w w w . L a w y e r S e r v i c e s . i n



Simplex Infrastructures Ltd. v/s Goa State Infrastructural Development Corporation Ltd. & Another


Company & Directors' Information:- SIMPLEX INFRASTRUCTURES LIMITED [Active] CIN = L45209WB1924PLC004969

Company & Directors' Information:- C K INFRASTRUCTURES LIMITED [Active] CIN = U70200DL1997PLC089706

Company & Directors' Information:- D B INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U04520MP2006PTC018493

Company & Directors' Information:- R S INFRASTRUCTURES LIMITED [Active] CIN = U45201PB1997PLC020316

Company & Directors' Information:- SIMPLEX DEVELOPMENT PVT LTD [Amalgamated] CIN = U15491WB1983PTC036771

Company & Directors' Information:- K R INFRASTRUCTURES LIMITED [Active] CIN = U73100TG1992PLC013995

Company & Directors' Information:- I M B INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70102DL2009PTC195079

Company & Directors' Information:- Y K M INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45202CH2006PTC029960

Company & Directors' Information:- R 3 INFRASTRUCTURES LIMITED [Active] CIN = U45400DL2014PLC268953

Company & Directors' Information:- P G M INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U01119AP2007PTC054326

Company & Directors' Information:- N H INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45209CH2010PTC032243

Company & Directors' Information:- R V INFRASTRUCTURAL PRIVATE LIMITED [Active] CIN = U45203DL1999PTC099057

Company & Directors' Information:- Y D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70102UP2009PTC037603

Company & Directors' Information:- C 4 INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201MH2013PTC242843

Company & Directors' Information:- B S V R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45209TG2009PTC064901

Company & Directors' Information:- V AND K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200TG2001PTC036581

Company & Directors' Information:- GOA INFRASTRUCTURAL DEVELOPMENT COMPANY PRIVATE LIMITED [Active] CIN = U29244GA1998PTC002619

Company & Directors' Information:- J L INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200TN2008PTC066965

Company & Directors' Information:- T & C INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70102TG2008PTC060995

Company & Directors' Information:- U R C INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200TG2008PTC058894

Company & Directors' Information:- R V A INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70102UP2013PTC056289

Company & Directors' Information:- S R G INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74110DL2005PTC134967

Company & Directors' Information:- S R G INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70101DL2005PTC134967

Company & Directors' Information:- N. C. R. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45400UP2008PTC034623

Company & Directors' Information:- P T INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U51909DL2007PTC159635

Company & Directors' Information:- S. L. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45203PB2007PTC031300

Company & Directors' Information:- V C H INFRASTRUCTURES PRIVATE LIMITED [Under Process of Striking Off] CIN = U45203KL2011PTC028762

Company & Directors' Information:- P A INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45208TN2009PTC071929

Company & Directors' Information:- A E K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45309TN2009PTC071702

Company & Directors' Information:- K G N INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74200DL2007PTC167982

Company & Directors' Information:- M A M INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70109KA2012PTC062160

Company & Directors' Information:- P N INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45201OR2010PTC012647

Company & Directors' Information:- R S INFRASTRUCTURES INDIA PRIVATE LIMITED [Strike Off] CIN = U45206TN2013PTC091533

Company & Directors' Information:- J S K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200MH2005PTC156097

Company & Directors' Information:- S A INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400WB2013PTC192691

Company & Directors' Information:- L & W INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200DL2008PTC182372

Company & Directors' Information:- K R R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70102TG2008PTC061194

Company & Directors' Information:- INFRASTRUCTURES PRIVATE LIMITED [Under Process of Striking Off] CIN = U45200JH2007PTC012792

Company & Directors' Information:- S AND A INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45206UR2012PTC000345

Company & Directors' Information:- J & K INFRASTRUCTURES LIMITED [Active] CIN = U40101JK2009PLC003034

Company & Directors' Information:- V. J. S. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74999UP2008PTC035636

Company & Directors' Information:- K R M INFRASTRUCTURES (INDIA) PRIVATE LIMITED [Strike Off] CIN = U45209TG2011PTC073850

Company & Directors' Information:- M D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201CH2001PTC024224

Company & Directors' Information:- V K INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400UP2008PTC034415

Company & Directors' Information:- K Y INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201DL2004PTC127815

Company & Directors' Information:- A K C INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45200KL2010PTC025716

Company & Directors' Information:- D N D INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45203PN2008PTC133243

Company & Directors' Information:- G V R INFRASTRUCTURES INDIA PRIVATE LIMITED [Strike Off] CIN = U45209AP2008PTC059504

Company & Directors' Information:- K & K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74120KA2006PTC040900

