Final Order 1

Order Details: Notice of Motion
Pdf Text: 1
IN THE COURT OF CITY CIVIL COURT AT
GR.BOMBAY
NOTICE OF MOTION NO.2268 OF 2019
IN
COMMERCIAL S.C. SUIT NO.27 OF 2019
CNR NO.MHCCO10062302019
Shree Anukul Industries Pvt.Ltd }
Having address at 51/52, Shubh }
Commercial premises, Akruli Rd, }
Opp. ESIS hospital, Kandivali(E) }
400 101. } ..Plaintiff
V/s
1. Maharashtra Jeevan }
Pradhikaran }
Having address at 4th floor, }
Express Tower, }
Nariman Point, Mumbai }
2. Karnataka Bank Ltd }
Having address at LIC Complex }
J.B.Nagar, Borivali West. }
400 103 } ..Defendants
Ld. advocate Bernardo Reis with adv.Viraj Kandpile for plaintiff
Ld. advocate Ajit Pitale for defendant no.1
Ld. advocate S.R.Shetty for defendant no.2
CORAM: HIS HONOUR JUDGE SHRI M.SALMAN AZMI
DATE: 05/08/2019
ORAL ORDER
1. This Notice of Motion is tendered by the plaintiff
company interalia for restraining defendants from
acting upon the letter of termination dated
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16/04/2019 and letter for encashment of bank
guarantee and further restraining the defendants
from assigning the work to any third party which was
assigned to the plaintiff company vide work order
dated 17/06/2017.
2. Heard.
3. In short the contentions of the plaintiff company was
that the plaintiff company was lowest financial
bidder for the work of augmentation to Nhava Sheva
water supply scheme, stage III. The work order was
issued on 17/06/2017 to the plaintiff company. The
plaintiff company has submitted bank guarantee of
Rs.68,44,404/. The defendant no.1 delayed by over
7 months for approving alignment under the said
work order as well as delay in site clearances for
implementation of the project. The costs of
execution of works under the said work order was
40% increased. It was agreed that plaintiff company
will be compensated for the actual tax difference
arising due to GST after taking into account input tax
credit excluding input tax credit of excise exempted
items like MS pipes, coating valves etc. Defendant
no.1 falsely stated to impose penalty charges on
account of delay in execution of the work. The delay
cannot be attributed to the plaintiff company. The
considerable time for a period of four months was
lost due to the monsoon. Moreover, plaintiff
company stated that land owners where site
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clearance were handed over were not allowing them
to execute works under the said work order. Plaintiff
company by letter dated 27/01/2018 gave defendant
no.1 a detailed account of the ground reality of the
financial burden imposed upon them due to GST. By
letter dated 14/06/2018, plaintiff company recorded
the financial burden of this project as imposed upon
them and stated that the costs for MS plates, diesel,
cement etc have an average increase of 41.14%.
Defendant no.1 was never interested in project
completion. The plaintiff company had burden of
excise duty and GST of Rs.77 lacs. Defendant no.1
had no intention of refunding the amount of Rs.77
lacs incurred by the plaintiff company. Defendant
no.1 has no authority to terminate the said work
order since plaintiff company has completed
approximately 40% of the said work and cannot be
terminated without following due process. The said
notice of termination dated 16/04/2019 is illegal and
bad in law. The plaintiff company apprehends of
encashment of bank guarantee, therefore the plaintiff
company was compelled to file the present suit
alongwith accompanying notice of motion.
4. The defendant no.1 resisted the claim of the plaintiff
company by filing the reply and the written
statement. It is the contention of defendant no.1 that
it is a ambitious National importance scheme of
supply of drinking water to Jawaharlal Nehru Port
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trust and also to cater the potable water demand of
Panvel Municipal Corporation and CIDCO area and
also to cater the water demand of 19 surrounding
villages. By work order dated 17/06/2017 the
contract to plaintiff company was supposed to
complete the work within 18 months i.e. by
16/12/2018. The plaintiff company has only
completed 40% of the work by the end of December
2018. Defendant no.1 issued number of letters and
reminders to plaintiff company requesting to
complete the work within stipulated time, but the
plaintiff company ignored all the instructions and the
conditions of tender. Therefore, defendant no.1 has
imposed the penalty in conformity with the
notifications and guidelines. The penalty imposed by
the defendant no.1 has reached to the extent of
Rs.3,14,19,223/ as on 15/04/2019 and for recovery
of the said penalty amount, defendant no.1 is
proposing to encash bank guarantee of
Rs.68,44,404/. As per the request of the plaintiff
company, defendant no.2 extended the bank
guarantee upto 31/05/2019. As per clause 3(c) of
the tender the contract was terminated. There is no
cause of action for filing suit. Hence, prayed for
rejection of the notice of motion.
