Delhi District Court
Mytrah Energy (India) Private Limited vs Solar Energy Corporation Of India ... on 29 April, 2024
IN THE COURT OF MS. ANURADHA SHUKLA
BHARDWAJ: DISTRICT JUDGE (COMMERCIAL
COURT)-02, SOUTH, SAKET, DELHI
OMP (I) COMM 725/2024
1. Mytra Energy (India) Private Limited
Through its Authorized Signatory,
#8001, Survey No.109, Q-City, Nanakramguda,
Gachibowli, Hyderabad, Telangana-500032.
2. Mytrah Aditya Energy (India) Private Limited
Through its Authorized Signatory,
#8001, Survey No.109, Q-City, Nanakramguda,
Gachibowli, Hyderabad, Telangana-500032.
........Petitioners
Versus
1. Solar Energy Corporation of India Ltd.
Through its Manager (Contract & Procurement)
Registered office at 6th Floor, Plate-B,
6th Floor, Plate-B, NBCC Office Block Towr-2,
East Kidwai Nagar, New Delhi-110023.
2. IDFC First Bank Ltd.
Through its Manager,
Ground Floor, Plot No.83 & 84,
Punnaiah Plaza, Road No.2, Banjara Hills,
Near Jubilee Hills Check Post,
Hyderabad, Telangana-500033.
.........Respondents
Date of institution : 25.04.2024
Date of submissions : 27.04.2024
Date of Order : 29.04.2024
OMP (I) (COMM) 725/24 Page no. 1 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd.
ORDER
1. This is a petition u/s 9 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'A&C Act') seeking urgent interim measure to restrain Solar Energy Corporation of India Limited-Respondent no.1 from encashing the three performance Bank Guarantees dt. 11.10.2017 issued by IDFC First Bank Limited- respondent no.2 bearing nos. LOBG802011701631 (for Rs.40,62,500/-), LOBG802011701643 (for Rs.1,01,09,125) and LOBG802011701644 (for Rs.57,26,500) cumulatively amounting to Rs.1,98,98,125/-. The said PBGs were originally valid up to 11.10.2019 and have since been extended from time to time. As on the date of filing the present petition, the PBGs were valid till 10.04.2024.
2. The PBGs were not valid on the date of petition. Ld. Counsel for petitioners, however, stated that since PBGs were invoked at the time when they were valid, respondent no.2 bank can encash them if urgent relief is not granted. In this regard, he relied upon Hon'ble Supreme Court's judgment holding that the BG invoked during the time of validity could be encashed even after the expiry of the same. In this matter the invocation admittedly was during the period of validity of bank guarantees, hence this petition.
OMP (I) (COMM) 725/24 Page no. 2 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd.
3. The case of the petitioners is that the petitioners were developing 12.245 MW Grid Connected RoofTop Solar PV Projects in various states. The dispute between petitioners and respondent no.1 arose when respondent no.1 failed to grant relief to the petitioners despite being in knowledge of hurdles that the petitioners were facing in implementing projects. Respondent no.1 instead of understanding the difficulties and extending the contractual timeline for completion of projects invoked the PBGs furnished by petitioners thereby attempting to cause wrongful loss to petitioner and unjust enrichment to respondent no.1. Petitioners have relied upon letter of respondent no.1 dt. 11.07.2023 written to respondent no.2 bank invoking the PBGs issued by respondent no.2 on behalf of petitioners.
4. It is stated that prior to approaching this court, petitioners had approached Principal Special Court, City Civil Court, Hyderabad, in which the Ld. Civil Court after consideration of submissions of petitioners was pleased to restrain respondents from encashing/invoking PBGs vide order dt. 13.07.2023. Subsequently, respondent no.1 filed IA u/o 7 rule 11 CPC seeking rejection of suit as arbitration agreement existed between the parties. On 02.04.2024 petitioners through their counsel issued a notice invoking arbitration in terms of section 21 of the Arbitration & Conciliation Act and requested SECI-R1 to give its consent for arbitration as per rules of Delhi OMP (I) (COMM) 725/24 Page no. 3 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. Arbitration Center. In the petition the petitioners have narrated various issues faced by them in completion of contracts in Para 26 of the petition. It is stated that the bank guarantee was ending in 2020 itself, however, respondent no.1 issued a legal notice to petitioner no.2 as an arm twisting tactic calling upon petitioner no.1 to honour the claim raised by R-1 and renew PBGs, which were valid till 11.04.2020 only or to furnish new PBG. Petitioners were compelled to extend PBGs till 31.03.2021 and the PBGs were further extended on various dates till 30.09.2023.
5. On 11.07.2023, respondent no.1 had issued a letter to respondent no.2 invoking the PBGs issued by respondent no.2 and calling upon respondent no.2 to remit a sum of Rs.1,98,98,125/-. Subsequent thereto petitioners approached City Civil Court by filing Civil Suit alongwith an application u/o 39 rule 1 & 2 CPC and the court vide the order of same date granted ex-parte injunction in favour of the petitioners, which injunction was extended from time to time till 22.04.2024. Petitioners are seeking by way of present petition an order restraining respondent no.1 from encashing the Performance Bank Guarantees.
