Delhi High Court Boc Properties Ltd. vs Delhi Development Authority on 1 September, 1996 Equivalent citations: 1996VAD(DELHI)26, I(1996)BC15, 64(1996)DLT143 JUDGMENT S.K. Mahajan, J. (1) The tender of the petitioner for the work of 770 Mig DUs in Sector 18, Rohini, Phase Ii was accepted by the respondent for a total sum of Rs. 12.59 crores. In terms of the contract, a sum of Rs. 90 lakhs was released to the petitioner by way of mobilisation advance against six Bank guarantees issued by Canara Bank, Connaught Circus, New Delhi. On account of the petitioner having not been able to perform the contract, the respondent is alleged to have terminated the same and by letter dated 28th October, 1994, invoked the Bank guarantees and called upon the Bank to pay to the Authority the total sum of Rs. 90 lakhs which the Bank had undertaken to pay under the aforesaid guarantees. (2) That it was on the writing of the said letter invoking the Bank guarantees that the petitioner filed this petition under Section 20 of the Arbitration Act on November 1,1994 alleging that certain disputes had arisen between the parties under the subject contract which required to be referred to arbitration. Along with the petition under Section 20 of the Arbitration Act, an application under Section 41 read with Schedule 2 of the Arbitration Act has been filed for restraining the Authority from encashing the said Bank guarantees. It is this application which I propose to dispose of by this order. (3) The contention of learned Counsel for the petitioner is that there was a delay in the performance of its obligation by the Delhi Development Authority which resulted in the delay in the execution of work and up to December, 1992 the petitioner had executed work of the value of Rs. 88 lakhs. It is, therefore, his contention that as there was no default on the part of the petitioner, the respondent could not invoke the Bank guarantees and call upon the Bank to pay the amount covered by them. It is also the contention of the petitioner that the Delhi Development Authority itself had, by its letter dated January 2, 1993, admitted that a sum of Rs. 8,30,894.00 had been recovered out of the mobilisation advance of Rs. 90 lakhs and the liability of Canara Bank in respect of the Bank guarantees corresponding the said amounts stood discharged. By another letter dated 18th November, 1993, the Delhi Development Authority informed the petitioner that an amount of Rs. 24,15,588 had been recovered from the mobilisation advance of Rs. 90 lakhs and the balance pending mobilisation advance, as on date, was Rs. 65,84,412.00 . (4) According to the petitioner, therefore, the maximum liability of the Bank under the bank guarantees was Rs. 65,84,412.00 and the respondent could not have called upon the Bank to pay the entire amount of the Bank guarantees. He, therefore, submits that it was a clear case of fraud and misrepresentation on the part of the beneficiary of the Bank guarantees which gives special equity in favour of the petitioner to stop payment by Bank on the basis of the demand letter. (5) He has referred to judgments reported as Banerjee & Banerjee v. Hindustan Steel Works Construction Limited, ; M/s. G.S. Atwal & Company v. Hindustan Steel Works Construction Limited, ; Ansal Properties & Industries Limited v. Engineering Projects India Limited, 1988 (1) Delhi Lawyer 339; M/s. Nangia Construction (India) Private Limited v. National Building Construction Corporation Limited, and M/s. Som Dutt Builders Limited v. Star Industries & Textile Enterprises, 1990 (3) Delhi Lawyer 369 in support of his contention that as disputes have been raised by the petitioner regarding the amount which is allegedly due to the respondent, he is entitled to an order in his favour restraining the respondent from encouraging the Bank guarantees. (6) The further contention of the petitioner is that the Arbitrator, in certain disputes which had earlier been raised by the petitioner, has already given an award in favour of the petitioner and a sum of Rs. 55 lakhs is due to the petitioner from the respondent for the work done and on the basis of the award already passed in his favour. It is, therefore, submitted that the respondent did not have any right to invoke the Bank guarantees. (7) It is also the contention of the petitioner that the Bank guarantees have not been invoked for encashment by an authorised person as it was only the Chairman of the Delhi Development Authority who could issue the notice of demand whereas the demand has been issued by the Executive Engineer. (8) With a view to appreciate the contention of the petitioner, it will be useful to note the terms of the Bank guarantees. All the Bank guarantees are exactly similar and the contents of one of the Bank guarantees are as under : "IN consideration of the Chairman, Delhi Development Authority (herein after called