TMI Blog2020 (5) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... fy its nonperformance due to the epidemic/pandemic - It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. In response to the Force Majeure argument of the Contractor, the Company s stand is that activity related to petroleum projects were exempted as per the letter of DGH Hydrocarbon dated 26th March, 2020. The Contractor s stand is that only petroleum production is exempted and not other construction/ project completion activity. However, there is nothing on record to show as to what steps the Contractor took toward mitigation, which was necessary as per the Force Majeure clause. The past non-performance of the Contractor cannot be condoned due to the COVID-19 lockdown in March 2020 in India. The Contractor was in breach since September 2019. Opportunities were given to the Contractor to cure the same repeatedly. Despite the same, the Contractor could not complete the Project. The outbreak of a pandemic cannot be used as an excuse for nonperformance of a contract for which the deadl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 20th April, 2020 (as modified on 24th April 2020), stands vacated in the above terms. The present petition and all pending applications are disposed of. - JUSTICE PRATHIBA M. SINGH For the Petitioner : Mr. Gopal Subramanium, Mr. Sandeep Sethi Mr. Sacchin Puri, Sr. Advs. with Mr. Piyush Sharma, Mr. Dhritiman Bhattacharyya, Ms. Deeti Ojha, Ms. Ujwala, Mr. Pavan Bhushan, Mr. Aditya Prasad and Mr. Dhananjay Grover. (M:9810222509) Advocates Mr. Sanjeev Verma (VP, South East Asia and India), Ms. Tejinder Kaur Oberoi (Counsel) and Larry (Chief Counsel) For the Respondents : Mr. Harish Salve, Sr. Adv. with Ms. Anuradha Dutt, Mr. Anish Kapur, Ms. Nikhita Suri and Mr. Kunal Dutt, Advs. for-R-1. Ms. Pooja Yadava (Deputy General Counsel, Cairn Oil and Gas), Mr. Rahul Bhattacharjee (Chief Counsel, Cairn Oil and Gas), Mr. Ajay Dixit, CEO, (Cairn Oil and Gas) and Mr. Rajesh Mohata, (Director- Procurement and Supply Chain Management, Cairn Oil and Gas) JUDGMENT 1. A production sharing contract dated 15th May, 1995 was executed between Vedanta Limited (hereinafter, Company ) and Cairn Energy (Cairn), ONGC and the Government of India in respect of exploration of the Rajasthan Block RJ-ON-90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... competition dates were thereafter proposed by the Contractor for completion of the Project. The Company, repeatedly insisted that work on all three fields ought to stand concluded by 31st January 2020. Finally, however, as per the agreement between parties, the deadline for conclusion of the entire work was agreed as 31st March 2020. 6. However, on 18th March 2020, the Contractor invoked the Force Majeure clause and sought further time to complete the Project. This was however not acceptable to the Company, which on 31st March 2020 and again on 7th April 2020 invoked Clause 11 proposing termination of the contract and threatened consequential action including invocation of the Bank Guarantees. At that stage, the present petition was filed on 13th April 2020. The reliefs sought in the petition are: a) restrain the Respondent No.1 from invoking and/ or encashing and /or receiving any payment from Respondent No. 2 under said Bank Guarantee as described in para 3.4 above in favour of Respondent No. 1 including all coercive actions and consequential follow up action taken pursuant to the same till the present Petition and / or disputes arising under the Agreement between the Petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project till the imposition of lockdown on 22nd March, 2020, or at least shortly prior thereto, and in view of the sudden and emergent imposition of lockdown, the interests of justice would justify an ad interim injunction, restraining invocation or encashment of the aforesaid eight bank guarantees, till the expiry of exactly one week from 3rd May, 2020, till which date the lockdown stands presently extende d. As to whether this interim injunction merits continuance, thereafter, or not, would be examined on the next date of hearing, consequent to pleadings being completed and all requisite material, including all relevant Governmental instructions, being placed on record. The injunction presently being granted, it is reiterated, is purely ad interim in nature, and is being granted only in view of the completely unpredictable nature of the lockdown, and its sudden imposition on 22nd March, 2020, of which the petitioner could not legitimately be treated as having been aware in advance. I am also persuaded, in this regard, by the fact that the government itself has, after imposition of the lockdown, being issuing instructions, from time to time, seeking