Madras High Court
V.D.Swami And Company Pvt.Ltd vs M/S. Lodge Cottrell India Pvt. Ltd on 3 December, 2013
Author: R.Subbiah
Bench: R.Subbiah
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 03.12.2013
Coram:
THE HONOURABLE MR.JUSTICE R.SUBBIAH
O.A.Nos.657, 4350 and 4351 of 2013
in
C.S.No.595 of 2013
V.D.SWAMI AND COMPANY PVT.LTD. .. Petitioner
vs.
1.M/S. LODGE COTTRELL INDIA PVT. LTD
2. AXIS BANK LTD KARUMUTHU NILAYAM GROUND FLOOR NO.192,
ANNA SALAI CHENNAI 02 .. Respondents
FOR PETITIONER : K.HARISHANKAR
ORDER:
R.SUBBIAH, J The application in O.A.No.657 of 2013 has been filed to grant an order of interim injunction restraining the second respondent, its officers, men and agents from making any payment to the first respondent or its men and agents pursuant to any invocation of the four Bank Guarantees dated 5.5.2012 and 16.5.2012 by the first respondent or its representatives pending disposal of the said suit.
2. The application in A.No.4350 of 2013 has been filed to vacate the interim order dated 6.9.2013 passed in O.A.No.657 of 2013 in C.S.No.595 of 2013.
3. The application in A.No.4351 of 2013 has been filed to return the plaint in C.S.No.595 of 2013 to the plaintiff for presenting in the Court having jurisdiction.
4. The applicant in both the applications viz., A.Nos.4350 and 4351 of 2013 is the first defendant in the suit. The first respondent is the plaintiff and second respondent is the second defendant.
5. For the sake of convenience, the parties will be referred to as per their ranking in the suit.
6. The brief facts which are necessary to decide the issue involved in all the applications are as follows:-
(a) The plaintiff M/s.V.D.Swami and Company Private Limited has filed the suit in C.S.No.595 of 2013 as against the first defendant M/s.Lodge Cottrell India Private Limited and the second defendant Axis Bank Limited for permanent injunction restraining the second defendant, its officers, men and agents from making any payment to the first defendant or its men and agents pursuant to any invocation of the four Bank Guarantees dated 5.5.2012 and 16.5.2012 by the first defendant or its representatives.
(b) The National Thermal Power Corporation (herein after referred to as NTPC) had floated a tender for designing, engineering, manufacturing, supply, inland transportation, insurance, installation, testing / commissioning and guarantee tests of Retrofitting and Modernisation Electrostatic Precipitator Package for Badarpur Thermal Power Station, Unit IV and V 2 X 210 MVV, New Delhi. The first defendant is a foreign company with the Indian Investment. The affiliate of the first defendant company viz., KC Cottrell Company Limited (KC Cottrell) located in Republic of South Korea, submitted its bid and the same was accepted by NTPC and contract was awarded to KC Cottrell. The scope of work was split by NTPC into three parts and hence, three agreements were entered into between KC Cottrell and NTPC dated 28.3.2011. Under the NTPC contract, KC Cottrell was required to compete the work by September, 14, 2012. The NTPC contract has also provided for sub-contracting of any portion of the work. Accordingly, KC Cottrell sub-contracted the works pertaining to procurement (supply) vide work order dated 26.4.2011. Similarly, by work order dated 30.7.2011, KC Cottrell sub-contracted the scope of work pertaining to Erection and Commissioning to the first defendant. In turn, the first defendant decided to sub-contract portions of its scope of work placed by KC Cottrell to them viz., (a) Mechanical, Erection, Commissioning and testing of new ESP system in respect of NTPC contracts and (b) Retrofitting, erection, commissioning and testing works of existing ESP systems in respect of NTPC contracts. Hence, the first defendant invited bids from interested parties and the plaintiff through its office located in Kota, Rajasthan, submitted its bids. The plaintiff was selected for the scope of work stated above. In this connection, the first defendant awarded a contract to the plaintiff, under which two work orders dated 4.4.2012 for retrofitting, erection, commissioning and testing works of existing ESP systems and mechanical erection, commissioning and testing works of existing ESP systems in connection with NTPC Badarpur Thermal Power Station Unit IV and V projects were awarded. In this connection, four purchase orders dated 4.4.2012 and two work order dated 5.4.2012 were issued to the plaintiff for supply of consumables to carry out the above work.
