Allahabad High Court Refuses To Grant Stay On Seeking Encashment Of Bank Guarantee [Read Order]


11 Sep 2020 7:18 AM GMT

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    Allahabad High Court

    The Hon'ble High Court of Allahabad (Lucknow Bench) it its decision on 28th August 2020 in M/S Cg Power & Industrial Solutions Ltd. (formerly Crompton Greaves) Thru. Poa Holder vs. U.P. Power Transmission Corporation Ltd. Thru. M.D. & Ors. (UPPTCL) dismissed MISC. BENCH writ petition No. - 13782 of 2020 seeking to refrain the Respondent U.P. Power Transmission Corporation Ltd (UPPTCL) from seeking extension and/or encashment of the Bank Guarantee withheld on account of non-payment of statutory dues towards the labour cess by Cg Power & Industrial Solutions Ltd (CGL).

    The Petitioner (CGL) sought relief from the Lucknow Bench of the Hon'ble High Court of Allahabad on the basis of an order passed by the co-ordinate Division Bench of the Court on 24.2.2020 passed in Writ Petition No.125 of 2019 [Cg Power & Industrial Solutions Ltd. Vs. U.P. Power Transmission Corporation Ltd], subsequently challenged and assailed by the Respondent corporation (UPPTCL) in the Supreme Court of India vide Special Leave Petition (c) no. 008630 of 2020.

    The Learned Counsel for the Petitioner submitted that the writ petition regarding imposition of 1% Cess on the writ petitioner has been allowed, therefore, the letter, by which Bank has directed the petitioner to extend the period of Bank Guarantee, is incorrect and against the aforesaid order dated 24.2.2020 (supra).

    In response the Counsel for the Respondent Corporation argued that as the aforesaid order and the same question of law is pending before the Supreme Court of India in SLP ( c ) no. 008630 of 2020, the matter cannot be entertained at this stage.

    After considering the submissions made by the parties, the Division Bench of the Hon'ble High Court held that,

    "5. […]there is an arbitration clause and, therefore, in case the petitioner is aggrieved by the aforesaid action of the Bank, he can take recourse as available to him under Section 9 of the Arbitration and Conciliation Act, 1996.

    6. As the SLP is still pending before the Hon'ble Supreme Court, therefore, at this stage, we are not inclined to issue or grant any interim relief in favour of the petitioner.

    7. However, in case the petitioner fails to extend Bank guarantee within a statutory time period, as provided in the Bank guarantee, the respondent nos.1 and 2 may proceed in pursuance to the impugned letter issued by the Bank."

    With the aforesaid directions, the writ petition was dismissed.

    The matter was taken up through Video- Conferencing, and the Petitioner was represented by Shri Sudeep Seth, learned Senior Advocate assisted by Mr Samanvya Dhar Dwivedi, and the respondent corporation was represented by Learned Standing Counsel for UPPTCL, Mr Shishir Prakash Advocate assisted by Shri Romit Seth Advocate, and Ms Karuna Krishan Thareja Advocate.

    The principal controversy with respect to the applicability of labour cess of 1% on the construction cost of the project inter-alia including the cost of supply component, for purposes of levy of cess as provided under Section 3 sub-clause (1) and (2) of the Building and Construction Workers Welfare Cess Act, 1996 is yet to be examined by the Supreme Court of India and is pending adjudication in SLP (c) no. 008630 of 2020.

    Click here to download the Order

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