On September 17, 2024, the Delhi Tall Court conveyed a critical judgment within the case between Executive Common Venture Varsha, the appealing party, and Navayuga Van Oord JV, the respondent. The case centered on a major legally binding debate relating to the development of an external harbor for Extend Varsha by the Indian Naval force, and a challenged conjuring of Execution Bank Ensures (PBGs), Progress Bank Ensures (ABGs), and Maintenance Cash Bank Ensures (RBGs), producing to ₹633.73 crores.
Case Background
The debate emerged from a contract marked in 2017 between the Chief Common Venture Varsha, speaking to the Indian Naval force, and Navayuga Van Oord JV for the development of an external harbor at Extend Varsha, a maritime venture found southwest of Visakhapatnam, Andhra Pradesh. After issuing a delicate in November 2016, Navayuga Van Oord JV was announced the effective bidder, coming full circle in a contract being marked on December 19, 2017.
As portion of the contract, Navayuga Van Oord JV outfitted a few bank ensures, counting PBGs and ABGs, totaling over ₹633 crores. In any case, as the venture advanced, debate between the parties surfaced, especially around extend delays and neglected legally binding commitments, which inevitably driven to the end of the contract by the appealing party.
Key Legal Dispute
An important point of contention in the arbitration process was the appellant's attempt to make use of the bank guarantees that Navayuga Van Oord JV had provided. The appellant was barred by the Arbitral Tribunal from utilizing the bank guarantees until the arbitration process was finished in January 2024. Under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996, the Director General of Project Varsha, however, appealed this ruling in the Delhi High Court with the intention of reversing the tribunal's ruling and continuing to use the assurances.
On the other side, Mr. Saurav Agrawal, learned direct for Navayuga Van Oord JV, contended that uncommon values existed which avoided the conjuring of the bank ensures. The respondent kept up that the delays in completing the extend were to a great extent due to circumstances past their control, counting complications emerging from COVID-19. Additionally, the respondent had submitted an master report from IIT Madras, which recommended that the venture required more time than the initial plan, and claimed that conjuring the ensures
The Judgment
Judge C. Hari Shankar considered both arguments in his ruling, concentrating on the characteristics of the bank guarantees and the idea of "special equities" that would support limiting their use. The appellant's letters of invocation were examined by the court to see if the requirements for invoking the assurances were fulfilled.
The court upheld the Arbitral Tribunal’s decision to restrain the invocation of the bank guarantees, reasoning that the appellant had failed to meet the procedural requirements outlined in the guarantees themselves. Specifically, the court noted that the invocation letters did not comply with the terms of the guarantees, such as declaring the specific nature of the breach or making explicit that the amount claimed was due under the contract. This omission, according to the court, rendered the invocation legally untenable.
Conclusion
Furthermore, the court supported the Arbitral Tribunal’s finding that the respondent was entitled to protection under the principle of special equities. The court emphasized the financial burden that would befall Navayuga Van Oord JV if the bank guarantees were invoked, particularly in light of the COVID-19 pandemic’s impact on the construction industry and the respondent’s reliance on advance payments that had already been utilized for project-related expenses.
Click Here to: Download/View Related File
TAGS: Delhi High Court Director General Project Varsha Navayuga Van Oord JV arbitration dispute bank guarantees Section 17 Arbitration Act performance bank guarantee advance bank guarantee retention money bank guarantee construction contract
