DLF UNIVERSAL LIMITED Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) THE short facts of the case are that the appellant is engaged in the business of manufacture of boilers and commissioning of DG Set. Earlier the appellant was known as M/s.DLF Industries Limited, but the said company has merged with the appellant (for the sake of convenience M/s.DLF Industries Limited, who was party to the contract in question, will be referred to as 'the Appellant/DLF'). On 27.2.1995, 1.3.1995 and 3.3.1995 the agreements were entered into between the appellant and M/s.Atul Limited respondent No.2 herein for design, supply and erection of TG Set of 15 MW at the site of respondent No.2 for sum of Rs.135 lac + Rs.794 lac + 71 lac. THEreafter, on 5.3.1995, a consolidated agreement was entered into between respondent No.2 and the appellant for successful operation of the project on turn-key basis amounting to Rs.10 crore in furtherance to the above referred three agreements. As per the agreement the bank guarantee was to be furnished by the appellant in favour of respondent No.2 in lieu of the advance to the appellant by the respondent for design/engineering and supply contract. THE bank guarantee furnished were of; (i) Rs.65.31 lac of Central Bank of India; (ii) Rs.13.15 lac of Central Bank of India; (iii) Rs.7.10 lac to Hong Kong Sanghai Bank Corporation Limited (hereinafter referred to as 'HSBC' for short). On 29.7.1993, it was agreed that SBI- respondent No.1 herein was to render finance to respondent for the project and, therefore, it was agreed to execute a tripartite agreement between SBI, Atul and DLF (for the sake of convenience, hereinafter referred to the appellant shall be referred to as 'DLF' and respondent No.2 shall be referred to as 'Atul'). On 29.3.1996 the letters were issued by SBI to DLF for rendering lease assistance to Atul and novatio of the agreement and thereafter, on April 30, 1996, the agreement was entered into between the Atul and DLF, which, inter alia, provided that Atul shall be empowered to enforce their rights equally and severally against any money payable or retained in all the three agreement, which were earlier entered into and it was also provided that the parties to the novatio of the original three agreements favouring SBI and as per Clause No.1.7, it was specifically provided that novatio of the original three agreements favouring SBI and signing of three MOUs between Atul, SBI and DLF have been done at the request of Atul in view of the leasing arrangement entered into by them with SBI and any commercial implication of DLF as a consequence of such leasing shall be on account of Atul Limited is not due to any default or lapse on the part of DLF. On 5.6.1996 three MOUs were entered into between Atul, SBI and DLF, which, inter alia, provides for novatio between the parties keeping/retaining all terms and conditions unaltered and it also specifically provided that Atul shall be entitled to call upon SBI to pursue and enforce the terms and conditions of the original agreement under novatio and it was also provided that additionally Atul was authorized to pursue and enforce the terms and conditions of the original agreement under novatio against DLF. On 19.2.1997, the minutes were drawn between Atul and DLF for enhancement of the contract price of Rs.1,157.50 lac and the consequential alteration in the schedule of implementation.

(2.) IT appears that thereafter as per the DLF, it had announced the execution of contract with all policies and submitted different drawings, load data, etc., as required under the design and engineering contract and it had placed various purchase orders for various equipments and material to procure them from Engineers, Suppliers as well as foreign importers. As per the DLF in the course of execution of the contract, Atul intimated the DLF that it was arranging necessary fund for being remitted to the DLF towards the contract. As per DLF it had started making various dispatches of the equipments and material was lying ready with its Sub-vendors after making to the vendors as per the terms of agreement with its sub-vendors. Various invoices were raised by DLF on Atul for discharge of these items required due to execution of turbine contract. As per DLF, ultimately separate purchase orders were issued in favour of SBI as required by Atul and SBI released adhoc finance for Rs.61 lac to get the imported material clear from the contract in question. The payment was directly released by SBI in the name of RBI Account Commissioner of Customs Account of DLF. As per DLF despite the fact that SBI had become the purchaser, DLF had to submit the invoices raised on SBI to Atul, who were to certify and forward the same to SBI for releasing the payment, but on account of various delays in releasing the payment by SBI and Atul, DLF was not able to release imported turbine components. There were various delays in releasing the payment. Further, since as per the agreement between the parties for raising the contract price by Rs.2 crore and more, Atul required DLF to execute further bank guarantee of Rs.1.15 crore and accordingly the said bank guarantee was also furnished on 1.5.1997 of ABN Amro Bank in favour of Atul. Accordingly all four bank guarantees became operative.

(3.) IT appears that thereafter the proceedings were conducted before the Arbitrators and Justice J.K. Mehra (Retd) awarded claim of DLF amounting to Rs.52,59,255/- with interest at the rate of 18% p.a., from 21.2.1998 till the date of the award. IT was further found that Atul was not entitled for any counter-claim being barred by limitation. The bank guarantees were ordered to be realised, which were not encashed and the interest was awarded at the rate of 18% p.a., for the alleged delay in encashment of bank guarantee plus interest at the rate of 12% p.a., was awarded till actual payment as per the award. As against the same, the majority view of the Arbitrators, Arbitral Tribunal comprising of Justice B.J. Divan (Retd), Presiding Arbitrator, Justice S.B. Majmudar (Retd.) , Co-Arbitrator directed the claimant to pay Atul a net amount of Rs.3,78,30,197/- with interest at the rate of 10% p.a., till payment, out of which an amount of Rs.1,20,70,955/- available in the ESCRO Account was to be paid by the Presiding arbitrator to Atul and the balance of the aggregated awarded of Rs.2,57,59,242/- was ordered to be paid by the DLF to Atul with simple running interest at the rate of 10% p.a., from 1.4.2005 till actual payment.