Back
High Court of Delhi
DEEPA SHARMA, J.
Voltas Ltd.
Versus
NCC Ltd. & Another
O.M.P. No. 1117 of 2014
Decided On : 10-12-2014
Arbitration - Bank Guarantees - Arbitration and Conciliation Act, 1996, Section 9
Fact of the Case:
The petitioner, a contractor, sought relief under Section 9 of the Arbitration and Conciliation Act, 1996, to restrain the respondent from invoking three bank guarantees. The dispute arose from a construction contract for an ESIC Medical College-cum-Hospital at Mandi Himachal Pradesh. The petitioner furnished bank guarantees totaling Rs. 4,28,00,000, which were later encashed by the respondent. Subsequently, the parties entered into a settlement, and the petitioner executed fresh bank guarantees for Rs. 3,39,56,750. Disputes arose when the respondent failed to pay the petitioner's bills and escalation charges, leading to the petitioner seeking restraint from invoking the bank guarantees.
Finding of the Court:
The Court found that the bank guarantees were unconditional and irrevocable, and the petitioner failed to establish that an egregious fraud had been played upon them. The Court held that the petitioner voluntarily entered into the settlement and failed to show that the respondent had put them in a position of undue disadvantage. Additionally, the Court found that the petitioner would not suffer irretrievable injury if the stay was not granted.
Issues: The issues revolved around the nature of the bank guarantees, the allegations of fraud, and the petitioner's entitlement to relief under Section 9 of the Arbitration and Conciliation Act, 1996.
Ratio Decidendi: The Court held that bank guarantees can only be restrained from invocation in cases of egregious fraud or irretrievable injustice. The petitioner failed to establish either ground and thus was not entitled to relief.
Final Decision: The Court dismissed the petition and vacated the stay granted, holding that the petitioner was not entitled to any relief.
DEEPA SHARMA, J.
1. The present petition has been filed under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) for the relief that respondent No.1 be restrained from invoking three bank guarantees bearing Nos. 999513BG0002397, 0999513BG0002398 and 0999513BG0002399 all dated 24.09.2013 of the following nature:-
S. No. Date Description Amount
(i) 24.09.2013 Mobilization Bank Guarantee Rs. 1,30,56,750.00
(ii) 24.09.2013 Performance Bank Guarantee Rs. 1,09,50,000.00
(iii) 24.09.2013 Retention Bank Guarantee Rs. 99,50,000.00
Total Rs. 3,39,56,750.00
2. The admitted facts of the case are that respondent No.1 was formerly known as Nagarjuna Construction Company Ltd. and was a part of an unincorporated joint-venture (JV), namely M/s. CRSSG-NCC (JV). The JV was awarded the work under a tender floated by National Building Construction Company Ltd. (NBCC Ltd.) on behalf of Employee State Insurance Corporation (ESIC) for the construction of ESIC Medical College-cum-Hospital at Mandi Himachal Pradesh. The Joint Venture ceased to exist and its rights and liabilities have been taken over by respondent No.1. Work for supply, erection and commissioning of air-conditioning equipment in the five buildings of ESIC was awarded to the petitioner for a fixed contract having value of Rs. 2,19,00,000/-. The completion period of the work was 14 months. At that time, the petitioner had furnished three bank guarantees of a sum of Rs. 4,28,00,000/-. During the course of execution of the work, some dispute arose between the petitioner and respondent No.1 and respondent No.1 encashed the bank guarantees of total sum of Rs. 4,28,00,000/- on 07.06.2013.
The petitioner filed O.M.P. No. 672 of 2013 under Section 9 of the Act seeking stay of the operation of termination letter dated 01.07.2013 by which the contract was terminated by respondent No.1. The petitioner also moved a petition under Section 11 of the Act being Arbitration Petition No. 284 of 2013, whereby a sole Arbitrator was appointed to resolve that dispute vide order dated 30.08.2013. Subsequent thereon, the parties entered into a negotiation. The petitioner sought an adjournment on 11.09.2013 from Arbitrator and subsequently, the petitioner and respondent No.1 entered into a settlement and pursuant to that settlement, a Memorandum of Understanding (MOU) dated 18.09.2013 was drawn. Pursuant to the terms of this MOU, respondent No.1 refunded the sum of Rs. 4,28,00,000/- which the respondent was having pursuant to the encashment of three bank guarantees of the petitioner and in turn the petitioner furnished fresh bank guarantees for Rs. 3,39,56,750/-. Respondent No.1 also agreed to compensate the petitioner by way of escalation charges which was quantified at Rs. 1,25,00,000/- and agreed to pay in four equal instalments in the following manner:-
S. No. Date Amount
1. 18.12.2013 Rs. 31,25,000/-
2. 18.03.2014 Rs. 31,25,000/-
3. 18.06.2014 Rs. 31,25,000/-
4. 18.09.2014 Rs. 31,25,000/-
Total Rs. 1,25,00,000/-
3. The petitioner resumed the work in view of this MOU. Under the terms of the MOU, bills for future work were to be paid within 45 days. The petitioner raised the following bills, details of which are shown as under:-
RA Bill No. Bill Date Due Amount
11th RA Bill 28.11.2013 Rs. 3,480,389.00
12th RA Bill 26.12.2013 Rs. 5,087,207.00
13th RA Bill 25.01.2014 Rs. 2,072,761.00
14th RA Bill 24.02.2014 Rs. 854,463.00
15th RA Bill 25.03.2014 Rs. 2,781,502.92
16th RA Bill 14.04.2014 Rs. 3,110,789.00
17th RA Bill 28.05.2014 Rs. 1,041,173.00
18th RA Bill 26.06.2014 Rs. 1,249,202.00
Total Rs. 1,96,77,486.92
4. The respondent No.1 against those bills paid a sum of Rs. 1,24,84,211/-. The petitioner has submitted that respondent No.1 is in financial difficulties and has been unable to pay its debts and has also not made the payment of RA bills to the petitioner and in terms of the MOU has not paid single instalment of escalation amount of Rs. 1.25 crores and is presently in
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
