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2004 Supreme(Del) 1017
High Court Of Delhi
VINITEC ELECTRONICS PVT.LTD - Appellant
Versus
HCL INFOSYSTEMS LTD. - Respondent
O.M.P. 273 of 2004
Decided On : 11/03/2004
HIMANSHU GOSWAMI, JATINDER KUMAR SETHI, POONAM GUPTA, RAJIV NAYAR, SANJAY ABBOT
The bank guarantee was found to be payable only upon a written demand from the respondent company during the validity of the bank guarantee, and no collateral questions of breach of contract, including non-payment of the sum, could be agitated.
Headnote:
arbitration - Interim Injunction - arbitration and CONCILIATION ACT, 1996 - [Section 9] - [Section 9]
Fact of the Case:
The petitioner sought an interim injunction against the encashment/remittance of the performance bank guarantee pending arbitration, as the respondent had defaulted in making stipulated payments.
Finding of the Court:
The court found that the bank guarantee was payable only upon a written demand from the respondent company during the validity of the bank guarantee, and as such, no case was made out for interference. The petition under Section 9 of the Arbitration and Conciliation Act was dismissed.
Issues: The main issue was whether the bank guarantee could be invoked without the full payment being made by the respondent.
Ratio Decidendi: The court held that the bank guarantee was payable only upon the written demand from the respondent company during the validity of the bank guarantee, and no collateral questions of breach of contract, including non-payment of the sum, could be agitated.
Final Decision: The petition under Section 9 of the Arbitration and Conciliation Act was dismissed, and the interim order was vacated.
( 1 ) THIS PETITION UNDER SECTION 9 OF THE arbitration and CONCILIATION ACT, 1996 (HEREINAFTER REFERRED to AS THE `act ) SEEKS AN INTERIM INJUNCTION PENDING arbitration, AGAINST THE ENCASHMENT/remittance OF THE performance BANK GUARANTEE AT 10% OF THE CONTRACT VALUE to THE RESPONDENT OR ANY ONE ACTING ON ITS BEHALF. THE guarantee DATED 10th AUGUST, 2001 AS AMENDED ON 20th august, 2001 WAS PROVIDED BY THE PETITIONER/applicant TO the RESPONDENT IN THE SUM OF RS. 16,81,238. 50p. , ISSUED by THE ORIENTAL BANK OF COMMERCE, KIRTI NAGAR BRANCH, NEW delhi. THE ENCASHMENT OF THE SAID BANK GUARANTEE IS sought TO BE STAYED BY THIS PETITION.
( 2 ) THE FACTS OF THE CASE ARE AS FOLLOWS:- THERE WAS A CONTRACT DATED 10th MAY, 2000 FOR the VALUE OF RS. 1,68,12,400/- (RUPEES ONE CRORE SIXTY eight LACS TWELVE THOUSAND AND FOUR HUNDRED ONLY) AND IT is THE PETITIONER s CASE THAT AFTER 30 PER CENT OF THE contract VALUE WAS PAID TO THE PETITIONER, A BANK guarantee IN QUESTION WAS FURNISHED TO THE RESPONDENT. THE ORIGINAL CLAUSE OF THE BANK GUARANTEE DATED 10th august, 2001 READS AS FOLLOWS:-
"whereas M/s VINITEC ELECTRONICS PVT. LTD. H-33, BALI nagar, NEW DELHI (HEREINAFTER CALLED THE `supplier ) supplied THEIR VINITEC ON-LINE UPS SYSTEMS OF VARIOUS capacities PURSUANT TO THEIR AGREEMENT DATED 10th MAY, 2000 and P. O. 4500011730 DATED 30. 05. 00 (HEREINAFTER CALLED the `company ) FOR THE FINAL PURCHASER PRESIDENT OF INDIA through THE DIRECTOR, NATIONAL CRIME RECORDS BUREAU, ministry OF HOME AFFAIRS, GOVERNMENT OF INDIA, NEW delhi (HEREINAFTER CALLED THE `purchaser ). WHEREAS IN TERMS OF CLAUSE NO. 15 OF THE AGREEMENT FOR receiving THE ENTIRE BALANCE PAYMENTS OF RS. 49,99,335/- from THE COMPANY, THE SUPPLIER HAVE AGREED TO PROVIDE A performance BANK GUARANTEE EQUIVALENT TO RS. 16,81,238. 50 as TEN PERCENT OF THE VALUE OF THE CONTRACT TO BE KEPT valid TILL THE WARRANTY PERIOD DURING WHICH TIMES THE supplier IS REQUIRED TO PERFORM THEIR WARRANTY obligations TO THE PURCHASER; AND whereas PURSUANT TO THE APPLICATION MADE BY THE SUPPLIER, we ORIENTAL BANK OF COMMERCE, KIRTI NAGAR, NEW delhi (HEREINAFTER CALLED THE `bank ) HAVE ACCORDINGLY agreed TO GIVE THE SUPPLIER A BANK GUARANTEE FOR THE aforesaid PURPOSE.
