TMI Blog1995 (12) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... was asked to give a performance guarantee for an amount of 2 per cent of the contract amount. Accordingly, the performance guarantee bond bearing No. 55 of 1995, dated February 13, 1995, for 1,03,500 US dollars was executed by defendant No. 2 in favor of defendant No. 1. 2. It is the case of the plaintiff that the plaintiff had definite arrangements with Mac Danial Co. incorporated in the United States of America for supply of urea. Defendant No. 1, had given contracts to others at a higher rates. Due to the said unequal rates the international price of urea were jacked. Hence the manufacturer refused to supply urea to the plaintiff at a rate lower than the rate given by defendant No. 1 to other contractors. It is further alleged by the plaintiff that the plaintiff had sought extension of time by one month and the said extension of time was granted by giving time to fulfill the contract till April 30, 1995. His further request for grant of extension of time by one month was also granted. But it is alleged that the extension was granted after a long gap of time and hence the extensions had become unworkable. It is further alleged that on May 25, 1995, a further request was made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion for encashment of bank guarantees. In the case of U. P. Co-operative Federation Ltd. v. Singh Consultants and Engineers Pvt. Ltd. [1988]1SCR1124 , the following principles are laid down (headnote of SCC) : Commitments of banks must be honoured free from interference by the courts and irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with in order to restrain the operation either of irrevocable letter of credit or of the confirmed letter of credit or of bank guarantee. There must be serious dispute and there should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between parties otherwise the very purpose of the bank guarantee would be negatived and the fabric of the trading operation would be jeopardised. 7. In the subsequent case of General Electric Technical Services Co. Inc. v. Punj Sons (P.) Ltd. [1991]3SCR412 , the following principles are laid down : ... the bank must honour the bank guarantee free from any interference by courts. Otherwise, trust in commerce, internal and international would be irreparably damaged. It is only in excepti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievable injury. The court should normally insist upon enforcement of the bank guarantee and the court should not interfere with the enforcement of the contract of guarantee unless there is a specific plea of fraud or special equities in favor of the plaintiff. He must necessarily plead and produce all the necessary evidence in proof of the fraud in execution of the contract of the guarantee, but not the contract either of the original contract or any of the subsequent events that may happen as a ground for fraud. 9. Therefore, bearing the above principles in mind, I proceed to consider the facts of the case before me. It is an admitted fact that defendant No. 1 had floated a global tender for supply of 1 lakh metric tonnes of urea with certain specifications in the month of January, 1995. Bidders were permitted to offer the quantities they could supply and the prices at which they could do the same. In pursuance of the said advertisement, the present plaintiff has given his tender to supply 25,000 metric tonnes of urea at the rate of 207 US dollars per metric tonne. It is further an admitted fact that the said tender of the plaintiff was accepted and the plaintiff was given the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany only after he took the contract in question and there was no concluded transaction between the plaintiff and the said McDaniel Co. It is quite possible that the rates might have gone up after the plaintiff took the contract in question and because of the same the plaintiff could not get the urea at a rate which he was expecting and on the basis of which he had given his tender to supply the urea to defendant No. 1. But the failure of the plaintiff to get the urea at a rate which he was expecting in the international market could not be said to be the result of any conduct or activity of defendant No. 1. 11. It is further the claim of the plaintiff that defendant No. 1 had given extension of time to others till June 15, 1995, and defendant No. 1 had refused to give him extension of time as per his letter dated May 29, 1995. It is an admitted fact that the plaintiff was to supply the quantity of urea till March 31, 1995. The plaintiff had sought extension of time twice for a period of one month on each occasion and that extension of time was granted to the plaintiff by defendant No. 1. No doubt in the letter of May 29, 1995, the plaintiff had sought further extension of tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept the contention of the plaintiff that defendant No. 1 has behaved discriminatory towards the plaintiff. 13. It is also alleged by the plaintiff that though defendant No. 1 had given extensions of time they were not given immediately and they were given after long gap of time and hence the extension was unworkable. But that claim of the plaintiff could not be believed and accepted in the absence of material on record. Defendant No. 1 has produced the plaintiff's letter dated March 29, 1995, in which the plaintiff has averred as under : Thanks for your letter No. NFL/CMD/IMC/IU/127, dated March 27, 1995, extending the time of shipment up to April 30, 1995, under the ICPO. 14. The above contents clearly show that the extension given by defendant No. 1 on the first occasion was communicated to the plaintiff before March 29, 1995. As a matter of fact it was informed on March 27, 1995, by fax message. The second extension is sought by the plaintiff as could be seen by plaintiff's letter dated May 3, 1995, produced by defendant No. 1 at page 19 up to May 31, 1995, and the plaintiff was informed by fax message on the next date of May 4 of extending the time till May 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is report at the discharge port or have not settled dispatch/demurrage and dead freight shall not be questioned and shall be final and conclusive (irrespective of the stand that may be taken by or on behalf of the sellers), the said amount of US $ 103,500 will accordingly, forthwith be paid without any conditions or proof whatsoever. 17. If the above terms of the bank guarantee are seen along with the plaintiff's own fax message dated May 29, 1995, then it could not be said that the act of the defendant in writing a letter on that day to the bank to mobilise the bank guarantee is an act of fraud. 18. Therefore, in view of the above discussions, I am unable to hold that the plaintiff has made out any case of fraud. The plaintiff has also failed to show that the plaintiff has got any case of suffering irretrievable injustice in the present case. The plaintiff's conduct is a clear conduct of breach of contract between the plaintiff and defendant No. 1 and defendant No. 1 is quiet justified in asking for the mobilisation of the bank guarantee. The learned advocate for the plaintiff has cited before me the case of Banwari Lal Radhe Mohan v. Punjab State Co-operative Suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
