TMI Blog2015 (2) TMI 486X X X X Extracts X X X X X X X X Extracts X X X X ..... iciary and can be challenged only on the ground of fraud and irreparable injury. Petitioner has challenged the invocation of the bank guarantee only on the ground of irreparable injury. The plea of irreparable injury is based on the contentions that the petitioner since having financial problems would suffer irreparable loss, if the respondent be allowed to encash the band guarantees. Whether this constitutes irreparable injury of the nature which is sufficient to restrain the respondent from invoking the bank guarantees is the matter which requires consideration. Now what is an irreparable loss and injury on the basis of which court can restrain the respondents, has been discussed and the principle laid down by the supreme court in the U.P.State Sugar Corporation’s case (1996 (12) TMI 294 - SUPREME COURT OF INDIA). From the principles laid down in the Itek Corporation v. First National Bank of Boston [1983 (6) TMI 203 - UNITED STATES DISTRICT COURT], it is apparent that the petitioner can be said to have suffered irreparable injury if he has been able to show that he shall suffer irreparable harm. - petitioner has failed to bring on record which can show that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/Township (CS-0260- 364-9)/LOA/09-10/201 dated 30.01.2010 by respondent no.1. Thereafter the agreement/contract was drawn on 25.03.2010. The work was for a value of ₹ 137.847 Crores. The completion period was 24 months. However, since the work could not be completed within 24 months, the period was extended by respondent no.1 from time to time but the work could not be completed even after expiry of 53 months. The petitioner could complete the work worth of 35 % of the awarded contract value by April, 2014. 3. At the time when the contract was drawn, the petitioner had furnished security in the form of bank guarantees, the details of the bank guarantees are reproduced as under: S.No. Date Nature of B.G. Bank Guarantee No. Amount 1. 10.02.2010 (Bank guarantees as on date extended upto 27.10.2014) B.G. for security deposit 1015/1LG/5/10-11 3,06,33,000/- 2. 22.10.2013 (Bank guarantees as on date extended upto 19.10.2014 Security Deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractor from security deposit and this clearly indicates that without determining the amount payable by the petitioner, the respondent no.1 cannot invoke the bank guarantees. It is also submitted that in view of clause 9.7 of GCC read with Condition 33 of the GCC, respondent no.1 had to give 7 days notice for curing the defects and thereafter adjust the outstanding amount, if any, from the security deposits if the defects were not cured within the stipulated period. It is submitted that there is nothing on record to show that there was any defect which was required to be cured by the petitioner, hence, the respondent is not entitled to invoke the bank guarantees. It is further submitted that under clause 9 of GCC, the respondent no.1 is only required to deduct from the security deposit on a proportionate basis and therefore, the respondent no.1 cannot invoke entire security deposit. It is further submitted that the petitioner herein was facing hardships. The site was situated in a low lying area and in a coastal region and during the monsoons there was water logging and because of this nature of the site and the climatic conditions of the region delay was caused in construction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not towards security deposits. On these facts, it is submitted that petitioner be given relief. 7. The claim is contested by the respondent on the ground that even before furnishing the bid the bidder were advised to inspect the site and it was expected that the petitioner would have given the bid only after inspection of the site. Clause 6 of the contract also bound down the contractor to inspect the site and its surroundings and satisfy himself before submitting his tender. Under Clause 19 of the agreement the duty was of the contractor to remove water accumulated at the site during the progress of the work at his own risk. 8. Clause 41 empowers the respondent no.1 to cancel the contract by written notice in case the contractor fails to complete the work within stipulated period. It is argued that existence of any pending dispute between the parties cannot be a ground for preventing the invocation of the bank guarantee. Reliance has been placed on Vinitec Electronics Private Ltd. v. HCL Infosystems Ltd. reported in (2008) 1 SCC 544 and U.P.State Sugar Corporation s case (supra). It is further argued that the invocation of the bank guarantee can be challenged only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e caused to or suffered by the Corporation from time to time shall be final and binding on us. 11. The nature and purpose of bank guarantee has been discussed by Supreme Court in the case of Hindustan Construction vs. State of Bihar (1999) 8 SCC 436, relied upon by the petitioner. The relevant paragraphs 8 and 9 of the said judgment are reproduced as under:- 8. Now, 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 of the amount under that Guarantee in terms thereof irrespective of any pending dispute between the person on whose behalf the Guarantee was given and the beneficiary. In contracts awarded to private individuals by the Government, which involve huge expenditure, as, for example, construction contracts, Bank Guarantees are usually required to be furnished in favour of the Government to secure payments made to the contractor as advance from time to time during the course of the contract as also to secure performance of the work entrusted under the contract. Such Guarantees are excusable in terms thereof on the lapse of the contractor either i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt would be paid without demure or objection. The bank guarantee thus is an independent contract between the bank and the beneficiary and can be challenged only on the ground of fraud and irreparable injury. 13. In the present case, the petitioner has challenged the invocation of the bank guarantee only on the ground of irreparable injury. The plea of irreparable injury is based on the contentions that the petitioner since having financial problems would suffer irreparable loss, if the respondent be allowed to encash the band guarantees. Whether this constitutes irreparable injury of the nature which is sufficient to restrain the respondent from invoking the bank guarantees is the matter which requires consideration. Now what is an irreparable loss and injury on the basis of which court can restrain the respondents, has been discussed and the principle laid down by the supreme court in the U.P.State Sugar Corporation s case (supra). The petitioner has also relied on this case. The Supreme court has held as under: on the question of irretrievable injury which is the second exception to the rule against granting of injunctions when an unconditional bank guarantees ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent no.1 and the petitioner would have been entitled to its refund in terms of the GCC. Clause 9.6 of the GCC deals with the refund of security deposit. It reads as under: 9.6. Refund of Security Deposit:- One half of the Security deposit refundable to the Contractor worked out on the basis of the value of work completed shall be re-funded to the Contractor on the Engineer-in-Charge certifying in writing that the work has been completed as per condition 31 hereof etc. 18. This clause clearly contemplates that the security deposit is refundable only on completion of the work and after the engineer-in-charge certifies in writing that the work has been completed as per the condition 31. Admittedly, in the present case the petitioner has only completed work of 35% worth of contract amount and thus in view of clause 9.6 of GCC the petitioner is not entitled for the refund of security deposit and the security deposit is to remain with respondent no.1. For this reason also the petitioner is not entitled for the relief. 19. Mere pendency of a reference before the arbitrator is also not a ground to issue restrain order to the bank guarantee. 20. This Court in a recen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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