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File photo of the Delhi High Court.
File photo of the Delhi High Court.

HC dismisses plea by HCC's invocation of bank guarantee by NHPC worth 214 cr

  • NHPC invited bids from pre-qualified bidders for turnkey execution of the 330 MW hydro-electric power plant
  • The bid was accepted on Jan 2009 and a contract was signed between the parties on March same year

NEW DELHI : The Delhi High Court on Tuesday dismissed an appeal filed by Hindustan Construction Co. Limited (HCC) against a single-judge bench order, seeking an injunction restraining National Hydro-Electric Power Corporation Limited from invoking or encashing any or all of its bank guarantees cumulatively worth 214.36 crore.

“In other words, encashment of the unconditional BGs will not result in irretrievable injury to the appellant/HCC requiring this Court to take a view different from the very well considered view taken by the learned Single Judge. The appeal is dismissed as being devoid of merit," the judgment reads.

NHPC being a Public Sector Undertaking involved in the setting up of and execution of hydro-electric power projects in India, invited bids in 2006 from pre-qualified bidders for turnkey execution of the 330 MW hydro-electric power plant on the Kishanganga River in Bandipora, Jammu and Kashmir.

Bid accepted, contract signed

The bid by HCC was accepted on 22nd January, 2009 and a contract was signed between the parties on 9 March, 2009 for the execution of the Kishanganga Project.

The scope of the work was defined along with other civil work. The work was to be completed by January, 2016. As part of its contractual obligations the appellant/HCC was required to furnish Performance Bank Guarantees, which it furnished.

The timeline for execution of the project was till 2016, however, when HCC failed to adhere to the same, NHPC invoked the bank guarantees in June 2020. The construction giant then claimed NHPC had committed fraud against it and approached the high court.

Senior Advocate Dayan Krishnan appearing for HCC keenly urged that the challenged judgement wrongly rejected the principle of proportionality and even if fraud was not disclosed in the making of the BGs, the conduct of the respondent/HCC disclosed fraudulent intent.

He added that the case of the HCC was covered under the two exceptions recognized by the courts and that the cumulative impact of all circumstances put together, was to shock the conscience of the court and thus, special equities existed in favour of the appellant.

Senior Advocate Maninder Acharya contended, on the other hand, that the Single Judge had rightly concluded that neither was there fraud, which in any case had to be of an egregious kind, nor were there any special equities made out in favour of the appellant/HCC.

It was pointed out that the communication between the parties and as reproduced in extenso in the challenged judgement, showed that the work had not been completed by the HCC.

“... The contract is not a concluded one. Neither has it been terminated. The liabilities are not crystallized. There were also several payments that had been made by the respondent/NHPC on behalf of the appellant/HCC. As pointed out by the learned Senior Counsel for the respondent/NHPC, though it had extended the DLP, the stand of the appellant/HCC in its communications has been that it had no finances to proceed to complete the pending work and the respondent/NHPC should pitch in with the money," the judgment said.

“It is, thus, clear that the respondent/NHPC may have to get the work completed from some other agency at the risk and cost of the appellant/HCC which justified the respondent/NHPC encashing the existing BGs.Suffice for our purposes that all the facts highlighted by the learned Senior Counsel for the appellant/HCC do not disclose special equities in favour of the appellant/HCC," it added.

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