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IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
M/s Garg Builders Through Shri Mohinder Pal Garg - Appellant
Versus
Hindustan Prefab Ltd. & Anr. - Respondents
Original Miscellaneous Petition (I) (COMM.) No. 200, 201, 202 of 2021, I.As. No. 7653-7655, 7656-7658, 7659-7661 of 2021
Decided On : 02-05-2022
The Court held that the invocation of the bank guarantees by HPL was in accordance with the terms of the bank guarantees and that there was no case for interdicting invocation of the bank guarantees. The Court also held that the petitioner had not made out a case of egregious fraud, irretrievable injustice, or special equities that would justify interdicting invocation of the bank guarantees.
Fact of the Case:
The petitioner, Garg Builders, had entered into three contracts with HPL for the construction of various projects. As required by the agreements, the petitioner provided HPL with nine bank guarantees totaling Rs. 10,74,98,388/-. Disputes arose between the parties, and the petitioner invoked the arbitration clause in the agreements. While the arbitration proceedings were ongoing, HPL wrote to the bank on 14th June, 2021, seeking to invoke the bank guarantees. The petitioner approached the Court seeking a stay of the invocation of the bank guarantees. The Court had earlier stayed the operation of the letter of invocation dated 14th June, 2021, subject to the petitioner renewing the bank guarantees. On 1st July, 2021, HPL wrote to the bank again, seeking to invoke the bank guarantees. The petitioner filed the present petitions challenging the invocation of the bank guarantees.
Finding of the Court:
The Court held that the invocation of the bank guarantees by HPL was in accordance with the terms of the bank guarantees and that there was no case for interdicting invocation of the bank guarantees. The Court also held that the petitioner had not made out a case of egregious fraud, irretrievable injustice, or special equities that would justify interdicting invocation of the bank guarantees.
Issues: Whether the invocation of the bank guarantees by HPL was in accordance with the terms of the bank guarantees. Whether the petitioner had made out a case of egregious fraud, irretrievable injustice, or special equities that would justify interdicting invocation of the bank guarantees.
Ratio Decidendi: The Court held that the invocation of the bank guarantees by HPL was in accordance with the terms of the bank guarantees and that there was no case for interdicting invocation of the bank guarantees. The Court also held that the petitioner had not made out a case of egregious fraud, irretrievable injustice, or special equities that would justify interdicting invocation of the bank guarantees. The Court noted that the bank guarantees were unconditional and irrevocable and that the only condition for invocation was that HPL had to state that the amount claimed was required to meet the recoveries due or likely to be due from the petitioner. The Court held that HPL had complied with this condition and that the bank was therefore bound to honor the bank guarantees. The Court also held that the petitioner had not made out a case of egregious fraud, irretrievable injustice, or special equities that would justify interdicting invocation of the bank guarantees. The Court noted that the petitioner had not alleged that the bank guarantees were procured by fraud and that the petitioner had not shown that it would suffer irretrievable injustice if the bank guarantees were invoked. The Court also held that the petitioner had not shown that there were any special equities in its favor that would justify interdicting invocation of the bank guarantees.
Final Decision: The Court dismissed all three OMPs.
JUDGMENT
C. Hari Shankar, J. - Hindustan Prefab Limited (HPL) invited tenders from interested bidders for construction activities to be carried out at various locations in the country. With respect to three of the tenders thus floated, the petitioner Garg Builders was the successful bidder.
2. Tenders were awarded to the petitioner, by HPL, for carrying out of construction activities at Ghaziabad, Uttar Pradesh, Raipur, Chhattisgarh and asansol, West Bengal vide Letters of award dated 3rd March, 2016, 9th January, 2017 and 4th august, 2018, followed by agreements dated 21st March, 2016, 25th January, 2017 and 25th September, 2018 respectively.
3. Each of these agreements required the petitioner to provide Bank Guarantees towards security deposit as well as Performance Bank Guarantee (PBGs). Bank Guarantees, as so required, were undisputedly furnished by the petitioner to HPL. all the Bank Guarantees were issued by HDFC Bank Ltd. ('the Bank') which is, accordingly, Respondent 2 in these three petitions.