(c) The amount of Rs.79,00,000/- was paid by the first defendant as mobilisation advance for performance of the above contracts, for which four bank guarantees were furnished by the plaintiff through AXIS Bank, the second defendant. The particulars of the Bank Guarantees furnished by the plaintiff are as follows:-
(i) Bank guarantee No.11650100002216 dated 5.5.2012 for Rs.5,20,000/- (Rupees five lakh and twenty thousand only) for work order bearing No,.LCIN/EP005/WO/12-13/025.
(ii) Bank guarantee No.11650100002217 dated 5.5.2012 for Rs.46,80,000/- (Rupees forty six lakh and eighty thousand only) for the work order bearing No.LCIN/EPOO5/WO/12-13/021.
(iii) Bank guarantee No.11650100002265 dated 16.5.2012 for Rs.2,70,000/- (Rupees two lakh and seventy thousand only) for work order bearing LCIN/EPOO5/WO/12-13/026.
(iv) Bank guarantee No.11650100002266 dated 16.5.2012 for Rs.24,30,000/- (Rupees twenty four lakh and thirty thousand only) for work order bearing No.LCIN/EPOO5/WO/12-13/022.
(d) It is the case of the plaintiff that it has been complaining of non-receipt of payments in time from the first defendant. The total running bills raised from inception till 1.8.2013 is Rs.3,30,41,159/-. Against this, the first defendant has paid the plaintiff a sum of Rs.2,64,75,061/- till date. The plaintiff has also submitted the final claim of running bill dated 17.8.2013 towards the labour and consumables of Rs.36,28,681/- and Rs.3,66,012/- respectively. Thus, the total dues from the first defendant is Rs.1,05,60,791/-. The plaintiff requested the first defendant to process these bills at the earliest since the plaintiff was facing serious cash flow issues, owning to non-payment of the bills by the first defendant for the work completed by it. It was also brought to the notice of the first defendant that the bills submitted for the work executed in the month of May 2013 was not paid in full, even after repeated reminders to settle the amount and hence, the plaintiff was finding it difficult to run the site without adequate cash flow to meet their expenses. In this regard, the plaintiff requested the first defendant to convene a meeting at the earliest to resolve the issues and also to consider extending the contract for completion of work at the site at the earliest. On 31.7.2013, a meeting was held between the representatives of the plaintiff and the first defendant, wherein, it was recorded in the Minutes of the Meeting that extension of contract was not possible in the given current situation and that the parties will amicably resolve the issues by submitting accounts and reconcile the bills by the end of August 2013 without any financial implications. Further, it was agreed between the parties that a final meeting would be convened by the end of August 2013 to settle the accounts. While the plaintiff was taking steps to fulfil its obligations as recorded in the Minutes, it was shocked to hear from the second defendant that the first defendant had communicated to the second defendant to encash the bank guarantees. Vide letter dated 12.8.2013, the plaintiff referring to the terms of the Minutes dated 31.7.2013, requested the first defendant not to encash the bank guarantees and they would reconcile the accounts as agreed by both of them by the end of August 2013. Further, it was also brought to the attention of the first defendant that the bank guarantees were in fact in force upto 31.10.2013. Vide another letter dated 12.8.2013, the plaintiff informed the first defendant that despite the assurance, and disregarding the terms of the Minutes, the first defendant had proceeded to encash the bank guarantees and this was clearly against the mutually agreed terms. The plaintiff vide letter dated 12.8.2013, referred to the terms of the Minutes of the meeting held on 31.7.2013 and requested the second defendant to withhold invocation of the bank guarantees pending reconciliation and finalisation of accounts as per the Minutes of meeting held on 31.7.2013.
