Tirupati Building And Office Pvt. Ltd vs Delhi Development Authority on 10 January, 2024

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Delhi High Court - Orders

Tirupati Building And Office Pvt. Ltd vs Delhi Development Authority on 10 January, 2024

Bench: Prathiba M. Singh

                                    $~27
                                    *           IN THE HIGH COURT OF DELHI AT NEW DELHI
                                    +                        O.M.P. (COMM) 287/2016 & I.A. 6838/2016
                                                TIRUPATI BUILDING AND OFFICE PVT. LTD ..... Petitioner
                                                              Through: Mr. Gaurav Sarin, Ms. Charul Sarin,
                                                                       Mr. Harish Kumar, Advs. (M.
                                                                       9818770156)
                                                              versus

                                                DELHI DEVELOPMENT AUTHORITY               ..... Respondent
                                                               Through: Ms. Chand Chopra, and Ms. Neha
                                                                        Bhupathiraju, Adv. (M. 9915907494)
                                                CORAM:
                                                JUSTICE PRATHIBA M. SINGH
                                                         ORDER

% 10.01.2024

1. This hearing has been done through hybrid mode.

2. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, '1996 Act') has been filed by the Petitioner- Tirupati Building and Office Pvt. Ltd. challenging the impugned Arbitral Award dated 17th March, 2016 (hereinafter, 'the Award') passed by the ld. Sole Arbitrator.

3. The petition reveals a peculiar set of facts and events. The Petitioner purchased Plot No.3, Sector 10, Dwarka City Centre, New Delhi - 110075 (hereinafter, 'the plot') in a public auction conducted on 28th August, 2007 where it emerged as the only successful bidder after paying a sum of Rs.211.11 crores against the reserve price of Rs. 188.83 crores. As per the Tender Document, the bidder/Petitioner was to construct a hotel on the said plot and the same was to be completed within a period of 24 months. An Allotment letter was also issued on 17th October, 2007. The expected date O.M.P. (COMM) 287/2016 Page 1 of 8 This is a digitally signed order.

4. On 24th October, 2008, a performance security in the form of a bank guarantee was furnished by the Petitioner for the sum of Rs.10,55,56,000/- in favour of the Respondent. However, subsequently there appears to have been certain delays in the construction of the hotel on the said plot. As per the Petitioner, the delay in the finishing of the project occurred due to the delay in the sanctioning of the building plans, which was finally granted on 14th May, 2009. As per the Petitioner, the construction of the hotel is claimed to have been finally completed sometime in March, 2010, which is denied by the Respondent-Delhi Development Authority (hereinafter, 'DDA').

5. In the above background, the DDA issued a show cause notice on 4th May, 2010 seeking to invoke the performance bank guarantee. On 17th May, 2010, the notice of invocation of arbitration was issued by the Petitioner in terms of clause 3.8 of the Tender Document and Section 21 of the 1996 Act. The said clause specified that in the event of a dispute regarding the interpretation of the Tender Document between the parties, the dispute shall be referred to the Vice-Chairman of the DDA. The Vice-Chairman had been conferred the authority to adjudicate and resolve any disputes between the parties. The Respondent, vide communication dated 14th June, 2010 informed the Petitioner that its representation was 'rejected' and that the performance security would be forfeited, leading the Petitioner to file a petition under Section 9 of the 1996 Act, being OMP No. 373/2010 titled 'M/s. Tirupati Bldgs. v. DDA' in July, 2010. An interim order was passed in the said petition on 6th July, 2010. The operative portion of the said order reads as under:

O.M.P. (COMM) 287/2016 Page 2 of 8

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 25/01/2024 at 03:41:11 "Consequently, subject to the petitioner keeping the bank guarantee, annexure P-2 alive. till further orders, the encashment of the same by the respondent shall remain stayed till the next date."

6. In May, 2011, the Petitioner also filed an application under Section 11(6) of the 1996 Act, being Arbitration Petition No. 365/2010 titled 'M/s. Tirupati Buildings and Offices Pvt. Ltd. v. DDA'. Vide order dated 12th May, 2011, in the said petition, the ld. Sole Arbitrator was appointed to adjudicate upon the disputes between the parties arising out of the Tender Document. In July, 2011, the ld. Sole Arbitrator entered reference.