5. On the rival submissions of the parties, following
points arise for my determination and findings to it
are recorded for the reasons stated to follow:
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POINTS
(i) Whether the plaintiff company has made out a
prima facie case?
(ii) Whether the balance of convenience lies in
favour of plaintiff company?
(iii) To whom the irreparable loss would be
caused?
(iv) What order?
FINDINGS
(i) In the negative.
(ii) In the negative.
(iii) To the defendants.
(iv) As per final order
REASONS
POINT NOS.1 TO 3
6. The parties are not at dispute that work was assigned
to the plaintiff company as plaintiff company was
the lowest bidder in the financial bid in the StageIII,
Nhava Sheva water supply scheme. The work order
was issued on 17/06/2017 and thereby it was
directed to the plaintiff company to complete the
work within 18 months (during monsoon) from
17/06/2017. The plaintiff company was called upon
to furnish bank guarantee of Rs.68,44,404/. The
contract of the plaintiff company was terminated for
the said project by termination letter dated
16/04/2019. Defendant no.1 wrote to defendant
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no.2 vide letter dated 17/05/2019 for encashment of
the bank guarantee. The contention of the plaintiff
company is that defendant no.1 has played fraud
upon the plaintiff company. The plaintiff company
was forced to incur Excise duty and GST amounting
to Rs.67 lacs and Rs.10 lacs on all costs incurred by
the plaintiff company for execution of the work
which was not the part of the contract. Defendant
No.1 denies the said contention. The advocate for
plaintiff company pointed out that there is Excise
duty exemption clause in the tender. The relevant
clause is reproduced as under:
“The concession would be subject to the certification by
the collector/District Magistrate/Deputy Executive
Engineer of the District in which the water treatment
plant is to be setup. To avail exemption on duty the
tenderer himself shall pursue the matter with different
Government Departments. Any cooperation in this
regard will be extended to the tenderer. The tenderer
shall quote his offer taking into account above
exemption which he may avail.”
7. The Ld. Counsel for defendant no.1 pointed out that
plaintiff company has submitted various bills in
respect of the purchase of the pipe lines, coating,
valves etc which are exempted from Excise duty. He
would submit that on 01/07/2017, The Goods and
Services Act was enacted. Upon the request of the
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plaintiff company, meeting was conveyed at JNPT
office, Raheja Chambers, Nariman Point, Mumbai on
25/07/2017 with the agenda of discussing Excise
Duty reimbursement & GST under the said works
order. The meeting was attended by the Chairman of
JNPT, Member Secretary of defendant no.1 as well as
many others, where it was agreed that contractor
would be compensated for the actual tax difference
amount arose due to GST after taking into account
the input tax credit excluding input tax credit of
Excise exempted items like MS pipes, coating, valves,
MS specials etc. The plaintiff company vide letter
dated 27/07/2017 demanded the minutes of meeting
dated 25/07/2017 and requested defendant no.1 to
confirm the minutes of the meeting dated
25/07/2017 so that actual work would be started.
