Exceptional cases of egregious fraud, irretrievable injustice, and special equities are required to restrain the encashment of a bank guarantee, which must be performed on its own terms.

JUDGMENT :

1. The petitioner has filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereafter “the A&C Act”), inter alia, praying that direction be issued to respondent no.1 (hereafter “Indure”) to return the original Advance cum Performance Bank Guarantee No. 171020261470-AA, dated 04.02.2010 (hereafter “the PBG”) as extended from time to time. The petitioner also seeks an order restraining Indure from invoking and encashing the said bank guarantee. It is further prayed that respondent no.2 (Standard Chartered Bank – hereafter ‘the Bank’) be restrained from acting on any letter seeking extension or encashing the PBG.

2. The disputes between the parties arose in connection with a Work Order dated 20.11.2009, issued by Indure to complete the civil work at RRVUNL- Chhabra T.P.P - 2 x 250 MW-Unit# 4, CHP & BOP (hereafter “the Contract”) .

3. It is Indure’s case that the petitioner neglected to perform the Contract and failed to complete the work within the stipulated time. Indure further claims that it had from time to time highlighted the slow progress of work performance on part of the petitioner, however, the petitioner had completed only a small fraction of the Contract awarded to it. Indure claims that as a consequence of the petitioner’s deficiency in performing the contract, it had to incur extra cost to complete the work. Indure claims that the petitioner must bear the additional costs in terms of the Contract. Indure further claims that it is also entitled to recover damages on account of breach on the part of the petitioner in performing the Contract.

4. Mr Mehta, the learned counsel appearing for the respondents referred to a letter dated 20.12.2017, whereby Indure had made claims aggregating Rs. 35,63,92,989.44 and called upon the petitioner to pay the same within a period of seven days from the date of receipt of the said notice.

5. Mr. Dogra, learned counsel appearing for the petitioner, submits that the claims made by Indure are unsustainable apart from being barred by limitation. He submits that even without going into the merits of the claims made by Indure, it is apparent that the PBG has been invoked only on the basis that it was not being extended. And, the said premise is wholly erroneous.

6. Mr Dogra referred a letter dated 01.12.2020 addressed by Indure to the Bank stating that the said letter be treated as a notice for invocation of the PBG. However, the said letter also states that in the event, PBG is extended for six months and the Original Bank Guarantee Extension Advice is received by the Bank, the claim may be treated as withdrawn, otherwise its claim stands and the amount equivalent to Rs.4 crores be remitted in favour of Indure. He states that the petitioner complied with the said demand and by a letter dated 19.12.2020 – which was prior to the expiry of the term of the PBG confirmed the extension as demanded by Indure. He submits that since the petitioner had complied with the demand of extension made by the Indure, it is not open for the respondent to insist that PBG be encashed.

7. Mr Mehta countered the aforesaid submissions. He states that the letter dated 01.12.2020 was issued as a matter of usual procedure followed by Indure. He states that as a matter of practice, Indure issues such letters in respect of all bank guarantees, at the beginning of the month in which the bank guarantees are to expire. He states that since PBG was valid till 31.12.2020, Indure sent a letter dated 01.12.2020 seeking extension of the PBG. He submits that the said demand was not complied with and the Bank did not send the Original Bank Guarantee Extension Advice immediately, as requested by Indure. In the circumstances, Indure, after examining the matter, invoked the PBG by a letter dated 16.12.2020. He points out that the extension advice was furnished only after the PBG was invoked.

8. He further submitted that the invocation of the PBG was deferred as the parties were attempting to