to mitigate the rigours and di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustified reasons for invoking the Bank Guarantees. He further relies upon the letter dated 6th May, 2020 to argue that a final proposal was given by the Company clearly seeking timelines for execution. This itself showed that the contract was still alive between the parties and the Contractor wanted to resolve the matter. It is further submitted that Force Majeure squarely applies in view of the outbreak of COVID-19 globally. It is well within the knowledge of the Company that the kind of equipment that is to be installed requires personnel to travel from various foreign countries which is not possible due to lockdown. Thus, the Contractor is entitled to an injunction. 10. Reference is made to the contract dated 25th April, 2018 to submit that as per clause 2.1 the contract was to remain in effect for two years from the effective date. The terminologies i.e. the effective date and commencement date would show that it is when the last, out of the three fields, is commenced that the two years period is kicked off. The commencement date is 17th January, 2018 concluding only on 16th January, 2020. As per clause 2.1(b) the Company had an option to extend the term of the contract for a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Contractor. According to him the said letter merely permitted the continuance of oil and gas production, which are public utilities, to continue their work. However, the MBA Fields which are yet to be commissioned would not get any exemption under the said letter. 15. It is also submitted that as per the `callout order issued under clause 2.2 substantial portion of the work is completed and only a small portion of the work is left to be completed. The various progress reports according to him showed that the work was continuously being conducted. As per clause 6 of the contract, milestones were specified in Exhibit-J, which clearly provided that maximum 10% of the call out value can only be charged towards liquidated damages. 16. It is further submitted that there are three types of Bank Guarantees i.e. (i) Bank Guarantee to secure advance payment (ii) Bank Guarantee for performance and for (iii) Bank Guarantees to secure liquidated damages. Until and unless the amount of liquidated damages is adjudicated, the question of encashing the guarantee to the liquidated damages does not arise. Further the Bank Guarantees are alive till 2021 i.e. the defect liability period and thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty when the Bank Guarantees were invoked and the contract was terminated. The Contractor has been permitted to work beyond 31st March, 2020. Since outbreak took place during which period event occurred, which prevented the progress of the Project, the interest of the Contractor ought to be protected. Reliance is placed on the following judgments: i. Leighton India Contractors P Ltd v. DLF Ltd. Ors, [OMP (I) COMM 109/2020, decided on 13th May, 2020]; ii. Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80; iii. National Agricultural Co-operative Marketing Federation Of India v. Alimenta2020 SCCOnline SC 381 ; and iv. Nalini Singh Associates v. Prime Time IP Media Services Ltd. 2008(106) DRJ 734. 21. Finally, it is submitted that the contract was valid, a substantial portion of the work was completed and the Contractor is to be paid a large sum for works which have already been conducted. Under these circumstances, the Section 9 petition deserves to be allowed and the interim order already granted ought to be confirmed. Submissions of Mr. Harish Salve, Ld. Senior Counsel on behalf of the Respondent No.1 22. Mr. Salve, ld. Senior Counsel appearing for the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of work to the tune of 26% is still outstanding. The Contractor was put to the notice that the Project should achieve completion by 31st January, 2020. According to Mr. Salve, giving of the notice to submit a `cure plan in effect meant, that the Contractor was in serious breach of the contract. As per the reply dated 5th December, 2019 the Contractor on its own agreed to complete the work on the various fields by the following deadlines: a) Aishwarya - 31st January 2020 b) Bhagyam - 29th February 2020 c) Mangala - 31st March 2020 25. Ld. Sr. Counsel emphasized that this suggested cure plan was not acceptable to the Company which again called upon the Contractor vide repeated letters dated 9th December, 2019 and 16th January, 2020 that the cure plan is not agreeable. Letter dated 16th January, 2020 was issued invoking Clause 11.3 of the contract and clearly informing the Contractor that if the work on the entire Project does not achieve completion by 31st January, 2020, the