7. The petition under Section 9 of the 1996 Act was disposed of on 21st October, 2011, permitting the Petitioner to move an application under Section 17 of the 1996 Act before the ld. Arbitrator. The interim order dated 6th July, 2010, was continued on 21st October, 2011 permitting the Petitioner to approach the ld. Sole Arbitrator. The said order reads as follows:

"2. Learned counsel for the Petitioners state that they will file applications under Section 17 of the Arbitration & Conciliation Act ('Act') before the Arbitral Tribunal ('Tribunal') within two weeks.

3. Consequently, it is directed that the interim orders already passed by this -. Court in these petitions will continue till such time the Tribunal passes orders in the applications to be filed by the Petitioners under Section 17 of the Act. The Tribunal will pass appropriate orders on such applications in accordance with law. Before the Tribunal, it will be open to the parties to rely on the pleadings in these petitions.

4. The petitions are disposed of in the above terms."

8. The ld. Arbitrator heard the Petitioner/Claimant's application under O.M.P. (COMM) 287/2016 Page 3 of 8 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 25/01/2024 at 03:41:11 Section 17 of the 1996 Act and vide order dated 22nd October, 2013, the application of the Petitioner was decided and an injunction was passed confirming that the invocation of the bank guarantee would remain stayed. The operative portion of the said order reads as under:

"33. Based on the aforesaid discussion, I am of the view that the invocation of the bank guarantee ought to remain stayed subject to the final outcome of the proceedings, provided the bank guarantee is kept alive and renewed during the course of these proceedings. I order accordingly. Any breach of the aforesaid condition shall result in automatic vacation of the order. "

9. However, after that stage, the matter took a curious turn. It was revealed to the ld. Arbitrator that the Petitioner, in the meantime, had failed to renew the performance bank guarantee, as the Bank had refused to renew the same without 100% margin money due to the Petitioner's account being declared as a Non-Performing Asset (hereinafter, 'NPA'). Thus, the bank guarantee lapsed on 31st December, 2012. This fact had not been revealed by the Petitioner to the ld. Arbitrator, which then led to the Award dated 17th March, 2016. Vide the said order, the ld. Arbitrator withheld the release of the order dated 22nd October, 2013 and terminated the proceedings on 17th March, 2016 in the following terms:

"8. Thus, it is crystal clear that on Dec 18, 2012 the Claimant came to know that the Bank was demanding 100% margin money to renew the bank guarantee. According to its his own admission, recorded in its letter of December 27, 2012 to the Bank, the Claimant was facing "liquidity issues' on account of which it was not in a position to arrange the stipulated margin money. This being so, in all fairness, the Claimant on December 18, 2012 or so, should have brought to the O.M.P. (COMM) 287/2016 Page 4 of 8 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 25/01/2024 at 03:41:12 notice of the Tribunal and the Respondent that the Bank was demanding 100% cash as margin money for renewing the bank guarantee and it was not possible for the Claimant to deposit the same. This would have given an opportunity to the Respondent to take appropriate steps to safeguard its rights and interests as the bank guarantee was alive until December 31, 2012. Since the Bank Guarantee was not renewed, the application of the Claimant under Section 17 of the Act was rendered infructuous as there was no bank guarantee in existence in respect of which a restraint order was required. But the Claimant by its silence misled the Tribunal in passing the order dated October 22, 2013.

8. The offer of the Claimant to execute a mortgage deed for the aforesaid immovable property in favour of the Respondent is not convincing in view of the financial status of the Claimant. In case the property was available to the Claimant, it could have raised money against it for furnishing the bank guarantee. The fact that the bank guarantee was not renewed from January 01, 2013 shows that the offer to mortgage the said property in favour of the Respondent was a ruse.

9. In view of the aforesaid discussion, I am of the view that the Claimant has not acted bona-fide and had at crucial stages concealed the vital information from the Tribunal pertaining to its financial status and its failure to renew the bank guarantee in breach of the aforesaid orders dated October 06, 2010 and October 21,2011.

10.In two other somewhat similar matters which were heard on March 10, 2016 and orders passed today, the proceedings have been terminated qua Claims as the Claimants violated the conditions subject to which encashment of the bank guarantees was stayed."