6. Ld. Counsel for respondent no.1 appeared and argued that the bank guarantee is a separate and independent agreement between respondent no.1 & respondent no.2. Ld. Counsel referred to terms of bank OMP (I) (COMM) 725/24 Page no. 4 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. guarantee at page no.171 and took the court to line no.19, whereby the bank had agreed on behalf of petitioners unequivocally, irrevocably and unconditionally to pay to respondent no.1 forthwith on demand in writing from SECI (respondent no.1)....any amount up to the amount of bank guarantee. Similar guarantees have been executed in different amounts. Bank guarantee as stated herienabove was renewed from time to time. At page no. 172 lines 38, 39, 40 it is written that guarantor bank shall make payment on first demand without restriction and conditions and notwithstanding any objection by Mytrah Aditya Energy Pvt. Ltd. (P-2 herein). The guarantor bank shall not require SECI (R-1) to justify the invocation of this bank guarantee nor shall the guarantor bank have any recourse against SECI in respect of any payment made hereunder. It was argued that as per clear terms of the agreement the amount was to be released to respondent no.1 irrespective of any objection taken by petitioners.
7. Arguments were heard. I have gone through the judgments filed by both the parties.
8. Ld. Counsel for petitioners has relied upon the judgment of Hon'ble High Court in Paharpur Cooling Tower Limited Vs. Sinnar Thermal Power Limited & Ors. OMP(I) (COMM) 338/2019, wherein Hon'ble Court had granted status quo on the invocation of bank guarantees and had continued the status quo till the arbitral OMP (I) (COMM) 725/24 Page no. 5 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. tribunal considered the application u/s 17 of the A & C Act. Relevantly, in the said matter the Hon'ble Court by the same order had appointed arbitrator and with the consent of both the parties directed the status quo to continue till application u/s 17 was considered by the Arbitrator.
The facts of the present case differ. Admittedly, the parties are not agreeable at maintaining status quo in the instant matter. The petition therefore, will have to be decided on merits.
9. Ld. Counsel for respondent no.1 has relied upon judgments in cases titled as Shapoorji Pallonji and Company Limited Vs. Indure Private Limited and Anr., 2021 SCC Online Del 3173; Standard Chartered Bank Vs. Heavy Engineering Corporation Limited and Anr., (2020) 13 SCC 574; Techno Unique Infratech Private Limited Vs. Gammon Infrastructure Projects Limited & Ors., (2020) SCC Online Bom 42; Tata Projects Limited Vs. Hazel International FZE, Sharjah and Ors., 2018 SCC Online Born 5858; JCL Infra Limited vs. Government of NCT of Delhi through Chief Secretary and Anr., 2015 SCC Online Del 8156; Himadri Chemicals Industries Limited Vs. Coal Tar Refining Company, (2007) 8 SCC 110; Reliance Salt Limited Vs. Cosmos Enterprises and Anr., (2006) 13 SCC 599; U.P State Sugar Corporation Vs. Sumac International Limited, (1997) 1 SCC 568; Dwarikesh OMP (I) (COMM) 725/24 Page no. 6 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. Sugar Industries Limited Vs. Prem Heavy Engineering Works Private Limited and Anr., (1997) 6 SCC 450; Zee Entertainment Enterprises Ltd. and Anr. Vs. Railtel Corporation of India Ltd. and Anr., 2021 SCC Online Del 5004; Consortium of Deepak Cable India Limited & Abir Infrastructure Private Limited (Dcil- Aipi) Thr Abir Vs. Teestavalley Power Transmission Limited, 2014 SCC Online Del 4741 & Appellant Tribunal for Electricity Mytrah Vayu (Brahamputra) Private Limited Vs. M/s. Solar Energy Corporation of India Limited & Anr.
10. In Zee Entertainment Enterprises Ltd. (Supra), the Hon'ble High Court negated the contention of petitioner that special equities create a separate exception for grant of injunction of a bank guarantee and relied upon Consortium of Deepak Cable India Limited & Abir Infrastructure Private Limited (Dcil-Aipi) Thr Abir Vs. Teestavalley Power Transmission Limited, 2014 SCC Online Del 4741, wherein it was held as under:-
"145....There are only two well recognized exceptions to the rule against permitting payment under a bank guarantee. The same are:-
A. A fraud of egregious nature; B. Encashment of the bank guarantee would result in irretrievable harm or injustice of an irreversible kind to one OMP (I) (COMM) 725/24 Page no. 7 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. of the parties.
147.. There is no separate third exception of a special equity justifying grant of an injunction to restrain the beneficiary from receiving under an unconditional bank guarantee and if there exists any third exception of a special equity, the same has to be of a kind akin to irretrievable injustice or putting a party in an irretrievable situation."
The Court further held as under:-
"31... 'Special equities' are in a sense special circumstances, which would justify granting the exceptional relief for interdicting a bank guarantee as not granting the said relief would cause irretrievable harm or injury to the party who has otherwise established a compelling case.