Company would be compelled to use alternative sources to complete the Project. In response to this letter the Contractor submitted a cure plan which gave projected completion dates in March and April which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )1 SCC 568, Svenska Handelsbanken v. Indian Charge Chrome, (1994) 1 SCC 502, Larsen and Toubro v. Experion Developers Pvt. Ltd., [OMP (I)(COMM) 234/2019, decided on 3rd December, 2019], Vinitec Electronics (P) Ltd. v. HCL Infosystems Ltd., (2008) 1 SCC 544, Gujarat Maritime Board v. Larsen and Toubro Infrastructure Development Projects Ltd., (2016) 10 SCC 46, U.P Coop. Federation Ltd. v. Singh Consultants Engineers (P) Ltd (1998) 1 SCC 174 Dwarikesh Sugar Industries Ltd v. Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450, Ansal Engineering Projects Ltd. v. Tehri Hydro Development Corporation Ltd., (1996)5 SCC 450, BSES Ltd. v. Fenner India Ltd., (2006) 2 SCC 728 and Consortium of Deepak Cable India Ltd. and Abir Infrastructure Private Limited v. Teestavalley Power Transmission Limited, (FAO (OS) 397/2014, decided on 15th September, 2014) . He submits that egregious fraud is required to be established not in the encashment of the Bank Guarantee but in the underlying contract itself. The contract is not challenged in this case and neither is the termination. COVID-19 according to Mr. Salve is not special equity. Relying upon the above judgments he submitted that the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion clause. It was held that the contractual conditions are not part of the letter of credit. 32. Mr. Salve further submitted that once the breach took place, the fact that further time is given to the Contractor to complete the Project, does not mean that the right of liquidated damages is waived or that the Bank Guarantees cannot be invoked for non-performance. Reliance is placed on Ansal Engineering Projects Limited (supra) to argue that the adjudication of liquidated damages is not required to be made to justify the invocation of the Bank Guarantees. He submits that variation orders can be placed even after the breach had taken place as the company is entitled to seek performance of the contract. Whenever there is a breach, there are two options given to the other party i.e. repudiation leading to arbitration and claim for damages or extension for completing the contract along with a claim for damages. In the latter circumstance, the claim for damages is one which would be proved before the Arbitral Tribunal. The party alleging breach can, argue that the extension was granted without prejudice and the other party can argue that the extension was with prejudice and hence no clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the Contractor was that it would achieve the milestones as per the milestone dates contained in the contract. It also warranted that it had the capability, expertise manpower and the required technical and financial resources to undertake the Project. Under clause 6 the Contractor guaranteed that it would achieve each milestone by the milestone date. Failure to achieve the milestones entailed payment of liquidated damages in terms of clause 6.2. 38. As per clause 6, if there is delay in achieving any milestone as stipulated in Exhibit-J of the contract, for each day of delay, the Contractor had to pay liquidated damages merely on a demand by the Company. If there was any failure to pay the liquidated damages the Company could withdraw the said amounts from the various bonds/Bank Guarantees. Under clause 9, the Contractor was obliged to furnish `advance payment bonds , `performance bonds , `financial bonds and `Parent Company guarantee for the various agreed amounts as per the contract. 39. The completion dates for each of the fields was 12 months, 14 months and 17 months from the respective `call-out orders . The completion dates for each of the fields were as under: a) Aish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5th September, 2019. It was claimed that the contract closeout date would be 30th November, 2018 (sic 30th November 2019). Similarly, vide emails dated 10th September, 2019, the Contractor gave monthly progress reports for Bhagyam and Aishwarya with revised milestones. For Bhagyam , the completion was to be achieved with the first injection by the forecast date of 20th September, 2019 and the forecast contract close out date was 25th November, 2019. For Aishwarya , the completion was to be achieved with the first injection for AEOR by the forecast date of 25th October, 2019 and the forecast contract close out date was 30th November, 2019. 