1 NMS/1300/2010 acd IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION NOTICE OF MOTION NO. 1300 OF 2010 IN SUIT NO. 1080 OF 2010 IVR Constructions Ltd. ..Plaintiffs Vs. Technocraft Industries India Ltd. & Ors. ..Defendants. ---- Mr. Vivek Kantawala with Mr. Ajit Makhijani and Ms.Sneha N. i/b M.M. Legal Consultants, for Plaintiff. Mr. Rafeeq with Mr. Santosh Kumar Mishra and Mr. K.G. Singhania i/b Singhania & Co., for Defendant No.1. --- CORAM: S.C. DHARMADHIKARI, J. DATED : 24 th AUGUST, 2010 . P.C. 1] The present Notice of Motion is taken out by the plaintiffs to seeks interim reliefs during the pendency of the instant suit. 2] The interim injunction that is sought by the plaintiffs is a restraint to restraint against the invocation of Mobilization Bank Guarantees, details of which are mentioned in the schedule, being Exhibit-1 to the affidavit in support of the notice of motion. In other words, the plaintiff seeks restraint against invocation of these bank guarantees by 2 NMS/1300/2010 injuncting defendant no.1 from realizing and defendant no.2 from otherwise paying the amounts thereunder to the first defendant. 3] Shri Kantawala, learned counsel appearing on behalf of the plaintiff in support of this notice of motion submits that initially the suit was filed by the plaintiff in the Court of VII Additional Senior Civil Judge, City Civil Court at Hyderabad. He fairly submits that there are two bank guarantees in question. One is performance bank guarantee and other is mobilization advance bank guarantee. So far as the performance bank guarantee is concerned, the same is in the sum of Rs.6 lakhs and that has already been invoked and encashed by the first defendant. 4] There are ten bank guarantees aggregating to a sum of Rs. 21,40,000/- which are termed as mobilization advance bank guarantees and the injunction pertains to these bank guarantees. According to Shri Kantawala the suit was filed in the year 1997 seeking permanent restraint against purported invocation of the subject bank guarantees. Although, interim injunction was not granted by the learned VII Additional Senior Civil Judge, City Civil Court at Hyderabad, the matter was carried to appeal to Andhdra Pradesh High Court where a Division Bench of the said High Court granted such injunction. That injunction has continued till date. Shri Kantawala submits that eventually the suit was tried and finding that the court lacks territorial jurisdiction, the learned Additional Senior Civil Judge 3 NMS/1300/2010 returned the plaint for presentation to a proper Court. This Order and decree was challenged in Misc.Civil Appeal before the Andhdra Pradesh High Court, but, the same was dismissed. The matter was carried to the Hon’ble Supreme Court as well, but the plaintiff was unsuccessful. 5] Thereafter the plaint has been presented to this Court. Shri Kantawala submits that in pursuance of the contract between the parties a sum of Rs.21,40,000/- was paid towards the mobilization advance for which the plaintiff furnished ten mobilization bank guarantees of the 2nd defendant-bank in favour of the first defendant. Inviting my attention to the orders passed by the Courts in Andhra Pradesh, Shri Kantawala submits that if reasoning of the Division Bench of the Andhra Pradesh is perused, then, it is apparent that the first defendant’s own Architect has certified that recoveries have been made towards mobilization advance in the running bills. Once such recoveries are made then invocation of the subject bank guarantees would constitute a fraud, and in any event there is irretrievable injustice. For all these reasons, and when the suit is likely to become infructuous if the injunction as granted is not continued, this Court should continue the interim order. 6] Shri Kantawala fairly submits that the Court was informed on 23.8.2010 when the matter was mentioned that first defendant has already invoked the bank guarantee but this Court has protected the plaintiff and 4 NMS/1300/2010 restrained first defendant from claiming the amounts under the same and equally the second defendant-bank is restrained from paying the amount to the plaintiff. 7] On the other hand, first defendant’s counsel submits that the principles on which a restraint against invocation of the bank guarantee can be granted are well settled. In the present facts and circumstances, bank guarantees must be read as a whole. The phraseology and terms used by the parties in the bank guarantees are wide enough not only cover mobilization but the entire contract and working thereof. Once such is the nature of the guarantee and there is no case of fraud, irretrievable injustice and special equity being made out, then, the same should not be prevented from being invoked and encahsed by the first defendant. Learned counsel for the first defendant highlights the fact that guarantee is an independent contract and any dispute under the parent contract would not be enough to restrain encashment of the bank guarantee. Every suit of the present nature is likely to become infructuous but as the Hon’ble Supreme Court holds that there has to be a strong prima facie case made out which in this case has not been made out, then, injunction should be refused. 8] With the assistance of the counsel appearing for the parties, I have perused the plaint and subject bank guarantees. It is needless to reiterate the principles upon which the injunction can be granted. In a 5 NMS/1300/2010 recent decision of the Division Bench of this Court passed on 20.8.2009 in the case of Maytas Infra Limited Vs. Utility Energytech & Engineers Pvt. Ltd. & Anr.