9911796707
TMI Blog1998 (4) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... ng International Pte. Ltd, Singapore and its Indian partner M/s. Alkaram Aluminium Pvt. Ltd of New Delhi, is engaged in the manufacture, installation and sale of aluminium curtain wall, cladding and glazing for the construction industry.Defendant no.1 is the Canara Bank, who have furnished the bank guarantee in question on behalf of the plaintiff. Defendant no.2 is M/s. Gemini Arts Ltd., a company engaged in the business of construction of multi-storeyed buildings. 5. Defendant No.2 undertook the construction of a multi-storeyed project, named as Prasad Towers, at Chennai. Pursuant to negotiations between the plaintiff and the said defendant regarding fixing of semi-utilized aluminium curtain wall for the said Prasad Towers, the defendant awarded the job to the plaintiff by communicating the work order to them on 28 December 1995. The relevant portion of the work order reads as follows: "Completion Time: the total work shall be started immediately and completed within 5 months in phased manner from the date of this work order. However, we will give one more month for final finishing". x x x x x x x x x x x x "Mobilization advance: 20% of the contract price sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for otherwise the purpose of giving bank guarantee would be defeated and the present being neither a case of fraud nor of irretrievable loss, the suit is misconceived. In support, reliance is heavily placed on the decision of the Supreme Court in U.P. State Sugar Corporation Vs. Sumac International Ltd., (1977) 1 S 568. It is alleged that the advance of ₹ 20 lacs was given to the plaintiff for using it exclusively for the purpose of the contract, to be executed within six months, time being the essence of the contract, but after receiving the said amount, the plaintiff, with ulterior motive, did nothing towards the execution of the contract and did not utilise the said amount; the plaintiff has no valid claim against the defendant; it can always sue the defendant for damages and it has no right under law for injuncting the defendant from invoking the bank guarantee. It is denied that any officer of the plaintiff company had visited the site or that the defendant had ever waived the clause of completion of work within six months. It is asserted that the site was made available for commencement of work on 21 October 1996, and on failure of the plaintiff, the contract in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within a fortnight". 8 August 1996 Plaintiff's fax to the defendant, requesting it to make site available. 3 October 1996 Fax message from defendant's General Manager to the plaintiff stating: "This is to inform you that after a slight delay on the project, we are back on track and we will be in a position to hand over the site to you by the 21st of this month. Please do the needful to start the work by then." 31 March 1997 Plaintiff's letter to defendant - informing that huge amount spent in procuring designed frames and brackets and requesting to inform if site is ready so that it could send workers to take measurements. 9 April 1997 Defendant No.2's letter to the plaintiff saying: "we understand from the letter that you have already purchased the entire material for this project immediately after getting the mobilization advance. We would like to you to get the shade of powder coating approved by Mr. Rajinder Kumar in Delhi. Subsequently please make arrangements to send the material to site. Kindly send us the schedule for delivery of material to the site immediately" 15 April 1997 Plaintiff's letter to the defendant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2 in its failures to discharge its obligations, like those reflected in the affronted resume of correspondence, the invocation of bank guarantee is challenged primarily on the grounds: (a) the fraud allegedly perpetrated by defendant no.2 on the plaintiff and (b) irretrievable injustice to the plaintiff as a consequence of allowing its encashment. 13. Elaborating the plea of fraud played by defendant no.2, Mr.Bhagat, has contended that the gamut of correspondence between the parties clearly indicates that the defendant neither intended to nor was in a position to hand over the site but was only making fraudulent misrepresentations and its stand about the site being ready on 21 October 1996 was only a make belief. It was urged that the said defendant not only made it impossible for the plaintiff to complete the contracted work right from inception of the contract, it perpetrated a fraud in an attempt to cover up its defaults by illegally terminating the contract orally on the purported false please that the plaintiff has failed to perform its part of the obligation under the contract. It has been urged that the defendant has not only misled the plaintiff to invest huge funds in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank and any person who deals with these properties either as a lessee or a purchaser or the like in any manner whatsoever will be doing so at his own risk and responsibility". 15. Though the fact of defendant being under a heavy debt is disputed but issue of public notice by the bank is not denied in the written statement. During the course of hearing, a copy of the letter dated 9 August 1997, written by defendant no.2 to the bank asking it to remit the amount under the bank guarantee in question was placed on record and it was submitted that the invocation of bank guarantee is not in accordance with its terms, as it neither stated that the plaintiff has not utilised the mobilization advance nor indicated the amount of loss allegedly suffered by defendant no.2 to entitle it to invoke the bank guarantee. For all these reasons, it was submitted that encashment of bank guarantee maybe restrained. 16. Mr. Javeli, learned senior counsel for contesting defendant no.2, relying on the terms of the work order, relating to "completion time" has submitted that in the contract there was no stipulation about the completion of the entire civil work and/or of handing over the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be affected by disputes between the parties to the underlying transactions. It creates an irrevocable obligation on the bank to perform the contract in terms thereof and on occurrence of the events mentioned therein, the bank guarantee becomes enforceable. It is only in exceptional cases like : (i) a case of established fraud (based on material events and not on bald pleadings in the application for stay) of "egregious" nature of which the bank has the knowledge and (ii) allowing encashment would result in irretrievable injustice to one of the parties concerned, the Court may interdict the encashment of the bank guarantee. In all other cases, the bank, giving such a guarantee, is bound to honour it as per its terms. The said principles have again been reiterated in the latest decision rendered in Dwarikesh Sugar Industries case (supra). 18. In Hindustan Steel Works Construction Ltd. Vs. Tarapore & Company and Anr. (1996) 5 S 34, the Supreme Court dealt with the question whether apart from fraud there can be any other valid ground for interdicting encashment of bank guarantee. While referring to various earlier decisions, succinctly analysing the ratio of the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract was only five months, extendable by one month for final finishing. Again, vide letter dated 29 May 1996, the plaintiff furnished to the defendant precise details of the deficiencies in the civil work as a result whereof it was unable to carry out the structural glazing. Though the defendant objected to the tone of the letter but nonetheless admitted that there were areas of civil work which were yet to be taken up. Similarly, it kept quiet on the request of the plaintiff contained in the same letter that the date of start of work may be considered from the date the site was handed over to them after completion of the civil work. 22. As for the plea in defense based on the work order that work assigned to the plaintiff was to commence "immediately", on the issue of work order and, therefore, the plea of the plaintiff that the work could not be executed for want of site could not be accepted, I feel that, the stand of learned counsel for the defendant is belied by the defendant's own stand, reflected in the correspondence exchanged between the parties, particularly by its fax message dated 17 July 1996 and letter dated 3 October 1996. 23. It is evident from thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the plaintiff and if the defendant is allowed to encash the bank guarantee in question, it would amount to irretrievable injustice to the plaintiff. I am, therefore, satisfied that it is a fit case where defendant no.1 needs being interdicted from encashing the bank guarantee in question. 25. For the view I have taken, it is unnecessary to go into the pleas of fraud and improper invocation of the bank guarantee raised by the plaintiff, although the invocation of bank guarantee by defendant no.2's letter dated 9 August 1997, asking the bank- defendant no.1 to remit the amount under the bank guarantee, prima facie, does not appear to be in terms of the bank guarantee. 26. For all these reasons, the application is allowed and the interim order dated 19 August 1997 is confirmed till the disposal of the suit subject to the condition that the entire material procured by the plaintiff from M/s. Hindalco under various invoices, filed in Court, for use in the defendant's building will be properly preserved and shall not be disposed of without the leave of the Court and further the plaintiff shall keep the bank guarantee alive till the disposal of the suit. 27. The view exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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