B.S. Verma, J.
1. With the consent of both the parties, this appeal was heard to be disposed of finally at the admission stage.
2. This appeal is directed against the order dated 14-9-2011 passed by the District Judge Dehradun in Arbitration Case No. 53 of 2011, filed under Section 9 of the Arbitration and Conciliation Act, 1996 (for short the Act), whereby the petition under Section 9 of the Act moved by the appellant-contractor was partly allowed with reference to the forfeiture of the amount due under the bills raised against the work done by the appellant and lying with the respondents and the respondents were directed not to forfeit any such amount during the continuance of the contract and during the arbitral proceedings till award is passed by the said Tribunal. For rest of the reliefs with reference to invocation of bank guarantee and repudiation of the contract, the petition was rejected.
3. Briefly stated the facts giving rise to the present appeal are that tenders were invited by respondent no.1- UJVN Limited for installation of complete civil works for 2x4.5 MV Kaldigad SHP, located at village Sangam Chatti, Taluka Bhatwari, district Uttarkashi and the bid of the appellant contractor was accepted for Rs. 35.83 Crores and in pursuance thereof, a contract dated 24-12-2008 was entered into between the parties. It was agreed that the work under the contract shall be executed and completed by the contractor within a period of 24 months from the effective date of contract, i.e. 23-2-2009 and according to the schedule, the date of completion of the project was 22-2-2011.
4. According to the appellant, on payment of advance, the appellant-contractor started sending the machinery to the site, but the machinery could not reach even village Sangam Chatti as there was no approach road beyond Sangam Chatti and that forest road could not be utilized as the Forest Department did not agree to it. Even otherwise, the said road was in a highly dilapidated condition. The appellant brought this fact to the notice of the respondent no.1 and requested to make available approach road as contained in the contract. The respondent no. 1 did not pay any heed and neglected to make available this basic requirement with the result the appellant was compelled to devise its own means to meet out the problem. Under the contract, the respondent no.1 was under obligation to provide requisite land and approach road for execution of work under the contract, as mentioned in Clause 10 of the contract containing Employers Responsibilities. The appellant-contractor has also alleged that under Clause 25.1.2 of the Special Conditions of the Contract, it was incumbent upon the respondent no.1 to provide land (for construction of approach roads), and forest and environmental clearance as are necessary for execution of the project, but the respondent no.1 failed to provide the approach road and also failed to obtain necessary clearances in that respect, particularly when the project itself is located inside a reserve forest.
The availability of approach roads and other infrastructures were to be necessarily got executed by the Forest Department only subject to payment of expenses to be borne by the respondent no.1. As per scheme of contract, the appellant was required to submit a work programme, delineating the scope of work proposed to be accomplished by him along with specific time schedule for achievement of the same and accordingly the appellant planned out the execution of total project work in a span of 24 months from the effective date of contract. The appellant was required to prepare detailed design drawings for all the project facilities based on the preliminary drawings provided by the respondent no.1 and to be submitted to the respondents for approval before taking up the execution work. The appellant performed his part of contract in this regard, but the respondents engaged the services of some third agency to get the needful. This conduct of the respondents caused further delay in approval of the detailed design drawings and thereby led to delay in execution of the facilities and burden of escalated costs and expenses upon the appellant. The appellant made request by sending letters dated 25-11-2009 and 17-12-2009 to the respondents but to no avail.
5. Although the effective date of contract was February 23, 2009, the appellant could start the project work only after the approval of the drawings by the respondents by the end of December 2009 or beginning of the year 2010. Apart from that, due to the negligence of the respondents and failure to get the needful done as per contract, the appellant was forced to change the entire construction methodology from mechanized to manual due to non-availability of approach roads and had to deploy mules for transportation of construction materials and heavy equipments to the site. The respondents instead of fulfilling their part of contractual obligations, insisted upon the appellant to mark the alignment of various components on an area covered by dense forest. It was only the unavailability of land as well as forest road by the respondents caused delay to start the execution of project work by the appellant. According to the appellant, for want of approach road, there was no alternative to shift components such as trench weir, intake chamber, power channel, power duct, desalting tank, tunnel inlet except by walking on a treacherous, difficult and dangerous path on mountain slopes.
6. The respondents have sought to recover an amount to the tune of 10% of the running bills of the appellant without any prior intimation or explanation arbitrarily without any authority, which is illegal act on the part of the respondents. The appellant further alleged that contract provides for resolution of dispute through a Dispute Board of three members with each party nominating one member and the third member being elected by the nominated two members and that the Dispute Board was to be appointed within three months from the effective date of contract. When it was not don, the appellant sent a letter on 12-1-2010 to constitute the said Board. The respondent no.1, in turn, directed the appellant to nominate its Member. The appellant nominated one member and requested the respondent no.1 to do the needful in the matter, but the respondents failed to constitute the Dispute Board on one pretext or the other. Ultimately, the appellant by letter dated 17-7-2011 asked the respondents to constitute the Dispute Board for adjudication of disputes. Instead of nominating its member to the Dispute Board, the respondent no.2 as a counterblast by letter dated 22-7-2011 had taken a stand totally against the provisions of the contract and summarily rejected and dismissed all the claims of the petitioner as raised by the appellant in its letters dated 23-5-2011, 10-5-2011 and 23-6-2011.
