IN THE HIGH COURT OF SINDH AT KARACHI
SUIT NO.857 OF 2007
Before Mr. Justice Gulzar Ahmed.
O R D E R
Dates of hearing : 03.12.2008, 29.01.2009,
03.02.2009, 20.02.2009,
24.02.2009, 18.05.2009
& 25.5.2009.
Plaintiff through : Mr. Farough Naseem, Advocate.
Defendants 1-3 through : Mr. Nadeem Akhtar, Advocate.
Defendant No.4 through : Mr. Arshad Tayab Ali, Advocate.
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GULZAR AHMED, J.:- Plaintiff has filed the suit under Section 20 of Arbitration Act, 1940 with an application under clause 4 of the Second Schedule read with Section 41 of Arbitration Act, 1940 (CMA No.6302 of 2007) for restraining the defendants from encashing the three bank guarantees namely Bank Guarantee No. 35/03/2005 dated 26.2.2005 for Rs. 18,000,000/-, LG No. 195/03/2006 dated 20.12.2006 for Rs.80,000,000/- and G No.0110BGO001207 dated 05.5.2007 for Rs.35,000,000/-. Through an interim order dated 11.7.2007 the defendants were restrained from encashing the said three bank guarantees. Through a consent order dated 21.9.2007 the main suit was disposed off by making reference of dispute between the parties to Hon’ble Mr. Justice (R) Ajmal Mian, the former Chief Justice of Pakistan as a sole Arbitrator. Learned counsel for the parties, however, pressed to have the above noted CMA heard and decided by this Court. Defendants 1 to 3 have filed counter affidavit to the said CMA to which the plaintiff has filed rejoinder affidavit.
2. Learned counsel for the parties argued the said CMA extensively, cited case law and concluded oral arguments on 25.5.2009. The counsel for the plaintiff as well as defendants 1 to 3 requested for filing of written synopsis for which they were allowed time uptil 15.6.2009, whereupon the matter was to stand reserved for announcement of order. It appears from the record that the counsel for defendants 1 to 3 has filed on 10.6.2009 written synopsis with photocopies of case law. No written synopsis has been filed by the counsel for the plaintiff within the time allowed or even thereafter until the writing of this order.
3. Mr. Farough Naseem, the learned counsel for the plaintiff has contended that plaintiff has submitted pre bid bank guarantee in the sum of Rs. 18 million for the construction of six Lane Karachi-Hyderabad Motorway in place of existing Four Lane Super Highway known as M-9 on Build, Operate and Transfer (BOT) basis and that as a condition for collection of toll, plaintiff has further submitted two bank guarantees one of Rs.80 million and the other of Rs.35 million. He has contended that as per concession agreement dated 26.9.2006 signed between plaintiff and defendant No.2 for the said project, plaintiff was to arrange total finances and to achieve financial close within 150 days which time was extended uptil 13.6.2007. He contended that plaintiff did achieve the financial close on 13.6.2007 whereafter performance bond was vetted and returned by defendant No.2 and therefore, not only the plaintiff has achieved the financial close on 13.6.2007 as per concession agreement but such fact stood admitted by defendant No.2 when it vetted and returned the performance bond to the plaintiff and therefore the defendant’s action of seeking encashment of said three bank guarantees is malafide and illegal as no cause for such encashment has accrued to the plaintiff. In support of his submissions he relied upon the cases of COLLECTOR, CENTRAL EXCISE AND LAND CUSTOMS V/S RAHM DIN (1987 SCMR 1840), ROYAL BOOK COMPANY V/S JOHN WRIGHT & SONS LTD.(1989 MLD 1191), BINYAMEEN V/S HAKIM (1996 SCMR 336), STATE V/S ZIA-UR-RAHMAN (PLD 1973 SC 49), MUHAMMAD YOUSUF V/S UROOJ (PRIVATE) LTD. (PLD 2003 Karachi 16) and Mst. AZEEMUN NISA BEGUM V/S ALI MUHAMMAD(PLD 1990 SC 382).