43. A perusal of the various monthly progress reports would show that the completion date which was initially in January 2019, March 2019 and June 2019 was thereafter moved to November, 2019. When the Company vide its letter dated 25th November, 2019 realised that the deadlines of November, 2019 would also not be fulfilled by the Contractor as there was considerable amount of work which was still pending, it demanded a `cure plan on 25th November, 2019 in terms of clause 11.3, though it had the option of terminating the contract. 44. Thus, by this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y which the Contractor invoked the Force Majeure clause was clearly as a last resort, in response to which the Company notified the Contractor that it was in complete breach as it had failed to complete the Project by 31st March, 2020. The Company then reserved its right to complete the Project on its own using alternative sources. The subsequent letters dated 1st April, 2020 and 7th April, 2020 exchanged between the parties clearly show that while the Contractor relies upon Force Majeure as the justification for the non-completion of the Project, the Company s stand was that the timelines were not adhered to and that the Contractor was in breach even prior to the occurrence of the Force Majeure event. 47. In view of the letter dated 31st March, 2020 issued by the Company threatening to terminate and to use alternative sources, the Contractor filed the present Section 9 petition. A perusal of the petition shows that the same simply alleges that the Company is in breach for not providing the work site, not clearing the outstanding amount and other pending invoices which led to the delay in the completion of the Project. It is, then claimed that since the Contractor could not mobilis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untenable. v) The timelines proposed by the Contractor was not at all agreeable to the Company. vi) Finally, vide the e-mail dated 20th February, 2020 the Contractor was called upon to complete all its obligations by 31st March, 2020, that the Contractor did not admit or agree to this deadline proposed by the Company, that the Contractor was in default of its obligations and has wrongly attributed the same to a Force Majeure event. In view of the same, the contract stood terminated and the Contractor was called upon to take all steps required to give effect to the termination as per the contractual terms. 49. The Bank Guarantees were also invoked on 13th April, 2020. In reply to the termination notice, on 15th April, 2020, the Contractor claimed as under: a) That the termination was illegal and was malicious, that there were various delays by the Company including in closure of variation orders etc., that only 2.4% of the work in respect of Aishwarya , 5.5% of the work in respect of Bhagyam and 2.1% of the work in respect of Mangala is outstanding, that the Contractor is facing financial difficulties. b) That the deadline of 31st March, 2020 was agreed to subject to resolution of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncluded by March, 2020 which was not adhered to. A perusal of the Monthly reports submitted on 11th March, 2020 just before the invocation of the Force Majeure clause, shows a bleaker picture i.e., that even the miniscule work carried out in November- December, 2019 was absent in January-February, 2020. Vide the said report the Contractor projected that it would complete a substantial portion of the work in March, 2020 and in April, 2020. This report was submitted with an e-mail of 11th March, 2020 and just seven days later, the Contractor invoked the Force Majeure clause. The progress graphs for the other two fields are similar in nature. Thus, the work at the fields had stopped long before the outbreak of COVID-19 or the lockdown. 54. As the saying goes `a picture speaks a thousand words . As per the monthly progress reports tabulated and extracted above, it is prima facie visible that the Contractor did not adhere to the deadlines for completion of the Project and was, thus, in breach. The Contractor seeks to justify the same by laying the blame on the Company and the Company does the exact opposite. However, this Court is clear that the reasons for the delay are not to be gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract. d) If an untoward event or change of circumstance totally upsets the very foundation upon which the parties entered their agreement it can be said that the promisor finds it impossible to do the act which he had promised to do. e) Express terms of a contract cannot be ignored on a vague plea of equity. f) Risks associated with a contract would have to be borne by the parties. g) Performance is not discharged simply if it becomes onerous between the parties. h) Alteration of circumstances does not lead to frustration of a contract. i) Courts cannot generally absolve