Company & Directors' Information:- A & G INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U31900PB2012PTC036358

Company & Directors' Information:- Y R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45201RJ2015PTC047298

Company & Directors' Information:- U D INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45400MH2010PTC203382

Company & Directors' Information:- J W INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U74120MH2015PTC268554

Company & Directors' Information:- G AND G INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200MH2004PTC147316

Company & Directors' Information:- A. N. Y. INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45206MH2013PTC243735

Company & Directors' Information:- J V S M S INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200TG2010PTC070371

Company & Directors' Information:- K S V V INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45209TG2010PTC069359

Company & Directors' Information:- A V R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400DL2009PTC186399

Company & Directors' Information:- A P S INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U70109DL2013PTC248564

Company & Directors' Information:- R R INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U70109DL2006PTC150324

Company & Directors' Information:- S D P INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45200HR2013PTC048666

Company & Directors' Information:- B P K INFRASTRUCTURES PRIVATE LIMITED [Active] CIN = U45203KA2009PTC049331

Company & Directors' Information:- T M R INFRASTRUCTURES PRIVATE LIMITED [Strike Off] CIN = U45400TG2007PTC054647

Company & Directors' Information:- SIMPLEX (INDIA) LIMITED [Dissolved] CIN = U99999MH1946PTC005414

    Writ Petition Nos.517 of 2007 and 518 of 2007

    Decided On, 25 July 2008

    At, In the High Court of Bombay at Goa

    By, THE HONOURABLE MR. JUSTICE S.C. DHARMADHIKARI

    For the Petitioner: V.B. Nadkarni, Senior Advocate with Y.V. Nadkarni, Advocates. For the Respondents: R1, M.S. Sonak, D. Pangam, N. Vaze, R2, E. Afonso, Advocates.



Judgment Text

Oral Judgment:


1. On 26.10.2007, this Court had directed issuance of notice and further observed that the petition would be disposed of finally at the admission stage.


2. Hence, Rule. The respondents waive service. By consent of the parties, rule is made returnable forthwith.


3. The petition challenges the order dated 29th September, 2007 passed by the District Judge-I, Panaji in Miscellaneous Civil Appeal No.76/2005. Whereunder the learned District Judge has quashed and set aside the order dated 28.6.2005 in Civil Miscellaneous Application No.124/2005 in Regular Civil Suit No.43/2005. As a result of the order of the District Judge, an application for temporary injunction filed by the petitioner plaintiff in the above suit has been dismissed.


4. Very few facts are necessary to be mentioned to appreciate the challenge to the impugned order. The petitioner plaintiff filed the above mentioned Civil Suit for declaration and injunction against the first respondent Corporation and United Bank of India seeking declaration that invocation of the suit bank guarantee, vide letter dated 31.1.2005 so also by the further communications of 31.3.2005 and 20.4.2005, is wrongful and illegal and the original defendant No.2 is under no obligation to pay the amount demanded by the original defendant No.1, Corporation. Further, permanent injunction be granted restraining the first respondent before me from encashing suit bank gaurantee or any part thereof and restraining the Bank from making any payments pursuant to the letters referred to above.


5. A temporary injunction was claimed in furtherance of the above reliefs and that is how the Miscellaneous Civil Application under Order XXXIX of the Code of Civil Procedure, 1908, was filed by the original plaintiff. The case set out in the plaint is that the petitioner plaintiff is Public Limited Company and the first respondent Corporation invited tenders from eligible contractors for performance of Four (4) jobs which are more particularly set out in paragraph 5 of this petition. In response to the tender notices, the petitioner submitted its tender for all four jobs and by their letter dated 14.1.2004 also informed the first respondent that in case all the four jobs were awarded to them, they will agree to carry out the work at the price more particularly mentioned in paragraph 6 of the plaint. The Corporation informed the petitioner that their bid in respect of Four packages were accepted and the price was mentioned in the communication in that behalf.


6. In terms of the tender conditions, the petitioner was required to furnish performance security equivalent with the pay of the contract price, through bank guarantees. Accordingly, in respect of package-II, the contract price being Rs.12,60,15,082 a bank guarantee bearing No.377 of 2004 dated 19.2.2004 was furnished in the sum of Rs.63,00,754/-This is the suit bank guarantee. It is alleged in the plaint that Individual Agreements were executed between parties and stipulated period of completion of all four jobs was 8 months including monsoons. The petitioner further, alleged that originally the validity of suit bank guarantee was up to 31.10.2004. However, the job could not be completed within stipulated time solely on account of inaction or delay on the part of the first respondent Corporation. Under oral instructions of the Engineer or of the first respondent Corporation, the petitioner plaintiff was required to continue the work and as the validity of the suit bank guarantee was expiring on 31.10.2004, the suit bank guarantee was extended up to 31.3.2005 as desired by the first respondent Corporation. The case of the petitioner is that the suit bank guarantee were extended initially upto 31.1.2005 but by letter dated 31.1.2005 of one J. N. Chimulkar, General Manager of the first respondent Corporation he purported to inform second respondent Bank that the Corporation has decided to invoke and encash the suit bank guarantee. The suit bank guarantee was offered to be extended by the petitioner plaintiff by their letter 1.2.2005 and in fact by letter dated 5.2.2005, the petitioner agreed to extend the validity of the suit bank guarantee up to 31.3.2005. It requested the Corporation to withdraw the invocation letter dated 31.1.2005. Since the bank guarantee was extended, the demand made in the letter dated 31.1.2005 for encashment was not pressed by the Corporation.


