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2020 Supreme(Del) 1180
IN THE HIGH COURT OF DELHI AT NEW DELHI
Jayant Nath, J.
Bharat Heavy Electricals Limited - Appellant
Versus
Egyptian Electricity Transmission Company & Ors. - Respondent
Civil Suit (Comm) No. 675 of 2017
Decided On : 01-06-2020
Amit Sibal, Advocate, Prashant Mehta, Advocate, Vasundhara Bhardwaj, Advocate, Ravinder Sethi, Advocate, Ateev Mathur, Advocate, Ajay Monga, Advocate, Jagriti Ahuja, Advocate, Amol Sharma, Advocate, Adityabakshi, Advocate, Nareshthanai, Advocate, Khushboo Singh, Advocate
A suit for declaration that bank guarantees issued by defendant No. 2 in favor of defendant No. 1 stand discharged and that the bank guarantees cannot be invoked/encashed is maintainable if a part of the cause of action arose within the territory of the court.
Headnote:
BANK GUARANTEE - DISCHARGE - SUIT FOR DECLARATION - JURISDICTION - EGYPTIAN LAW - FORUM NON CONVENIENS - INJUNCTION - IRREPARABLE INJURY - FORCE MAJEURE - SECTION 20(C) CPC - SECTION 17 OF THE CONSUMER PROTECTION ACT, 1986 - ORDER 7 RULE 11 CPC - ORDER 39 RULES 1 & 2 CPC:
Fact of the Case:
Plaintiff, a public sector undertaking, filed a suit seeking a declaration that bank guarantees issued by defendant No. 2 in favor of defendant No. 1 stand discharged and that the bank guarantees cannot be invoked/encashed. A decree of permanent injunction was also sought to restrain defendant No. 1, etc. from invoking/encashing or receiving any moneys thereunder or getting an extension of the bank guarantees. Defendant No. 2 filed IA No. 14196/2017 under Order 7 Rule 11 CPC seeking rejection of the plaint on the grounds which are stated in the written statement. Defendant No. 3 filed IA No. 11601/2017 under Order 39 Rules 1 and 2 CPC.
Finding of the Court:
The court held that the suit was maintainable as a part of the cause of action arose within the territory of Delhi. The court also held that the bank guarantees were discharged as per the terms and conditions of the contract and that the invocation of the bank guarantees was not in terms of the bank guarantees. The court further held that Egypt is undergoing a war-like situation which constitutes a force majeure situation and that the encashment of bank guarantees has to be stayed. The court also held that the plaintiff has made out a prima facie case and that the balance of convenience is in favor of the plaintiff. The court accordingly confirmed the interim order passed by the court on 03.10.2017 subject to certain conditions.
Issues: 1. Whether the suit is maintainable? 2. Whether the bank guarantees were discharged as per the terms and conditions of the contract? 3. Whether the invocation of the bank guarantees was in terms of the bank guarantees? 4. Whether Egypt is undergoing a war-like situation which constitutes a force majeure situation? 5. Whether the plaintiff has made out a prima facie case? 6. Whether the balance of convenience is in favor of the plaintiff?
Ratio Decidendi: 1. The court held that the suit was maintainable as a part of the cause of action arose within the territory of Delhi. The court relied on the judgment of the Supreme Court in the case of A.B.C. Laminart Pvt. Ltd. vs. A.P. Agencies, Salem, (1989) 2 SCC 163 to plead that this court would have territorial jurisdiction to decide the suit in question. 2. The court held that the bank guarantees were discharged as per the terms and conditions of the contract. The court relied on Clause 12 of the contract agreement, which provided that the performance guarantee was to remain valid till the end of the warranty period. The court also held that the performance guarantees also provide that the same shall get discharged on issuance of the final certificate. 3. The court held that the invocation of the bank guarantees was not in terms of the bank guarantees. The court relied on the fact that the bank guarantees were issued for a specific purpose and that the defendant No. 1 had not complied with the terms of the bank guarantees. 4. The court held that Egypt is undergoing a war-like situation which constitutes a force majeure situation. The court relied on the communication issued by defendant No.1 dated 31.04.2015, which admitted that the political disturbance in Egypt began in 2011 while both the contracts should have been implemented much earlier. 5. The court held that the plaintiff has made out a prima facie case. The court relied on the fact that the transformers are functional since 2008 and that the bank guarantees are sought to be encashed now in 2017. The court also relied on the fact that the defendant No.1 has withheld large amount of dues of the plaintiff amounting to above of Rs.40 crores and the question of encashment of the advance bank guarantees would not arise. 6. The court held that the balance of convenience is in favor of the plaintiff. The court relied on the fact that the plaintiff is a Government of India enterprise and would be put extreme hardship if it were unable to recover its dues.