performance of a contract either because it has become onerous or due to an unforeseen turn of events. Doctrine of frustration has to be applied narrowly. j) A mere rise in cost or expense does not lead to frustration. k) If there is an alternative mode of performance, the Force Majeure clause will not apply. l) The terms of the contract, its matrix or context, the knowledge, expectation, assumptions and the nature of the supervening events have to be considered. m) If the Contract inherently has risk associated with it, the doctrine of frustration is not to be likely invoked. n) Unless there was a break in ident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable care but provided further that the exercise of diligence and reasonable care will not include the obtaining or maintaining of Insurance beyond the requirements of this Agreement. Force Majeure includes the following events and circumstances but only to the extent that each satisfies the above requirements. (i) any act of war (whether declared or undeclared) invasion armed conflict or act of foreign enemy, blockade, embargo, revolution, riot, insurrection, civil commotion act of terrorism or sabotage; (ii) strikes go- slows or works to rule that are widespread or nationwide of a political nature unless affecting only or caused by the affected Party or, in the case of Contractor, any of its Subcontractors; and (iii) significant archaeological discoveries in the Block officially recognised by a relevant Governmental Authority, and (iv) natural events, including: (A) acts of God, including earthquake, volcanic activity, hurricane, cyclone, flood or lightning and the consequences arising thereform; (B) explosion or chemical contamination (other than resulting from the act of war); and (C) epidemic or plague (b) Force Majeure will expressly not include the following conditions ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances that were required to be made and only then assess as to whether, genuinely, a party was prevented or is able to justify its nonperformance due to the epidemic/pandemic. 63 . It is the settled position in law that a Force Majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. As observed in Energy Watchdog (supra) it is not in the domain of Courts to absolve parties from performing their part of the contract. It is also not the duty of Courts to provide a shelter for justifying nonperformance. There has to be a real reason and a real justification which the Court would consider in order to invoke a Force Majeure clause. 64. It is not in dispute between the parties that the two years term commenced on 17th January, 2018 which is hereinafter referred to as the commencement date. As per clause 2.1(b), the Contractor had the option to extend the term on the same terms and conditions for a period of one year. The said extension would be by a notice which would be served by the Company before the expiry of the term. 65. In response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epeatedly. Despite the same, the Contractor could not complete the Project. The outbreak of a pandemic cannot be used as an excuse for nonperformance of a contract for which the deadlines were much before the outbreak itself. 70. As held in Global Steel (supra) the question as to whether the Force Majeure clause itself would apply or justify non-performance in these facts would have to be finally determined finally in the arbitral proceedings. The observations of the Ld. Division Bench are as under: 9. It is not in dispute that the LC is an independent contractual document. The disputes between the contracting parties are to be settled by arbitration in London but the banks are not party to that contract. Thus, what is sought to be restrained by filing the suit is payments to be made under the LC. . 14. There is no doubt that clause 21 does provide for force majeure clause and the manner of its invocation and as to how it would come into force. That is, however, a dispute between the parties to the contract as to whether the force majeure clause stood properly invoked and whether respondent No. 3 should have still proceeded to load the goods for shipment. Such disputes have to be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not taken to minimise the delay. The procedure for a variation to come into effect is specified in clause 10.2 which requires the following chronology to be adhered to: a) Company makes a request for variation under clause 10.1 (a) or 10.1 (b). Contractor shall submit a variation order request along with its proposal for adjustment to the milestone dates and compensation payable i.e., the Exhibit J and C within 14 days. After within 14 days such a proposal is not received the same shall constitute a waiver of