Decided on January 09,2017

Shree Ahuja Properties And Realtors Private Ltd. Respondents


- (1.) By the above Arbitration Petition filed under Section 9 of the Arbitration and Conciliation Act, 1996 ('the Act'), the Petitioner -- Larsen and Toubro Limited ('L and T') has sought reliefs against Respondent No.1 -- Shree Ahuja Properties and Realtors Pvt. Ltd. ('Ahuja Properties') and the Respondent No. 2 -- Punjab National Bank ('PNB') in terms of prayer clauses (a) to (d) of the Petition, interalia for Ahuja Properties to furnish security towards the claim of L &T, appointment of Court Receiver for the unoccupied flats in the Residential Project at Prabhadevi, an order of injunction against Ahuja Properties, its servants, agents and officers from in any manner dealing with and/or creating third party rights in respect of the unoccupied flats in the Project. L and T is also seeking urgent reliefs in the nature of a temporary order and injunction to restrain Ahuja Properties from in any manner invoking or making any demand on, or receiving, or recovering any amount from PNB, under a document titled "Performance Guarantee" bearing No.2175ILGO16614 dated 16th July, 2014 ('PG') extended from time to time, the last being upto 31st December, 2016, and against PNB from making payment under the PG to Ahuja Properties and/or anyone else.
(2.) Since Ahuja Properties had issued an invocation letter dated 25-10-2016 to PNB, L and T on 26-10-2016 filed the present Petition and moved this Court for urgent ad- interim reliefs, when PNB was restrained from making any payment to Ahuja Properties under the PG upto 27-10-2016. On 27-10-2016, Ahuja Properties submitted in Court a copy of the invocation letter dated 25-10-2016, and it was contended on behalf of L & T that the same was not in accordance with the PG. Ahuja Properties therefore withdrew the said invocation letter with liberty to issue a fresh letter of invocation. In the evening of 27-10-2016 itself, Ahuja Properties by a fresh letter of invocation sought to invoke the PG. L & T therefore, on 28-10-2016, moved this Court in Chambers for urgent ad-interim reliefs. L and T was allowed to carry out amendments to the Petition, without prejudice to the rights and contentions of the parties. The matter was listed on 04-11-2016 for final hearing, and in the meantime the order restraining PNB from making any payment under the said PG was passed. The matter was finally heard on 04-11-2016, and the same was reserved for orders after the parties filed their written submissions.
(3.) The brief facts as set out by L and T in the above Petition are as under: 3.1 In or about November, 2009, Ahuja Properties floated a tender for construction of a world class residential complex at Prabhadevi, Mumbai ( 'the said Project'). L and T was one of the many entities which participated in the bidding for the said tender. 3.2 L and T was appointed as a Contractor by Ahuja Properties under Contract dated 02-03-2010 ( 'the Contract') [ at page 64 Exhibit C to the Petition]. M/s. DTZ International Property Advisers Pvt. Ltd. were appointed as the Project Manager. 3.3 Under the said Contract, the stipulated date of completion of works by L and T was 28-02-2012 ('original completion date'). 3.4 Under Clause 8.1 of the Contract, L and T was required to submit, interalia an unconditional and irrevocable, on demand: (A) Performance Bond ( 'Performance Guarantee') in the format attached to the conditions of the Contract as Annexure B, which Guarantee was to be issued by a reputed national or international bank in Mumbai, being 2.5% of the Contract sum and (B) the Performance Indemnity Bond, in the format attached to the conditions of the Contract as Annexure AA ( the 'Performance Indemnity Bond') for an amount of 2.5% of the Contract sum. 3.5 The works under the Contract were not completed on or before the original completion date i.e. 28-02-2012. 3.6 Extensive correspondence was exchanged between L and T and Ahuja Properties, with regard to the works not being completed on or before the original completion date. 3.7 After several meetings and discussions, the parties executed a Supplementary Agreement dated 01-08-2013 ('Amended Contract') [at page 341 - Exhibit J to the Petition], which provided for a revised completion date of 28-02-2014. 3.8 On 13-09-2013, Ahuja Properties appointed High Point Project Management Solutions Private Limited as the Project Manager. 3.9 On 01-10-2013, Revised Milestone Schedule was executed by Ahuja Properties with the Revised Contract Value of Rs.400 Crores which covered the scope of work to be carried out by L and T as per the Supplementary Agreement. 3.10 Pursuant to Clause 8.1 of the Contract, L and T through PNB got the Bank Guarantee issued in favour of Ahuja Properties being PG No. 2175ILGO16614 dated 16-07-2014, which is found at page 297 of the Petition, and which is in accordance with the format provided at page 210 of the Contract. 3.11 Post the execution of the Supplementary Agreement, due to external factors, and factors attributable to Ahuja Properties, there were several delays in execution of the work as contemplated under the Amended Contract, some of which delays are set out in clause (q) of paragraph 5 of the Petition. Ahuja Properties for reasons best known to them also unilaterally and surreptitiously removed certain activities from L and T's scope of work as set out in clause (5) of Paragraph 5 of the Petition. The bills raised by L and T since May 2015 are not certified by Ahuja Properties till date, though L and T is fully entitled to such certification and payment, which resulted in further delay in completing the Project. The prejudicial approach of the Project Manager resulted in further delay being caused, whilst mutually arriving at the value of the work which had been removed from the scope of the work of L and T. The Project Manager in or about September, 2015, unilaterally issued a list of certain activities and termed the same as "incomplete works". 3.12 That after much persuasion and follow up, at a meeting held on 06-03-2016, Ahuja Properties and L and T agreed to the final list of accounts. However, there were disputes between Ahuja Properties and L and T in the final accounts, more particularly with regard to MEP floors, Energy Meters, Motion Detectors, etc. On 7th September, 2016, L and T received an e-mail from the Project Manager wherein it was alleged that there were certain problems with regard to the plumbing installation by L and T. Though discussions between the parties were immediately held and the representatives of Ahuja Properties were satisfied with the explanation offered, and steps were taken by L &T towards rectification, the Project Manager by his email dated 12-10-2016 enlarged the allegations made earlier in the email dated 07-9-2016 and threatened L and T with consequences including invocation of the Performance Guarantee and Indemnity Bonds, in case L and T failed to certify the alleged defects as set out in the emails of 07-09-2016 and 12-10-2016 respectively. The same was responded to by L and T vide its letter dated 14-10-2016. L and T also addressed a Notice dated 19-10-2016 through its Advocate to Ahuja Properties and interalia demanded payment of its dues of Rs.115,80,88,257/-. The Project Manager again by his letter dated 20-10-2016 called upon L and T to rectify the shortcomings within a period of seven days of the email, which according to L and T showed that the Project Manager, for reasons best known to him, was ''hell-bent'' to blame L and T for the alleged defects which had resulted in the work carried out by the other sub-contractors. Apprehending that Ahuja Properties may fraudulently seek to invoke the Performance Guarantee, L and T addressed a letter/email dated 25-10-2016 to PNB, informing PNB that Ahuja Properties may fraudulently seek to invoke the Performance Guarantee and requested PNB not to honour the invocation by Ahuja Properties. 3.13 Ahuja Properties invoked the Bank Guarantee as set out hereinabove on 27- 10-2016, which led L and T to file the above Arbitration Petition. ;

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