IGH COURT OF CHHATTISGARH AT BILASPUR Division Bench: _ Hon‘ble Shri Dhirendra MIYshra & Hon‘ble 5hri R.N. Chandrakar‘ JJ. WRIT PETITION [c] NO.221 .OF 2010 “* PETITIONERS 1. M/s Na‘rional Heavy Engineering Co- opera‘rive Limifed, a company dul;’ regis’rer'ed under ‘rhe relevanT provisions of law having i’rs registered office a? 17, Mehaima Gandhi Road, , Pune ac’ring in Tfhe premises Through i’rs General Manager (Project) / Auihorized sign‘amry 5m T.s. Pam, son of Shri Tanaji Shamrao PaTil, aged 60 years. 2. Shri T.S. Pafil, son of Shri Shamrao ? Rasfum Pa’ril, aged 6O years; General ' ti. Manager (Project) / Aufhorized Signo’rory, M/s Na’rional Heavy Engineering Co—opera’rive Limi’red 17 M.G. Road, Pune, 411001 (MS) £LL-” 1. Danfeshwari Maiya Shahkari Shakkor Karkhana Maryadif Balod, a Sfa’re insirumen‘rah’ry ’rhrough ifs Managing Direc’ror, Dan’reshwari Maiya Shahhari Shakkar Karkhana Maryadif Balod, ‘ Bunkar Bhawan, Sanfra Badi, Sfafion Road, Durg (CG) . Punjab Nafional Bank, a nafionalized a infer-alia amongsT o’rher RESPONDENTS U H 2 bnk > brancheS'having 'i-fs branch office a’r ' Aurora Towers, MG Road, Pune Camp, 411 001, Through f 1e‘Br‘anch Manage-n. Present: Mr'.B.P.$hor'rho, Advocate wi’rh Mr‘. K. Sharmo, Advoca‘e for The pe‘rifi'on‘er's. 5 l ' ORAL ORDER (Passed on 18"“ January, 2010) i » ‘ Per Dhlrendm Mlshr'a J [£4 1. The pe’n’rloner‘ by The ms’ram‘ pe’rmon has chollenged The deCISIon of respondenT N01 commumca‘red To The peTiTioner Vlde leTTer doTed 7 1 2010 (Annexur'e P 1) whereby a deCISIon hos been Taken To Invoke The bank guoronTee for a sum of Rs.1,38,40,000/—, leTTer doTed 8.1.2010 senT To respondenT- No.2 invoking bank guaronTee and IeTTer daTed 8.1.2019 senT by' respondenT No.2 informing The peTiTioner abouT invocaTion of bank guaranTee by respondenT No.1. f‘ . 2. The’peTiTioners' caSe,as revealed from The pleadings inThe peTiTion and E The ddcumenTs annexed TherewiTh, are eThaT The peTiTioner and The /, respondenT No.1 enTered inTo The agreemenT of Annexure P-4 daTed 17.12.2007 for supply of cerTain machineries and equipmenTs for Their sugar planT aT KarkabhaTa, Balod, DisTricT Durg. Under The aforesaid agreenjenT, The peTiTioners were required To furnish bank guaranTees for securing conTracTual obligaTions an‘d as many as nine bank guaranTees of .naTiondlized bank have been furnished in The fo‘rmaT prescribed in Clause 16 of The agreemenT AfTer enTermg InTo The agreemenT and furnishing The bank guaranTees delivery schedule has been changed / exTended. V .WIThouT any demur or proTesT by The respondenT No.1 and Time was noT The essence of The conTraoT. All The supplies have been made by The ‘ peTiTioners wiThin Time, finally allowed by respondenT' No.1"'i.e. by 3. ’ November, 2009'. However, The, respondenT No.1 has noT paid The consideraTion Towards The supply of m'achi-neries, deTaiIsof which are given in‘The leTTer daTed 28.12.2009. WiTh. The peTiTioners’ efforTs . {v- #, produl‘c’riory in The pla’nT has been s’rar’red Clf‘rer' ’rhe sugar mill was inaugdw‘a’red On 15 12 2009 and since ‘rhen produchon of sugar has commenced In View of above fac’rual scenamc Issuance of no’rlce dafed 712010 Invoking bank guaram‘ee as per Clause 16.1 (iii) of fhe' agreemem‘ !s unnecessary and uncalled for . Referrlng To Clause 161 (III) of The agreemenT IT was argued ThaT The aforesaid clause specifically prowdes ThaT guaranTee was auTomaTIcally. adJusfable and reduce wufh fhe progress of supply of machmemes and equipments Smce respondent N01 has accepfed fhe machmery and equipmenfs supplied by fhe pe’nfloners wnfhouf any demur or profesf fhe bank guaranfee sfands aufomafIcaHy adJusfed and fhe same cannof be Invoked as per ferms of fhe agreemenf and Invocafion of The bank guarantee offer aufoma‘nc adJusfmen’r amounfs To fraud Furfher referring To Clause 13 of The agreemenf If was argued fha’r Force MaJeure clause was appllcable In fhe Insfanf caSe as on accounf of labour sfrlkelaf Bellls India Bhadreshwar Wesf Bengal who are suppliers of 3000 KW STeam Turbine machine The peTITIoners were noT able To supply furblne machine In flme and fhls facf was broughf To The noTIce of The