(e) On 13.8.2013, the plaintiff sent an e-mail to the first defendant enclosing a letter requesting him to withhold the invocation of bank guarantees until 7.9.2013 and agreed to reconcile the accounts by 31.8.2013. It was requested that the first defendant should settle the accounts of the plaintiff within August 2013 as already agreed to in the meeting held on 31.7.2013. Vide e-mail dated 13.8.2013, the plaintiff enclosed an official letter requesting the second defendant to hold the encashment of the bank guarantee until further instructions in this regard. The same was accepted and communicated to the plaintiff by the second defendant vide e-mail dated 13.8.2013. Thereafter, an amount of Rs.24,85,864/- was adjusted by the first defendant towards mobilisation advance and there remains only Rs.54,14,136/- balance to be adjusted towards mobilisation advance. The first defendant was reminded of their communication stating that the claims were being processed. The first defendant however failed to revert as agreed and sought for extension of time until 29.8.2013. The plaintiff, vide another e-mail dated 28.8.2013, brought to the notice of the first defendant that despite attempts taken by the representatives of the plaintiff for material reconciliation at the earliest, the first defendant had failed to take any steps in that regard. But, the first defendant failed to co-operate with the plaintiff's representatives despite their assurance at the meeting held on 31.7.2013 to amicably settle the accounts without any financial implications. Now, the first defendant owes the plaintiff a sum of Rs.3,63,04,415/- for the work executed upto 31.7.2013 for which bills and invoices were submitted. All these issues relating to the claims of the plaintiff and the denial of payments by the first defendant have to be either resolved through reconciliation of accounts or through recourse to arbitration. While so, without reconciliating the accounts as agreed to in the meeting held on 31.7.2013, the first defendant is trying to encash the bank guarantees. The first defendant is a multi-national corporation and if any amount is paid by the second defendant to the first defendant, it would be difficult for the plaintiff to recover the amount from the first defendant. Hence, the plaintiff has filed an application in O.A.Nos.657 of 2013 for interim injunction restraining the second defendant, its officers, men and agents from making any payment to the first defendant or its men and agents pursuant to any invocation of the four Bank Guarantees dated 5.5.2012 and 16.5.2012 by the first defendant or its representatives pending disposal of the said suit.
(f) This Court, by an order dated 6.9.2013, granted an order of ad-interim injunction as prayed for. On receipt of the notice, the first defendant after entering appearance in the case, had taken out two applications, one to vacate the interim injunction dated 6.9.2013 and another to return the plaint.
(g) It is the case of the first defendant that in terms of the work orders, the plaintiff was to commence the work on March 29, 2012 ending with July 31, 2013. According to work / purchase orders, the plaintiff had to mobilise on site on 2.4.2012, but it failed to mobilise on site by due date. The subsequent activities also got delayed. There were serious defaults on the part of the plaintiff and hence, the first defendant had to undertake obligations, which were otherwise the obligation of the plaintiff under the work orders and purchase orders. During the course of execution of the work under the work order, the plaintiff's performance was unsatisfactory and not in accordance with the terms and conditions of the purchase orders / work orders. Moreover, several complaints were made by NTPC in this regard including by letters dated 11.5.2013, 15.7.2013, 23.7.2013 and 7.8.2013. The first defendant made repeated representations to the plaintiff for performing their scope within the contractual period i.e., July 31, 2013 failing which NTPC might cancel the NTPC contracts and also seek damages including liquidated damages. However, the plaintiff did not heed to the repeated requests of the first defendant. The plaintiff expressed its inability to perform its obligations and in this regard, the parties held a meeting on 15.5.2013 and the Minutes of the meeting was reduced into writing and signed by both parties. Since the plaintiff did not commence supply and / or service in relation to the second work order and the corresponding second purchase order, it was mutually agreed that the same would be withdrawn. In addition, it was mutually agreed that the advance amount of Rs.27,00,000/- would be returned. But the same was not returned by