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Rithwik Projects Private Limited v/s Sintex Infra Projects Limited & Others


Company & Directors' Information:- RITHWIK PROJECTS PRIVATE LIMITED [Active] CIN = U45200TG1999PTC031431

Company & Directors' Information:- V S A INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45400TG2011PTC074588

Company & Directors' Information:- K N INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45200TG2008PTC058128

Company & Directors' Information:- B L INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45400DL2014PTC266491

Company & Directors' Information:- K. C. INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45209NL1990PTC003414

Company & Directors' Information:- K K INFRA PROJECTS (INDIA) PRIVATE LIMITED [Active] CIN = U45200TG2007PTC056630

Company & Directors' Information:- A E INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45200MH2009PTC196191

Company & Directors' Information:- S R R INFRA PROJECTS LIMITED [Strike Off] CIN = U45209TG2008PLC058571

Company & Directors' Information:- N R R INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U70200TG2010PTC067299

Company & Directors' Information:- K AND G INFRA PROJECTS PRIVATE LIMITED [Under Process of Striking Off] CIN = U45200KL2010PTC027108

Company & Directors' Information:- R Y INFRA PROJECTS PRIVATE LIMITED [Under Process of Striking Off] CIN = U45400TG2013PTC091764

Company & Directors' Information:- K C R INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45200TG2009PTC064374

Company & Directors' Information:- M. D. INFRA - PROJECTS PRIVATE LIMITED [Active] CIN = U45400MH2009PTC193074

Company & Directors' Information:- V G INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45209TG2011PTC074184

Company & Directors' Information:- J S V INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U70200TN2010PTC078632

Company & Directors' Information:- S. G. INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45400DL2009PTC192400

Company & Directors' Information:- D & G INFRA AND PROJECTS PRIVATE LIMITED [Active] CIN = U45203PN2009PTC133571

Company & Directors' Information:- G INFRA PROJECTS LIMITED [Active] CIN = U45400TG2015PLC102010

Company & Directors' Information:- D. K. INFRA PROJECTS (INDIA) LIMITED [Strike Off] CIN = U45400WB2011PLC170421

Company & Directors' Information:- J S INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45400WB2011PTC163788

Company & Directors' Information:- B S INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45400WB2010PTC151174

Company & Directors' Information:- M R INFRA & PROJECTS INDIA PRIVATE LIMITED [Strike Off] CIN = U45209TG2011PTC074858

Company & Directors' Information:- G-9 INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45202MP2021PTC054704

Company & Directors' Information:- S V V INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45200TG2009PTC065498

Company & Directors' Information:- K M M INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45209TG2013PTC088878

Company & Directors' Information:- A R INFRA PROJECTS LIMITED [Active] CIN = U45400DL2010PLC198594

Company & Directors' Information:- N-INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45200TG2008PTC057620

Company & Directors' Information:- M. M. INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U70109WB2011PTC165005

Company & Directors' Information:- D R R INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45200TG2007PTC055772

Company & Directors' Information:- R V INFRA PROJECTS INDIA PRIVATE LIMITED [Active] CIN = U45400WB2011PTC158257

Company & Directors' Information:- U M T INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45400MH2013PTC244469

Company & Directors' Information:- R K B INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45400WB2009PTC132587

Company & Directors' Information:- A H V INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U74999WB2012PTC180309

Company & Directors' Information:- G. S. INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45400DL2008PTC174931

Company & Directors' Information:- P B S INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U70102TG2008PTC060836

Company & Directors' Information:- R M INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45400MH2011PTC224655

Company & Directors' Information:- M C W INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U74120MH2013PTC244153

Company & Directors' Information:- S. A. INFRA PROJECTS (INDIA) PRIVATE LIMITED [Active] CIN = U45400TG2015PTC099812

Company & Directors' Information:- C Z INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45400TG2016PTC103916

Company & Directors' Information:- P AND C INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45200TN2014PTC096607

Company & Directors' Information:- U K PROJECTS AND INFRA PRIVATE LIMITED [Active] CIN = U45200TN2015PTC102111

Company & Directors' Information:- M N C INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45200TG2008PTC058369

Company & Directors' Information:- K V P INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45209TG2011PTC073318

Company & Directors' Information:- L K D INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45209TG2013PTC085748

