Back
IN THE HIGH COURT OF DELHI AT NEW DELHI
Prathiba M. Singh, J.
Chandralekha Constructions Private Limited – Appellant
Versus
Nbcc (India) Limited – Respondent
W.P.(C) 4644 of 2023 and CM Appls. 17915 of 2023, 17916 of 2023
Decided On : 15-04-2023
Bank Guarantees - Construction Contract - GCC(Section-3) - Clause 2.0 - 2.2 - Performance Guarantee - Invocation of Bank Guarantees - COVID-19 Pandemic - Extension of Time - Irrevocable and Unconditional Bank Guarantees - Forfeiture of Performance Guarantee - Notice Requirement
Fact of the Case:
The Petitioner challenges the invocation of two bank guarantees by the Respondent, NBCC, in a construction contract for a residential complex for the NIA in Delhi. The Petitioner failed to complete the work within the stipulated time, citing COVID-19 pandemic as the reason for delay. The NBCC granted provisional extension of time but later invoked the bank guarantees without notice.
Finding of the Court:
The Court found that the extensions granted to the Petitioner have been agreed to by the NBCC, and they have been granted without prejudice to the rights and contentions of the NBCC to take action if the agreed deadlines are still not met. The Court held that the invocation of the bank guarantees was in accordance with the contract and refused to interfere in the matter.
Issues: Delay in completion of work, invocation of bank guarantees without notice, impact of COVID-19 pandemic on project timelines, compliance with contract terms and conditions.
Ratio Decidendi: The Court emphasized that the COVID-19 pandemic cannot be used as a blanket reason to delay projects, especially infrastructure projects, and that the extensions granted did not preclude the NBCC's right to encash the bank guarantee. The Court also relied on the principle that unconditional bank guarantees should be honored as per their terms, except in cases of fraud or irretrievable harm or injustice.
Final Decision: The petition was dismissed, and the Court refused to interfere in the invocation of the bank guarantees, leaving the rights and remedies of all parties open.
JUDGMENT
Prathiba M. Singh, J. (Oral)--This hearing has been done through hybrid mode.
2. The present writ petition has been filed by the Petitioner-Chandralekha Constructions Pvt. Ltd. challenging the invocation of two bank guarantees. The total sum of the bank guarantees sought to be invoked by the Respondent-National Buildings Construction Corporation Ltd. (hereinafter `NBCC') is Rs.1,55,25,000/-. The details of the BGs are as follows:
| Bank Guarantee | Amount |
| BG 03871PBG1902003 | Rs.77,62,500/- |
| BG 03871PBG1902004 | Rs.77,62,500/- |
| Total amount | Rs.1,55,25,000 |
3. A tender dated 15th November 2018 was floated by the NBCC for construction of a residential complex for the National Investigation Agency (`NIA') in Delhi. The Petitioner was declared the successful tenderer vide letter 22nd January 2019 and was awarded the contract by the NBCC. The total value of the contract is Rs.62,10,00,000/- (Rupee Sixty Two Crores Ten Lakhs Only). In terms of the letter of award dated 22nd January, 2019, the completion of the work contract was scheduled to be within 18 months. The said letter of award is as follows:
"Performance Guarantee: Pursuant to GCC(Section-3) clause No. 2.0 of the contract, you are required to furnish irrevocable Performance Guarantee for an amount equal to 5% (Five Percent Only) of contract value within 30 days from the issue of this letter of award.
Time Schedule: The Time of 18 (Eighteen) Months allowed for execution of the work shall be reckoned from the 10th day after the date of issue of letter of award. You are also required to submit Completion Schedule of the Project within 10 (Ten) days from the date of issue of LOA. This will be duly got approved from NBCC. This approved completion schedule shall form a part of the agreement."
4. The Petitioner could not complete the work within the stipulated time of 18 months. The claim of the Petitioner is that the work was delayed due to COVID-19 pandemic. In the meantime, the NBCC has been repeatedly emphasizing on the early completion of the work. However, vide letter dated 28th February, 2023, provisional extension of time was granted by the NBCC to the Petitioner in respect of the work up to 31st May, 2023. The said letter is relevant for the present purposes and is extracted below:
"Sub: Provisional extension of time
Reference your letter no. NIA/NBCC/CCPL/004/2022-23 dated 27.02.2023, in connection with the grant of extension of time for completion of the work i.e. Construction of NIA Head Quarter Residential Complex at village Rajpurkhurd, New Delhi.
The date of completion for the above mentioned work, is 31.07.2020 as stipulated in the agreement, dated 21.02.2019.
Extension of time for completion of the above mentioned work is granted upto 31.05.2023 provisionally, without prejudice to the right of the NBCC to recover compensation for delay in accordance with the provision made in the Clause of the said agreement dated 21.02.2019. It is also clearly understood that the NBCC shall not consider any revision in contract price or any other compensation whatsoever due to grant of this extension.
Provided that notwithstanding the extension hereby granted, time is and shall still continue to be the essence of the said agreement."
5. According to the Petitioner, post the issuance of a letter dated 28th February, 2023, meetings were also held between the parties and thereafter, the Petitioner vide letter dated 25th March, 2023accepted the completion of the entire work by 31st May, 2023. There was a performance plan which was also attached with the said letter dated 25th March 2023 and specific dates were given in the said plan as to when each of the sub-items of the work contract was to be executed as well. The ld. Counsel for the Petitioner, Mr. Rachit Batra submits that ninety percent of the total work which was to be carried out by the Petitioner, is complete, and more than Rs.2 crore worth the raw material is lying at the work site.
6. Ld. Counsel for the Petitioner also relies upon C
Unconditional bank guarantees should be honored as per their terms, and extensions granted without prejudice do not preclude the beneficiary's right to invoke the bank guarantee if agreed deadlines a....
Bank guarantees cannot be interdicted on account of contractual disputes between the parties, and exceptions for interdicting bank guarantees include cases of egregious fraud and irretrievable injust....
The main legal point established in the judgment is that the invocation of an unconditional bank guarantee must meet the stipulated requirements, and the court may grant a restraint order if the invo....
The court reinforced that unconditional bank guarantees cannot be restrained unless egregious fraud or irretrievable injustice is established, which was not proven by the petitioner.
Bank guarantees cannot be interdicted due to contractual disputes unless fraud or irretrievable injustice is established.
The invocation of a bank guarantee must strictly adhere to its stipulated terms, particularly the requirement to assert loss or damage; otherwise, it may be restrained.
The court established that while bank guarantees cannot be prohibited from invocation, prior notice must be given to the petitioner due to ongoing project works, considering disputes related to timel....
Writ jurisdiction cannot be used solely for granting interim relief. Disputed factual matters are not within the purview of writ jurisdiction.
Termination of contracts must adhere to established contractual obligations and procedural requirements; failure to comply with these undermines claims of unreasonableness or arbitrariness in actions....
A confirmed Bank Guarantee/irrevocable Letter of Credit cannot be interfered with unless there is established fraud or irretrievable injustice involved in case.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