( 3 ) THEREFORE, WE, THE BANK, HEREBY AFFIRM THAT WE ARE guarantors AND RESPONSIBLE ON BEHALF OF THE SUPPLIER UPTO a TOTAL OF RS. 16,81,238. 50 (RUPEES SIXTEEN LACS EIGHTY one THOUSAND TWO HUNDRED THIRTY EIGHT AND PAISE FIFTY only) AND WE UNDERTAKE TO PAY ANY SUM OR SUMS WITHIN THE limit OF RS. 16,81,238. 50 (RUPEES SIXTEEN LACS EIGHTY ONE thousand TWO HUNDRED THIRTY EIGHT AND FIFTY PAISE ONLY) as AFORESAID UPON RECEIPT OF WRITTEN DEMAND FROM THE purchaser AND COMPANY WITHIN THE VALIDITY OF THIS BANK guarantee, ESTABLISHING THE SUPPLIER TO BE IN DEFAULT for THE PERFORMANCE OF THEIR WARRANTY OBLIGATIONS UNDER the CONTRACT.
WE, THE BANK, AFFIRM THAT OUR LIABILITY UNDER THIS guarantee IS LIMITED TO THE TOTAL AMOUNT OF rs. 16,81,238. 50 (RUPEES SIXTEEN LACS EIGHTY ONE THOUSAND two HUNDRED THIRTY EIGHT AND PAISE FIFTY ONLY) AND IT shall REMAIN IN FULL FORCE UPTO AND INCLUDING 31st august, 2003 AND SHALL BE EXTENDED FROM TIME TO TIME FOR such FURTHER PERIOD (S) AS DESIRED BY THE PURCHASER, company, AND SUPPLIER ON WHOSE BEHALF THIS GUARANTEE HAS been GIVEN. "however, SUBSEQUENTLY BY THE LETTER DATED 20th august, 2001, THE BANK GUARANTEE WAS AMENDED AND THE paragraph 4 OF THE BANK GUARANTEE WAS REPLACED AND WAS TO be READ AS UNDER:-
"therefore, WE, THE BANK, HEREBY AFFIRM THAT WE ARE guarantors AND RESPONSIBLE ON BEHALF OF THE SUPPLIER UPTO a TOTAL OF RS. 16,81,238. 50 (RUPEES SIXTEEN LACS EIGHTY ONE thousand TWO HUNDRED THIRTY EIGHT AND PAISE FIFTY ONLY) and WE UNDERTAKE TO PAY ANY SUM OR SUMS WITHIN THE LIMIT of RS. 16,81,238. 50 (RUPEES SIXTEEN LACS EIGHTY ONE thousand TWO HUNDRED THIRTY EIGHT AND PAISE FIFTY ONLY) as AFORESAID UPON RECEIPT OF WRITTEN DEMAND FROM THE company WITHIN THE VALIDITY OF THIS BANK GUARANTEE. "
( 4 ) CONSEQUENTLY