4. On the other hand, Mr. Nadeem Akhtar, learned counsel for defendants 1 to 3 has contended that defendant No.2 is entitled to encash the bank guarantees on the terms stated in the bank guarantees itself and that in any case plaintiff has failed to achieve the financial close on 13.6.2007 which entitles the defendant No.2 to the encashment of three bank guarantees in terms of the concession agreement signed between the plaintiff and defendant No.2. He also contended that merely vetting of performance bond will not amount either to admitting that financial close was achieved on 13.6.2007 or that such condition was waived by the defendants. In support of his submissions he has relied upon the cases of UNITED BANK LIMITED V/S PAKISTAN INDUSTRIAL CREDIT AND INVESTMENT CORPORATION LTD.(PLD 2002 SC 1100), M/S NATIONAL CONSTRUCTION LTD. V/S AIWAN-E-IQBAL AUTHORITY (PLD 1994 SC 311), SHIPYARD K. DAMEN INTERNATIONAL V/S KARACHI SHIPYARD AND ENGINEERING WORKS LTD. (PLD 2003 SC 191), SHAHENSHAH SHAHALAM CO-OPERATIVE HOUSE BUILDING SOCIETY LTD, KARACHI AND ANOTHER V/S HOUSE BUILDING FINANCE CORPORATION (PLD 1972 Karachi 178), OCEAN INDUSTRIES LTD. V/S INDUSTRIAL DEVELOPMENT BANK (PLD 1966 SC 738) and MANZOOR TEXTILE MILLS LTD, V/S SPECIAL JUDGE BANKING, LAHORE (1996 CLC 422).
5. The facts of the case in nut shell are that defendant No.2 i.e. National Highway Authority published in newspapers in or about 07.7.2004 seeking expression of interest for construction and operation of Karachi-Hyderabad Partial Access Controlled Motorway (M-9) on Build, Operate and Transfer (BOT) basis in place of existing four Lane Karachi-Hyderabad Super Highway into six Lane Motorway facility.
6. Plaintiff submitted to defendant No.2 a pre-bid bank guarantee of Rs. 18 million of defendant No.5. The plaintiff seems to have submitted its bid and the defendant No.2 awarded letter of intent to the plaintiff as a best bidder. The defendant No.2 also issued to the plaintiff letter of support confirming the cost of project and other parameters. Negotiations were held for the finalization of the concession agreement and ultimately concession agreement dated 26.9.2006 for the said project was signed between plaintiff and defendant No.2. The plaintiff started toll collection from 25.12.2006 and as a security for collection of toll, plaintiff submitted to defendant No.2 two bank guarantees; one of Rs.80 million of defendant No.4 and the other of Rs. 35 million of defendant No.5. The total project cost was of Rs. 6,318,000,000/- in which equity portion of plaintiff was Rs.1,895,000,000/- and remaining amount of Rs.4,423,000,000/- was to be raised by the plaintiff from the financial institutions under firm commitment. Under the concession agreement, plaintiff was allowed six months time for ensuring financial close confirming that it has arranged the availability of the funds of project cost. The time for obtaining of financial close was extended on the request of plaintiff and ultimately plaintiff was allowed to achieve financial close on or before 13.6.2007. It is alleged that plaintiff sent to defendant No. 2 through its letter dated 11.6.2007 format of agreements between plaintiff and financiers banks for approval of the defendant No.2 and on 13.6.2007 the plaintiff signed financial agreements with the consortium of banks and forwarded the executed agreements to defendant No.2 confirming financial close with the firm commitment/confirmation of arranging Rs.4,423,000,000/-. It is alleged that pursuant to clause 30 of concession agreement plaintiff submitted to defendant No.2 performance bond equivalent 5% of project cost which defendant No.2 through its letter dated 19.6.2007 forwarded to the plaintiff. It is alleged that suddenly on 21.6.2007 defendant No.2 through its two letters of even date addressed to defendants 4&5 sought encashment of bank guarantees. The plaintiff on being informed by its banks of the fact of encashment of bank guarantees, the defendant No.2 on enquiry by the plaintiff informed that the bank guarantees were encashed since they were to expire on 22.6.2007. The plaintiff agreed to submit a renewal of expired bank guarantees. It is alleged that defendant No.2 sought excuses for terminating/revoking concession agreement and ultimately in the meeting with the officers of defendant No.2 on 26.6.2007 the plaintiff Chief Executive Officer was informed that since the plaintiff has failed to achieve financial close, the plaintiff should not submit the performance bond. The defendant No.2 did not accept the plea of plaintiff that it has duly achieved the financial close and ultimately without any reason the defendant No.2 vide its two letters both dated 07.7.2007 informed the plaintiff that since the financial close has not been approved by the defendant No.2, the plaintiff should hand over to the defendant No.2 the toll plazas and further defendant No.2 vide its three letters all dated 09.7.2007 addressed to defendants 4 & 5 sought encashment of bank guarantees. It is alleged that such action of defendant No.2 is completely malafide, illegal, without jurisdiction, void ab initio and the defendants be restrained from encashing the bank guarantees.