auThorITIes concerned and realizing The aforesaid dIffIculTy, respondenT N01 exTended The period of supply from Time To flme and accepTed The supply afTer The schedule fixed In This regard under The agreemenT IT was also argued ThaT The work was delayed on accounT of n omission and commission on The parT of‘respondenT N01 as The respondenT N01 failed To fulfill The reCIprocal oblIgaTIons under The agreemenT Placmg reliance on The JudgmenT of The Honble Supreme CourT In The maTTer of U P STaTe Sugar CorporaTIon Vs Sumac InTernaTIonal LTd. IT was argued ThaT IT Is seTTled\law ThaT If There Is such a fraud of ' whichl Thebeneficiary seeks To’T‘ake advanTage, he can‘be resTrained , 1w ‘ I { 1‘ ‘ E i from? doing so and where allowing encashmen’r of an unconditional bank gua'r‘ém’ree would resulflin ir'r'eTr‘ievable ’harm or injus’rice To one of fhe par‘lle‘s concerned, an injunction can be issued ’ro restrain fhe enforcemem‘ of bank guaran’rees. 4. We have heard learned counsel for The peTiTioners. 5. Thelpe‘ri’rioners enTered inTo an agreemen‘r w Th The respondent ‘NoA lor design, manufacture and supply of machineries and ’equipmenfs for The "sugar’pldn’r aT Karakbho’ra, Balod, Dis’rricT Durg. The pe’ri’rionersagreed ’ro sfar’r supply of machi'neries and equipments in accordance with i i ' K . Annexures 1 to 3 forming part of the agreement The petitioners were requnred to furnish to the purchaser nine bank guarantees by a nationalized bank In the formats enclosed wuth the agreement as Annlel<ure P—10, P-11 & P—13. As per Clause 16.1 (iii) a bank guarantee of { Rs 1‘ 38 4O 000/- was to be furnished within lsixty days of the signing of ‘the agreement against timely delivery of the machineries and eqUipment and it was automatically adJustable and reduce With the progress of f supply of machineries and equipments The guarantee was to be valid up i l to thirty days after the scheduled date or altered after mutual discussions between the parties of completion of the suppl)’ of the ‘ entirle machinery and equipment. 6. Fronl barereadin‘g‘of the format of bank‘guarantee (Annexure—XI to i the agreement) revealed that the bank guarantees are payable on q demand it Is expressly prOVIded that the guarantor shall on demand and 5 'p‘” Without any demur pay the aforesaid guaranteed amount to the ’1 purchaser and Without requiring the purchaSer to invoke any legal l remedy that may be available to them It is specifically prowded that '- purchaser shall be the sole Judge of and as to whether the seller have I committed breach or breaches of any of the terms and conditions of the q; agreement and secondly, that the right of the purchaSer to recover from the guarantor any amount due to the purchaser shall not be, affected or suspended by reasons of the fact that any dispute or‘ disputes have been raised by the seller With regard to their liability, and l 4, _~\/ .u . Third y, THe guaranTor shall immedia‘rely pay The aforesaid guaranfeed- shall no’r be oper’i‘fo fhe guarain‘ror fro know The reasons of or f0 inv sTigaTe or ’ro go in’ro ‘rhe merifs‘of i1'he demand or To ques’rion or to ahallenger The demand and Iasflyl, ’rha‘r if shall nof be open To The guaranfor fo require proof of ’rhe Ilablllfy of The seller To pay fhe amounf be ore paying ’rhe aforesaid guaranfeed amounf To The purchaser. The guaranTee Is Irrevocable excepTx wiTh The wriT‘Ten consenT of The purchaser. . From: perusal of The noTice of Annexure P 1 ddTed 7 1 2010 issued by The I . respondenT N01 To The peTITIoners IT Is evu'denT ThaT The peTITIoners IdefaulTed In supply of eqUIpmenT and machinery and respondenT N01 allowed Time To The peTI-Tloners for The aforesaud purpose and m Thls process There is a delay of one year in commission of The planT From The aforesaid noTIce IT also appears ThaT in The pasT also a wrITTen noTice Iv was senT for delay in supply of The machinery and eqUIpmenT conTemplaTmg InvocaTion of bank guaranTee.rRespondenT No.1 Vide ITs memo liaTed 8.1.2010, addressed To respondenT No.2, informed The bank ThaT They are invoking The guaronTee bond daTed 30.7.2008 issued in Their favour on behalf of The peTiTioners as The guaranTee bbnd was valid ‘up To 10.1.2010 only and They were called upon To make paymenT of Rs 1 38 4O 00 OOO/— immediaTely by way of c’rediT To TheiraccounT On ' receIpT of The above mformaTIon The bank In Turn Vlde Their memo, doTed 8 1 2010 requesTed The peTITIoners To make paymem‘ of The clolm raised by The benefICIary under The said agreemenT . In The maTTer of U P STaTe Sugar CorporaTIon In Para 15 The Hon ble Supreme CourT observed Thus.