Company & Directors' Information:- B R S INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45201DL2013PTC248023

Company & Directors' Information:- D V INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U45200AP2014PTC095005

Company & Directors' Information:- N V R INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U70100AP2015PTC097985

Company & Directors' Information:- D. B. INFRA PROJECTS PRIVATE LIMITED [Strike Off] CIN = U45201GJ2010PTC059696

Company & Directors' Information:- R A INFRA PROJECTS PRIVATE LIMITED [Active] CIN = U29309RJ2021PTC075070

Company & Directors' Information:- V J INFRA PROJECTS INDIA PRIVATE LIMITED [Active] CIN = U45500AP2021PTC118892

    Special Civil Application No. 10242 of 2014

    Decided On, 25 June 2015

    At, High Court of Gujarat At Ahmedabad

    By, THE HONOURABLE MS. JUSTICE HARSHA DEVANI

    For the Appellant: D.C. Dave, Senior Advocate, Jigar M. Patel, Advocate. For the Respondents: Mihir Joshi, Amar N. Bhatt, Advocates.



Judgment Text

1. This petition, though stated to be under Articles 226 and 227 of the Constitution of India, can be entertained only under Article 227 in view of the law laid down by the Supreme Court in Radhey Shyam and Others Vs. Chhabi Nath and Others(2015) 3 AD 73 : (2015) 2 RCR(Civil) 606 : (2015) 3 SCALE 88 : (2015) 5 SCC 423 : (2015) 3 SCJ 552 : (2015) 1 UPLBEC 646 , wherein it has been held that judicial orders of civil courts are not amenable to writ jurisdiction under Article 226 of the Constitution and that an order of a civil court can be challenged under Article 227 and not under Article 226.

2. The order dated 10th April, 2014 passed by the learned Judge, Court No. 4, City Civil Court, Ahmedabad below Exhibit-26 in Civil Suit No. 2144/2013 is the subject matter of challenge in this petition whereby the application made by the petitioner has been rejected.

3. The facts giving rise to the present petition are that the first respondent namely, the original plaintiff instituted a suit being Civil Suit No. 2144/2013 in the City Civil Court at Ahmedabad inter alia praying for a decree for a sum of Rs. 1,96,10,516/- (hereinafter referred to as "the suit amount") from the defendants, that is, the petitioner and the respondents No. 2 and 3. The first respondent - plaintiff has claimed the suit amount on account of the so called wrongful invocation of bank guarantee by the petitioner (original defendant No. 3).

4. The above referred civil suit has been instituted in the following backdrop. The State of Madhya Pradesh entrusted to the Madhya Pradesh Road Development Corporation (MPRDC) a project of construction, upgradation, modernisation, development and maintenance of border check-post at twenty four locations in the entire State. The MPRDC, in turn, invited offers from interested bidders for the said project. In the bidding process, M/s. IL&FS emerged as the successful bidder for the said project. On 27th July, 2011, M/s. IL&FS entered into a contract with the petitioner (original defendant No. 3) for the construction of seven border check-posts out of a total of twenty four border check-posts in the State of Madhya Pradesh on the terms and conditions mentioned therein. Insofar as the work of construction of five border check-posts was concerned, the same came to be entrusted to the first respondent - plaintiff by the petitioner (original defendant No. 3). In fact, a letter of intent was issued by the petitioner in favour of the first respondent on 9th June, 2011, which was followed by the execution of a sub-contract by and between the first respondent and the petitioner on 26th August, 2011 at Hyderabad. It is the case of the petitioner that clause 38 of the sub-contract dated 26th August, 2011 executed by and between the first respondent and the petitioner, conferred exclusive jurisdiction on the courts in Hyderabad for resolving any disputes between parties, that is, the petitioner on one hand and the first respondent on the other. It is further the case of the petitioner that with respect to the performance of the work forming part of the subcontract, the first respondent - plaintiff gave a corresponding performance bank guarantee through IDBI Bank for a sum of Rs. 3,83,77,206/- which was equivalent to 5% of the total work forming part of the sub-contract price. Subsequently, at the request of the first respondent - plaintiff, the scope of work was reduced from five check-posts to three check-posts. Correspondingly, the amount of performance bank guarantee was reduced to Rs. 1,92,85,048/- from the original amount of Rs. 3,83,77,206/-. It is further the case of the petitioner that the first respondent - plaintiff miserably failed to adhere to the time table prescribed by IL&FS for the completion of work due to which IL&FS terminated the main contract issued in favour of the petitioner. According to the petitioner, it was, therefore, left with no option but to invoke the bank guarantee for a sum of Rs. 1,92,85,048/- submitted by the first respondent - plaintiff. After the invocation of the bank guarantee by the petitioner, the first respondent - plaintiff instituted the above referred suit in the City Civil Court at Ahmedabad, inter alia, praying for a decree for a sum of Rs. 1,96,10,516/- from the defendants alleging wrongful invocation of the bank guarantee by the petitioner (original defendant No. 3). Along with the civil suit, the first respondent - plaintiff also produced a number of documents on record. According to the petitioner, since clause 38 of the sub-contract dated 26th August, 2011 executed by and between the first respondent - plaintiff and the petitioner - defendant No. 3 conferred exclusive jurisdiction upon the courts in Hyderabad for resolving any dispute between the parties, viz., the petitioner (original defendant No. 3) on one hand and respondent No. 1 (original plaintiff) on the other hand, the petitioner moved an application at Exhibit-26 under the provisions of rule 10 of Order VII of the Code of Civil Procedure, 1908 (hereinafter referred to as "the Code") with a prayer to return the plaint of Civil Suit No. 2144/2013 for being presented in the court at Hyderabad. In response to the said application, the plaintiff filed its reply opposing the said application. By the impugned order dated 10th April, 2014, the trial court rejected the application filed by the petitioner which has given rise to the present petition.

