

5. The learned counsel appearing for the respondent submits that the respondent has not accepted the impugned award and has preferred an application under Section 34 of the A&C Act [OMP(COMM) 458/2023] for setting aside the impugned award, which is pending before the learned Single Judge.

6. The learned Single Judge had considered the appellant's application and had passed an order directing that the bank guarantees in question be invoked, but not encashed.

7. Prima facie, we find it difficult to accept that any such order could have been passed in the appellant's application for interim measures of protection. If the learned Single Judge was of the view that the appellant was not entitled to seek interdiction of invoking the bank guarantees in question, the appellant's application was required to be rejected. However, the learned Single Judge has passed a positive order for invoking the bank guarantees in question, which is contrary to the impugned award. Concededly the impugned award is, absent any order staying the same, required to be enforced.

8. The contention of the respondent that notwithstanding the impugned award directing the release of the bank guarantees in question, the respondent could have proceeded to encash the same, is unpersuasive. In the event, the respondent required that the impugned award not be implemented, it was incumbent upon the respondent to secure an appropriate order in this regard. Concededly, there is no order passed by the Court staying the implementation of the impugned award.

FAO(OS) (COMM) 166/2023 Page 6 of 7

This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01

9. In view of the above, we are, prima facie, of the view that the impugned judgment is liable to be set aside and the respondent is required to be interdicted from invoking the same. Since the bank guarantees have been invoked, prima facie, appropriate directions for release of the bank guarantees is required to be issued.

10. However, at the request of learned counsel for the respondent, we defer further hearing for a period of two weeks from date. The respondent is not precluded from approaching the learned Single Judge for appropriate orders in accordance with law.

11. List on 13.03.2024.

VIBHU BAKHRU, J TARA VITASTA GANJU, J FEBRUARY 15, 2024 RK/r FAO(OS) (COMM) 166/2023 Page 7 of 7 This is a digitally signed order.

The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 20/02/2024 at 20:45:01

Unlock Advanced Research with PRISMAI

Delhi High Court - Orders