IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE TWENTY FIFTH DAY OF NOVEMBER TWO THOUSAND AND ELEVEN PRESENT THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR WRIT PETITION No.24956 of 2009 BETWEEN SSA Constructions, Bangalore. ... PETITIONER AND Government of Andhra Pradesh, Rep. By its Secretary, Irrigation and Command Area Development, Secretariat, Hyderabad and six others. ...RESPONDENTS Counsel for the Petitioner: MR. P. VENUGOPAL Counsel for the Respondents: GP FOR IRRIGATION MR. B. ADINARAYANA RAO MR. D. JAIPAL REDDY The Court made the following order: ORDER: Petitioner seeks a Mandamus against the third respondent bank for enforcing the special conditions attached to the letter of sanction of bank guarantee in favour of the petitioner. 2. The first respondent – State invited tenders under E-Procurement for various irrigation works in Satya Sai Telugu Ganga Canal and ancillary works. It is alleged that the conditions of tender permitted Joint Ventures (JV) to bid and accordingly, respondents 5 and 6, which were interested in bidding, formed a JV in the name of the seventh respondent and participated in the said tender, which was awarded to the seventh respondent – JV. For the purpose of entering into the agreement it was required to furnish a bank guarantee for Rs.1500 Lakhs as against EMD, Bid bond, Mobilization advance etc. In order to fulfill the said condition, the fifth respondent, one of the constituents of JV is alleged to have approached the petitioner requesting to furnish bank guarantee from petitioner’s account from the third respondent bank at Gandhinagar Branch. It is alleged that a memorandum of understanding for the aforesaid purpose was executed by and between the petitioner and the fifth respondent dated 31.03.2005 wherein both sides took several mutual obligations to be performed. One of the conditions, which is relevant for the purpose of this writ petition, was condition No.27, which provide that mobilization advance, which would be provided by the Irrigation Department, Government of Andhra Pradesh, as and when availed by JV shall be passed on to the extent of 50% and proportionate recoveries of both principal and interest shall be effected on back-to-back basis from out of the running bills payable to the petitioner. 3. It is alleged that in pursuance of the said MOU, the petitioner approached the third respondent bank, which sanctioned the bank guarantee on behalf of JV for Rs.1500 Lakhs on the various terms and conditions of the sanction as per the letter of the bank dated 12.08.2005. So far as is relevant for the purpose of this writ petition, the special conditions were also appended in this writ petition, the petitioner seeks to enforce condition No.5, which provides that the branch in turn transfer 2% of the receipts to the JV as per its directions and 98% to M/s. Surya Constructions – fifth respondent, out of which 50% of the amount shall be transferred to the petitioner. Petitioner alleges deviation of the aforesaid condition No.5 by the third respondent bank and seeks enforcement thereof. It is stated in the affidavit that the bank failed to honour its commitment to the extent of mobilization advance amount in the proportion of 2%, 49% and 49% between respondents 6 and 5 and the writ petitioner respectively. Petitioner states that the said deviation by the bank in not crediting the amount in the ratio as per clause (5) of the special conditions clearly amounts to deviation by the bank. It is also alleged that to the extent of crediting running bills to petitioner’s account, the bank is alleged to have honoured the same up to 08.11.2006 but thereafter, the bank deviated from complying with the said commitment as well. Petitioner, therefore, states that while no contractual right is sought to be enforced by this writ petition, petitioner only seeks enforcement of committed by the bank as per the terms of sanction. 4. The writ petition is seriously opposed by the third respondent as well as the seventh respondent on various grounds including the maintainability of the writ petition. The third respondent’s counter affidavit states that the terms and conditions of the bank guarantee cannot be read in such a way as to put unilateral obligation on the bank alone. With condition No.5 referred to by the petitioner, the bank relies upon condition No.4 as well contending that both the conditions are required to be read together. It also accepted that mobilization advance was repayable with interest and as such, cannot be treated as a receipt. It is alleged that the said event of release of mobilization advance and its disbursement occurred five years back and never objected to by the petitioner and as such, questioning the same for the first time after so many years, in the present writ petition, is clearly an after thought. The bank also denied to have received any mobilization advance and consequently, distribution thereof did not arise. On the contrary, the mobilization advance released on 21.05.2005 and 30.05.2005 is alleged to have been credited by the seventh respondent with a different bank and not with the third respondent bank. It is also stated that 49% of the running bills were duly credited to petitioner up to 08.11.2006 but thereafter, the fifth respondent as General Power of Attorney of the JV/seventh respondent started depositing the cheque towards running bills in some other bank and in the absence of the third respondent bank receiving any amount on that account, compelling the third respondent to credit 49% of the bills to the petitioner cannot be enforced. 5. The seventh respondent, which is JV, filed a separate counter affidavit denying any entitlement of the petitioner on the ground that the petitioner did not do any work and as such, not entitled to make any claim against JV. It is also alleged that till October 2006, the account with the third respondent bank was operated but thereafter on petitioner’s instructions dated 08.01.2007 the third respondent bank declined to issue further bank guarantee. The seventh respondent – JV, therefore, justifies its action in approaching another bank for assistance. It is further contended that since the transaction is purely a commercial business transaction petitioner cannot invoke the extraordinary jurisdiction of this Court. 