Delhi High Court Directs Vedanta Limited to Pursue Statutory Remedy in Coal Mine Bank Guarantee Dispute

The High Court declines to intervene in Vedanta's plea against the invocation of a performance bank guarantee, advising the company to approach the designated tribunal.

In a significant legal development, the Delhi High Court has directed Vedanta Limited to seek redressal through the statutory tribunal for its dispute concerning the invocation of a performance bank guarantee related to the Radhikapur (West) Coal Mine. The court declined to entertain Vedanta's writ petition, emphasizing the availability of an alternate efficacious statutory remedy under Section 27 of the Coal Mines (Special Provisions) Act, 2015.

The case arose from Vedanta's challenge against the appropriation of a substantial sum from its performance bank guarantee by the Nominated Authority, Ministry of Coal, due to alleged non-compliance with efficiency parameters under the Coal Mine Development and Production Agreement (CMDPA). Vedanta argued that the delays in meeting the milestones were not solely attributable to them, citing various external factors including the COVID-19 pandemic and administrative hurdles.

Presiding over the case, Justice Amit Sharma pointed out that the tribunal established under the Coal Bearing Areas (Acquisition and Development) Act, 1957, is the appropriate forum to adjudicate such disputes involving factual determinations related to CMDPA provisions. The court highlighted that the statutory remedy is not only available but preferable for resolving the intricate factual disputes presented in the case.

The judgment underscored the principle that bank guarantees are independent contracts and should generally be honored according to their terms, with interference permissible only in cases of fraud, irretrievable injustice, or special equities. Vedanta's plea was found lacking in establishing any of these exceptions.

While disposing of the petition, the court granted Vedanta interim protection for ten days to maintain the status quo concerning the bank guarantee, allowing them time to approach the tribunal. Vedanta is now expected to pursue its grievance before the tribunal located in Talchar, Odisha.

This decision reaffirms the judiciary's stance on directing parties to utilize designated statutory mechanisms for dispute resolution, particularly in complex commercial and contractual matters, thereby upholding the intent of the legislative framework.

Bottom Line:

Dispute regarding invocation of performance bank guarantee for non-compliance of efficiency parameters under Coal Mine Development and Production Agreement (CMDPA) - High Court refused to interfere due to the availability of alternate efficacious statutory remedy under Section 27 of the Coal Mines (Special Provisions) Act, 2015 - Petitioner directed to avail statutory remedy before the concerned Tribunal.

Statutory provision(s): Article 226 of the Constitution of India, 1950, Coal Mines (Special Provisions) Act, 2015 - Section 27, Coal Bearing Areas (Acquisition and Development) Act, 1957.

Vedanta Limited v. Nominated Authority Ministry of Coal Government of India, (Delhi) : Law Finder Doc Id # 2816695