Judgment:
*IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision:
8. h March, 2013 % + CS(OS) No.2737/2011 KROFTA ENGINEERING LTD. ..... Plaintiff Through: Mr. Akhil Sibal with Mr. Salil Seth & Mr. Debarshi Dutta, Advs. Versus HERMES PROPERTIES LTD. & ORS. ..... Respondents Through: Mr. Gyanendra Agarwal, Adv. for D-4. CORAM :HONBLE MR. JUSTICE RAJIV SAHAI ENDLAW RAJIV SAHAI ENDLAW, J 1.The plaintiff has sued for declaration that the invocation by the defendants of the Performance Bank Guarantee (PBG) dated 03.09.2008 is invalid, illegal, null and void and for permanent injunction restraining the defendants from taking any steps in pursuance to the said invocation. A decree for recovery of Rs.1,42,363/- along with interest at 12% per annum is also sought jointly and severally against the defendants.
2. Summons of the suit and notice of the application for interim relief were issued and vide ex parte ad-interim order dated 08.11.2011, on the condition of the plaintiff depositing an amount of Rs.9,00,000/- by way of an FDR in the name of the Registrar of this Court, the defendant No.4 Union Bank of India (UBI), Nehru Place Branch, New Delhi was restrained from remitting the amount of Bank Guarantee dated 03.09.2008 to the defendant No.3 Bank of Cyprus Public Company Ltd., Limassol (Lemesos).
3. The defendants No.1 Hermes Properties Ltd., Limassol, Cyprus and the defendant No.2 Velpa Trade, Bulgaria, were reported to be served by email. They were vide order dated 08.12.2012 also directed to be served through DHL courier and were so served but failed to appear and were proceeded against ex parte vide order dated 22.01.2013. Similarly, the defendant No.3 also failed to appear inspite of service and was also proceeded against ex parte. The defendant No.4 UBI has filed its written statement. The plaintiff led its ex parte evidence and the counsel for the plaintiff has been heard.
4. The counsel for the plaintiff has stated that the subject Bank Guarantee has since lapsed and thus the relief claimed of declaration has become infructuous. He, under instructions, further states that the plaintiff is not pressing for the relief of recovery of Rs.1,42,363/- which was earlier claimed towards charges incurred by the plaintiff for keeping the Bank Guarantee alive beyond the period for which it was required to be kept alive and at the asking of the defendants No.1 & 2. He has argued that thus the only question which remains for consideration in the present case is qua the amount of Rs.9,00,000/- which was got deposited in this Court as a condition for grant of interim order. Besides arguing on merits on the said aspect, the counsel has also contended that the defendants No.1 to 3 having failed to contest the suit, the FDR of Rs.9,00,000/- together with interest accrued thereon ought to be returned to the plaintiff.
5. The plaintiff had furnished the aforesaid PBG in terms of the order placed by the defendant No.1 on the plaintiff for supply of Effluent Treatment Plant (ETP) for the defendant No.2s paper mill in Bulgaria. The plaintiff in the ex parte evidence of its Managing Director has proved, that the defendants No.1&2 were entitled to invoke the said Bank Guarantee for payment of USD18,500, only if the plaintiff failed to rectify at its own costs any defects in the equipment due to faulty design, defective material and / or workmanship that may be discovered by the purchaser at any time during the defective liability period of 12 months after the erection of the goods or 18 months from the date of shipment of the goods; that the materials reached the defendants in December, 2008 and the installation thereof was completed prior to September, 2009; that the defendants No.1&2 delayed the commissioning of the plant and sought extension of the PBG which was to expire on 20.02.2010 and the plaintiff in good faith and as a gesture of goodwill extended the validity of the PBG successively to 05.05.2010, 05.08.2010, 05.02.2011, 05.05.2011, 05.08.2011 and 11.11.2011; that though the defective liability period had expired on 20.02.2010 and there was no faulty design or defective material or workmanship in the ETP supplied and no grievance with respect thereto was made but the defendants No.1&2 thereafter cited frivolous issues in operating the ETP; that the defendant No.2 had in fact failed to adhere to the inlet parameters of the ETP provided by the plaintiff and owing whereto the desired result of the finally treated water was not being achieved; that the plaintiff was not liable to change the goods owing to variation in inlet parameters by the defendants No.1&2; that the defendants No.1&2 desired further extension of the PBG and only because of refusal of the plaintiff to oblige the defendants No.1&2 was the PBG invoked as a threat; that the said invocation was thus for oblique reasons and not in terms of the Bank Guarantee; that the defendants No.1&2 had also never called upon the plaintiff to rectify the defects within the time provided therefor.
6. The aforesaid ex parte evidence of the plaintiff has gone unrebutted.
7. The concerned defendants having not contested the claim of the plaintiff, I have no reason to disbelieve the version of the plaintiff and as per which the invocation of the Bank Guarantee by the defendants was wrong and the defendants are found to be not entitled to the amount of the Bank Guarantee.
8. On enquiry, the counsel for the plaintiff has informed that the defendants No.1&2 have not initiated any proceedings for recovery of any amounts from the plaintiff.
9. The invocation of the Bank Guarantee by the defendants is thus found to suffer from a fraud of the egregious nature and without following the conditions prescribed for invocation of the Bank Guarantee.
10. The plaintiff is thus entitled to return of the FDR of Rs.9,00,000/- deposited in this Court as a condition for the interim relief granted to the plaintiff.
11. The suit is accordingly decreed, restraining the defendant No.4 UBI by a decree of payment injunction from making any payment to the defendant No.3 Bank of Cyprus Public Company Ltd., Limassol (Lemesos) in pursuance of the Bank Guarantee dated 03.09.2008 and by further restraining the defendants No.1&2 viz. Hermes Properties Ltd., Limassol, Cyprus and Velpa Trade, Bulgaria by a decree of permanent injunction from making any claim under the said Bank Guarantee.
12. Costs as per schedule.
13. Decree sheet be drawn up. RAJIV SAHAI ENDLAW, J MARCH 08 2013 gsr..