437 0 FeAaOeNoa3608 of 2011 l0 8 Mle IN THE HIGH COURT FOR THE STATES OF PUNJAB S HARYANA AT CHANDIGARH Date of Decisionl May r0 1 20110 Ct FAOe Nos3608 of 2011 l0 8 Mla 7e 0 A JaiparkashAssociated Limited eAppellant I 0 I Versus Z National Fertilizers Limited GohanaRoad Panipat through its Executive Directors maRespondent 2 C I CORAM HONBLE MRaJUSTICE MOHINDER PALa Z 80 1 Whether Reportersof Local papers may be allowed to see the judgment7 2 To be referred to the Reportersor not7 3 Whether the judgmentshould be reportedin the Digest2 Z Presentl Mr Ashwani Chopra Senior Advocate with Mr Sushil Jain Advocate and Ms ShilpaMalhotra Advocate for the appellant MOHINDER PAL Je The appellant Company has preferred this appeal againstthe judgment dated 35201 1 passed by the Iearned Additional District Judge Panipat whereby petition filed by the Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document 4 38 0 m2m FeAeOeNoe3608 of 2011 O S Ml appellant under Section 9 of the Arbitration and Conciliation Act 1996 for short the ActI and an application filed along therewith for interim relief thereby restraining the National Fertilizers Limited respondent for short NF from m encashingthe bank guarantee issued by the State Bank of 0 Hyderabad Commercial Branch Janpath New Delhl were 0 1 dismissed I I have heard Mr Ashwani Chopra Senior Advocate C5 I assisted by Mr Sushil Jain Advocate and Ms Shilpa Malhotra Advocate appearing for the appellant and have gone throughthe Z records of the case r On 106 2010 sealed tenders were invited by NFl from cement manufacturers for collection and sale of Dry Fly Co Z Ash The IS a cement companYe Dry Fly Ash was to be used by the cement man ufacturing com pany The opelIantCom pany gave a bid and e Z was declared successful The was required to arrange Performance Bank Guarantee of Rsl8225000 which 1 was arranged and submitted by it OappelIanteCompanyl on 212010 Agreement dated 8112010 was entered into between the parties The tenure of agreement was two years with a further extension for a maximum periodof one year As the failed in Iifting com plete quantity of Dry Fly Ash NFl had to run the deeashing section of the plant and dump the Dry Fly Ash in slurry form in Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document 4 39 0 e FAOa Noe3608 of 2011 l0 8 Ml the Ash Ponds which consume power a nd water during operationbesides filiingof empty space available in the Ash Ponds NL incurred huge expenses on use of power and water for dumping DryFly Ash A perusalof the record shows that NF requested C the a number of times to enhance the Iifting 0 of Dry FlyAsh so as to ensure smooth operationof the plant but to no effect NFL also made it clear to the 0 I that nonfting of minimum agreed quantityof Dry Fly Ash Z would entail significant financial Iiability on the part of the lY Due to short Iifting of Dry Fly Ash quantity by the I duringthe period from 1112010 to Z 31122010 a debit note dated 211252011 for Rs713865600 was raised on the by the NFl as per the provisionsof the contract entered into between 7 Z the parties CL The NL thereafter on 62011 when the failed to comply with the provisions of the agreement1 contract entered into between the parties raised debt note to the tune of Rs 10030676 and advised the appeilantw Company to submit a demand draft amounting to Rs l716933200 failing which Bank Guarantee furnished by the would be encashed Failure of the petitioner company to pay the aforeestated amount would necessarily Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document 4 40 0 e4e FaAeOeNoe3608 of 2011 l0 8 Mle entail encashmentof the Bank Guarantee by the N Fl as it NF would have no other alternative It is mentioned in the Performance Bank Guarantee furnished by the appellantCompany before the N Fl that if 1 the buyer fails to performthe contract within its terms and conditlonsor commits breach or deviates from any of the terms of 0 the contract the seller shall have the right to encash the I Performance Bank Guarantee It has also been incorporatedin the 0 I Performance Bank Guarantee that it Performance Bank Guarantee shall be encashed and forfeited either in full or to Z the extent of the Iosses suffered by the seller due to breach of r thecontract