5. Mr. Dhaval Dave, Senior Advocate, learned counsel for the petitioner invited the attention of the court to the facts of the case to point out that the dispute involved in the present case arises out of the contract executed by and between the petitioner and the first respondent - plaintiff. It was submitted that it was in view of the poor performance on the part of the first respondent - plaintiff that IL&FS had deemed it fit to terminate the contract with the petitioner. Accordingly, it was in view of the loss suffered by the petitioner on account of the conduct of the first respondent, that the bank guarantee had been invoked. Reference was made to clause 38 of the subcontract agreement which provides that the sub-contract or any subsequent agreement that the parties may enter into shall be governed and construed in accordance with the law for the time being in force in India and within the exclusive jurisdiction of the courts in Hyderabad, to submit that, therefore, any dispute between the parties connected with the sub-contract would fall within the exclusive jurisdiction of the courts in Hyderabad in view of the agreement between the parties conferring exclusive jurisdiction upon the said court. Reliance was placed upon the decision of the Supreme Court in the case of South East Asia Shipping Co. Ltd. Vs. Nav Bharat Enterprises Pvt. Ltd. and Others, (1996) 3 AD 453 : (1996) 3 JT 656 : (1996) 3 SCALE 191 : (1996) 3 SCALE 190 : (1996) 3 SCC 443 : (1996) 3 SCR 405 : (1996) 2 UJ 129 , for the proposition that it is settled law that cause of action consists of bundle of facts which give cause to enforce the legal injury for redress in a court of law. The cause of action means, therefore, every fact, which if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the court. In other words, it is a bundle of facts, which taken with the law applicable to them, gives the plaintiff a right to claim relief against the defendant. It must include some act done by the defendant since in the absence of such an act, no cause of action would possibly accrue or would arise. Mr. Dave submitted that, therefore, the place where the bank guarantee came to be executed is inconsequential and that no cause of action can be said to accrue to the first respondent - plaintiff within the jurisdiction of the courts at Ahmedabad. Reference was made to the decision of the Supreme Court in the case of Begum Sabiha Sultan Vs. Nawab Mohd. Mansur Ali Khan and Others, AIR 2007 SC 1636 : (2007) 5 JT 431 : (2007) 5 SCALE 754 : (2007) 4 SCC 343 : (2007) 5 SCR 36 : (2007) AIRSCW 2488 : (2007) 3 Supreme 732 , for the proposition that at the stage of consideration of the return of the plaint under Order VII rule 10 of the Code, what is to be looked into is the plaint and the averments therein. At the same time, it is also necessary to read the plaint in a meaningful manner to find out the real intention behind the suit. It was submitted that, therefore, one has to go for a meaningful reading of the plaint and that if the plaint is read in a proper manner, the only conclusion would be that the jurisdiction to entertain the suit is conferred on the court at Hyderabad. Reference was also made to the decision of the Supreme Court in the case of Hindustan Construction Co. Ltd. Vs. State of Bihar and Others, AIR 1999 SC 3710 : (2000) 99 CompCas 297 : (1999) 3 CTC 618 : (1999) 8 JT 142 : (1999) 6 SCALE 486 : (1999) 8 SCC 436 : (1999) 3 SCR 554 Supp : (2000) 1 UJ 336 : (1999) AIRSCW 3747 : (1999) 9 Supreme 1 , for the proposition that a bank guarantee is the common mode of securing payment of money in commercial dealings as the beneficiary, under the guarantee, is entitled to realise the whole amount under the guarantee in terms thereof irrespective of any pending dispute between the person on whose behalf the guarantee was given and the beneficiary. Referring to the impugned order, it was pointed out that the trial court after stating that issues do not arise for consideration in the present application, ought not to have entered into the merits thereof. Referring to paragraph 36 of the impugned order, it was submitted that the findings recorded by the trial court are irrational. It was urged that the bank guarantee is consequential to the contract and hence, clause 38 of the sub-contract would also apply and the dispute raised by the plaintiff would be subject to the exclusive jurisdiction of the courts at Hyderabad. It was submitted that moreover, there is an arbitration clause in that sub-contract whereby disputes between the parties are required to be referred to Arbitrator in terms thereof and also the suit ought not to be entertained.

