Point of Law: Bank - Bank guarantee cannot invoke - Bank guarantees cannot be interdicted on account of disputes between parties and any allegation that respondent has been reluctant to join proceedings for an amicable resolution of disputes in terms of Contract is not per se a ground for interdicting an unconditional bank guarantee

JUDGMENT :

VIBHU BAKHRU, J.

IA Nos. 6495/2021, IA 6496/2021

1. Allowed, subject to all just exceptions.

O.M.P.(I) (COMM.) 158/2021

2. The petitioner has filed the present petition under Section 9(1) of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’), inter alia, praying as under:-

“i) Direct the Respondent not to invoke and/or encash the Performance Bank Guarantees No. 003GT02180720033 of Rs. 1,18,75,000/- dated 13.03.2018. till further orders;

ii) Direct the Respondent not to encash the HDFC bank cheque bearing No. 000209 amounting to Rs. 1,18,75,000/- till further orders;

iii) Restrain the Respondent from taking any coercive steps against the Petitioner in relation to the Contract dated 27.12.2017.”

3. Mr Nath, learned counsel appearing for the petitioner has, essentially, stressed on two reliefs. First, that this Court should restrain the invocation of the bank guarantee in question (Performance Bank Guarantee No. 003GT02180720033 of Rs.1,18,75,000 - hereinafter ‘the Bank Guarantee’); and second, that the respondent be directed not to encash the cheque furnished by the petitioner (Cheque bearing No. 000209 amounting to Rs.1,18,75,000/-) till further orders.

4. On 27.12.2017, the parties had entered into an Agreement (Contract No: DPSI-HO-Jawa-15 - hereafter ‘the Agreement’) whereby the respondent sub-contracted CHS Civil Works of Jawaharpur Super Thermal Power Station (2 x 660 MW Project) to the petitioner. In terms of Clause 9.1 of the Agreement, the petitioner furnished the Bank Guarantee as a Performance Guarantee. The petitioner claims that it also issued a cheque for an equivalent value.

5. Clause 9.1 of the Agreement is relevant and set out below:-

“9.1 Performance Bond

a) The Subcontractor shall submit to the Contractor as a guarantee of the faithful performance of the obligations under this Subcontract and a guarantee of the quality of Works and materials provided by the Subcontractor, an unconditional Performance Bond acceptance to the Contractor In the following manner

Performance Bank Guarantee equivalent to Two point Five percent (2.5%) of Contract Value.

In leu of Performance Bank Guarantee equivalent to Two point Five percent (2.5%) of Contract Value, Signed Cheque without date equivalent to Two point Five percent (2.5%) of Contract Value and Five Percent payment hold from progressive payment.

Contractor shall return the cheque and hold amount once Subcontractor submits Performance Bank Guarantee equivalent to Two point Five percent (2.5%) of Contract Value.

The Performance Bond shall expire after expiry date of Warranty Period as defined in Clause 12 [WARRANTY] in this Sub-contract. Such guarantee shall be binding notwithstanding any variations, alterations or extensions of time that may be given or be agreed upon. No interest shall be paid for this bond.

b) The Performance Bond shall be provided by a first class bank of the Country at Contractor’s discretion in the form attached hereto acceptable to the Contractor.”

6. The petitioner claims that the scope of the work was considerably enhanced and the petitioner requested the respondents to correspondingly enhance the value of the Agreement. It is stated that on 08.01.2019, a meeting was held between the parties to sort out the issue of additional financial implication and thereafter, on 21.08.2019, to commensurate with the enhanced scope of work, the value of the Agreement was revised to Rs.66.26 crores.

7. The petitioner claims that there was significant delay in making the payments under the Agreement and the petitioner continued to pursue the respondent for making the payment for extra work executed by it. The petitioner has also annexed several letters along with the petition to the aforesaid effect.

8. By a letter dated 02.04.2021, the respondent reminded the petitioner that the completion date of the Agreement is 30.06.2021 and substantial works are to be completed within the said period. It also cautioned the petitioner that in the event the contr