United Engineers (Malayasia) Essar Projects Ltd v. National Highways Authority of India

T.S. THAKUR, J.

VEENA BIRBAL, J. FEBRUARY 08, 2008 pk

* THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision : 8 TH FEBRUARY , 2008 + FAO(OS) 392/2007 UNITED ENGINEERS (MALAYSIA) ESSAR PROJECTS LTD. ..... Appellant Through : Mr. Ashok H. Desai, Sr. Adv. with Mr. Rishi Aggarwal, Mr. Mahesh Aggarwal, Mr. B.S. Shukla, Mr. S. Mittal, Mr. Akshay, Advocates versus NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Respondent Through : Mr. Sandeep Sethi, Sr. Adv. with Mr. Ravi Singhania, Mr. Vikas Goel, Mr. R.N. Sharma, Mr.Santosh Pandey, Advocates + FAO(OS) 393/2007 UNITED ENGINEERS (MALAYASIA) ESSAR PROJECTS LTD. ..... Appellant Through : Mr. Ashok H. Desai, Sr. Adv. with Mr. Rishi Aggarwal, Mr. Mahesh Aggarwal, Mr. B.S. Shukla, Mr. S. Mittal, Advocates versus NATIONAL HIGHWAYS AUTHORITY OF INDIA ..... Respondent Through : Mr. A.S. Chandhiok, Sr. Adv. with Mr. Ravi Singhania, Mr. Vikas Goel, Mr. R.N. Sharma, Mr.Santosh Pandey, Mr. Mahesh Chibber, Advocates CORAM: HON'BLE MR. JUSTICE T.S. THAKUR HON'BLE MS. JUSTICE VEENA BIRBAL 1. Whether reporters of local papers may be allowed to see the judgment? YES 2. To be referred to the Reporter or not? YES 3. Whether the judgment should be reported in the Digest? YES Per Thakur, J : Encashment of bank guarantees run into rough waters when amounts payable under the same are sizeable and the contractual relationship between the parties embittered by disputes. More often than not the party who has provided the bank guarantees takes a chance to stall the encashment by seeking judicial intervention undeterred by the fact that such intervention is limited to certain exceptional situations not always easy to establish. The present appeals arise out of a similar failed attempt on the part of the contractor appellant to prevent encashment of the bank guarantees furnished by it. A Single Judge of this Court has by a well reasoned order repelled the contentions of the appellant that the encashment of the guarantees was likely to cause irretrievable damage to the appellant or that the appellant had made out a case on the ground of special equities in its favour to protect it against encashment. The appellant assails that order to canvass over again the very same contentions in a bid to persuade us to take a different view. 2. The appellant Joint Venture entered into a contract for the construction of two sections of National Highway No. 4 (NH-4) forming part of the Western Transport Corridor of the prestigious National Highway (Golden Quadrilateral) in the State of Karnataka. In Package 4 forming subject matter of the said Contract, the Joint Venture had to construct the Highway admeasuring 77 Kms. (4 lane) of the main carriage way in addition to service/side road with road fixtures, jewelery items etc. The total contract price for this package was over Two Hundred and Sixty Four Crores (Rs.2,64,87,23,756/- to be precise). Package 5 also forming subject matter of the same contract involved construction of the Highway over a length of 56 Kms. (4 lane) of the main carriage way with service/side road, jewelery items and road fixtures at a total contract price of Rs.200,91,94,490/-. 3. It is common ground that the appellant joint venture furnished to the respondent Highway Authority bank guarantees for a sum of Rs.79,46,45,899.56 in connection with the Package 4 and Rs.59,87,39,959/- in connection with Package 5. These bank guarantees comprised performance bank guarantees, retention money bank guarantees, machinery advance bank guarantees and mobilisation advance bank guarantees. The details of the bank guarantees when presented in a tabular form would be as under : PACKAGE 4 S.No. Category Essar UEM Total Performance BG Rs. 12,97,81,465/- Rs. 13,50,84,911/- Rs. 26,48,72,376/- Retention Money BG Rs. 13,24,36,188/- NIL Rs. 13,24,36,188/- Machinery Advance BG Rs. 13,24,64,960/- NIL Rs. 13,24,64,960/- Mobilisation Advance Rs. 12,97,87,464/- Rs. 13,50,84,911.56 Rs. 26,48,72,375.56 Rs. 52,44,76,077/- Rs. 27,01,69,822/- Rs. 79,46,45,899.56 PACKAGE 5 S.No. Category Essar U