7. However, by letter dated 31.3.2005, the Corporation once again confirmed its desire to invoke the bank guarantee and called upon the bank to make payment. The bank by letter dated 31.3.2005, informed the Corporation that the validity of the suit bank guarantee was further extended up to 30.6.2005. Notwithstanding such extension, the managing director of the Corporation by letter dated 20.4.2005 demanded payment under the suit bank guarantee. In paragraph 20 of the plaint, the petitioner plaintiff referred to the terms of the guarantee and contended in the subsequent paragraphs that the suit bank guarantee although constituting a separate, distinct and independent contract, ultimately, the invocation will have to be in accordance with the terms of bank guarantee or else, same is bad. The invocation has to be done by duly authorized person, failing which the invocation would not be in terms of the guarantee and bank is under no obligation to pay the amount covered by the guarantee. Further, case of the petitioner plaintiff was that the bank guarantee cannot be said to be unequivocal and or unconditional inasmuch as same does not recite that the amount would be paid without demur or objection or irrespective of any dispute that might have cropped up or might have been pending between the beneficiary or the person on whose behalf the guarantee was furnished. It was alleged that the dispute with regard to the extension of time for completion of the contract has cropped up and is pending between the parties. In such circumstances, and considering the wording of the bank guarantee, it cannot be said to be unconditional and absolute. Lastly, it was alleged that the invocation by the General Manager of the Corporation is not in terms of the bank guarantee and, therefore, the bank is under no obligation to pay the amount as demanded.


8. Alleging thus, the petitioner plaintiff claimed above mentioned reliefs.


9. In the application for temporary injunction, all these aspects were highlighted and affidavit was filed in support of the same. The trial Court was requested to issue temporary injunction during the pendency of the suit restraining the bank from encashing the bank guarantee or making any payment thereunder to the defendant No.1 Corporation in furtherance of the demand letters. It appears that an ad-interim ex-parte injunction order was passed by the Trial Court.


10. The injunction application was contested after notice by the first respondent Corporation. It filed its written statement and in addition to the preliminary objections, pointed out that the bank guarantee is unconditional and unequivocal. The bank guarantee is furnished in terms of the contract stipulation. The plaintiff has not alleged fraud or irretrievable injustice so also, failed to point out any special equities permitting issuance of injunction to restrain encashment of a bank guarantee. Highlighting terms of the guarantee, it was contended that the suit as filed does not disclose any cause of action and, therefore, should be dismissed. The averments in the plaint have been denied and further it was contended that the bank guarantee is being invoked by the Corporation and the Corporation is not prohibited in law from acting through its officers duly authorized. In such circumstances, there is no substance in the contention that the invocation is not in terms of the bank guarantee. Further, it was urged that the bank guarantee being unconditional and unequivocal so also, unconcerned with the dispute under the parent contract, there is no substance in the contention that the bank guarantee cannot be invoked. The alleged dispute between the parties, is not something which is pending before the Tribunal or Court of Law and hence, the stipulation in the bank guarantee in this behalf, is not attracted in any event. For this reason, it was prayed that the application for temporary injunction be dismissed. The trial Court after considering both, the plaint averments and the written statement/ reply affidavit of the Corporation so also, hearing the parties concluded that the bank guarantee must be interpreted with reference to the terms and words used in it. So construed, the first respondent, Corporation would be entitled to the amount under the bank guarantee only on proof of breach on the part of the petitioner contractor of any terms and conditions under the contract. No demand claiming specific amount or alleging specific breach has been made before the expiry of the extended date. No claim has been made to enforce the guarantee. There was a bonafide contention between the parties inasmuch as the question of making payment of payment under the guarantee would arise only after the terms of the guarantee are fulfilled. Considering the terms of the guarantee and it referring to the parent contract, this is a fit case where prima facie, the petitioner has established the plea of equity in its favour and balance of convenience is also in its favour. The petitioner would suffer irreparable harm or injury in case Injunction as prayed is not granted. In such circumstances, the trial Court confirmed its ex-parte order dated 25.4.2005 and issued the restraint as prayed by the petitioner plaintiff. The result was that there was an injunction issued in favour of the plaintiff restraining the defendant No.1 Corporation from encashing the bank guarantee till the disposal of the suit.