7. It is an admitted position on the record that the Concession Agreement dated 26.9.2006 was signed between plaintiff and defendant No.2 and the plaintiff was also handed over the toll plazas for collection of toll on 25.12.2006 and that until 08.7.2007 when the possession of toll plazas was taken over from the plaintiff by defendant No.2, plaintiff has collected as toll an amount of about Rs.135 million. The plaintiff alleges that it has spent Rs.234.9 million on the project which fact however is disputed by defendant No.2. To substantiate the plea of expending the money on the project, the plaintiff has filed with the rejoinder affidavit two documents namely annexure R/7 and R/8 which are statements showing the item of work and the expended sum. The question whether such expenses were actually incurred as shown in the two statements can only be determined after the evidence supporting such expenses is led by the plaintiff. The question of allowing the encashment of bank guarantees or not is not to be influenced by the fact of collection of toll by the plaintiff and the alleged money expended by the plaintiff on the project rather this question will squarely be determined on the construction of stipulations of the bank guarantees furnished by the plaintiff.
8. Time and again the question relating to encashment of bank guarantee has been coming up before the Hon’ble Supreme Court and it has constantly been observed that the contract of bank guarantee is independent contract in terms of section 126 of the Contract Act 1872 from that of the contract between the employer and the contractor and that in the bank guarantee the principal debtor is the contractor while the bank is a surety and beneficiary is the employer and the contract of bank guarantee has to be enforced on the terms stipulated in the bank guarantee itself and that the bank must honour the guarantee notwithstanding any dispute between the employer and the contractor on the contract made between them. Reference in this respect is made to the case of M/S NATIONAL CONSTRUCTION Company LTD. V/S AIWAN-E-IQBAL AUTHORITY (PLD 1994 SC 311), UNITED BANK LIMITED V/S PAKISTAN INDUSTRIAL CREDIT AND INVESTMENT CORPORATION LTD.(PLD 2002 SC 1100) and SHIPYARD K. DAMEN INTERNATIONAL V/S KARACHI SHIPYARD AND ENGINEERING WORKS LTD. (PLD 2003 SC 191)
9. Looking at the state of law as laid down by Hon’ble Supreme Court in respect of encashment of bank guarantee, I have perused three bank guarantees furnished by the plaintiff to the defendant No.2. The pre bid bank guarantee of Rs.18 contains the following stipulation:
“At the request of the Bidder we hereby open and establish the irrevocable and unconditional Guarantee for an amount up to Pak.Rs.18,000,000/= (Pakistani Rupees Eighteen Million only) payable by us to you forthwith upon the happening of any of the following events:
1. If the Bidder partially or wholly withdraws or suspense the Bid or amends or modifies the same without the prior approval in writing of the NHA: or
2. If the Bidder fails or refuses to execute the concession agreement with the NHA in terms acceptable to the NHA on or before 25.10.2005; or
3. If the Bidder, having executed/ signed the concession agreements fails or refuses to provide a construction phase bond in accordance with the requirement of such an agreement within days of such execution /signature.
