Full Text
HIGH COURT OF DELHI
Date of Decision: 29.05.2025
M/S SCHINDLER INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Saurabh Kripal, Sr. Adv.
ANR. .....Respondents
Through: Mr. Rajshekhar Rao, Sr. Adv.
JUDGMENT
1. This is a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, seeking ad interim injunction restraining the respondent No. 1 from invoking two bank guarantees, i.e. the Advance Bank Guarantee (“ABG”) and the Performance Bank Guarantee (“PBG”), totaling to Rs.1,14,40,676/-, issued in favour of the respondent.
2. Vide the Order dated 07.05.2025 passed by this Court, in paragraph Nos. 13, 14, 15 and 16, while staying the bank guarantees, it was held as under: “13. As per the averments of the petitioner, the respondent no.1 has not completed the office building or made it ready for the installation of lifts and escalators.
14. Further, the advance bank guarantee was furnished with respect to the lifts and escalators to be supplied by the petitioner. The advance amount has been utilized and the petitioner has already supplied 03 lifts and 01 escalator. As regards, the PBG is concerned, the respondent no. 1 has attributed the delay of the completion of Work Order on the petitioner, however, prima facie, I am of the view that a ready site was essential for the completion of the work order and in the absence of a complete site, the supply and installation of the remaining lifts and escalators could not have been done.
15. The fact whether the petitioner was in violation of its obligations under the Work Order dated 25.07.2023, will be adjudicated once the respondent no. 1 files its reply.
16. I am satisfied that the petitioner has a prima facie case and the balance of convenience lies in favor of the petitioner. The invocation of bank guarantee(s), would be causing irreparable loss and injury to the petitioner.”
3. Thereafter, a reply has been filed by the respondents and the matter has been taken up for hearing.
4. Mr. Kripal, learned senior counsel for the petitioner, has drawn my attention to the terms of the ABG and the PBG, which read as under:
5. As regards ABG is concerned, it is submitted that the ABG was issued for supply of 20 lifts and 4 escalators. Even though the petitioner has supplied 3 lifts and 1 escalator only, the balance lifts and escalators could not be supplied as the infrastructure of the respondent, i.e. where the lifts were to be installed, was not ready. Hence, no fault lies on behalf of the petitioner.
6. As regards the PBG is concerned, it is submitted that the terms of the PBG show that it was a conditional bank guarantee and could only be invoked on the failure of the petitioner not performing its obligations. However, in the present case, the invocation of the PBG is not in accordance with the terms of the PBG. It is further submitted that the petitioner has always been ready and willing to perform its obligations.
7. I have heard learned counsels for the parties and perused the material available on record.
8. The invocation notice of the ABG reads as under:
9. The law on bank guarantees is well settled. The Hon’ble Supreme Court in Ansal Engineering Projects Ltd. v. Tehri Hydro Development Corporation Ltd. & Anr., (1996) 5 SCC 450, held as under:
10. On perusal, it is clear that once the bank guarantee is unconditional and irrevocable, the only requirement is of the beneficiaries of bank guarantee to make a demand.
11. Reliance is placed by the petitioner on the decision of the Hon’ble Supreme Court in Hindustan Construction Co. Ltd. v. State of Bihar & Ors., (1999) 8 SCC 436. The relevant paragraph reads as under:
it unnecessarily interfered with the order of injunction, granted by the Single Judge, by which the defendants were restrained from invoking the Bank Guarantee.”
12. On perusal, I am of the view that the decision in Hindustan Construction Co. Ltd. (supra) is of no assistance to the petitioner as the bank guarantee itself was conditional to the terms of the Contract in the said case.
13. The disputes - whether the infrastructure of the respondent was ready or not and whether the non-supply of the balance lifts and escalators by the petitioner was due to the fault of the respondent or not - are issues which the Arbitral Tribunal will decide as and when appointed.
14. As of today, the ABG is unconditional and the invocation is in terms of the ABG and hence, the same must be encashed.
15. The next question that arises is with regard to the PBG.
16. It is stated that the PBG could only be invoked if there was a failure on part of the petitioner to perform its obligations.
17. The invocation notice of the PBG reads as under:
18. A perusal of the invocation of the PBG shows that the respondent has categorically stated that there has been a loss/ damage caused on behalf of the petitioner due to non performance of its contractual obligations.
19. In issues relating to bank guarantees, it is not for the Courts to see whether there was a failure of the petitioner in performance of its obligations or not. The failure has to meet the opinion of the respondent alone. Mere averment in the invocation that the petitioner has caused loss/damage due to breach is good enough. The determination of the reasons of the respondent come to the opinion that the petitioner has committed breach of its obligations, is an issue which the arbitrator shall decide as and when appointed.
20. For the said reasons, there is no merit in the petition and the same is dismissed and the interim order stands vacated.
21. The petition is disposed of.