11. Aggrieved and dissatisfied with this order of injunction, the first defendant carried the matter in appeal to the Appellate Court. The Miscellaneous Civil Appeal was placed before the District Judge-I, Panaji. The learned District Judge framed necessary points for determination and by the impugned judgment and order held that there is no prima facie case made out of fraud or irretrievable injustice by the petitioner plaintiff. No special equities can be claimed by the petitioner plaintiff. On the other hand, the bank guarantee is unconnected with any dispute under the parent contract. Being independent of the same and that the terms demonstrating that it is unequivocal and unconditional, there is no question of issuance of any temporary injunction and, therefore, the trial Court was not justified in granting an injunction. From paragraph 25 onwards, the learned Judge extensively considered the pleas raised by the petitioner plaintiff in the plaint and orally reiterated before him. However, he perused the suit guarantee and the demand letter. He, then, concluded that there was no dispute which could be said to be pending in any Court or Tribunal when the guarantee was first invoked. In such circumstances and considering the law laid down by the Supreme Court, the learned District Judge allowed the appeal and reversed the order of the trial Court.


12. It is this judgment and order of the lower appellate Court, which is subject matter of challenge in this petition.


13. Shri Nadkarni, learned Senior Counsel appearing for the petitioner contended that the impugned judgment and order is ex facie erroneous and contrary to law. He submits that the learned Judge has erred in reversing the view taken by the trial Court. He submits that the prima facie conclusion of the trial Court was based on perusal of the terms of the suit bank guarantee and the letter of invocation. The trial Court was justified in concluding that the invocation, must be in terms of the bank guarantee and in the instant case that was not so. Once this was prima facie conclusion and special equities arising in favour of the petitioner plaintiff being proved, the lower Appellate Court was not justified in interfering with the discretion exercised by the trial Court. The discretion cannot be said to be vitiated by any error muchless apparent on the face of the record nor can be said to be perverse. Mr. Nadkarni has urged that the lower appellate Court's judgment being vitiated, this Court would be failing to fulfill its duty under Article 227 of the Constitution of India. If it does not interfere and reverse the same. Mr. Nadkarni was at pains to point out that the guarantee, copy of which is at Exh.G expressly refers to the terms, covenant and conditions of the contract and the agreement between the petitioner and the first respondent Corporation. In addition, it refers to the due and punctual payment by the contractor to the Corporation of all sums of money, losses, damages, costs, charges, penalties and expenses under or in respect of agreement. It is, therefore, that second defendant Bank gave an undertaking to the Corporation to pay on demand and ?without dispute or disputes raised by the contractor? in any suit or proceeding filed in any Court or Tribunal relating to the contract, the sums related or such lesser sum as is demanded. Mr. Nadkarni submits that this guarantee cannot be said to be unconditional and unequivocal. Its invocation is directly depending upon fulfillment of the terms and conditions of the agreement by the contractor and payments thereunder to the Corporation. Unless that aspect has been gone into and decided, there is no question of any payment under the bank guarantee. Similarly, the words ?without the dispute or disputes raised by the contractor? appearing in the bank guarantee would demonstrate that if any dispute is raised and the same is pending, then, suit bank guarantee cannot be invoked. In the instant case, the plea raised was that the petitioner contractor is unable to fulfill his obligations on account of the deliberate inaction or delay on the part of the Corporation. The Corporation was orally intimating to the contractor and seeking extensions under the contract. The contractor was not agreeable to pay and there was a dispute in this behalf. Pending adjudication of that dispute or in any event resolution thereof in accordance with law, the bank guarantee could not have been invoked.


14. The next contention was that the bank guarantee is capable of being invoked only by the duly authorized person. The contract refers to the term Engineer and defines it to mean as M/s. S. N. Bhobe and Associates Pvt. Ltd. or any other consultant appointed by the employer and notified in writing to the bidder to act as an Engineer for the purpose of contract. In these circumstances and when M/s. S.N. Bhobe and Associates communicating to the petitioner contractor that the work has been carried out to its satisfaction and calling upon the Corporation to make payment of the running bills, the invocation of the bank guarantee by the Corporation, was not in terms thereof and in any event could not be said to be by person authorized to do so. The General Manager was not a person authorized so also, the other official. Inviting my attention to the letters invoking the Bank guarantee, Mr. Nadkarni contended that the Corporation has not authorized anybody to invoke the bank guarantee. The resolutions passed are not authorizing encashment of the bank guarantee but are on some other aspects. The power conferred to execute agreement and contracts etc. so also, to sign documents, does not include a power to invoke and enforce the bank guarantee and, therefore, there is serious dispute as to whether the invocation was in terms of the bank guarantee. If such being the case, the trial Court was right in granting an injunction and the lower appellate Court by overlooking this aspect has seriously erred in reversing the order of the trial Court. In such circumstances, the order under challenge should be quashed and set aside. Mr. Nadkarni has also taken me through the letter dated 11.1.2005 addressed by the Engineer M/s. S.N. Bhobe and Associates Pvt. Ltd. recommending extension of 190 days without imposing liquidated damages on the contractor.


