A.SHANKAR NARAYANA, J. - (1.) THESE two miscellaneous appeals are preferred under Section 37 of Arbitration and Conciliation Act, 1996, aggrieved of the common order, dated 2nd April, 2014, in O.P. Nos.154 and 178 of 2014, passed by the learned II Additional Chief Judge, City Civil Court, Hyderabad, by the petitioner in both the O.Ps.
(2.) IN O.P. No.154 of 2014 filed under Section 9 of the Arbitration and Conciliation Act, 1999 (for short the Act), the petitioner sought direction restraining the 1st respondent not to en -cash the bank guarantees invoked by it issued by the 2nd respondent and also restraining the 2nd respondent from honouring/disbursing the guarantee amount under both bank guarantees shown in the schedule furnished by the bank to the 1st respondent. In O.P. No.178 of 2014 filed under Section 9 of the very same provision, petitioner sought the relief to restrain the 1st respondent from presenting the D.D. No.169498, dated 31 -12 -2014 for Rs.10,00,00,000/ - issued by the State Bank of India, Commercial Branch, Secunderabad 2nd respondent payable at State Bank of India, Main Branch, Mumbai and D.D. No.169498, dated 31 -01 -2014, for a sum of Rs.16,72,50,000/ - issued by the 2nd respondent payable at the State Bank of India, Main Branch, Mumbai for encashment of the same and also to restrain the 2nd and 3rd respondents or any of their branches from honouring the said two D.Ds. and paying the amounts on presentation of the same by the 1st respondent for encashment and also to pass an injunction restraining the 2nd respondent from enforcing the securities deposited by the petitioner with them.
(3.) DURING the pendency of both the petitions before the Court below, the interim orders passed on 03 -02 -2014 and 05 -02 -2014 respectively in the said O.Ps., were vacated by the final common order, dated 02 -04 -2014. The fact -situation occurring in both the original petitions for the purpose of disposal of these appeals are concerned is, originally, TK Toll Road Pvt. Ltd. entered into a concession agreement with National Highway Authority of India (NHAI) on 19 -07 -2007. The said company in turn entered into an EPC contract with M/s Reliance Utility Engineers Limited, the 1st respondent herein on 31 -01 -2008. The 1st respondent was formerly known as Utility Energy -tech and Engineers Pvt. Limited, but in the year 2010, its name was changed and came to be known by its present nomenclature. The 1st respondent, in turn, sub -delegated the work assigned to it by entering into a construction agreement with M/s. Techtrans Construction India Pvt. Ltd. and Ksheeraabad Constructions Pvt. Ltd., joint venture, the appellant herein on 14 -03 -2008. i) The scope of the work so far as the contract between the petitioner and the 1st respondent is concerned, it was limited to laying the road chainage, which in turn was divided into two sections, wherein the 1st respondent covered the chainage from Km. 0.00 to Km.17.00 (Trichy by -pass) and Km.153.23 to Km.190.00, and the second section covered the chainage from Km.190.00 to Km.218.00, admeasuring a total length of about 80 Kms. ii) The terms of contract makes a provision for completion of the road chainage within 27 months from the initiation of the contract. A period of 30 months was provided for the said purpose and the land would be acquired and handed over to the Concessionaire within 12 months from the date of the concession agreement. The 1st respondent entered into the construction agreement three months after the date of concession agreement and, therefore, the period of completion was fixed as 27 months from the date of initiation as per the construction agreement. As per Article 5.1, responsibility is cast on the 1st respondent to procure the land and provide the same for construction to the petitioner. iii) As per further terms, a performance bank guarantee for Rs.16,72,50,000/ - was to be furnished by the petitioner in favour of the 1st respondent, and the petitioner got a counter guarantee issued by the bank Tejarat, Iran in favour of State bank of India, Overseas Branch, Mumbai, which in turn issued a bank guarantee to the petitioner for the said sum. The petitioner presented the said bank guarantee to the 2nd respondent with a request to issue a back -to -back guarantee in favour of the 1st respondent and executed a power of attorney in favour of the 2nd respondent empowering it to encash the bank guarantee lodged with them by the petitioner in the event of back -to -back guarantee issued by them is encashed. It is also stated that the banks had a cushioning period of one month where the bank guarantee of the 2nd respondent would expire first, and the other bank guarantees would follow. Along with that performance bank guarantee, the 2nd respondent issued another bank guarantee for Rs.10,00,00,000/ - on stand alone basis in favour of the 1st respondent to secure the advance payment made to the petitioner by the 1st respondent under the contract. iv) It