Saturday, April 20, 2024

Delhi HC Stays the Invocation of Bank Guarantees

The Delhi HC has granted interim stay on the invocation and encashment of eight bank guarantees of M/s Halliburton Offshore Services Inc. which expressed its inability to perform the contract with Vedanta Limited, due to the unavoidable circumstances emerged with the outbreak of Corona Virus COVID-19 Pandemic and subsequent Nationwide Lockdown.

Justice C. Hari Shankar was hearing an application under Section 9 of the Arbitration and Conciliation Act, 1996, seeking interim protection, by way of restraint against respondent/Vedanta Limited, injuncting the said respondent from invoking or encashing eight bank guarantees, five of which are due to expire on 30th June, 2020, and the remaining three on 24th November, 2020, issued by the ICICI Bank, under instruction of Petitioner/ M/s Halliburton Offshore Services Inc. 

The Court observed that “The countrywide lockdown, which came into place on 24th March, 2020 was, in my opinion, prima facie in the nature of force majeure. Such a lockdown is unprecedented, and was incapable of having been predicted either by the respondent or by the petitioner.”

Senior Advocate Mr. Sandeep Sethi appearing for Halliburton submitted before the Court that till the date of clamping of the lockdown, on 22nd March, 2020, his client was in the process of proceeding with the project, and that, had the lockdown not be imposed, the project might have been completed by 31st March, 2020.

The bench while allowing the application stated, Prima facie, in my view, special equities do exist, as would justify grant of the prayer, of the petitioner, to injunct the respondent from invoking the bank guarantees of the petitioner, forming subject matter of these proceedings, till the expiry of a period of one week from 3rd May, 2020, till which date the lockdown has been imposed.”

Mr. Sethi informed the Court that Vedanta had extended the project deadline earlier till 31st March 2020. Whereas, a substantial portion of the project was completed prior to the deadline.

However, Senior Advocate Dr. Abhishek Manu Singhavi appearing for Vedanta, contended that “in law, the only ground on which invocation of a bank guarantee can be stayed, is the existence of egregious fraud” relying on the judgment of U. P. Cooperative Federation Ltd v. Singh Consultants and Engineers (P) Ltd and Svenska Handelsbanken v. Indian Charge Chrome.

Whereas, The Court while granting the interim relief stated in its order that, “I am convinced, prima facie, that, in view of the submission, of the petitioner, that it was actually working on the project till the imposition of lockdown on 22nd March, 2020, or at least shortly prior thereto, and in view of the sudden and emergent imposition of lockdown, the interests of justice would justify an ad interim injunction, restraining invocation or encashment of the aforesaid eight bank guarantees, till the expiry of exactly one week from 3rd May, 2020, till which date the lockdown stands presently extended.”

The Court further added that as to whether this interim injunction merits continuance, thereafter, or not, would be examined on the next date of hearing.

-India Legal Bureau


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