15. Mr. Nadkarni has relied upon following decisions in support of his above contentions.


i) Crest Communications Ltd. Versus State Bank of India and another reported in (2000(3) Mh.L.J. Page 163).


ii) Shubh Shanti Services Ltd. Versus Manjula S. Agarwalla and Others reported in (2005 AIR SCW 2663).


iii) Shankar Tukaram Kakade Vesus Lakshmibai Shankarrao Ghadge reported in (AIR 1928 Bombay 225).


iv) Hindustan Construction Co. Ltd. Versus State of Bihar and Others reported in ((1999) 8 Supreme Court Cases 436).


16. On the other hand, Mr. Sonak, learned Counsel appearing for the first respondent Corporation has contended that the plaint read as a whole, does not disclose any element of fraud, irretrievable injustice. The plaint averments only discloses misrepresentation and alleged oral agreement between the parties. He has specially relied upon paragraphs 13 and 14 of the plaint, who urged that the averments therein are not sufficient and adequate to issue a temporary injunction as prayed. He has also taken me through paragraphs 15 to 20 of the same and has contended that the petitioner plaintiff has miserably failed to make out a

case of fraud or irretrievable injustice. On the other hand, the petitioner plaintiff has referred to the settled principles enabling the issuance of an injunction to restrain encashment of bank guarantee. In paragraphs 21 to 23 of the plaint, they do not dispute that the Corporation can invoke the bank guarantee by issuing a letter of demand. In such circumstances, there is no question of issuance of temporary injunction and the lower appellate Court was right in reversing the order of the trial Court.


17. Mr. Sonak has pointed out that this bank guarantee is unconditional and mere recital in the guarantee does not mean that it is connected with or is part of the parent contract. The parent contract and the disputes thereunder have nothing to do with the obligation of the banker to honour its commitment and pay the sum under the guarantee. The terms of the guarantee show that it is unconditional. There is no dispute about the fact that no proceedings are pending in a Court of law or Tribunal. Once the bank is unconcerned with such disputes and has unconditionally undertaken to make payment, then, the lower appellate Court's approach cannot be faulted. He submits that the alleged dispute regarding extension of time, is not a dispute pending in a Court of law. In such circumstances, when there are no pleadings of fraud, when there is nothing in the plaint demonstrating special equities in favour of the petitioner plaintiff, then, the encashment of the bank guarantee could not be prevented. For all these reasons, the lower appellate Court's order is perfectly justified and is in accordance with law and, therefore, should not be interfered with.


18. Mr. Sonak has relied upon the following decisions in support of his contentions.


i) Vinitec Electronics Private Ltd. Versus HCL Infosystems Ltd. reported in (2008) 1 Supreme Court Cases 544).


ii) Mahatma Gandhi Sahakra sakkare karkhane Versus National Heavy Engg.Coop. Ltd. and another reported in (2007)6 Supreme Court Cases 470).


19. With the assistance of the learned Counsel for the both sides, I have perused the petition and annexures thereto including the impugned order. By now, the Hon'ble Supreme Court and this Court has on umpteen number of occasions set out the well established and settled principles. In the latest decision reported in 2008(1) Supreme Court Cases 544 relied upon by the Corporation, these principles have been reiterated. The Supreme Court holds that the law relating to invocation of bank guarantee is now well settled. The bank guarantees which provide that they are payable by the guarantor on demand, are considered to be an unconditional bank guarantee. When in the course of commercial deals such guarantees have been given and accepted, the beneficiary is entitled to realize them in terms thereof irrespective of any pending dispute with regard to the contract is pending or not. This is what the Supreme Court has observed in paragraphs 11, 12 and 21 & 22 of the above decision. They read as under:


?11. The law relating to invocation of bank guarantees is by now well settled by a catena of decisions of this Court. The bank guarantees which provided that they are payable by the guarantor on demand is considered to be an unconditional bank guarantee. When in the course of commercial dealings, unconditional guarantees have been given or accepted the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. In U.P. State Sugar Corpn. V. Sumac International Ltd., this Court observed that: (SCC p.574, para 12)


?12. The law relating to invoation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realization of such a bank guarantee. The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence, if there is such a fraud of which the beneficiary seeks to take advantage, he an be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would be override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. The two grounds are not necessarily connected, though both may coexist in some cases.?