The bone of contention of the plaintiff company is
that there was unavoidable reasons for delay in
execution of the work. The fact that progress of
work was subject to timely Excise exemption, site
clearance and condition. The plaintiff stated that
pipe fabrication factory was flooded on account of
monsoons and it was practically impossible to begin
excavation work during the monsoon period. On the
other hand it was the stand of defendant no.1 that
previous letters and reminders were issued to the
plaintiff company to carry out the work at the
earliest. The letter dated 28/09/2017 by defendant
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no.1 to the plaintiff company reflects that the work
was not as per work schedule submitted by the
plaintiff company and the plaintiff company was
called upon to carry out the work as per the time
schedule given by the plaintiff. The letter dated
18/12/2017 was again issued. The representation
was made to the plaintiff company that work is
unsatisfactory and he was called upon to submit the
report to defendant no.1 as to how he would
complete the work within the time schedule in the
tender. The plaintiff company responded to the said
letter by reply dated 23/12/2017. He made the
contentions that minutes of the meeting dated
25/07/2017 were issued to them on 25/10/2017
after a period of three months. The plaintiff
company had applied for QAP approval of pipes vide
letter dated 21/08/2017, however they received QAP
approval after a period of one month i.e. on
21/09/2017. He also raised issue that due to
monsoon excavation work was not started and there
were resistance from the villager due to which the
work was stopped. Again the letter dated
19/01/2018 was issued to the plaintiff. It was
expected that 39% of the work should have been
completed. In respect of GST and Excise that the
plaintiff company was called upon to submit the
calculation sheet and the same is required to be
approved from the Finance Department and to
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complete the work within the time period. The
plaintiff company by letter dated 27/01/2018
informed defendant no.1 and expressed its inability
to carry out the work as the work has been stopped
by concerned road contractor for almost a period of
nine months and after due persuasion they were
asked to shift the alignment for pipe laying at a
distance of 40 meters from road center. The
defendant no.1 by letter dated 15/02/2018 informed
the plaintiff company that expected 44% of the work
has not been completed and was called upon the
plaintiff company to complete the work. By letter
dated 20/08/2018, the plaintiff company was again
informed by defendant no.1 that 60% of the work
was supposed to be completed and it appears that
the work would not be completed within a period of
four months and if the work is not completed the
penalty would be imposed. On 30/08/2018, the
letter was issued by defendant no.1 to plaintiff
company and called upon to give the schedule as to
how plaintiff company would complete the work
within a short span of time. Again by letter dated
14/02/2019, the plaintiff company was called upon
to complete the work and so far as the issue
regarding GST, plaintiff company was informed that
same is pending before the Government for its
decision. Thereafter again plaintiff company was
called upon by defendant no.1 on 16/02/2019 to
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complete the work. By letter dated 02/03/2019, the
plaintiff was informed as regard the meeting dated
28/02/2019 and various issues were discussed in the
said meeting and accordingly the plaintiff company
was informed about the same. Ultimately on
16/04/2019, the contract was terminated.
8. It is apparent that there were several
correspondences from defendant no.1 to the plaintiff
company for timely completion of the work. although
the plaintiff company has replied and showed its
inability in the progress of the work. The issue that
factory was flooded in monsoon cannot be the
ground because the time limit includes the monsoon
season and plaintiff company was well aware about
the same. So far as the issue of Excise and GST
exemption is concerned, it is nowhere coming
forward that defendant no.1 has denied for the same.
But for the GST it was made clear that decision is
pending at the Government level. The other issue of
escalation of price claimed by the plaintiff company,
it was made clear that the plaintiff company was not
entitled for the same and therefore it was not
considered. Even otherwise the plaintiff company has
given understanding that plaintiff company will not
claim escalation.
9. At this juncture, the issue which is relevant is
whether the defendant no.1 can encash the bank
guarantee. The argument of the plaintiff company is
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that the termination is illegal. The clause (3) of the
agreement contemplates that if any case in which
under any clause of this contract the contractor shall
have rendered himself liable to pay compensation
amounting to the whole of his security deposit
(whether paid in one sum or deducted by installment)
or in the case of abandonment of the work owing to
serious illness or death of the contractor or any other
cause, the Executive Engineer on behalf of the MJP
shall have power to adopt any of the courses, as he
may deem best suited to the interest of the MJP. It is
the contention that as per clause (c) the contract was
terminated. It is argued on behalf of defendant no.1
that the work was not completed by the plaintiff
company within stipulated time. Only 40% of the
work has been completed. Therefore the contract
was terminated. The clause (3) is clear that
defendant no.1 has a right to deduct the excess from
any money due to the contractor under the contract
or otherwise however or from his security deposit or
the sale proceeds thereof in case of the costs of the
execution through the new contractor and exceeds
the certified cost of such work and allied expenses.
Thus the guarantee was a performance guarantee.