4. Disputes arose between the petitioner and HPL in respect of all these three contracts. The contracts provided for reference of the disputes to arbitration. accordingly, after following the pre-arbitral regimen stipulated in that regard in the individual agreements, the petitioner moved this Court by way of arb. P 518 of 2021, arb. P 473 of 2021 and arb. P P47 of 2020, respectively.
5. Prior to filing arb. P 518 of 2021, arb. P 473 of 2021 and arb. P 47 of 2020, however, the petitioner moved the captioned three OMPs, under Section 9 of the arbitration and Conciliation act, 1996 ('the 1996 act'), seeking pre-arbitral interim reliefs.
6. The relief sought in these three cases is identical. In each of these cases, the petitioner has averred that HPL had written to the Bank on 1st July, 2021, invoking the Bank Guarantees furnished by the petitioner, and calling upon the Bank to credit the amount secured by the Bank Guarantees into HPL's account. The petitioner has sought a restraint against such invocation, pending resolution of the disputes between the petitioner and HPL by arbitration.
7. The petitioner was represented, initially, by Mr. Jayant Mehta, learned Senior Counsel, and later, by Mr. Raj Shekhar Rao, learned Senior Counsel, in these matters, whereas Mr. ankit Jain appeared on behalf of the contesting respondent HPL. They were heard at length. The Bank was represented by Mr. amol Sharma, who did not choose to advance any argument, as the Bank has no stake in the matter.
8. I proceed to dispose of the captioned OMPs by the present judgment. The relevant facts, and prevailing considerations, being the same in all the three OMPs, they are dealt with together.
Facts
9. The details of the contracts in these three OMPs may be tabulated as under:
| OMP No. | Date of Contract | Location of work |
| 200 of 2021 | 25th January, 2017 | Raipur |
| 201 of 2021 | 25th September, 2018 | asansol |
| 202 of 2021 | 21st March, 2016 | Ghaziabad |
Other specifics of the contracts are of no particular relevance to the determination of the issue in controversy; ergo, reference thereto is eschewed.
10. Nine Bank Guarantees, provided by the petitioner as required by the aforenoted three contracts, form subject matter of these three petitions. The petitioner also provided four Bank Guarantees towards security deposit, the details of which may be tabulated thus:
| BG No. | Dated | amount (Rs. ) | Purpose |
| OMP (I) (Comm) 200/2021 | |||
| 003GT02163520012 | 17.12.2016 | 3243000/- | Security Deposit |
| 003GT02192540009 | 11.09.2019 | 2974000/- | Security Deposit |
| 003GT02182790007 | 06.10.2018 | 7500000/- | Security Deposit |
| 003GT02173030030 | 30.10.2017 | 3243000/- | Security Deposit |
| OMP (I) (Comm) 201/2021 | |||
| 003GT02182190021 | 07.08.2018 | 28773504/- | Performance |
| OMP (I) (Comm) 202/2021 | |||
| 003GT02160760022 | 16.03.2016 | 15172278/ | |
The Court held that the invocation of the bank guarantees by HPL was in accordance with the terms of the bank guarantees and that there was no case for interdicting invocation of the bank guarantees.....
The invocation of an unconditional bank guarantee can only be interdicted in exceptional circumstances, such as egregious fraud, irretrievable injustice, or special equities.
The court emphasized the independence and unconditional nature of bank guarantees, while recognizing exceptions such as fraud, irretrievable injustice, or special equities.
Unconditional bank guarantees may only be reviewed for egregious fraud or irretrievable injustice; disputes over contract performance must be resolved through arbitration.
Bank guarantees are independent and unconditional contracts, and courts should refrain from interfering with their invocation unless exceptional circumstances such as fraud or irretrievable injury ar....
A confirmed Bank Guarantee/irrevocable Letter of Credit cannot be interfered with unless there is established fraud or irretrievable injustice involved in case.
The court clarified that injunction against unconditional bank guarantees requires proof of egregious fraud, irretrievable injustice, or special equities, none of which were sufficiently substantiate....
Bank guarantees can be invoked regardless of disputes, unless fraud or irretrievable harm is clearly established.
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