andl or nonfulfilment of the obligationsby the buyer I underthe contract Z In the presence of aforestated conditions in the 11 Performance Bank Guarantee there IS no escape from the conclusion that the N F is well within its rightto encash the 7 Z Bank Guarantee if the appellantcompanyfails to performthe terms and conditions of the contract which the appellantcompany has failed to perform as noticed above A meeting was held between the representativesof the appellantcompanyand the NF on 3112011 in which the had assured the N Fl to enhance Iiftingof Dry Fly Ash by deploying more number of trucks On the requestof the petitionerecompanythe N Fl had agreed in principle not to take a ny further action on the debit note dated Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document 441 0 e FAO Noe3608 of 2011 lO S Mlm However the situation did not improve after the said meeting The had been afforded sufficient by the N F to comply with the provisionsof the contract and to Iift the contractual quantityof Dry Fly Ash In spite of that no heed was paid by the to 0 abide bythe terms and conditions of the contract entered into I between the parties NL being a Government Undertaking C5 I Company IS dutybound to ensure compliance of the provisions of the contract NL acted strictly in accordance with the Z 2 provisions of the contract Duringthe course of arguments much emphasis was I Iaid by the Iearnedcounsel for the on the Z point that Dry Fly Ash supplied by the N Fl was not in 10 consonance with the issued by the Minlstry of Environment and Forests meaning thereby Dry Fly Ash was e Z of poor quality Accordingto the Iearned counsel as the Dry FlyAsh suppliedby the NFl was having carbon contents more than in excess of 5010 as prescribedby the Bureau of IndianStandards the appellantCompanycould not be expected to use poorqualityof Dry Fly Ash After giving my careful thoughtto the argumentraised by the Iearned counsel for the appellantI do not find any substance in the sameThe appellant company was well aware of thequality of Dry FlyAsh proposedto be suppliedby the N F1 a Government Undertaking Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document 442 1 1 0 6 FeAeOnN3608 of 2011 l0 8 Mle at the time of submittingthe quotationfor the contract in question It also deserves mentioninghere that in the Notice InvitingTender VITJ for Collection S Sale of DryFly Ash 1 under the head Special Terms 8 Conditions it has been in clause No233 General at Page 90 of the that Dry Fly Ash shall be suppliedon as is 0 where is basis No claim shall be entertained on this account It cannot now be by the that Dry 9 FlyAsh being suppliedby the NFl was of inferior quality It is wellmsettled that Since the Bank Guarantee Z representsan contract between the Bank and the both the partieswould be bound by the terms thereof I The encashment of the Bank Guarantee therefore will have to be Z in accordance with the terms of the Bank Guarantee otherwise the encashment of the Bank Guarantee will be bad As noticed above it IS incorporatedin the Performance Bank Guara ntee 7 Z furnished by the before the NFl that if tl the buyer fails to performthe contract within its terms and conditionsor commits breach or deviates from any of the terms of the contract the seller shall have the right to encash the Performance Bank Guarantee Further it has been mentioned in the Performance ank Guarantee that it shall be encashed and forfeited either in full or to the extent of the Iosses suffered bythe seller due to breach of the contract and 1 or non4ulfilment of the obligations by the buyerunder the contract At the cost of Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document 443 10 4 FaAe0 Non3608 of 2011 l0 8 Ml it may be said here that the failed to abide by the terms and conditions of the contract entered into between the parties Therefore the balance ofconvenience does not Iie in favour of the appeliantcompany 1 For the aforesaidreasons I do not find any merit in this appealThe sameis herebydismissed 0 C PALI C5 Mayc23 2011 JUDGE 1 I ak Z C Z 17 Z 1 11 J 1 1 Batra Amit 2013.04.26 10: 46 True Scannend Copy Of Original PHHC,Chandigarh JOYTI RANI 2016.03.28 15:56 I attest to the accuracy and integrity of this document