We, Askari Commercial Bank Limited, M.A.Jinnah Road, Quetta having its Registered Head Office at AWT Plaza, The Mall, Rawalpindi do hereby guarantee irrevocably and unconditionally to pay to you forthwith, without prior course to the Bidder to the extent of Pak. Rs.18,000,000/= (Pakistani Rupees Eighteen Million only) immediately upon receipt by us of your first written demand, which shall only state that the supplier has failed to comply with the requirements of the Brief. It is agreed that any such demand made hereunder by you shall be conclusive evidence of the Bidder’s failure to comply with or fulfill the requirements of the Brief as set out above. We shall at all times be bound on the first written demand of the NHA to pay the NHA forthwith the amount hereby guaranteed until we are expressly released and discharged in writing by the NHA from the liabilities/ obligations hereby guaranteed.”
This bank guarantee is admitted to have been extended upto 21.7.2007.
10. The toll collection bank guarantee of Rs.80 million contains the following stipulation:
We, the M/s Askari Commercial Bank Ltd., M.A.Jinnah Road, Quetta having its Registered Head Office at AWT Plaza, The Mall, Rawalpindi. Cantt. Incorporated under Banking Companies Act 1962 as instructed by the company, agree unconditionally and irrevocably without recourse to guarantee as primary obligator and not as surety merely, the payment to The National Highway Authority (‘NHA’) on his first demand without whatsoever right or obligation on our part and without his first claim to the Company, in an amount not exceeding Rs. 80,000,000/- (Rupees Eighty Million only) in the event that obligations expressed in the said Clause of the above mentioned Agreement have not been fulfilled by the company giving the right of claim to the NHA for recovery of the whole or part of the Toll Money from the Company under the Agreement.
We further agree that no change or addition to or other modification of the terms of the Agreement or of Works to be performed there under or of any of the Contract documents which may be made between the NHA and Company, shall in any way release us from any liability under this guarantee, and we hereby waive notice of any such change, addition or modification.”
This bank guarantee is also admitted to have been extended upto 22.9.2009.
11. The second toll collection bank guarantee of Rs. 35 million contains the following stipulation:
“We, Faysal Bank Ltd., Head Office & Main Branch, Shahrah-e-Faisal, Karachi as instructed by the company, agree unconditionally and irrevocably without recourse to guarantee as primary obligator and not as, surety merely, the payment to “the National Highway Authority” on its first demand without whatsoever right of objection on our part and without his first claim to the Company in an amount not exceeding Rs. 35,000,000/- (Pak Rupees Thirty Five Million Only) in the event that obligations expressed in clause 24.4 of the above mentioned Agreement have not been fulfilled by the company giving the right of claim to the NHA for recovery of the whole or part of the Toll money from the Company under the Agreement.
We further agree that no change or addition to or other modification of the terms of the Agreement/contract or of Works to be performed there under or of any of the Contract documents which may be made between the NHA and the Company, shall in any way release us from any liability under this guarantee, and we hereby waive notice of such change, addition or modification.
The liability under this guarantee is restricted to Pak RS.35,000,000/- (rupees Thirty Five million only) and is valid upto 22.6.2007. Any claim under this guarantee should be presented to us on or before 22.6.2007 after which the bank shall be released from all its liabilities and the guarantee shall automatically become null and void whether or nor the original guarantee is returned to us.”
12. Perusal of the three bank guarantees as noted above, sufficiently show that the banks are under obligation to make payment to the defendant No.2 on its demand the guarantee amount mentioned in the three guarantees without recourse to the contractor and that the demand of the defendant No.2, so expressed, will be conclusive against the bank that the contractor has failed to fulfill his obligations under the stipulations made in the contract of guarantee. Admittedly, the defendant No.2 has sought encashment of toll bank guarantee of Rs.35 million and Rs.18 millions by its two letters both dated 21.6.2007 addressed to the bank and as admitted in para 38 of the plaint, the defendant No.2 through its three letters dated 09.7.2007 addressed to banks has again sought encashment of bank guarantees. The very fact that the defendant No.2 has sought encashment of bank guarantees in itself is sufficient for the banks to meet their obligations under the guarantees and to make the payment of the guaranteed sum to the defendant No.2. The letter of encashment of bank guarantee dated 21.6.2007 was within the time when the bank guarantees for the toll collection were in force and when the second demand for encashment of bank guarantee was made through letter dated 09.7.2007 pre bid guarantee of Rs. 18 million so also the toll collection guarantee of Rs. 80 million was also in force.