7. Apart from above, the appellant had furnished bank guarantees to the tune of Rs. 7-00 Crores as security amount as well as against the mobilization advance released by the respondent no. 1 and that the mobilization advance released by the respondent no.1 has already been utilized by the appellant for procurement of material and for mobilization of men and machinery at site for execution of work under the contract. Despite the difficulties and problems having been faced by the appellant since the effective date of contract, the appellant had been continuing to carry on with the execution of the project and had never stopped the work at any point of time.
8. Against the application moved under Section 9 of the Act, the respondents filed their objection alleging therein that the contract in question was a consolidated contract for an amount of approximately Rs. 35,83,00,000/- awarded to the petitioner and that the appellant had unsuccessfully worked to the tune of Rs. 6,34,44,890/- only within the stipulated contract period till now and had completed only about 17.5% of the contract work, which too was defective. The contract was entered upon between the parties on 24-12-2008 with effective date as 23-2-2009 and the work was to be completed by 22-2-2011. No time was extended in favour of the appellant. Clause 9.2 of the special clauses of Contract is binding upon the contractor. It has also been alleged that a sum of Rs. 70 Crores is due against the appellant; that the appellant had not completed the contract within the stipulated time; that the allegations made by the appellant are not correct; that the appellant was aware that the contract of guarantee cannot be restrained in the present case and that appellant cannot obtained a restraint order against termination of contract and public funds; that it is wrong to say that the bank guarantee cannot be invoked by the respondent no.1; that the appellant cannot be permitted to travel beyond the terms of the contract; that the delay had been caused due to the fault of the appellant; that by serving notice, the respondents warned the appellant to improve performance at site, but the appellant approached the Court; that new bids have been invited for the remaining work; that as far as approach road to different civil structures is concerned, the contractor is required to make its own provision and arrangement for the same and that the respondents were required to provide land for approach road to Power House and also the land to construct project related civil structure and the same was provided well in advance prior to commencement of work; that the appellant had excavated almost all the location of the project structure, which was not possible prior to felling of trees; that there was loss to existing forest due to negligence of the contractor and appropriate action shall also be taken against the contractor; that the respondent no.1 provided all requisite forest clearance for commencement of work at site.
9. The respondents have also asserted that as far as constitution of Dispute Board is concerned, the same was to be constituted within 3 months after effective date, i.e. 23-2-2009. The request was initially received from the appellant by his letter dated 12-1-2010 after the expiry of the stipulated period of three months; that the contractor took about six months to submit the initial design while it should have been finalized within four months from the effect date of contract; that no machinery was mobilized upto October 2009; that the appellant failed perform his part of contract in not deploying competent staff and the appellant failed to give desired output as per the contract and that he himself is fully responsible for delay in execution of the project.
10. Regarding transportation of material to the construction site is concerned, it is the risk and expense of the contractor to transport all the materials and equipment at site by the mode of transport that may suit to the contractor, as provided in Clause 21.3 of GCC. According to the respondents, to mitigate the problems of the appellant-contractor, the respondent no.1 had set up a full-fledged construction division headed by Executive Engineer (Civil) with other officers and staff at the site; that the respondents have extended full cooperation to the appellant within the frame work of the contract provisions; that the appellant had made each and every part of the contract a matter of claim in breach of the contract on his part; that the losses caused by the appellant forced the respondents to issue notice to perform improvement in the contract work in order to protect public interest and that action has to be taken against the appellant for non-performance of the contract since the stipulated period of contract had already expired and the respondents are forced to complete the major portion of the contract work by other agency, therefore, the appellant is not entitled to relief of injunction as prayed for by him.