any entitlement to a change in the milestone dates or the compensation payable. b) Upon receiving the Contractor s proposal, the Company shall as soon as practicable respond to the said proposal. c) If there is consensus between the parties, the milestone dates i.e., Exhibit J and C would be suitably amended. d) If there is a dispute as to the amendment to be carried out in the Exhibit J and C for compensation the same would be determined in terms of the clause 10.2. e) If both parties have agreed it then it is an approved variation . f) Any variation or variation order request, in order to be effective has to be in terms of clause 10. The variation orders, if any, betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted revised Milestone Dates etc., which were never agreed upon. Thus, this Court holds that there is no novation in the present case. 74. There are three sets of Bank Guarantees Advance guarantees, Financial guarantees and Performance Guarantees. The details of the same are as under: Field Name BG Type Amount in USD Issuing Bank BG Ref No. Expiry Date Aishwarya ABG 2,728,728.59 ICICI 0021BG00012818 30 June 20 Bhagyam ABG 7,754,095.74 ICICI 0021BG00012918 30 June 20 Mangala ABG 3,695,607.42 ICICI 0021BG00013018 30 June 20 Aishwarya FBG 4,086,363.00 ICICI 0544BG00013219 30 June 20 Bhagyam FBG 7,261,744.00 ICICI 0544BG00013119 30 June 20 Mangala FBG 7,607,873.00 ICICI 0544BG00012519 30 June 20 Aishwarya PBG 4,086,363.00 ICICI 0544BG00012919 24 Nov 21 Bhagyam PBG 7,261,744.00 ICICI 0544BG00012619 24 Nov 21 Mangala PBG 7,607,873.00 ICICI 0544BG00013019 24 Nov 21 75. The advance guarantees were to secure the advance payments which were made by the Company to the Contractor. The performance bond was for the purpose of securing the efficient performance of the contract and was to remain valid and enforceable throughout the performance of the contract including the defects liability period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the Company would be entitled to draw upon the advance payment bond in the amount of the unrecovered portion of the advance payment. The `unrecovered portion is not yet determined. The invocation letters simply state that the amounts of the advance Bank Guarantees are unrecovered. A perusal of the petition shows that as per paragraph 3.23, it is the case of the contractor that approximately 6.6 million dollars has already been invoiced and is yet to be paid by the company. It is also claimed that the Contractor could not raise its final invoices. Further, a perusal of the Advance Bond as per Exhibit-N pursuant to which the Advance Bank Guarantees have been furnished has a clause to the following effect: The Contract has been executed between the Contractor and the Company with one of the terms of the Contract requiring that the Contractor furnishes to the Company a bank guarantee to [INR/]_______________ (in figures words) an amount equal to the advance being given by Company to the Contractor at the start of the execution of the Contract, which shall be adjusted against the running Invoices of the Contractor as per terms of the Contract. 77. The Contractor has clearly default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent are: 23. The settled position in law that emerges from the precedents of this Court is that the bank guarantee is an independent contract between bank and the beneficiary and the bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and is of no consequence.There are however, exceptions to this Rule when there is a clear case of fraud , irretrievable injustice or special equities. The Court ordinarily should not interfere with the invocation or encashment of the bank guarantee so long as the invocation is in terms of the bank guarantee. 26. In our considered view, once the demand was made in due compliance of bank guarantees, it was not open for the Appellant bank to determine as to whether the invocation of the bank guarantee was justified so long as the invocation was in terms of the bank guarantee. The demand once made would oblige the bank to pay under the terms of the bank guarantee and it is not the case of the appellant bank that its defence falls in any of the exception to the rule of case of fraud, irretrieva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of only the Advance Bank Guarantees which have been invoked, upon being encashed, shall be placed in a separate `Joint Account which shall be jointly held by the Contractor and the Company. The parties are directed to reconcile the accounts, including payment of any invoices already raised and upon reconciliation as to the unrecovered portion of the advance amount which the Company is entitled to retain, in terms of the clauses in the contract, they may instruct the bank to release the said amounts in favour of the Company. The remaining amounts be released to the Contractor. If the parties are unable to reconcile the same, they are free to approach the Arbitral Tribunal under Section 17 of the Act. The `Joint Account as directed, shall be opened within three days and the amounts of the Advance Bank Guarantees shall be directly deposited in the said account. The reconciliation process shall be completed in two weeks. 