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Court protects right of Jai Prakash-Hyundai in Satluj Hydro project

Written by: Staff

New Delhi, Mar 26 (UNI) The Delhi High Court has dismissed the appeal of the Satluj Jal Vidyut Nigam Ltd's (SJVNL) seeking encashment of bank guarantee given by the Jai Prakash Hyundai Consortium (JHC) due to delay in the construction of the 1500-MW Nathpa Jhakri Hydroelectric project in Himachal Pradesh.

While dismissing the appeal, a division bench of Justice Vijender Jain and Justice Rekha Sharma said that the JHC was entitled to protection by way of injunction against encashment of bank guarantees, ie, performance guarantees and guarantees in lieu of the retention money to the tune of Rs 75 crore in order to effect recovery of its alleged claim of Rs 53.12 crore, till the settlement of the claims of the contractor by the Arbitrary Tribunal.

''Faith and reliance upon the integrity of standby payment is vital for international as well as national commercial activities. A non-interventionist approach has been adopted by the Single Judge in its order,'' the Judges said.

While setting aside the order of the single Judge directing JHC, the joint venture, to furnish fresh bank guarantees of Rs 53.60 crore for securing adhoc payments, the Bench also said that the court cannot direct for the signing of a new contract between the parties which they never agreed during the subsistence of the main contract.

''Directing the contractor- JHC, to furnish fresh bank guarantees to secure ad hoc payments, in our view, amounts to creating a new contract, not permissible in the law as it is neither in the ambit of the main contract nor was agreed upon between the parties...,'' the court said in the order.

The SJVNL had filed an appeal against the single Judge order that had restrained it from invoking the existing bank guarantee given by JHC towards performance security and retention money for the purpose of recovery of outstanding ad hoc amount from it.

The Judge in his impugned order had directed that SJVNL's interest could be safeguarded to the extent of the outstanding amount of the ad hoc payment by asking the JHC to furnish a new bank guarantee of the equivalent amount in the SJVNL's favour till the settlement of the disputes by the tribunal.

However, the JHC had also filed another appeal against furnishing a new bank guarantee of the equivalent amount in favour of SJVNL.

The JHC had filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 for an interim order restraining SJVNL from encashing the bank guarantee.

The JHC had in June 1993 entered into a joint venture contract with SJVNL for construction of the 1500-MW Nathpa Jhakri ydroelectric project in Himachal Pradesh. The World Bank had also funded the project to a large extent.

It was alleged that on account of delay attributable to SJVNL, JHC had filed a claim for more than Rs 36 crore.


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