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IN THE HIGH COURT OF DELHI
VIBHU BAKHRU, J.
Dadheech Infrastructures Private Limited - Appellant
Versus
DTE GEN MD ACCN Project & Another - Respondent
O.M.P.(I) (COMM.). No. 3 of 2021 & I.A. No. 195, 196 of 2021
Decided On : 07-01-2021
Bank Guarantees - Arbitration and Conciliation - Section 9 of the Arbitration and Conciliation Act, 1996 - [Section 9] - [Summary of Acts and Sections: The court discussed the provisions of the Arbitration and Conciliation Act, 1996, particularly Section 9, and highlighted the unconditional nature of bank guarantees and the principles established by various Supreme Court judgments regarding the enforcement of bank guarantees despite disputes between the parties.]
Fact of the Case:
The petitioner sought to restrain the respondent from invoking and encashing Performance and Retention Bank Guarantees and from giving effect to the termination of a construction Contract. The petitioner claimed delay in completion of the Contract was due to the respondent's obligations and sought extension of time.
Finding of the Court:
The court found that the invocation of the Bank Guarantees was in accordance with their terms and that the termination of the Contract was permissible. The court dismissed the petitioner's prayer to restrain the invocation of the Bank Guarantees and to stay the termination of the Contract.
Issues: Delay in completion of the Contract, invocation of Bank Guarantees, and termination of the Contract.
Ratio Decidendi: The court held that the unconditional nature of the Bank Guarantees required them to be honored despite disputes between the parties. It also found that specific enforcement of the Contract was impermissible under the Specific Relief Act, 1963.
Final Decision: The petition was dismissed, and the pending applications were disposed of.
JUDGMENT :
[Hearing Held Through Video Conferencing]
1. The petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’), inter alia, praying that the respondent may be restrained from invoking and encashing the Performance Bank Guarantees – Bank Guarantee No.0770171GPER0040 for an amount of Rs.11,00,00,000/- and Bank Guarantee No. 0770171GPER0042 for an amount of Rs.2,91,00,000/- (hereafter referred to as the ‘Performance Bank Guarantees’) . The petitioner further prays that the respondent may be injuncted from encashing the Retention Guarantees being the Bank Guarantees furnished by the petitioner against disbursal of Retention Money, being Bank Guarantee No. 0770171GPER0037 for a sum of Rs.20,76,000/-; Bank Guarantee No. 0770171GPER0039 for a sum of Rs.2,07,50,000/-; and Bank Guarantee No. 0770171GPER0041 for a sum of Rs.1,80,00,000/- (hereafter referred to as ‘Retention Bank Guarantees’). In addition, the petitioner also prays that respondent no.1 be restrained from giving effect to letter bearing no. 84828/MAP/PHASE-II/PKG- 25/R&C/1656/E8 dated 04.01.2021 unlawfully cancelling the Contract Agreement No.DG MAP/PHASEII/ PKG-25 (R&C) 01 of 2013-14 (hereafter ‘the Contract’).
2. The petitioner was awarded the Contract for construction of dwelling units including allied services at Ahmedabad, Gandhinagar and Chiloda (“DGMAP/PHASE-II/PKG-25(R&C)/01 OF 2013-2014: COMPLETION OFBALANCE WORKS OF CONSTRUCTION OF DWELLING UNITS INCLUDING ALLIED SERVICES FOR OFFICERS & JCOS/OR AT AHMEDABAD, GANDHINAGAR ANP CHILODA” as detailed in Tender Enquiry vide letter no. 84828/MAP/PH-11/PKG-25/R&C/27/EB DT 12.07.2012 as amended by letters dated 02.08.2013, 12.08.2013, 19.08.2013 and 22.08.2013)
3. The petitioner had tendered for the aforesaid works pursuant to notices inviting tenders issued by respondent no.1. The petitioner’s tender was accepted and by a letter dated 11.10.2013, respondent no.1 informed the petitioner that it had accepted the petitioner’s offer for completing the works for a sum of Rs.2,78,16,52,390.08/-. The said parties also signed a formal Contract.
4. In terms of the said Contract, the petitioner furnished the two Performance Bank Guarantees, as mentioned above. Certain interim payments were made to the petitioner after retaining a specified proportion in terms of the Contract. The said retention money was also disbursed against Retention Bank Guarantees.
5. The works were to be executed within a period of twenty-four months. Admittedly, the execution of the works has been delayed and according to the petitioner, about 62% of the works are complete. The petitioner claims that the delay in completion of the Contract is not on account of any reason attributable to the petitioner but mainly on account of delay on the part of respondent no.1 in performing its obligations. The petitioner states that there was a considerable delay in handing over of the Site and the period of twenty-four months would not commence only when the complete Site was handed over to the petitioner. In addition, respondent no. 1 had also delayed handing over drawings. The petitioner states that it had sent letters setting out the reasons for the delay and seeking extension of time for completion of the Contract. However, instead of addressing the issues and extending the term of the Contract, respondent no.1 had blamed the petitioner for not maintaining adequate progress.
6. It is apparent that disputes arisen between the parties in relation to the execution of the said Contract. According to respondent no.1, the petitioner has failed to perform the Contract, therefore, it has terminated the same by its letter dated 04.01.2021.
7. By a letter dated 04.01.2021 addressed to the Andhra Bank (now the Union Bank of India), respondent no.1 has invoked the Bank Guarantees in question: the Performance Bank Guarantees as well as the Retention Bank Guarantees.
8. Mr Sheshagiri, learned counsel appearing for
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