84. Accordingly, the ad-interim order dated 20th April, 2020 (as modified on 24th April 2020), stands vacated in the above terms. The present petition and all pending applications are disposed of in the above terms. Copy of this judgment be communicated to Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions contemplated under or in connection with this Agreement of otherwise. In this regard, Contractor acknowledges that Company s issuance of a Call Out Order will be subject to the satisfaction of certain conditions, including an extension of the term of the PSC, JOA and the receipt of certain third party approvals . 2.3 Novation of Certain Agreements (a) Within 10 Business Days following the Effective Date or such other date as the Parties may agree, Company and Contractor may mutually agree to novate certain agreements to the Contractor and the Contractor will accept the novation of such agreements ( Novation Agreements ). (b) Contractor represents and warrants that it has satisfied itself in relation to the Novation Agreements, including that the goods, equipment, materials and services specified in the Novation Agreements are sufficient for the performance of the Services in accordance with the Agreement. Contractor will not be entitled to a Variation or for any other relief hereunder as a result of any failure or delay in performance under the Novation Agreements or for any failure of the goods, equipment, materials and services specified in the Novation Agreements to satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inbelow: 9. ADVANCE PAYMENT BOND, PERFORMANCE BOND, FINANCIAL BOND AND PARENT COMPANY GUARANTEE 9.1 Obligation to Provide Contractor shall provide to Company: (a) within 14 Days following the Call Out Order, an advance payment bond in an amount equal to [o] 1 and in the form set out in Exhibit N- Advance Payment Bond, issued by an Acceptable Bank (the Advance Payment Bond ); (b) within 14 Days following Effective Date, a performance bond in an amount equal to the then effective Required Performance Bond Amount and in the form set out in Exhibit E Performance Bond, issued by an Acceptable Bank (the performance Bond ); a Financial Bond in an amount equal to the Required Financial Bond and in the form as set out in Exhibit E - Financial Bond, issued by an Acceptable Bank (the Financial Bond ) 2 (c) on the Effective Date, a Comfort Letter as per Exhibit F. 9.2 Requirements (a) Contractor shall ensure that: (i) the Advance Payment Bond remains valid and enforceable until the Advance Payment is recovered in accordance with Section 8.9 (b); and (ii) the Performance Bond remains valid and enforceable throughout the performance of the Services and while any Defects Liability Period is in pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Advance Payment, Company will be entitled to draw upon the Advance Payment Bond in the amount of the unrecovered portion of the Advance Payment and to retain the amounts so drawn. (g) In addition to the other circumstances specified in this Agreement, Company has the right to draw down and, at Company s discretion, apply the proceeds in remedying any breach by Contractor of this Agreement, all or part of the value of the Performance Bond. Such recourse against the Performance Bond shall be without limitation to any other right or remedy of the Company in relation to the relevant Contractor breach. Further, in addition to the other circumstances specified in this Agreement, Company has the right to draw down and, at Company s discretion, apply the proceeds for recovering any Liquidated Damages or any payments due to the Company under this Agreement, all or part of the value of the Financial Bond. Such recourse against the Financial Bond shall be without limitation to any other right or remedy of the Company in relation to the relevant Contractor Breach CLAUSE 10 Relevant extracts from Clause 10 are hereinbelow: 10. VARIATION 10.1 Right to Vary ( a) Company may, at any time and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bit C Compensation) except as provided under section 15.4 (c); (ii) a delay caused to Contractor s performance of the Services as a result of an Optional Suspension by the Company; or (iii) a delay caused to Contractor s performance of the Services by Company s failure to