12. It is equally well settled in law that bank guarantee is an independent contract between bank and the beneficiary thereof. 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 of no consequence. In BSES Ltd. V. Fenner India Ltd. this Court held: (SCC pp.733-34, para 10)


10. There are, however, two exceptions to this rule. The first is when there is a clear fraud of which the bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction. The second exception to the general rule of non-intervention is when there are 'special equities' in favour of injunction, such as when 'irretrievable injury' or 'irretrievable injustice' would occur if such an injunction were not granted. The general rule and its exceptions has been ieiterated in so many judgments of this Court, that in U.P. State Sugar Corpn. V. Sumac International Ltd. (hereinafter 'U.P. State Sugar Corpn.') this Court, correctly declared that the law was 'settled'.?


21. In Hindustan Construction the appellant Company was awarded a contract by the State of Bihar for construction of a dam. Clause 9 of the contract between the parties provided that the State would make an advance loan to the Company for the costs of mobilization in respect of the works on furnishing of a bank guarantee by the appellant for an amount equal to the advance loan. The advance loan was required to be used exclusively for mobilization expenditure. In case of misappropriation of the advance loan the loan at once shall become due and payable immediately. In terms of this clause bank guarantee was furnished by the bank agreeing unconditionally and irrevocably to guarantee payment on demand without any objection but with the qualification that such payment shall be only in the event the obligations expressed in Clause 9 of the original contract have not been fulfilled by the contractor giving the right of claim to the employer for recovery of the whole or part of the advance mobilization loan. Clause 9 of the main contract was thus incorporated and made part of the bank guarantee furnished by the banker. It is under those circumstances this Court took the view that the bank guarantee furnished was not an unconditional one. Clause 9 in the bank guarantee refers to the terms and conditions of the contract between the parties. The bank guarantee thus could be invoked only in the circumstances referred to in Clause 9 wherein the amount would become payable only if the obligations are not fulfilled or there is misappropriation.


22. In the present case the amended clause does not refer to any of the clauses specifically as such but on the other hand the Bank had undertaken responsibility to pay any sum or sums within the guaranteed limit upon receipt of written demand from the Company. The operative portion of the bank guarantee furnished by the Bank does not refer to any of the conditions for payment under the bank guarantee. It is true that the bank guarantee furnished makes a reference to the principal agreement between the parties in its preamble. Mere fact that the bank guarantee refers to the principal agreement in the preamble of the deed of guarantee does not make the guarantee furnished by the Bank to be a conditional one unless any particular clause of the agreement has been made part of the deed of guarantee.?


(emphasis supplied)


In fact, this decision distinguishes the earlier view taken by the Supreme Court in Hindustan Construction Co. Ltd. Versus State of Bihar reported in (1999) 8 Supreme Court Cases 436). This is the judgment, which has been relied upon by Shri Nadkarni before me.


20. In the backdrop of these well established principles, if the present guarantee is considered, then, in my view, prima facie there is substance in the contention that the same is unconditional. The guarantee does not refer to any terms and conditions so also, covenant of the contracts. All that it says in paragraph 1 is that guarantee is given to the Goa State Infrastructure Development Corporation and the bank undertakes to pay to the Goa State Infrastructural Development Corporation on demand and ?without dispute or disputes raised by the contractor? in any suit or proceeding filed in any Court or Tribunal relating thereto. Thus, even if it is assumed for the sake of argument that said clause (a) and (b) of clause 1 of the guarantee makes a reference to the contract, that by itself does not mean that the bank guarantee is conditional upon compliance by the Corporation thereof. If that was to be the case, then, further words appearing in the said clause are rendered meaningless. No term can be construed as having been inserted as mere surplusage or unnecessary. Both sides were completely aware of the fact that what was executed is a bank guarantee. They were fully aware of what the contract of guarantee is. They were fully aware of the fact that when the bank undertakes to pay the amount, it is not concerned with the parent contract and fulfillment of its terms and conditions. In such circumstances the bank undertakes to pay on demand and ?without dispute or disputes raised by the contractor?. The words ?without dispute or disputes raised by the contractor? cannot be given the meaning assigned by Shri Nadkarni for obvious reasons. The bank makes its position clear that its undertaking is absolute and unconditional. Its commitment to make payment has no connection with any dispute or disputes raised by the contractor against the Corporation and its pendency in any Court of law or Tribunal. If the words appearing in clause 1 are read as a whole, it is apparent that any dispute touching the parent contract pending between the parties in any Tribunal or Court of law, notwithstanding, the bank will pay the sum under the guarantee on demand. In such circumstances, there is substance in the contention of Shri Sonak that the bank guarantee is unconditional and unequivocal.