the plaintiff. Hence, the first defendant is entitled to encash the bank guarantees. It was agreed between the parties that the obligation under the other work order and purchase order would be complied with by 31.7.2013. But, the plaintiff did not complete even the limited scope under the pending work order and purchase order. The delay in performance by the plaintiff was recorded in such Minutes and the first defendant declined to extend the pending work order and purchase order and the plaintiff was asked to de-mobilise by the end of 31.7.2013. Subsequently, the plaintiff de-mobilised from the site and the first defendant has engaged labour contracts and had also engaged a third party contractor for retrofitting work and the job is likely to be completed in the near future. In fact, no amount is payable by the first defendant to the plaintiff and on the contrary, huge sums are payable by the plaintiff to the first defendant. Hence, in respect of recovering the advance amount of Rs.79,00,000/-, the first defendant took steps to encash the bank guarantee by its letter dated 7.8.2013. On receipt of information about invocation, the plaintiff, by its letter dated 12.8.2013, claimed payments of bills raised by them and further claimed that after adjustment of the bank guarantee of Rs.79,00,000/-, demanded a further amount of Rs.51,78,000/-. On receipt of the letter, the first defendant informed the plaintiff that the bank guarantees constitute an independent contract and the first defendant is entitled to invoke the same. The plaintiff by its letter dated 13.8.2013 requested the first defendant company not to invoke the bank guarantees amounting to Rs.79,00,000/- and assured the first defendant that they would pay Rs.79,00,000/- and committed that it would deposit the said amount by 7.9.2013, failing which the first defendant can invoke the bank guarantees. Based on the said undertaking and commitment given in the letter dated 13.8.2013, the plaintiff failed to make payment as assured. On the contrary, the plaintiff approached this Court by filing the present suit and moved the application for interim injunction on 6.9.2013. The plaintiff concealed the letter dated 13.8.2013 before this Court and the assurance given by them that they would pay the amount of Rs.79,00,000/- by 7.9.2013 and has obtained the order dated 6.9.2013. But, in the present case, there is no pleading demonstrating any fraud on the part of the first defendant in relation to the bank guarantee. Similarly, the plaintiff has not made any averment in the plaint about the irretrievable harm or injustice being caused to it by the invocation of the bank guarantees. Even as per the admission on the part of the plaintiff, an amount of Rs.54,14,136/- remains payable out of Rs.79,00,000/-. The only ground urged by the plaintiff in the plaint is that certain amounts are due to them, in terms of the bills raised by them. The first defendant has also claimed huge sum against the plaintiff. Hence, both the claims have to be adjudicated in arbitral proceedings. Since the bank guarantee is an independent and unconditional contract, the same cannot be linked to the claims. A mere perusal of the bank guarantees would make it clear that they are payable on demand made by the first defendant company without any demur, reservation, contest, recourse or protest and / or without any reference to the plaintiff. Due to the exparte order of interim injunction, the first defendant has suffered considerable loss and injury. Further, the plaintiff has made a bald averment of irreparable loss and injury purely with the aim of pleading the same as a veiled attempt to show their existence. Thus, the first defendant sought for vacating the interim injunction granted on 6.9.2013.
(h) That apart, the first defendant has also filed an application in A.No.4351 of 2013 for return of the plaint for presenting the same before the proper Court. In the affidavit filed in support of the said application, it has been stated that the parties have expressly agreed that all disputes would be subject to the exclusive jurisdiction of Court in Gurgaon. Undisputedly, the work orders and purchase orders were issued to the plaintiff at its office in Kota, Rajasthan and the work was performed by the plaintiff from its office located in Kota, Rajasthan and undisputedly the work orders and purchase orders were executed in Gurgaon. In addition, the work was performed in Delhi and not in Chennai. Because the bank guarantees were issued by an bank located in Chennai, the jurisdiction of this Court cannot be invoked. Hence, the present suit is without jurisdiction and is likely to be returned to the plaintiff in terms of Order VII Rule 10 C.P.C.