perform any of its obligations under this Agreement or any negligent act or omission of Company, except to the extent that such act, omission, breach or default was due to a negligent act or omission of Contractor or any Subcontractor; provided, however, that : (A) the Contractor will not be entitled to such an adjustment to the Milestones or the Milestones Dates and/or the Required Commercial Operation Dates to the extent that the Contractor s achievement of the Milestones or the Milestone Dates would have been delayed notwithstanding the occurrence of the events specified in this Section 10.1(d) and (B) the Contractor will only be entitled to an increase in the compensation payable pursuant to Article 8 and Exhibit C Compensation in the circumstances described in Sections 10.1(d)(ii) or 10.1(d)(iii) and will not be entitled to an increase in compensation in the circumstances described in Section 10.1(d)(i). (e) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her: (A) within fourteen (14) Days of receipt of the Company s request for a Variation pursuant to Section 10.1(a) or a Variation Order Request pursuant to Section 10.1(b); or (B) if the Contractor is requesting the instruction of a Variation in accordance with Section 10.1(d), within fourteen (14) Days of the start of event(s) described in such Section, submit a Variation Order Request which shall include: (i) a description of the work to be performed in order to carry out the addition, deletion, alteration or modification to or from the Services described in the Variation or the Variation Order Request; (ii) Contractor s proposal for any necessary adjustments to the Milestone Dates, together with appropriate supporting evidence including an analysis of the effect of the Variation on the critical path of the Services; and (iii) the Contractor s proposal for adjustment to the compensation payable pursuant to Article 8 and Exhibit C Compensation. The Contractor failure to give a Variation Order Request within the time prescribed under this Section 10.2(a) shall constitute a waiver of any entitlement to a change in the Milestone Dates or the compensation payable pursuant to Article 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very of Notice to Contractor. (b) If Company terminates this Agreement or any portion of the Services pursuant to Section 11.1(a), Company will pay to Contractor (without double counting): (i) the amounts owing under Exhibit C- Compensation for any Services that have been duly completed in accordance with this Agreement as of the date of termination to the satisfaction of Company (which, in the case of any well(s), will occur when Company Contractor has accepted a Well Handover From in respect of such Well(s)) and to the extent not already paid; plus (ii) any direct and substantiated charges already incurred for cancellation of the procurement of third party goods or services from its Subcontractors which were to have been supplied by the Contractor in connection with the Services, substantiated by way of sufficient documentation to the satisfaction of the Company, provided that the Contractor shall use its best endeavours to minimise such charges provided the charges shall not exceed the Contract Price; minus (iii) 50% of any cumulative Holding Rate payable by Company in respect of any Optional Suspension preceding such termination in accordance with Section 12.3(a)(ii) 11.2 Termi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ger for the benefit of its creditors, or if any act is done or event occurs that under any Applicable Law has a similar effect to any of these acts or events; (e) if Contractor Abandons the Services or repudiates this Agreement; or (f) if any person providing a Comfort Letter repudiates its obligations there under. 11.4 Remedies for Contractor Default (a) Upon the occurrence and during the continuance of a Contractor Default, Company will have the right to terminate this Agreement or any portion of the Services upon delivery of Notice to Contractor. (b) Upon any termination of this Agreement or any portion of the Services pursuant to Section 11.4(a), Company will be entitled to: (i) recover from Contractor: (A) any advance payment made by Company to Contractor that has not yet been recovered by, or repaid to, Company; (B) any Mobilisation Fee paid by Company to Contractor in respect of the Services; and (C) any costs incurred by the Company in having the Services (or the portion thereof terminated by Company) completed by others that are in excess of those costs that Company would have paid to Contractor had this Agreement (or such portion of the Services) not been terminated, toge ..... X X X X Extracts X X X X X X X X Extracts X X X X
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