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2014 Supreme(Del) 819
High Court of Delhi
RAJIV SAHAI ENDLAW, J.
Brahmaputra Cracker & Polymer Ltd.
Versus
Aquafil Polymers Company Private Ltd.
CS(OS) No. 2 of 2013
Decided on: 12-03-2014
For the Plaintiff:Rashmeet Kaur, Akansha Chauhan, Advocates.
The terms of the bank guarantee and the contract govern the rights of parties in recovery suits, and the plaintiff must demonstrate actual damage or loss suffered to claim recovery.
Headnote:
Bank Guarantee - Recovery Suit - Clause 10.4 of the Instructions to Bidder, Clause 35.1 of the Special Conditions of Contract - [Clause 10.4, Clause 35.1]
Fact of the Case:
The plaintiff filed a suit for recovery of Rs.51,68,000 from the defendant, alleging submission of forged documents in a bid for a Petrochemical Complex project. The defendant's bid was rejected, and the plaintiff sought to recover the amount covered under the bank guarantee.
Finding of the Court:
The court found that the plaintiff failed to demonstrate any damage or loss suffered, and the terms relied upon only enabled forfeiture of the earnest money, not recovery from the defendant. The court also noted that the bank guarantee did not allow for encashment based on the grounds relied upon by the plaintiff.
Issues: The main issue was whether the plaintiff could recover the amount from the defendant when attempts to forfeit the bank guarantee had failed.
Ratio Decidendi: The court held that the plaintiff's claim for recovery was unfounded as it failed to show any damage or loss suffered and the terms relied upon only allowed for forfeiture, not recovery from the defendant. The court also emphasized that the bank guarantee did not permit encashment based on the grounds relied upon by the plaintiff.
Final Decision: The suit was dismissed with no costs.
1. The plaintiff has instituted this suit for recovery of Rs.51,68,000/- from the defendant, pleading:
I. that the plaintiff, a Government of India Undertaking, vide an Invitation to Bid dated 26.08.2010, invited bids through its authorized consultant M/s Engineers India Ltd. (EIL) for putting up a grass-root Petrochemical Complex at Lepetkata;
II. that the bids were to be submitted by 24.09.2010 along with an Earnest Money Deposit (EMD)/Bid Security for Rs.38 Lakhs in the form of a Demand Draft or a non-recoverable Bank Guarantee and inter alia required the bidders to have independently completed at least one similar contract in the last ten years of the bidding date;
III. that the defendant, a private limited company, submitted its bid along with its EMD in the form of a bank guarantee and unconditionally accepted all terms and conditions contained in the Bid Documents without any deviation;
IV. that while evaluating the bids with respect to the experience criteria prescribed under the Tender Conditions, the authorized consultant of the plaintiff, EIL, found discrepancies in the Work Order and Completion Certificate submitted by the defendant in respect of alleged work done by it for one M/s Ambur Economic Development Organization Ltd., Chennai (AEDO) against a Work Order dated 16.01.2005;
V. that upon being contacted, AEDO vide letter dated 11.10.2010 informed the plaintiffs that it had never issued the Work Order in question and that the Work Order and Completion Certificate submitted by the defendant in this regard were fake;
VI. that accordingly, the plaintiff issued a Show Cause Notice dated 12.10.2010 to the defendant seeking clarification regarding the aforesaid discovery of forged documents submitted by the defendant;
VII. that since the defendant failed to satisfy the plaintiff that the Work Order and Completion Certificate filed by it were genuine and authentic documents, the plaintiff rejected its bid and decided to forfeit the EMD furnished by the plaintiff in accordance with Clause 35.1 of Special Conditions of Contract (SCC) read with Clause 10.4 of the Instructions to Bidders which permitted such forfeiture in case of submission of false/forged documents for evaluation of bids;
VIII. that the plaintiff hence invoked the bank guarantee supplied by the defendant in terms of Clause 2(a) thereof vide its invocation letter dated 24.11.2010; however the said invocation letter was subsequently withdrawn when this Court in CS(OS) 2400/2010, at the instance of the defendant herein challenging such invocation of bank guarantee being not in accordance with the specific terms and conditions thereof, was pleased to restrain the State Bank of India (the bank which had issued the bank guarantee) from releasing any sum under the bank guarantee; and,
IX. that the plaintiff thereafter re-invoked the bank guarantee under Clause 35.1 of the SCC vide its invocation letter dated 02.12.2010; however the said invocation was also not pressed by the plaintiff in light of another restraining order passed by this Court in CS(OS) 1023/2011 on the allegation of the defendant herein that the aforesaid Clause
35.1 of the SCC was not one of the terms for invocation of the bank guarantee.
The plaintiff thus, after two unsuccessful attempts at invoking the bank guarantee, has now filed the present suit for directly recovering from the defendant the amount of Rs.51,68,000/-comprising of the sum of Rs.38 Lakhs covered under the bank guarantee and interest of Rs.13,68,000/-on the said amount at 18% per annum from October 2010 till the institution of this suit. The plaintiff has also sought pendente lite and future interest at 18% per annum.
2. Summons in the suit were issued on 04.01.2013 and upon non-appearance of the defendant despite due service, this Court ordered the defendant to be proceeded ex-parte vide order dated 04.10.2013.
3. The plaintiff has examined two witnesses to support its case. The first witness, Mr. Rajeev Garg, empl