21. If that is the case the next question arises as to whether prima facie case of fraud and irretrievable injustice so also, special equities was made out in the present facts and circumstances or not? To my mind, even that has not been made out. The plaint averments have been perused by me with the assistance of the learned Counsel for the both sides. Apart from setting out the contention and some letters and reference to oral understanding regarding the extension of time, there is no pleading of any fraud or irretrievable injustice muchless particulars thereof. Fraud has to be of the nature set out in the Supreme Court decision, that the fraud has to be pleaded and proved and must be of the nature set out in the decisions, is undisputed before me. The matter must be decided on the touchstone of these principles. The petitioner plaintiff has failed to make out a case of fraud or irretrievable injustice. The Corporation is justified in contending that the pleadings and more particularly paragraphs 13 to 15 of the plaint so also, 21 to 25 thereof do not make out a case of the fraud or irretrievable injustice. Merely stating that the contractors have extended guarantee on the oral understanding and there is some dispute raised in this behalf by the parties, was not enough to make out a case of either fraud or irretrievable injustice. Something more was necessary to be set out even for making out a case of special equities. That the pendency of the dispute between parties, is not before a Court of law or Tribunal, is an clear and admitted position. Both sides have entered into correspondence and that is how, the dispute is raised, is something which would not enough to make out a case of fraud and irretrievable injustice. In such circumstances, even on this count, the trial Court was not justified in issuing an injunction. In fact, the trial Court has ignored the note of caution initially sounded and the later warning issued by the Supreme Court while granting injunction in such cases. In fact, the Supreme Court for the last decade, has been heavily coming down on the trial Courts whenever they are granting injunction restraining encashment of bank guarantees without appreciating the facts properly and without applying their mind as to whether a case of the nature set out in the Supreme Court decision is made out or not. Such injunctions granted as a matter of course and routine by the trial Court were strongly deprecated. Despite such warning and repeated notes of caution, the trial Courts have been doing so, is unfortunate and present case is one more instance of that nature.


22. In such circumstances, the lower appellate Court has performed its duty in law and it is rightly stepping into for reversing the judgment and order of the trial Court. The criticism by the lower appellate Court that the trial Court has completely missed the bus, is fully justified having regard to the averments in the plaint and the application for temporary injunction. The perversity in the order of the trial Court was clearly demonstrated before the lower appellate Court and it performed and fulfilled its duty in law as an appellate Court while interfering with that order.


23. Lastly, the issue remains whether the invocation is in terms of the guarantee. The bank guarantee clearly states that the guarantee is to the Corporation and on demand from the Corporation, there is an undertaking and commitment to pay the same. The communication dated 31.1.2005 clearly sets out that the Corporation has decided to invoke and encash the suit guarantee issued by the defendant No.2 bank. Merely because it is signed by the General Manager (Engineer), does not mean that the Corporation has not invoked the bank guarantee. Further the petitioner then writes the letter dated 5.2.2005 to the managing director of the Corporation referring to its invocation letter dated 31.1.2005 and thereafter, requesting it to withdraw the invocation letter. Such being the conduct of the petitioner plaintiff, it is no longer open to it to urge that the invocation of the bank guarantee was not in terms thereof. This letter has been addressed by the petitioner on the basis that the Corporation has invoked the bank guarantee. The next invocation of March 2005, is clearly on the letter head of the Corporation and the demand by the Corporation is reconfirmed and endorsed. Thus, it is apparent that the Corporation has acted through its Managing Director and he has signed the letter. Even further communications are on that basis. The resolutions that are being relied upon clearly go to show that the Corporation in its 16th Board meeting, held on 13.1.2003, had delegated the powers to Managing Director and other officers stipulated in the resolution and authorized them jointly and/or severally to sign all agreements, deeds, documents, applications and any other relevant papers for and on behalf of the Corporation. The Managing Director's name appears so also, that of General Manager(Engineer) in this resolution. In such circumstances, it is futile to urge that this resolution does not empower the Engineer or the Managing Director when signing the letter invoking the bank guarantee. Once it is undisputed that the Corporation is invoking the bank guarantee and only communications are being signed by the concerned authorized officers, then, there is no substance in the contention that the invocation is not in terms of the bank guarantee. Therefore, the lower appellate Court was justified in holding that the bank guarantee has been invoked in accordance with its terms and conditions and reliance by the lower appellate Court on resolution No.91 so also, other resolutions, cannot be said to be vitiated by any error apparent nor can be termed as perverse so as to call for interference in writ jurisdiction. This is not a Court of further appeal so as to permit reappreciation and reappraisal of the factual materials. Once the view, which is possible, has been taken and further, that is in accordance with settled legal position, then, this Court cannot interfere with it in writ jurisdiction.


