NHAI can't encash China Coal guarantee: Delhi HC

The Delhi High Court has restrained the National Highways Authority of India (NHAI) from encashing a bank guarantee of Rs 51 crore furnished by China Coal Construction Group Corporation during signing of a contract for widening National Highway-II till disposal of the matter.

The NHAI had moved the court seeking restraint on China Coal from interfering in the utilisation of its equipment, temporary works and material lying on the site.

Besides, it had sought a direction that the construction company bear the costs for watch and ward and protection of its assets from any loss and damage, pilferage or theft in case it contested the grant of interim injunction.

The NHAI and China Coal had entered into a contract in March 2002 for widening and strengthening of the existing two-lane section between Km 250.500 and Km 307.500 of NH-II.

On account of differences, both parties purported to terminate the contract and invoked the arbitration clause. Earlier, the court had allowed China Coal to withdraw its suit unconditionally on the ground that the parties had decided to resolve their differences through arbitration.

Justice Badar Durrez Ahmed also directed China Coal not to remove machinery and equipment worth Rs 8 crore lying at the site.

The court said it would be unfair if the NHAI, on the one hand, was restrained from encashing the bank guarantee and, on the other, machinery over which it had a lien was permitted to be removed from the site or from its possession.

"However, if China Coal wishes to remove the machinery and equipment lying at the site, it would be only permitted to do so on lifting of the restraint or injunction on the petitioner (NHAI) to encash the bank guarantees," it said.

Refusing to implead SREI International as a party in the arbitration proceedings between the NHAI and China Coal, the court said it had no "locus standi" in the proceedings before it.

It observed that it was not privy to the contract between the NHAI and China Coal nor the NHAI was a party to the relationship between China Coal and the intervenor.

In another petition before the Calcutta High Court, the SREI had sought possession of its equipment rented out to China Coal for the purpose of carrying out widening of the highway, besides seeking recovery of its monthly dues.