[in Appeal (Lodg) No,350 of 2009 in Arbitration Petition (Lodg) No.366 of 2009], this Court summarized the same once again. Applying the tests to the instant case it would be evident that the bank guarantee for mobilization advance very clearly states that if the Contractor fails to utilize the said advance or any part thereof for the purpose of the contract and/or the said advance is not fully recovered by the first defendant, the bank unconditionally and irrevocably undertakes to pay to the first defendant on demand and without demur, the extent of the amount thereunder. Moreover, the first defendant is the sole judge as to whether said contractor has not utilized the said advance or any part thereof for the purpose of the contract and the extent of loss or damage suffered by them. 9] The terms of the bank guarantee are wide enough and it is the obligation of the bank to pay unconditionally the sum on demand by the first defendant. Thus, undisputedly this is on demand, unconditional and irrevocable bank guarantee. The encashment of the same has to be granted in exceptional circumstances. Reading the plaint allegations as a whole, there is nothing which would indicate save and except bare averements that the conduct of the first defendant shows there is blatant fraud by fabricating the bills with a view to set up false claim against the plaintiff and realise the bank guarantee amount unjustly. Preceding averements are 6 NMS/1300/2010 that there are certain works executed and cost incurred of extra items which are not covered by the original agreement on account of idling of the plaintiff’s plant and machinery and delays caused by the first defendant in not properly handing over the site. Thus, there is claim of the plaintiff against the beneficiary. It is the when such issue is pending that the bank guarantee cannot be invoked. That is how the allegations in the plaint read. 10] I am afraid that the disputes under the parent contract have nothing to do with the independent obligation of the bank to honour its commitment. That the bank guarantee is an independent contract is well established. In the instant case, the bank guarantee is unconditional, on Demand and irrevocable. It is the satisfaction of the first defendant which enables them to invoke the same. The bank having committed itself in this manner cannot be restrained from paying the sums on invocation of the subject bank guarantee. That would amount to acting contrary to the settled principles. 11] In my view, no prima facie case of fraud, irretrievable injustice and special equity has not been made out. I am not in a position to accept any of the contentions of Shri Kantawala that the Division Bench of Andhra Pradesh High Court at an interlocutory stage in the suit had granted limited protection and restrained encashment of bank guarantee. That by itself is of 7 NMS/1300/2010 no assistance to the plaintiff. To my mind, it appears the the Division Bench has not noticed the principles which are now reiterated and particularly after the decision of the Hon’ble Supreme Court in the case of Hindustan Construction Co. Ltd Vs. State of Bihar. To my mind observations made by the Division Bench at an interlocutory stage in the instant suit would not bind me. More so, when the plaint is returned after trial on account of lack of Territorial Jurisdiction. Further, argument that protection was already given to the first defendant by recovery of 10% of the mobilization under the running bill is concerned, that would not be of any assistance in the face of the clear wording of the bank guarantee. That would mean discarding and brushing aside the terms of the bank guarantee. That the invocation is in terms of the said bank guarantee has not been disputed before me. The argument is that the bank guarantees are only to secure mobilization advance, however, that is not proper and is incomplete reading of the subject bank guarantees. In such view of the matter, the interim injunction as claimed cannot be granted. 12] The argument that the suit will become infructuous in the absence of interim injunction is a plea raised in desperation. Merely because the suit become infrcutuous does not mean that binding judgment of the Hon’ble Supreme Court and this Court should not be followed. Applying the tests as laid down therein, I conclude that the plaintiff has failed to make out a prima facie case. The balance of convenience is also 8 NMS/1300/2010 not in their favour and in fact, irreparable loss would be caused to the first defendant if bank is prevented from honouring its commitment and obligation under the bank guarantee. For all these reasons, the notice of motion fails and is dismissed as such but without costs. 13] At this stage, Shri kantawala states that this Court should continue the order passed on 23.8.2008 by which second defendant has been restrained from paying the amount under the bank guarantee and first defendant has been restrained from receiving the same. Once I conclude that there is no prima facie cause made out by the plaintiff, then that order cannot be continued further, as that would be acting contrary to the binding judgment of this Court. The request is therefore rejected. [S.C. DHARMADHIKARI, J.]