13. Learned counsel for the plaintiff has submitted that the plaintiff has met his obligation under the guarantees so also the concession agreement and achieved the financial close on the stipulated date that is 13.6.2007 and there is no occasion with the defendant No.2 to encash the bank guarantee. This submission of the learned counsel for the plaintiff was seriously opposed by the learned counsel for defendant No.2, who contended that the plaintiff in the first place did not meet the condition stipulated in the clause 31.1.1.(c) which requires the plaintiff to submit the documents of financial plan at least 15 days before the financial close and secondly the Musharka Agreement dated 13.6.2007 between plaintiff and the banks sent by the plaintiff to defendant No.2 in itself is an incomplete document which does not show that the plaintiff has achieved the financial close and that it has become effective. There was no denial from the side of the plaintiff of non-compliance of clause 31.1.1(c). The defendant No.2 has filed copies of financial documents sent by the plaintiff through its letter dated 12.6.2007 which are in the nature of draft and all the annexures and schedules of such draft are blank documents which fact is not controverted by the plaintiff in its rejoinder affidavit. Immediately after sending of draft and incomplete financial plan, the plaintiff through its letter dated 13.6.2007 informed the defendant No.2 that it has signed the financial agreement with the lenders within provided time frame and pursuant to clause 31.1.1.(b) of the concession agreement sent a signed agreement between the plaintiff and the lenders to defendant No.2 for its perusal and record. Learned counsel for the plaintiff has contended that by providing to defendant No.2 the signed agreement between plaintiff and its lenders on 13.6.2007 was sufficient for the plaintiff to establish that it has achieved the financial close in terms of concession agreement and that in case any thing was found lacking, or deficient in the signed financial documents, the defendant No.2 either ought to have given notice to plaintiff in terms of clause 25.1.2 specifying the default and requiring the plaintiff to remedy the said default within ninety days and that in any case there cannot be application of clause 24.2.2 of the concession agreement providing for its lapsing as the documents for achieving the financial close were given by plaintiff to defendant No.2 within time frame of concession agreement and that clause 24.2.2 of concession agreement which provides for lapsing of agreement has to be read along with clause 25.1.1(a) which provides for termination of agreement by defendant No.2 as a matter of right as the term lapsed and termination in the agreement means one and the same thing. He has further contended that the concession agreement did not require the plaintiff to obtain the approval of defendant No.2 of the financial close as no sooner the documents of financial close are delivered to defendant No.2, the financial close is assumed to have been achieved.
14. I have gone through the relevant clauses of concession agreement dated 26.9.2006. Financial Close is defined in the said agreement in the following words:
“Financial Close – means the time not accruing after the date stated in the Sub-Clause 21.1.2 by which the Financial Agreements entered into with the Lenders have been executed and become effective.”
15. It is admitted fact that the plaintiff was required to achieve the Financial Close within 150 days of the Effective Date that is the date of signing of Concession Agreement. It is also admitted fact that the plaintiff could not achieve the Financial Close within 150 days and at its request time was twice extended finally upto 13.6.2007 for achieving the Financial Close. Now, on 13.6.2007, plaintiff did submit to the defendant No.2 Financial Agreements with its Lenders. The question is whether such Financial Agreements made between the plaintiff and its Lenders were at all effective as provided in definition of term Financial Close in the Concession Agreement. The defendant No.2 in para 15 of its counter affidavit has alleged that there were forty conditions in the Financial Agreement which fact is not disputed in the rejoinder affidavit filed by the plaintiff. Such Financial Agreement submitted by the plaintiff to the defendant No.2 prima facie do not appear to be the effective Financial Agreements as in order they become effective the Musharka Agreement dated 13.6.2007 signed between the plaintiff and its Lenders provides for fulfilling conditions precedent as contained in Schedule ‘C’ which runs into forty items including the items of amendment of Concession Agreement itself. There is nothing on the record to show that any amendment in the Concession Agreement was proposed by the plaintiff to defendant No.2 nor is there anything to show that the defendant No.2 has agreed to amend the Concession Agreement. Musharka Agreement provides that until the condition precedent is fulfilled the plaintiff will not