The contention of the plaintiff company is that it is a
additional security is not apparent from the terms of
tender. There are rival contentions for delay in
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execution of the work. But, at this juncture this is
disputed question of facts which needs to be
considered after the scrutiny of the evidence. It
would not be proper for this Court to come to
conclusion at the time of deciding interim
application that the contract was validly terminated.
One thing which this Court cannot ignore is that time
and again written instructions were given to the
plaintiff to complete the work within the time period
considering the nature of project. This fact is
relevant at the time of deciding this notice of motion.
10. The issue of GST to the tune of Rs.77 lacs is
before the Government for the consideration as
argued by defendant no.1. It is settled position of the
law that injunction cannot be granted for restraining
from invocation of the bank guarantee unless the
fraud is pointed out. The fraud should be such that it
would vitiate entire transaction and it is irretrievable
injustice or irreparable harm. Merely the fact that
bank guarantee has been extended cannot be the
ground for grant of injunction.
11. Ld. Counsel for the plaintiff placed reliance
upon the following judgments:
Hindustan Steelworks Construction Limited V/s
Tarapore & Co and another of Hon'ble Apex Court
(1996) 5 Supreme Court Cases 34
U.P.Cooperative Federation Ltd V/s Singh
Consultants and Engineers (P) Ltd of Hon'ble
Apex Court
(1988)1 Supreme Court Cases 174
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There is no quarrel about the law laid down by the
Hon'ble Supreme Court in above cited cases. It has
been held by the Hon'ble Supreme Court that,
injunction restraining the encashment of bank
guarantee can be granted only in case of fraud or in
case of irreparable loss. No such contingency has
been pointed out.
12. At the very outset company would have made
clear that till the issue of GST is resolved, plaintiff
company would not have proceeded with the
execution of work. The issue of payment of the
amount towards the GST cannot be attributed as
fraud upon defendant no.1. The payment of GST
liability is outcome of the subsequent Legislation
enacted and therefore it cannot be said that
defendant no.1 has played fraud upon plaintiff
company. Even otherwise the plaintiff company is
coming with the case that efforts were made by
defendant no.1 to resolve the same. It is apparent
that there is nothing on record to prima facie show
that any fraud has been committed by defendant
no.1 and therefore defendant no.1 cannot be
prevented from invoking the bank guarantee at this
stage.
13. By this notice of motion plaintiff company
prays that defendant no.1 be restrained from acting
upon the termination letter dated 16/04/2019. As
discussed above it would not be proper to examine
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the validity of the termination letter at the interim
stage. The notice was issued on 16/04/2019,
plaintiff knocks the door of the Court challenging its
validity after one and half months. The delay in
approaching the Court cannot be given go bye. Even
otherwise at this stage it cannot be overlooked that
the work is pertaining to augmentation to Nhava
Sheva water supply scheme and same cannot be kept
in abeyance pending the disposal of the suit.
Therefore, at this stage the other prayer of the
plaintiff for restraining defendant no.1 from creating
third party interest in respect of work order issued in
favour of plaintiff also cannot be considered. If the
work is withheld it will frustrate the project which is
meant to supply drinking water to JNPT, and carter
the water demand of Panvel Municipal Council and
others. In that event the project cost will increase
and thus would cause irreparable loss to defendant
no.1. In view of the above matter, this notice of
motion needs no consideration. Hence, I am
compelled to answer point nos.1 to 3 in the
negative.
POINT NO.4
14. In view of the above discussion, the Notice of
Motion deserves to be rejected. Accordingly, it is
expedient to pass following order:
ORDER
1. Notice of Motion No.2268/2019 is rejected.
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2. Costs in cause
3. Notice of Motion is disposed of accordingly.
05/08/2019 M.SALMAN AZMI
CITY CIVIL COURT,
GR.MUMBAI.
Dictated on : 05/08/2019
Transcribed on : 06/08/2019
Signed on : 08/08/2019
'CERTIFIED TO BE TRUE AND CORRECT COPY OF THE ORIGINAL
SIGNED JUDGMENT/ORDER”.
08/08/19 at 6.00 pm.
MRS.T.C.KAMBLE
Name of the Judge HHJ SHRI M.S.AZMI, CR NO.16
Date of Pronouncement of
judgment/order
05/08/2019
Judgment and order signed by P.O. 08/08/2019
Judgment/order uploaded on 08/08/2019
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