6. Vehemently opposing the petition, Mr. Mihir Joshi, Senior Advocate, learned counsel for the first respondent submitted that as held by the Supreme Court in Begum Sabiha Sultan. v. Nawab Mohd. Mansur Ali Khan (supra), there has to be a meaningful reading of the plaint. Referring to the contents of the plaint, it was pointed out that the claim in the suit is for the amount recovered by the petitioner by encashing the performance bank guarantee. The allegation in the suit is that the petitioner-defendant No. 3 has wrongly invoked the bank guarantee by exercising influence over the defendant No. 1 who, despite being aware that the contract had ceased to operate, in collusion with the defendant No. 3, paid over to it Rs. 1,92,85,048.00, being the amount of the said bank guarantee without even insisting on the presentation of the original bank guarantee by transferring such amount in the defendant No. 3's cash credit account in its Hyderabad branch. It was argued that having regard to the fact that the original bank guarantee was in the first respondent-plaintiff's possession, there was no question of encashment of the bank guarantee at the instance of the petitioner. It was submitted that a meaningful reading of the plaint goes to assist the case of the first respondent and that there are specific allegations against the bank with regard to collusion and irregularity in invocation of the bank guarantee. It was submitted that the bank is, therefore, liable to make good the amount which has been released in favour of the petitioner pursuant to the performance bank guarantee.

6.1 Next, it was contended that the bank guarantee is independent of the main contract and that the arbitration clause has no meaning when the first respondent-plaintiff has alleged fraudulent acts on the part of the defendants. It was submitted that no overt act has taken place under the subcontract giving rise to a cause of action for filing a suit at Hyderabad. It was submitted that in the present case, what the first respondent-plaintiff seeks is refund from the defendants and not restraint.

6.2 Dealing with the decisions cited by the learned counsel for the petitioner, it was submitted that the decision in the case of South East Asia Shipping Company Limited (supra), does not lay down any dictum that bank guarantee suits must go where the contracts signed. As regards the decision of the Supreme Court in the case of Begum Sabiha Sultan v. Nawab Mohd. Mansur Ali Khan (supra), reference was made to the contents of paragraph 12 of the said decision to submit that even on a meaningful reading of the plaint, it is apparent that the suit would lie only within the jurisdiction of the court at Ahmedabad. Insofar as the decision of the Supreme Court in the case of Hindustan Construction Company Limited v. State of Bihar (supra) is concerned, it was submitted that the said decision on the contrary supports the case of the first respondent and not the petitioner inasmuch as in the facts of the said case HCCL was required to furnish a bank guarantee as performance guarantee in respect of a contract awarded to it. In view of alleged breach of the contract, the defendants No. 4 to 6 therein invoked the bank guarantee. HCCL instituted a suit against the defendants No. 1 to 3 banks for restraining them from making payment of the amount covered under the bank guarantee to the defendants No. 4 to 6. The court held that a bank guarantee constitutes a separate, distinct and independent contract. This contract was between the bank and the defendants and was independent of the main contract between HCCL and the defendants. It was submitted that encashment of the bank guarantee has to be in terms thereof and not de hors it. It was submitted that the bank guarantee being an independent contract, the ouster clause contained in clause 38 of the sub-contract would not apply and the courts at Ahmedabad have the jurisdiction to entertain the dispute in relation to the bank guarantee.