6. Mr. P. Venugopal, learned counsel for the petitioner, on the one hand and Mr. B. Adinarayana Rao, learned counsel for the third respondent and Mr. D. Jaipal Reddy, learned counsel for the seventh respondent – JV, on the other, developed their respective contentions on the basis of the gist of the pleadings, referred to above. 7. In the circumstances, two principal questions arise for consideration: (1) Whether there is any enforceable subsisting agreement between the third respondent and the petitioner, as contended by the petitioner? and (2) Even if question No.1 is answered in favour of the petitioner, whether a Mandamus sought for can be granted to the petitioner? 8. In my considered opinion answer to both the questions are in the negative and the reasons therefore are as follows: (a) The special terms and conditions of the sanction are noted in the letter of sanction, the relevant conditions 4 and 5, are appropriate to be extracted hereunder: SPECIAL CONDITIONS (Pre disbursement) 1… 2… 3… 4. M/s. MSK Suryacon-JV shall undertake to route all the receipts of the joint venture through an account maintained with the branch and authorize the branch to receive receipts. 5. The branch in turn transfer 2% of the receipts to the JV as per its directions and 98% to M/s Surya Constructions 50% of this amount shall be transferred to the applicant firm. It would be noticed from the above that under condition 4 an obligation is cast upon the seventh respondent – JV but surprisingly the JV is not a party either to the MOU or to the said sanction. Learned counsel for the petitioner pointed out that the said letter of sanction is signed by the borrower as well as GPA of the seventh respondent. However, the seventh respondent denies the same. The MOU dated 31.03.2005 is, admittedly, between the fifth respondent and the petitioner and to the extent of the obligation relating to mobilization advance under clause 27, which is referred to above, also relates to obligation on behalf of the JV, though the said JV is not a party to the MOU. Even otherwise, if we look at condition 4, extracted above, it provides that the JV shall undertake routing of all receipts through the third respondent bank by authorizing the third respondent to receive all receipts. Condition 5 provides that ‘in turn on deposit of such receipts by JV, the third respondent will distribute the proportionate amount among the parties referred to therein’. It is, therefore, obvious that the obligation under condition 5, which is sought to be enforced by the petitioner, is based upon compliance with condition 4. In other words, condition 5 can be operated by the third respondent bank only if the JV routes all its receipts through the third respondent. From the counter filed by the JV, which is referred to above, it is specifically stated that after October 2006 no receipts were received by it from the Government till February 2007 and in the interregnum, the petitioner required the third respondent not to issue any further bank guarantee. No reply has been filed by the petitioner with regard to the said averment of the seventh respondent and even otherwise, in the absence of any receipts in the hands of the third respondent bank as per special condition 4, the special condition 5 cannot be operated by the third respondent bank. I am, therefore, unable to see as to how the petitioner can seek enforcement of the special condition 5 alone irrespective of the JV complying with condition 4. The mobilization advance was disbursed five years prior to the writ petition. It is also to be noticed that even according to the petitioner, the proportionate credits from the running bills were honoured by the third respondent bank up to 08.11.2006. The present writ petition is filed on 16.11.2009 more than three years after the last credit disbursement dated 08.11.2006. Even a suit for recovery of the amount by the petitioner with the self-same allegations would be barred after three years, which is also one of the reasons why the petitioner cannot be granted the Mandamus as prayed for. Question No.1 is answered against the petitioner. (b) So far as the second question is concerned, the terms and conditions of a commercial agreement between the petitioner and its bank – third respondent is sought to be enforced through the medium of the present writ petition under Article 226 of the Constitution of India, which is clearly impermissible. The third respondent bank, as ‘State’ under Article 12 of the Constitution of India, cannot be issued Mandamus prayed for as it cannot be said that its actions are contrary to public good and public interest or are otherwise unfair, unjust and unreasonable and as such, it cannot be said that any Constitutional guarantee under Article 14 is violated (See ABL INTERNATIONAL LTD. V. EXPORT CREDIT GUARANTEE CORPN. OF INDIA LTD [(2004) 3 SCC 553]) . The claim by the petitioner in this writ petition clearly amounts to enforcing a pure contractual mutual obligation under terms of sanction of bank guarantee where third respondent bank undertook to furnish bank guarantee subject to conditions of sanction, which in turn also imposed several mutual obligations on the petitioner as well as the seventh respondent i.e. JV. Thus, unilateral enforcement of the terms of sanction irrespective of discharge of mutual obligations by the petitioner or JV cannot but be said to be a purely contractual arrangement between the parties without their being any exclusive obligation on the third respondent. Question No.2 is also, therefore, answered against the petitioner. In the result, the writ petition fails and is accordingly dismissed. There shall be no order as to costs. _____________________ VILAS V. AFZULPURKAR, J November 25, 2011 DSK