- “The rule Is well esTablIshed ThaT a bank Issumg a guaranTee Is noT concerned WITh The underlying conTracT beTween The parTies To The conTracT The duTy of The bank under a performance guaranTee Is creaTed by The documenT iTself Once The documenTs are In order The bank giVIng The guaranTee musT amourjn‘ f0: 'rhe purchaser on demand and if I honour The same and make paymenT ordinarily unless There Is an y._1 x \KN ¢ ‘ v allegaTIon of fraud or The llke The cour‘1s will nof in’rer‘fere b: dlrec’rly or mdn‘ec‘rly ’ro wwhhold payment o’rherwnse Trusf m commerce mfer‘nal and m’rernahonal wquld be Vlr‘repambly \ damaged. Bu’rwhaf does nofmean Tha’f The par’ries ’ro the underlying con’rrac’r canno’r se‘me The dispJTes wi’rh respecTTo aIlegaTions of breach by resorTing To li'rigafion'or‘ arbifroTion'hs sfip‘uIaTed in The conTracT. The remedy ‘ar sing ex conTrac’ru is noT barred and The cause of acTion for The same is independenT of enforcemenT of The guaranTee 9. In The aforesaid JudgmenT IT has been held ThaT There are only Two excepTIons To This rule The fIrST excepTIon Is The case when There Is a clear fraud of which The bank has noTIce The fraud musT be of an egreglous naTure such as To VITIaTe The en‘hre underlying Transachon In para 12 of The JudgmenT The observaTIons of Slr John Donaldson, M R In BohvmTer OII SA Vs Chase ManhaTTan Bank reporTed m (1984) 1 All ER 351 have been quoTed WlTh approval Thus — “The wholly excepTIonal case where an InJuncTIon may be granTed Is where IT Ts proved ThaT The bank knows ThaT any demand for paymenT already made or which may ThereafTer be made will clearly be fraudulenT. BuT The evidence musT be ‘clear boTh as To The facT 'o’f fraud and as To The bank’s knowledge. IT would cerTainly noT normally be sufficienT ThaT This resTs on The uncorroboraTed sTaTemenT of The b cusTomer, for irreparable damage can be done To a bank's crediT in The relaTively brief Time which musT elapse beTween l The granTing’of such an injUncTion and an applicaTion by The bank To have iT charged." Au .10. In our considered view, The dispuTe raised by The peTiTioners in The insTanT peTiTion 'is noT a ground for issuing an injuncTion To resTrain enforc'emenT of bank guaranTee'There musT be a fraud in connecTion WITh The bank guaranTee In The presenT case uncondITIonal and ‘ \ irrevocable bank guaranTee was Issued by The peTITIoners In favour of Roshan ? 1 v respojnden’r N011 for securing com‘mc’rual obligafions by The pe’ri’rioners. i The éispufe of ’rhe na’rur'Ve beiween The parties cannof make invoca’rion 'of “the bank guaran‘tee fraudulen’r; L So far as The question of irrefrievable injury wich is fhe second excepfion ‘ro ’rhe r‘ule againsf gmm‘ing of injuqc’rions when un'condifional bank :gUar'cm’rees are sough’r to be realized, an irre’rrievable injury‘mu’s’r be of, The kind which make if impossible for ’rhe guaran’ror ’ro reimburse i h himseh‘ if he uh‘ima’rely succeeds. Guaran’ror ghas To decisively esTablish The above facT and a mere apprehension ThaT lhe oTher parTy will noT be able Toi pay, is noT enough. i . 5, il'he peTiTioners have nowhere pleaded in The peTiTion ThaT The peTiTiohers shall suffer irreTrievable harmlif The guaranTor honors invocation of bank guaranTee by respondenT No.1. 11. On The aforesaid discussions, we are of, The opinion ThaT The‘re is no excepfional case wherein injuncTion may be granTed againsT invocaTi‘on of bank guaranTee by The respondenT No.1 and The peTiTioners are noT enTiTlefd for The reliefs as claimed in This peTiTion. 12, Accordingly, The peTiTion has no subsTance, The same deserves To be dismislsed andlis accordingly dismissed aT The moTion sTage iTself. z i._ ,‘ ”x l I l i Sd/— . Dhirendr'a Mishra . Judge \ h