7. In rejoinder Mr. D.C. Dave, learned counsel for the petitioner submitted that on a proper reading of the plaint, it is apparent that the relief that is claimed is only qua the petitioner because the bank guarantee has already been invoked and if the plaintiff succeeds in the suit the refund has to come from the petitioner. It was emphatically argued that the suit against the bank is superfluous and has been made merely to bring the suit within the jurisdiction of the court at Ahmedabad and hence, ought not to be considered. It was submitted that the same principles as in a case where an injunction has been prayed for on the basis of an apprehended overt act, would apply after the overt act is committed. As regards the contention that the petitioner did not have the original bank guarantee, it was submitted that when the existence of the bank guarantee is not in dispute, the bank need not insist on the original bank guarantee.

8. The short dispute that arises in the present case is as to whether the civil court at Ahmedabad has the jurisdiction to adjudicate upon the dispute involved in the suit instituted by the first respondent - plaintiff against the petitioner and the respondents No. 2 and 3 banks.

9. The facts have been referred to hereinabove in detail. The petitioner was awarded a project for construction, up-gradation, modernization, development and maintenance of seven Border Check-posts by M/s. IL&FS. The petitioner, in turn, entrusted the work of construction of five border check-posts to the first respondent-plaintiff and in respect thereof, the petitioner entered into a sub-contract with the first respondent (original plaintiff) in connection with which the plaintiff has furnished a performance bank guarantee. Subsequently, upon the scope of the work being reduced to three check-posts, the amount of bank guarantee came to be reduced proportionately. It appears that at the time of extending the bank guarantee, the petitioner handed over the original bank guarantee to the plaintiff. Thereafter, IL&FS terminated the main contract with the petitioner, pursuant to which the petitioner invoked the bank guarantee furnished by the plaintiff. It appears that despite the plaintiff having informed the defendant No. 1 bank not to permit encashment of the bank guarantee for the reasons extensively set out in the plaint, the defendant No. 1 bank paid the amount of Rs. 1,92,85,048.00 to the petitioner-defendant No. 3. Alleging that the bank in connivance with the petitioner had committed fraud upon it, the plaintiff instituted the above referred suit for a decree of the above amount with interest at the rate of 14% per annum from all the defendants. In paragraph 12 of the plaint, it has been stated that the suit bank guarantee was given at Ahmedabad by Defendant No. 1's Ahmedabad Branch, it was invoked by Defendant No. 3 at Ahmedabad and the amount thereof was paid over at Ahmedabad and therefore, the City Civil Court at Ahmedabad had the jurisdiction to decide and entertain the suit. By way of the application at Exhibit-26, the petitioner has disputed the jurisdiction of the City Civil Court at Ahmedabad to entertain and decide the suit and has prayed that the plaint be returned for submitting the same before the competent court at Hyderabad. The trial court, by the impugned order, has rejected the said application.

10. The record reveals that the petitioner and the plaintiff had entered into a sub-contract dated 26th August, 2011 for construction of border check-posts. Clause 38 of the sub-contract provides that the sub-contract and any subsequent agreement that the parties may enter into shall be governed and construed in accordance with the law for the time being in force in India and within the jurisdiction of the Courts at Hyderabad. In connection with the said contract, the plaintiff had furnished a bank guarantee. The said contract came to be terminated subsequently and the petitioner invoked the bank-guarantee and the amount thereunder was paid to the petitioner by the defendant No. 1 bank. It is the invocation of the bank guarantee by the petitioner and payment of the amount thereunder by the defendant No. 1 bank which is subject matter of challenge in the suit. According to the petitioner, the dispute would be governed by clause 38 of the sub-contract and the City Civil Court at Ahmedabad does not have the jurisdiction to entertain the suit.