issue contribution request. The forty items of condition precedent contained in Schedule ‘C’ of the Musharka Agreement seem to be onerous and most of them apparently are wanting implementation including raising of plaintiff authorized capital to Pak.Rs. 2 billion and that the Initial Equity has been subscribed and paid up in full by Sponsors in the sum of Rs. 1,896,000,000/-. Though Project Fund Agreement is attached with the Musharka Agreement under which the Sponsors are required to contribute Initial Equity in the sum mentioned above and such Initial Equity has been distributed amongst seven Sponsors but four of the Sponsors have not signed the said agreement. In terms of definition Clause of Musharka Agreement, the Musharka commencement date is the date not latter than 90 days beginning from the date of its signing by which date condition precedent must stand satisfied or waived in accordance with the provision of the Musharka Agreement. The letter dated 13.6.2007 of the Lender Banks neither says that condition precedent have been fulfilled or waived and that the plaintiff has become entitled to issue contribution request. No such thing is mentioned in the said letter. The Musharka Agreement provides for Musharka commencement date and there is nothing in the Musharka Agreement providing for its date of effectiveness. Therefore, the term “effective” used in the banks letter dated 13.6.2007 appears to be of no consequences and does not fulfill the condition of Musharka commencement date. The submissions of learned counsel for the plaintiff that by mere filing of Financial Agreements on 13.6.2007, the plaintiff has achieved the Financial Close in the circumstances as noted above prima facie is not correct for the reasons that the Financial Agreements filed by the plaintiff with the defendant No.2 were not in the first place complete documents and secondly which is more important that they were not effective by their own terms but provided for their commencement conditions which were wanting implementation and thus were not effective in terms of definition of Financial Close as given in the Concession Agreement.
16. The submission of learned counsel for the plaintiff that in view of the fact that the plaintiff has submitted the documents of Financial Agreement and achieved the Financial Close on 13.6.2007, the defendant No.2 could not have invoked the provision of clause 24.2.2(i) rather the provision of clause 25.1.1 were attracted to the case and defendant No.2 ought to have given notice of ninety days to the plaintiff for remedying the default in the Financial Agreements in terms of clause 25.1.2. Clause 24.2.2 is as follows:
“ 24.2.2. In the event that the Financial Close cannot be achieved by the company within the period specified above in 24.2.1, and/or any extended period then the following shall be happen:
(i) The Agreement shall lapse;
(ii) Within thirty (30) days of the lapse of this Agreement the Company shall return to NHA the possession of the Concession Area and the Works;
(iii) Neither party will have nay recourse to the other except as specified in (iv) below;
(iv) Bid Security of the company shall be forfeited.”
17. Clauses 25.1.1 and 25.1.2 of the Concession Agreement are as follows:
“25.1.1 The following shall be the events of default on the part of company, giving the NHA the right to terminate this Agreement in the manner stated in Sub-Clause 25.1.2:
(a) The company fails to achieve Financial Close within 150 days (Excluding one month grace period – under prior intimation to NHA) after the Effective Date.
(b) The company without reasonable cause fails to commence the construction Phase of the Works within the period specified hereinabove.
(c) A competent court orders winding up of the Company or the Company’s shareholders in general meeting adopt a resolution of winding up of the Company (except for the purpose of reconstruction or amalgamation not involving the realization of assets in which the interests of creditors are protected);
(d) The Company goes into liquidation or a receiver is appointed on the assets of the company or the Company makes an assignment for the benefit of or enters into arrangement or comp0osition with its creditors or stops payment or is unable to pay its debts; decree is passed against Company, execution or attachment is levied against the substantial portion of the Company’s assets.
(e) Company, defaults under financing Agreements and fails in making payments to the Lenders as agreed and the Lenders have approached the NHA in the manner stated in this Agreement;
(f) Initial Sponsors fail to maintain in the aggregate at least 51% shareholding in the Company through the initial seven (7) years the Concession Period.
(g) Company fails to provide any Bond under Clause 30 of this agreement.
(h) Company fails to keep proper books of account, default in maintaining the accounts as it is required to maintain under this agreement and/or fails to allow their examination or provide the information in this regard to NHA as per terms of this agreement.