is stated owing to the inability of the 1st respondent to provide the land under Trichy by -pass (17 Kms.), the scope of the contract value was reduced by about Rs.120 Crores, and had the said stretch also been made available to the petitioner, there would have no out -standing under the mobilization advance. The details of bank guarantees issued by the petitioner in favour of the 1st respondent are thus: JUDGEMENT_79_LAWS(APH)9_2014.html v) The petitioners case is that performance of bank guarantee was initially issued on 20 -08 -2008 and the same was being extended from time to time and was valid up -till 20 -12 -2013 and the 1st respondent having lodged its demand for Extend or Pay before the expiry of said validity date, permitted the petitioner to submit duly validity extended bank guarantee bond on or before 31 -01 -2014. Thus, the advance payment bank guarantee was valid up -till 12 -03 -2014. Since it was found that the finishing of project within the scheduled time was proving to be impossible as the site was not handed over by the 1st respondent, the 1st respondent issued a letter to the petitioner dated 08 -06 -2012, asking the petitioner to extend the time of the bank guarantee till 31 -12 -2012 which was the scheduled date of completion of the project. The petitioner, in turn, reverted to the letter stating that the project was to be completed within 27 months, and the 1st respondent failed in procuring the land as promised due to which, it (petitioner) incurred huge loss, but despite the same, the 1st respondent insisted on the petitioner to extend the date of bank guarantee on which alone, the petitioner has been extending the validity of the bank guarantee, even though they were not contractually bound to do so, as the original contract has expired long ago and under the threat of the 1st respondent. vi) The petitioner also states that even by the date of filing the petition, the 1st respondent was yet to procure some of the land for completion of the road and, thus, it reflects the negligent attitude of the 1st respondent on account of which, the petitioner, who deployed a huge number of men and machinery, incurred great losses, despite extending the bank guarantees only with a good intent of finishing off the work. vii) The petitioner states that according to the letter, dated 03 -05 -2012 of NHAI, only 87% of the total stretch for the project was handed over as on 31 -03 -2012 which, thus, clearly shows that the land supposed to be provided for construction of the highway was not provided, thus, making it impossible for the completion of the project. viii) The petitioner states that the extension of the bank guarantee by the State Bank of India, Overseas Branch, Mumbai was delayed by a few days, as the request for the extension went up to the extent of Managing Director which fact was informed by the petitioner to the 1st respondent with reasons, but the 1st respondent replied that the delay can be done away with if a letter on the official letter head of the 2nd respondent addressing the reasons for the delay was sent to it. Pursuant to the same, the petitioner requested the appropriate officer of the 2nd respondent seeking a letter to that effect. But, while the things stood thus, to its surprise, a letter of encashment of bank guarantee, dated 30 -01 -2014, was received from the 2nd respondent wherein the 1st respondent asked the 2nd respondent to honour the bank guarantee and disburse the amount. ix) Thus, the petitioner sets out the fraud in paragraph Nos.13 and 14, alleging that dispute has arisen when the 1st respondent fraudulently invoked the bank guarantees in spite of being aware of the fact that there was a lapse on its part, and the fact that the petitioner had already extended the additional bank guarantee for Rs.10,00,00,000/ - and was actively working on the process for the extension of the performance of bank guarantee for Rs.16,72,50,000/ -. x) The petitioner, thus, claiming that in view of default on the part of the 1st respondent in not providing the site for construction of work and suffering huge losses quantified at Rs.175 Crores, states that the action of the 1st respondent embarking upon a fraudulent course of invoking the bank guarantees with a fraudulent motive of blocking the funds of the petitioner, amounts to fraud. xi) It is also stated that the 1st respondent despite knowing the fact that the present bank guarantee serving its performance of defect liability and that there are no defects identified by it (1st respondent), which makes the demand for encashment of performance of bank guarantee illegal and fraudulent. The petitioner, therefore, claims that he has a strong prima facie case and in case the relief is refused it would be put to irreparable loss and damage and even balance of convenience lies heavily in its favour. xii) The petitioner also states that arbitration proceedings have been initiated by it on 03 -02 -2014 by issuing a notice for arbitration. ;