11. On a plain reading of clause 38 of the sub-contract, it is manifest that what it provides is that the sub-contract and any subsequent agreement that the parties may enter into shall inter alia be subject to the exclusive jurisdiction of the courts at Hyderabad. The question that, therefore, arises for consideration is whether the performance bank guarantee furnished by the plaintiff to the petitioner can be said to be a subsequent agreement as contemplated under clause 38 of the sub-contract. In this regard reference may also be made to clause 9 of the sub-contract which bears the heading "Performance Bond" and reads thus: "The Sub Contractor shall submit the performance bond of 5% (Five Percent only) of Subcontract Sum as per Appendix-1, part-1 in the form of irrevocable Bank Guarantee valid till completion of defect liability period i.e. for 12 + 18 months for the satisfactory performance of scope of work. The same shall be refund to the Sub-contractor immediately upon receipt from the Employer/Developer on completion of work and defect liability period. The Performance Bank Guarantee shall be submitted within 10 days of entering into this Sub-contract Agreement." Thus, it is in compliance with clause 9 of the sub-contract that the performance bank guarantee has been given by the plaintiff to the petitioner. Evidently, therefore, the performance bank guarantee is not a subsequent agreement that the parties have entered into after executing the sub-contract. Besides, clause 38 contemplates a subsequent agreement between the parties, whereas the bank guarantee is not an agreement between the parties but is an independent contract wherein the bank is also a party. Therefore, on a proper construction of clause 38 of the sub-contract it is clear that the bank guarantee would not fall within the purview thereof and hence, the suit would not be governed by the provisions of clause 38. Hence, the contention that the suit would lie within the exclusive jurisdiction of the courts at Hyderabad does not merit acceptance, as the same does not fall within the ambit of clause 38 of the sub-contract.

12. Examining the facts from another angle, the Supreme Court in Hindustan Construction Co. Ltd. v. State of Bihar (supra) has held that a bank guarantee constitutes a separate, distinct and independent contract. This contract is between the Bank and the beneficiary and is independent of the main contract. In The State Trading Corporation of India Ltd. Vs. Jainsons Clothing Corporation and another, AIR 1994 SC 2778 : (1995) 1 ARBLR 351 : (1996) 1 BC 27 : (1996) 85 CompCas 470 : (1995) 5 JT 403 : (1995) 109 PLR 287 : (1994) 4 SCALE 332 : (1994) 6 SCC 597 : (1994) 3 SCR 527 Supp , the Supreme Court held that the contract of guarantee is a trilateral contract which the bank has undertaken to unconditionally and unequivocally abide by the terms of the contract. It is an act of trust with full faith to facilitate free flow of tr

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ade and commerce in internal or international trade or business. It creates an irrevocable obligation to perform the contract in terms thereof. On the occurrence of the events mentioned in the bank guarantee becomes enforceable. In Ansal Engineering Projects Ltd. Vs. Tehri Hydro Development Corporation Ltd. and Another, (1996) 6 AD 290 : (1997) 88 CompCas 149 : (1996) 7 JT 336 : (1996) 5 SCALE 769 : (1996) 5 SCC 450 : (1996) 4 SCR 226 Supp : (1996) 2 UJ 581 , the Supreme Court held that it is settled law that bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given and the beneficiary. 13. Thus, it is settled law that the bank guarantee is an independent contract and is not qualified by the underlying transaction. Accordingly, the question of jurisdiction to institute a suit in connection with a bank guarantee would have to be examined independent of the main contract between the parties. In the present case, in terms of the pleadings contained in the plaint, the bank guarantee was given at Ahmedabad, it was invoked by the petitioner-defendant No. 3 at Ahmedabad and the amount was paid over at Ahmedabad. Under the circumstances, the cause of action for instituting the suit having arisen within the jurisdiction of the courts at Ahmedabad, the trial court was wholly justified in holding that it had the jurisdiction to entertain and decide the dispute. 14. For the foregoing reasons, the court does not find any legal infirmity in the impugned order passed by the trial court in holding that it had the jurisdiction to entertain and decide the suit so as to warrant interference. At the same time this court is of the view that while adjudicating upon the question of its jurisdiction to entertain the suit, the trial court was not justified in entering into and commenting upon the merits of the suit. Under the circumstances, while upholding the impugned order, it is clarified that the observations made by the trial court on the merits of the main suit shall be ignored at the time of deciding the main matter. 15. In the result, the petition fails and is accordingly dismissed subject to the above observations. Notice is discharged with no order as to costs.
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