(i) Company fails to appoint project engineer and set up special and separate operations and maintenance units as per terms of this agreement.
(j) Company fails to carry out periodic maintenance (Overlays/Structural Overlays) as per specified roughness criteria.
(k) Company charges toll rates in excess of those prescribed in Appendix 2(b) of this agreement.
(l) Company fails to carry out the audit of its financial statements and other various accounts as prescribed in the Agreement.
25.1.2 The NHA Shall give notice in writing to the Company specifying the default and requiring the Company to remedy the said default within 90 (ninety) days from the date of the notice or such further period as the NHA and the Company may mutually agree on. If the Company fails to remedy such default within the stipulated period the NHA may terminate this Agreement by serving upon the Company written notice of 15 (fifteen0 days to this effect.”
18. On bare perusal of the clauses as noted above, clause 24.2.2 becomes effective when Financial Close cannot be achieved by the company within the period specified in clause 24.2.1 and/or any extended period. Clause 24.2.1 provides that company shall achieve the Financial Close within five months excluding one month grace period from the Effective Date or any extended period in accordance with this agreement. The clause 25.1.1 provides the events of default on the part of company on which the defendant No.2 will have the right to terminate the agreement in the manner stated in the clause 25.1.2 and one of the events of default is the company fails to achieve the Financial Close within 150 days (excluding one month grace period – under prior intimation to NHA) after the Effective Date. On bare reading of two clauses one of 24.2.2 and 25.1.1, they both seem to apparently have different dimensions. Clause 24.2.2 becomes operative when it becomes apparent to defendant No.2 that the company cannot achieve the Financial Close within the period of five months and one month grace period and the extended period. The clause 25.1.1 becomes operative when company fails to achieve Financial Close within 150 days excluding one month grace period after the Effective Date. On bare reading of the two clauses and looking to the admitted facts of the case, the plaintiff was granted the grace period of one month and further 80 days were granted to the plaintiff for achieving the Financial Close, which fact excludes the operation of clause 25.1.1(a) rather will make the provision of clause 24.2.2(i) operative and apparently the stand of defendant No.2 that the Financial Close could not be achieved by the plaintiff within the period as specified in clause 24.2.1 or any extended period will become applicable and the defendant No.2 will be justified to hold that the Concession Agreement has lapsed resulting in its consequences as provided in this clause and clause 24.4 giving right to the defendant No.2 to encash the three bank guarantees.
19. Learned counsel for the plaintiff has further submitted that after the submission of Financial Agreement on 13.6.2007, the defendant No.2 has returned to the plaintiff duly vetted performance bond and this fact in itself will act as a waiver from the side of defendant No.2 of achieving Financial Close and will also estop the defendant No.2 from asserting that Financial Close has not been achieved. Clause 30.1 of Concession Agreement provides that company shall within 15 days from the achievement of Financial Close provides the NHA with an unconditional, irrevocable and without recourse performance bond in form and substance acceptable to NHA from the scheduled bank approved by NHA and that such performance bond shall be in the amount equivalent to 5% of project cost, etc. The plaintiff with the plaint has filed annexure ‘T’ the letter of defendant No.2 dated 19.6.2007 which shows that plaintiff has faxed specimen of performance bond dated 8.6.2007 which performance bond was returned to the plaintiff for further necessary action as desired. This letter shows that specimen of performance bond was sent by the plaintiff to defendant No.2 much before the last date of financial close and it was returned by defendant No.2 to the plaintiff for further necessary action. Neither any waiver nor any estoppel can be spelled out from this document of defendant No.2 as both conditions of waiver and estoppel are found to be lacking. The mere inchoate and ineffective Financial Agreements submitted by the plaintiff to defendant No.2 will in itself not make out the prima facie case of achievement of effective Financial Close on 13.6.2007 by the plaintiff. The case law relied upon by the learned counsel for plaintiff apparently has no application to the facts and circumstances of the case in hand.
20. For the fore-going reasons I find no merit in this application which is dismissed and interim order dated 11.7.2007 restraining the encashment of three bank guarantees is recalled.
J U D G E