11. The learned District Judge heard learned counsel for the parties and after perusing the material available on record, the learned District Judge has observed that the petition under Section 9 of the Act has been moved for seeking interim injunction against the respondents to restrain them from invoking the bank guarantees, forfeiting any amount due and payable to the appellant-contractor lying in the hands of the respondents and further from repudiating the contract. The learned District Judge after considering the three ingredients of the temporary injunction, i.e. prima facie case, balance of convenience and irreparable loss has observed as under:-
âIn so far as invocation of the bank guarantee is concerned, it is well settled legal position that a party in whose favour bank guarantee has been executed, cannot be deprived of the same except on the ground of fraud. In the present case, admittedly, bank guarantee has been furnished by the petitioner against the mobilization advance received by him from the respondents and as such it cannot be said that the said bank guarantee was obtained by fraud. It has not been alleged by the petitioner that he was induced to furnish bank guarantee by fraud or misrepresentation. In these circumstances, I do not find a prima facie in favour of the petitioner in so far as invocation of the bank guarantee is concerned.â
12. The District Judge has also observed that as to who is responsible for frustration of the contract or who is at fault, it is a matter which can be adjudicated by the arbitral tribunal. It was also observed that âif there was lack of cooperation on the part of the respondents from the very beginning, then the petitioner was free to repudiate the contract and claim damages from the respondents. I am unable to understand as to why the petitioner kept on waiting for two and half years to resolve the matter and then he chose to resort to the provisions of section 9 of the Act. It is an admitted fact that on the date of this application, period of contract has already expired and only 17% of the work has been accomplished by the petitioner. Work had to be completed within two years from the effective date of contract.â
13. The learned District Judge at page 16 of the order has further observed in his order as under:-
âThe learned counsel for the respondents has specifically stated before the Honble High Court that they have not issued the alleged letter to repudiate the contract, rather, they have sought cooperation from the petitioner to expedite the work. In these circumstances, I again do not find a prima facie case in favour of the petitioner in so far as the repudiation of the contract is concerned as no such threat has so far been made by the respondents and there is nothing to disbelieve them. Further, it may be pointed out that the parties cannot go beyond the terms of the contract and respondents cannot be forced to proceed with the contract the stipulated period for which has already expired yielding only 17% of the work assigned under the said contract.â
14. Ultimately by the impugned order dated 14-9-2011, the District Judge has passed an order to the following effect:-
âPetition u/s 9 of the Arbitration and Conciliation Act moved by the petitioner/contractor is partly allowed with reference to the forfeiture of the amount due under the bills raised against the work done by the petitioner and lying with the respondents. Respondents are directed not to forfeit any such amount during the continuance of the contract and during the arbitral proceedings till award is pronounced by the arbitral tribunal. For rest of the reliefs with reference to invocation of bank guarantee and repudiation of the contract, petition is rejected.â
15. Aggrieved by the order dated 14-9-2011, the present appeal has been preferred by the contractor-appellant. Neither cross-objection has been filed, nor any appeal has been preferred against the said order by on behalf of the respondents.
16. The main ground of challenge raised in this appeal are that the District Judge fell into error in refusing to restrain the respondents from terminating the contract on the sole ground that there was no threat from the side of the respondents in that regard; that the District Judge failed to appreciate that the project has to be got completed by an alternative agency and that the learned District Judge completely lost sight of the provisions of Section 9 of the Act in granting the interim relief to the appellant-contractor.
17. I have heard learned counsel for the parties at length and perused the entire material placed before this Court including the averments made in the counter affidavit filed on behalf of the respondents.
18. Since, in this appeal, the appellant is aggrieved only the part of the order whereby the relief with reference to invocation of bank guarantee and repudiation of the contract sought in the application has been rejected, therefore, the following short question has to be decided in this appeal:-
âWhether interim injunction can be granted and the respondents can be restrained from terminating the contract dated 24-12-2008 invoking bank guarantees furnished by the appellant.â
19. Learned counsel for the appellant has firstly contended that the respondents were responsible for not providing approach road to the appellant as provided under the terms and conditions of the contract and this aspect has not been looked into by the learned District Judge in passing the impugned order. Learned counsel for the appellant further contended that the land to construct hydro project was not given to the appellant by the respondents till today. Learned counsel further contended that there was significant increase in the cost in carrying out the work and that the respondents were liable for the delay in approval of design. Learned counsel for the appellant lastly contended that the appellant was prevented from carrying out the work under the contract by the forest and revenue authorities.
20. At the outset, it may be mentioned here that the impugned order has been passed by the learned District Judge, Dehradun in a petition under Section 9 of the Act moved by the contractor-appellant, therefore, a reference to Section 9 of the Act is necessary, which reads as under:-
â9. Interim measures etc. by Court.- A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court-
(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the following matters, namely,-
(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or thing which is the subject-matter or the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining fully information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.â
21. Mr. Vinay Kumar, Advocate, learned counsel appearing on behalf of the respondents has contended that the Bank Guarantees furnished by the appellant can only be invoked, if it was obtained by fraud. In support of his contention, reliance has been placed upon the Apex Court judgment in the case of BSES Ltd. (Now Reliance Energy Ltd.) Vs. Fenner India Ltd. and another [(2006) 2 Supreme Court Cases, 728]. The Apex Court in paragraph 10 has inter alia observed as under:-
â10. There are, however, two exceptions to this rule. The first is when there is a clear fraud of which the bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction. The second exception to the general rule of non-intervention is when there are âspecial equitiesâ in favour of injunction, such as when âirretrievable injuryâ or âirretrievable injusticeâ would occur if such an injunction were not granted. The general rule and its exceptions has been reiterated in so many judgments of this Court, that in U.P. State Sugar Corpn. V. Sumac International Ltd. (hereinafter âU.P.State Sugar Corpn.â) this Court, correctly declared that the law was âsettledâ.â
22. So far as the contentions of the learned counsel for the appellant regarding lack of providing approach road, non-availability of land to construct hydro project, undue delay in approval of design and drawings submitted by the appellant and consequent increase in price for carrying out the work and whether the forest and revenue authorities stopped the construction work of the appellant are concerned and for that which of the parties is at fault, it is a subject-matter of arbitration and the decision can only be given after the evidence is adduced by the parties.