24. It is in the above facts and the conclusions reached that I find that reliance by Shri Nadkarni on the decision of learned Single Judge of this Court is totally misplaced. On facts relying upon the judgment in Hindustan Construction Company's case, this Court reached a conclusion that the terms of the Performance Guarantee disclose that it is not unconditional. Further, a written demand which must make a clear reference to the supplier/ plaintiff being in default, was not made. Therefore, and because the written demand made on record was not in terms of the guarantee that the injunction was granted. It is in such circumstances, that the law laid down in the Hindustan Construction Company's case (supra) was followed.


25. The decision of the Supreme Court in the case of Shubh Shanti Services Ltd. Versus Manjula S. Agarwalla and others reported in (2005 AIR SCW 2663) is not on the point at all. It refers to proceeding under section 630 of the Companies Act and in that context, when an oral assurance was given, that the observations in paragraph relied upon by Shri Nadkarni (paragraph 17) have been made. Hindustan Construction's case was a case peculiar of its own. There, on facts, the Supreme Court noticed that the bank guarantee was not unconditional and unequivocal as contended. The bank guarantee itself refers to the obligations in the contract and its invocation was conditional upon nonfulfillment thereof by the contractor. Only upon non-fulfillment thereof that the right accrued to the employer to invoke the same. Further, that was a guarantee undertaking to pay sums advanced as mobilization loan. In such

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circumstances, and when special equities were made out with proper pleadings and particulars, that the Supreme Court granted the injunction as prayed for. Such is not the case here. On the other hand, the law laid down in the decision relied on by Shri Sonak is applicable on all fours to the facts of the present case. Hence, for the reasons stated in this decision, an injunction could not have been granted. 26. In the result, the writ petition fails. Rule is discharged with no order as costs. 27. At this stage, Mr. Nadkarni appearing for the petitioner prays that the ad interim relief granted by this Court be continued for some time so as to enable the petitioner to challenge this order further. This request is opposed by Mr. Nikhil Vaze, learned Counsel appearing for the first respondent Corporation. The ad interim order has been granted on 26.10.2007 and has been continuing till date. Interest of justice would be served if the said order is continued for a period of 6 weeks from today. Needless to state that the extension of the ad interim order is conditional upon the petitioner's renewing the bank guarantee and if that is not done the benefit of such extension shall not be available to them. Petition dismissed. Oral Order: 1. In the present case all that has been pointed out to distinguish this case from the earlier matter i.e. W.P. No.517/2007 is that the suit bank guarantee is issued by Federal bank and it refers to the claim by way of loss or damage caused to or would be caused or suffered by employer. However, it is pointed out by the Corporation that even this suit bank guarantee is unconditional and the amounts are due and payable merely on demand from the Corporation and Corporation's satisfaction is enough for its invocation. There is no further proof or material that is required to be forwarded to the banker. This was a case of the mobilization advance and the contention before me is that there is non-payment of the said advance. In such circumstances, when the dispute in this behalf is pending, the plea raised is that the letter of invocation could not have been acted upon. 2. The invocation letter, copy of which is at page 62 may be referring to any mobilization advancement not being settled entirely by the Corporation but that by itself is of no consequence in the teeth of the clear language of the suit bank guarantee and bank being informed that the Corporation has decided to invoke the bank guarantee on its satisfaction as stipulated in terms of the suit bank guarantee, then, absence of some words here and there is of no consequence. The suit bank guarantee is unconditional and that appears to be the undisputed position. In such circumstances, compliance with the terms of the suit bank guarantee and the invocation cannot be faulted. 3. These are the only distinguishing factors, which have been pointed out to me. This by itself does not enable me to take a different view in this case. Thus, for the reasons set out in the order passed in Writ Petition No.517/2007, this writ petition also fails. Rule is discharged with no order as to costs. 4. At this stage, Mr. Nadkarni appearing for the petitioner prays that the ad interim relief granted by this Court, be continued for some time so as to enable the petitioner to challenge this order further. This request is opposed by Mr. Nikhil Vaze, learned Counsel appearing for the first respondent Corporation. The ad interim order has been granted on 26.10.2007 and has been continuing till date. Interest of justice would be served if the said order is continued for a period of 6 weeks from today. Needless to state that the extension of the ad interim order is conditional upon the petitioner's renewing the suit bank guarantee and if that is not done, the benefit of such extension shall not be available to them. 5. Registry to give a copy of my order dated 25.7.2008 in W.P. No.517/2007 to Mr. E. Afonso, learned Counsel for the Federal Bank.
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