Final Decision: The court confirmed the interim order passed by the court on 03.10.2017 subject to certain conditions.
JUDGMENT
Jayant Nath, J. - Ia Nos. 14196/2017 and 11601/2017
1. This suit is filed by the plaintiff, which is a public sector undertaking seeking a decree of declaration that the bank guarantees issued by defendant No. 2 vide defendant No. 3 in favour of defendant No. 1 stand discharged and that the bank guarantees cannot be invoked/encashed. A decree of permanent injunction is also sought to restrain defendant No. 1, etc. from invoking/encashing or receiving any moneys there under or getting an extension of the bank guarantees. Other connected reliefs are also sought.
2. I may note that along with the suit, the plaintiff filed IA No. 11601/2017 under Order 39 Rules 1 and 2 CPC. This court on 03.10.2017 restrained the defendants and directed them to maintain status quo regarding the bank guarantees. Defendants No. 2 and 3 were also restrained from transmitting to defendant No. 1 the funds of the bank guarantees in question. Despite this interim order, defendant No. 3 has on 20.12.2017 released the amounts to defendant No. 1 claiming that they were advised that despite interim order of this court, defendant No. 3 was obliged to release the money to defendant No.1.
3. Defendant No. 2 has filed IA No. 14196/2017 under Order 7 Rule 11 CPC seeking rejection of the plaint on the grounds which are stated in the written statement.
4. The case of the plaintiff is that in 2004, defendant No. 1 invited two tenders for purchase of 23 and 125 MVA, 220/66/11 KV Power Transformers. Defendant No. 1 nominated the plaintiff for execution of the contract. The parties, namely, the plaintiff and defendant No. 1 entered into a contract on 12.09.2006. As per the terms and conditions of the contract, the plaintiff was required to submit an advance payment guarantee in the form of a bank guarantee. The plaintiff was also required to submit a performance guarantee for 10% of the total contract price which was to remain valid till the end of warranty period. The details of the bank guarantees given are spelt out in the plaint.
5. It is further the case of the plaintiff that the supply of transformers pertaining to both the contracts were completed by the plaintiff by May 2008.Subsequently, the transformers were commissioned successfully under the supervision of the engineers of the plaintiff. It is also stated that after commissioning and erection of the transformers, the same were working to the satisfaction of defendant No. 1 as is evident from various certificates issued by defendant No. 1. Defendant No. 1 is also said to have issued completion certificate in respect of the supervision of commissioning and erection of various transformers.
6. It is the case of the plaintiff that all work pertaining to the contract was completed way back in 2008 and only very minor work which does not affect the operation of the transformers or performance of the sub-stations was left. This related to supervision of erection of firefighting system. The firefighting equipments had been supplied in full as per the contract in 2008-2009. However, it is pleaded that defendant No. 1 did not provide shut down schedule for installation of firefighting system till 2012. It is further pleaded that defendant No. 1 did not provide the shutdown schedule as the sub-stations were in commercial operation and any shut down would lead to loss of revenue to defendant No. 1.
7. As the entire work was completed, the plaintiff requested defendant No. 1 to issue a taking over certificate and close the contract. However, the said defendant No. 1 wrongly withheld the issuance of the taking over certificate.
8. It is pleaded that the officials of the plaintiff visited various sites from 19.03.2012 to 20.05.2012. Firefighting equipments of 90% sites were completed. The balance could not be completed due to cancellation of shut down. The total value of all such firefighting systems including equipments does not exceed even 0.25% of the total contract value. Hence, the value of the pending work a