23. This fact is not disputed that till the expiry of the period of contract, only about 17% of the contract work was completed by the appellant. Clause No. 10.2 of the General Conditions of Contract prescribes employers responsibilities and lays down that the employer shall be responsible for acquiring and providing legal and physical possession of the site and access thereto, and for providing possession of and access to all other areas reasonably required for the proper execution of the contract including all requisite rights of way, as specified in the Appendix to the contract agreement and that the employer shall give full possession and accord all rights of access thereto on or before the date specified in the Appendix. This obligation includes approach road and other forest clearances etc. Whether the appellant was handicapped in completion of the contract work due to non-fulfilment of obligations on the part of the respondents and whether the respondents were at fault and they shirked their responsibilities as contained in the contract agreement is a matter of evidence to be adduced by the parties before the arbitral Tribunal. Likewise, whether the land to construct hydro project was not given to the contractor-appellant and whether there had been delay on the part of the respondents in approval of the drawings and design submitted by the appellant-contractor and whether forest and revenue authorities stopped the contractor from doing construction work is also a matter of evidence to be led by the parties before the arbitral tribunal.
24. So far as the appellant has sought injunction with reference of invocation of bank guarantee, this Court is of the considered view that the argument of the learned counsel for the appellant cannot be accepted for the simple reason that it is not the case of the appellant that the bank guarantees were obtained from the appellant by the respondents by playing fraud. It has also not been established by the appellant in its favour that âirretrievable injuryâ or âirretrievable injusticeâ would occur if such an injunction were not granted, as has been held by the Apex Court in the case of BSES Ltd. (supra). The finding of the learned District Judge that no prima facie case is made in favour of the appellant-contractor in so far as invocation of the bank guarantee is concerned does not call for any interference by this Court.
25. So far as the interim injunction to restrain the respondents from terminating the contract agreement is concerned, I have already reproduced the observations made by the learned District Judge at page 16 of the impugned order. From a perusal of the entire material placed before this Court, I am unable to form a different opinion in the matter on this score and I hold that the appellant has failed to make out a prima facie case in its favour in respect of repudiation of the contract and in my view, the learned District Judge has also rightly held that the parties cannot go beyond the terms of the contract and respondents cannot be forced to proceed with the contract the stipulated period for which has already expired yielding only 17% of the work assigned under the said contract. I therefore hold that the respondents cannot be restrained from terminating the contract as sought by the appellant-contractor in the petition under Section 9 of the Act. The question is answered accordingly.
26. While parting with the order, it finds place to mention here that there is Clause No. 25.1.2 of the Special Conditions of Contract which inter alia prescribes that land for construction and approach roads and forest and environment clearance shall be provided by the employer. Moreover, under Clause No. 20.3.2 of the General Conditions of Contract, it is mentioned that within fourteen days after receipt by the Project Manager of any document requiring the Project Managers approval in accordance with GCC Sub-Clause 20.3.1, the Project Manager shall either return one copy thereof to the contractor with its approval endorsed thereon or shall notify the contractor in writing of its disapproval thereof and the reasons therefor and the modifications that the Project Manager proposes. Clause 7.1 of the General Conditions of Contract also refers to scope of works and supply by the employer as set forth in the Appendix to the contract agreement. In so far as the question whether the respondents have complied with the terms and conditions as contemplated in the said clauses or not, it is matter of evidence to be led before the arbitral tribunal and, therefore, these matters cannot be said to be open for agitation in an application under Section 9 of the Act, without concrete and reliable evidence having been adduced by the respective party. The contentions of the learned counsel for the appellant on these points cannot be accepted at this stage and are the subject matter of adjudication by the arbitral Tribunal.
27. For the reasons and discussion above, I do not find any merit in this appeal, which is liable to be dismissed outright at the threshold.
28. The appeal is dismissed summarily Costseasy the order dated 14-9-2011 appealed against is upheld.
29. Interim order dated 18-10-2011 passed by this Court is vacated.