Hellenic Electricity … vs Bharat Heavy Electricals Ltd. & … on 28 April, 2016

2. Bharat Heavy Electrical Ltd. (the first respondent in the appeal) is
the plaintiff. Public Power Corporation SA (respondent No.3 in the
appeal) is defendant No.1. Hellenic Electricity Distribution (the appellant
in the appeal) is defendant No.2. State Bank of India (respondent No.2 in
the appeal) is defendant No.3.

FAO (OS) No.281/2015 Page 1 of 9
3. The plaintiff instituted a suit pleading that defendant No.1 is a
company established in Greece and was in the business of power
production and power supply. It invited a global tender for supply of five
transformers. Plaintiff’s bid was accepted and on February 05, 2009 a
contract was executed containing, amongst others, terms on which
liquidated damages for late supply could be levied. As per the contract, a
performance guarantee had to be given to defendant No.1 and therefore,
at the asking of the plaintiff the defendant No.3 issued, in favour of
defendant No.1, a performance guarantee No.0999609FG in sum of
€7,54,707.50 which was valid till August 25, 2012 and that as per the
contract, as and when a transformer was supplied the value of the
performance guarantee stood automatically reduced proportionately.
Pleading certain facts concerning approval of a design and sourcing
components i.e. a dispute relating to the contract (which we need not
burden ourselves with for the reason the prayer in the suit was to restrain
defendants No.1 and 2 from invoking the bank guarantee and to restrain
defendant No.3 from paying under the bank guarantee), it was pleaded
that three transformers were delivered in respect of which payment was
released after deducting liquidated damages, in respect of which the
plaintiff reserved the right to initiate appropriate proceedings, it was
pleaded that in the month of March, 2012, defendant No.1 informed that
defendant No.2 would be substituted as the contracting party and that
discussions took place to execute a formal document replacing defendant
No.2 in place of defendant No.1 as the contracting party and a bank
guarantee in favour of defendant No.2 to be issued; it was pleaded that
defendant No.2 illegally rescinded the contract and threatened to encash
the bank guarantee. The prolix plaint running into 79 paragraphs spans
40 pages and learned senior counsel for the plaintiff during arguments in
FAO (OS) No.281/2015 Page 2 of 9
the appeal stated that invocation of the bank guarantee was challenged on
the ground that defendant No.2 was not the beneficiary and hence could
not have invoked the bank guarantee; that no assignment under the
contract could be made by defendant No.1 in favour of defendant No.2;
that neither defendant No.1 nor defendant No.2 had assets in India and
therefore if bank guarantee was allowed to be invoked, irretrievable
injustice would be caused to the plaintiff; keeping in view the fact that
three transformers were supplied, albeit belatedly in terms of the contract,
the entire bank guarantee could not be invoked; and lastly that invocation
of the guarantee would be an act of fraud.

Source: Indian Kanoon

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