10. The above order, passed under an application moved by the Petitioner under Section 17 of the 1996 Act and being an interim award under Section O.M.P. (COMM) 287/2016 Page 5 of 8 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 25/01/2024 at 03:41:12 2(1)(c) read with Section 31(6) of the 1996 Act, is the subject matter of challenge in the present petition. Vide order dated 19th October, 2013, further hearing before the ld. Arbitrator were deferred. Consequently, the matter has remained pending before this Court.

11. On behalf of the Petitioner, ld. Counsel Mr. Gaurav Sarin submits as follows:

 The Petitioner is now solvent and is actively conducting business.  The Petitioner is currently running the hotel situated on the plot in question, known as 'Welcom Hotel' in Dwarka, though its name may have undergone changes over time.

 The Petitioner now has the capacity and is in a position to renew the bank guarantee as its account is no longer categorised as an NPA.  He concedes that the Petitioner ought to have informed the ld.

Arbitrator of the fact that the bank guarantee has lapsed in December, 2012, and the same was nothing but an inadvertent omission on behalf of the Petitioner.

 The termination of claims vide the Award dated 17th March, 2016 has resulted in the Petitioner being unable to obtain any final relief from the Arbitrator.

 The Petitioner is willing to furnish a bank guarantee, and if the interim order dated 22nd October, 2013 can be continued, the Petitioner undertakes to keep the bank guarantee alive.  Further, reliance is placed on the judgment of the Bombay High Court in Maharashtra State Electricity Board v. Datar Switchgear Ltd. (2002 SCC Online Bom 983) to argue that the decision of the ld.

O.M.P. (COMM) 287/2016 Page 6 of 8

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 25/01/2024 at 03:41:12 Arbitrator to terminate the arbitral proceedings concerning the Petitioner's claim exceeded the scope of its powers.

12. On the other hand, ld. Counsel for the DDA submits that not all of the Petitioner's claims have been rejected. She relies upon the operative portion of paragraph 11 of the Award, referencing the order dated 22nd October, 2013, to argue that only the claim relating to the breach of non-furnishing of the bank guarantee would be affected, i.e. prayer (b) and (c) of the statement of claim.

13. Heard. The Court has perused the order dated 22nd October, 2013 and the Award dated 17th March, 2016. On merits, the ld. Arbitrator has agreed with the Petitioner and granted interim relief of non-encashment of the bank guarantee, subject to the same being kept alive.

14. The only reason the said interim order did not take effect in the case of the Petitioner is that the ld. Arbitrator was rightly concerned about not being informed of the lapse of the bank guarantee itself.

15. Given the circumstances, where the Petitioner is now willing to furnish a valid bank guarantee, it is deemed appropriate under Section 34(4) of the 1996 Act, considering the claims and counterclaims, to restart the arbitral proceedings.

16. Accordingly, in the peculiar facts and circumstances of this case, the following directions are issued:

i. The Petitioner shall obtain a bank guarantee in favour of the DDA for the sum of Rs.10,55,56,000/- , which shall be produced on the next date of hearing.

ii. The said bank guarantee, once furnished to the DDA, shall remain alive and valid until the conclusion of the arbitral proceedings.

O.M.P. (COMM) 287/2016 Page 7 of 8

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 25/01/2024 at 03:41:12 However, it shall not be encashed in terms of the order passed by the ld. Arbitrator on 22nd October, 2013. The said order shall be subject to further orders of ld. Arbitrator.

iii. Insofar as the ld. Arbitrator is concerned, the last hearing before the ld. Arbitrator was in 2016. After that, the entire arbitral record was transmitted to this Court. The ld. Counsel for the parties are directed to enquire with the ld. Arbitrator as to whether the ld. Arbitrator wishes to recommence the reference and proceed with the matter. Should the ld. Arbitrator decide not to continue, the Court would appoint a fresh arbitrator to adjudicate the claims and the counter claims.

17. In order to ensure that arbitral proceedings are recommenced either before the earlier ld. Arbitrator or before a new arbitrator, who would be appointed, list this matter on 7th March, 2024.

PRATHIBA M. SINGH, J.

JANURARY 10, 2024 dj/dn O.M.P. (COMM) 287/2016 Page 8 of 8 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 25/01/2024 at 03:41:12

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Delhi High Court - Orders