Calcutta High Court
M/S Action Bridgegap Constructions Pvt ... vs M/S Concast Infratech Ltd & Ors on 1 September, 2016
Author: Soumen Sen
Bench: Soumen Sen
ORDER SHEET
T No.33 of 2016
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
M/S ACTION BRIDGEGAP CONSTRUCTIONS PVT LTD
Versus
M/S CONCAST INFRATECH LTD & ORS.
BEFORE:
The Hon'ble JUSTICE SOUMEN SEN
Date : 1st September, 2016.
Appearance:
Mr. Manaj Chouhan, Adv.
Mr. Anand Farmania, Adv.
...for the petitioner.
Mr. S.K. Kapoor, Sr. Adv.
Ms. Noelle Banerjee, Adv.
Mr. Dipak Dey, Adv.
...for the respondents.
The Court : The petitioner was a sub-contractor appointed by the respondent for development of Damoh - Patharia - Garhakota Road (MDR) under package - IV on BOT (Toll + Annuity) basis - regarding the site activities from Km 30+000 to Km 40+500.
The petitioner contends that the respondent without following Clause 3.2.1.36 awarded a part of the contract to the son of a Minister of the State of Madhya Pradesh without any written information to the petitioner and, accordingly, the petitioner shall not be held to be liable for any damage, repair and maintenance work between stretch Km 35+000 to Km 40+500.
The learned counsel appearing on behalf of the petitioner has referred to the letter dated 18th May, 2014 and argued that since the respondent no.1 has acted in breach of the said clause, the invocation of the bank guarantee was fraudulent and illegal. It is 2 submitted that although the bank guarantee is an unconditional bank guarantee but having regard to the fact that the said invocation would cause irretrievable injury to the petitioner, the Court can always extend the equitable principle and restrain the enforcement of the bank guarantee. The learned counsel has referred to the decisions in 'Continental Construction Ltd. vs. Satluj Jal Vidyut Nigam Ltd.' reported at 2006 (1) ARBLR 321 Delhi, 'Hindustan Construction Co. Ltd. vs. Satluj Jal Vidyut Nigam Ltd.' reported at AIR 2006 Delhi 169, 'Satluj Jal Vidyut Nigam Ltd. vs. Jai Prakash Hyundai Corsortium' reported at AIR 2006 Delhi 239 and 'Puri International (P) Ltd. vs. National Building Construction' reported at 1997 (1) ARBLR 691 Delhi, in support of the said proposition.
Disputes arose sometime in March, 2015 when the petitioner was threatened with the invocation. The respondent contended that the work was not executed in terms of the contract and there has been delay on the part of the petitioner. Initially, a proceeding was initiated before the Delhi High Court in which an order was passed on 27th March, 2015. A learned Single Judge of the Delhi High Court passed an ex parte order on 27th March, 2015 on the basis of a submission made on behalf of the petitioner that despite various communications to the respondent nos. 1 and 2 for clearing various bills of the petitioner, no response has been given by the respondent nos. 1 and 2. The learned Single Judge by a short order restrained the respondent no.1 from invoking the bank guarantee subject to the petitioner keeping alive the two bank guarantees.
Thereafter, it appears on 22nd December, 2015, the respondent communicated that on full and final settlement of accounts a sum of Rs.12,72,58,730/- is due and payable under the said contract. This claim, however, is disputed by the petitioner. This is a subsequent development. The said communication shows adjustment of accounts. This adjustment is now being disputed.
3
It is well-settled law that the bank is obliged to honour an unconditional bank guarantee. The Court cannot interfere with such invocation unless there is established fraud or irretrievable injustice involved in the case. Fraud to the knowledge of the bank is essential to resist the claim for invocation of the bank guarantee. Similarly, the Court on conspectus of fact if satisfied that an irretrievable injury would cause to a party in the event the bank guarantee is invoked may restrain the beneficiary to invoke the bank guarantee. Only in these two exceptional cases, the Court may restrain the invocation even of an unconditional bank guarantee. The bank guarantees are a separate contract. It may have a connection in the sense that the said bank guarantees were furnished as a part of the agreement under which the work is to be executed, but for all intents and purposes, it is a separate contract. A contract of bank guarantees are to be seen as independent of the underlying contract. In fact, the bank guarantees are required to be furnished to insulate the matter covered thereby from the disputes that may arise under the underlying contract. As stated in 'Larsen & Tuobro Ltd. vs. Visa Power Ltd.' reported at 2013 (1) CHN 129 stated :-
"Not every perceived wrong can be exalted to the status of fraud. Irretrievable and unconditional bank guarantees are payable on demand without demur. That is the law."
It is also to be taken into consideration that the bank is not concerned with the underlying contract between the parties and is obliged to honour the bank guarantee which is unconditional in its term. The parties with their eyes wide open agreed to furnish such bank guarantee. It appears that the respondent no.1 has a substantial claim against the petitioner no.1. At this stage, it is not necessary for this Court to decide as to whether the respondent no.1 would succeed to establish such claim. It is for the Arbitrator to decide such claim.
4
However, the petitioner has failed to demonstrate on facts that the Court should extend the equitable principle restraining invocation on the ground that it would cause irretrievable injury to the petitioner.
Under such circumstances, this application fails. However, there shall be no order as to costs.
Urgent photostat certified copy of this order, if applied for, be supplied to the parties upon compliance of all requisite formalities.
(SOUMEN SEN, J.) B.Pal