34... the concept of irretrievable injury or extraordinary special equities cannot be expanded to take into its fold disputes regarding the interpretation or performance of the underlying contract. A dispute between the parties relating to performance of obligations under the contract does not give rise to any OMP (I) (COMM) 725/24 Page no. 8 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. special equities warranting interdiction of a bank guarantee."
11. In Dwarikesh Sugar Industries (Supra) the Hon'ble Supreme Court held that "consequently, the right of appellant to recover the guaranteed amount is not to be affected or suspended by reason of any dispute which can be raised or pending before the courts, tribunals or arbitrator.... an injunction of the Court ought not to be an instrument which is used in nullifying the terms of a contract, which is lawfully enforceable."
12. Hon'ble Division Bench of Delhi High Court in CRSC Research and Design Institute Group Company Ltd. Vs. Dedicated Freight Corridor Corporation of India Ltd. 2020 SCC Online Delhi 1526 held as under:
"We are unable to agree with the contentions of the Senior Counsel for the appellant that this Court, when approached for the interim measure of interference with unequivocal, absolute and unconditional BGs, is required to interpret the contract and/or form a prima facie opinion whether the beneficiary of the BG has wrongfully invoked the BGs. Such exercise in a view is to be done in a substantive proceeding to be initiated by the OMP (I) (COMM) 725/24 Page no. 9 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. appellant for recovery of the money of the BGs, if averred to have been wrongly taken by the respondent no.1 by encashment of BGs. If any, interim relief is also claimed in the said substantive proceedings, the need for taking a prima facie view, will arise therein; however, not while dealing with an application for the interim measure of restraining invocation/encashment of BGs".
13. The Hon'ble Court has thus categorically held that invocation/encashment of BGs cannot be restrained in the application for interim measure, which in fact is the application of the petitioner before this Court. The Hon'ble High Court further held:-
"Irretrievable injustice, as an
exception to the rules of non-
interference with encashment of BGs, is again not a mere loss, which any person at whose instance bank guarantee is furnished, suffers on encashment thereof. It is always open to such person to sue for recovery of the amount wrongfully recovered. What has to be proved and made out to obtain an injunction against encashment, is that it OMP (I) (COMM) 725/24 Page no. 10 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. will be impossible to recover money so wrongfully received by encashment.
There is not even a whisper to this effect neither in the pleading nor in the arguments".
14. The Hon'ble High Court has thus categorically held that the relief against wrong invocation of BG would be a suit to be filed by the person of whose BG is wrongfully invoked. The Court has held that a mere loss is not an irretrievable injustices which can be considered as an exception to the rule of non-interference with encashment of BGs.
15. The Hon'ble Dehi High Court in Central Electronics Ltd. Vs. Energy Efficiency Service Pvt. Ltd., 2023 SCC Online, Delhi 3938 held:
"Where the performance bank guarantees are invoked, whether or not the amount due or likely to be due from the petitioner are beyond the scope of enquiry by the Court or the bank and would be a matter to seek restitution in substantive arbitral proceedings. The disputes between the parties herein as to breeches, delay etc. are beyond the scope of this petition U/s 9 of the Arbitration and Conciliation Act, 1996 OMP (I) (COMM) 725/24 Page no. 11 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. and the argument that no coercive steps be taken and invocation be indicated predicated on the terms of parent contract between the parties is not available to the petitioner."
16. This Court thus is precluded from looking into the terms of the parent contract, violation or breach of it and is not expected to look into who faulted and how, which is to be considered by the arbitrator in arbitral proceedings where the petitioner shall have right of restitution.
17. The Hon'ble Delhi High court in AC Humidin Air System Pvt. Ltd. Vs. Shapoorji Pallonji and Company Pvt. Ltd." 2023 SCC Online Delhi 6628, held as under:
"The ground of financial constraint urged by the petitioner to support its case for restraining the encashment of PBG, cannot ensure to its advantage in view of the settled law that financial constraint, hardship or loss cannot insulate an unconditional PBG from encashment as a threshold of irretrievable harm or injury or special equity is much higher."
18. Ld. Counsel for the petitioners is insisting that its case falls under special equity. However, the Courts have OMP (I) (COMM) 725/24 Page no. 12 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd. specifically held that financial constraints and need for filing of a suit for recovery of money wrongfully taken from petitioners are not the grounds falling under special equity. The Court cannot consider the terms and conditions of contract between the parties for which they would be going before the Arbitrator, for the purposes of deciding whether or not bank guarantee should have been invoked; invoking bank guarantee is under an independent agreement having been executed between R-1 and R-2.
19. In view of above, the petition filed by the petitioners is dismissed. A copy of the order be provided dasti to the petitioner and the respondent. File be consigned to record room.
(ANURADHA SHUKLA BHARDWAJ) District Judge (Commercial Court)-02 South, Saket/Delhi Announced in the open court on 29.04.2024.
OMP (I) (COMM) 725/24 Page no. 13 of 13 Mytrah Energy (India) Pvt. Ltd.
Vs. Solar Energy Corporation of India Ltd.