(i) The plaintiff has filed a detailed common counter to the applications filed by the first defendant inter alia stating that the suit could have only been filed in Chennai, where the second defendant is having its bank and not in Guragaon as averred by the first defendant. The cause of action for the entire suit is the invocation of the bank guarantees issued by the second defendant for the benefit of the first defendant and the invocation has also been communicated only in Chennai. Substantial part of cause of action has arisen within the jurisdiction of this Court at Chennai and the forum convenient to adjudicate the disputes with respect to the invocation of the bank guarantees is also this Court only. Thus, the plaintiff prays for the dismissal of the application filed by the first defendant to return the plaint.
7. Though an elaborate argument was made on either side with regard to the various disputes relating to the terms of the contract and the amount liable to be payable under the contract, the scope of the application is very limited, since the application in A.No.657 of 2013 was filed only for interim injunction restraining the second respondent bank from making any payment to the first respondent or its men and agents pursuant to any invocation of the four Bank Guarantees dated 5.5.2012 and 16.5.2012. Therefore, the question that has to be decided in the application is, whether the invocation of the bank guarantees by the first defendant is legally sustainable and on such invocation, whether the second defendant bank is liable to pay the amount covered under the bank guarantees.
8. The plaintiff is a Chennai based company registered under the Indian Companies Act. The first defendant is a foreign company with the Indian Investment. The affiliate of the first defendant company viz., KC Cottrell Company Limited (KD Cottrell) located in republic of South Korea. That KC Cottrell submitted its bid pursuant to the tender floated by the NTPC for designing, engineering, manufacturing, supplying, inland transportation, insurance, installation, testing / commissioning and guarantee tests of Retrofitting and Modernisation Electrostatic Precipitator Package for Badarpur Thermal Power Station. The bid submitted by the KC Cottrell was accepted by NTPC and the scope of the work was split up into three parts and three agreements were entered into between NTPC and KC Cottrell. NTPC contracts provided for sub-contracting of any portion of the work. Accordingly, KC Cottrell sub-contracted the work pertaining to procurement to the first defendant. In turn, the first defendant decided to sub-contract portions of its scope of work orders placed by KC Cottrell. Hence, the first defendant invited bids from the interested parties. The plaintiff through its office located in Kota, Rajasthan, submitted its bids and the plaintiff was selected for the scope of work. Pursuant to the same, the first defendant awarded the contract to the plaintiff under two work orders dated 4.4.2012 and four purchase orders dated 5.4.2012 for the purpose of retrofitting, erection, commissioning and testing works of existing ESP system and mechanical erection, commissioning and testing works of existing ESP systems in connection with NTPC Badarpur Thermal Power Station Unit IV and V. Pursuant to the work orders and purchase orders, a sum of Rs.79,00,000/- being 10% of the contract value was given by the first defendant as mobilisation advance to the plaintiff for the purpose of the contract. As a security for the said amount, the plaintiff was required to furnish bank guarantees. Hence, the plaintiff provided four bank guarantees for the total value of Rs.79,00,000/- to secure the advance paid by the first defendant. The said bank guarantees were furnished by the plaintiff through AXIS Bank, the second defendant herein. All the four bank guarantees are valid upto 31.10.2013. Subsequently, the plaintiff was complaining of non-receipt of payment in time from the first defendant. Hence, the plaintiff requested the first defendant to process the bills at the earliest. Since after repeated reminders the amount was not paid, the plaintiff was finding it difficult to run the site without adequate cash flow to meet their expenses, whereas, according to the first defendant, the performance of the plaintiff was unsatisfactory and not in accordance with the terms and conditions of the work orders / purchase orders including on account of inadequate manpower deployment, unplanned style of working, poor quality of work, lack of supervision by their site supervisors, etc. Hence, several complaints were made by NTPC in this regard. Though repeated representations were made by the first defendant for performing their scope within the contractual period of time, the plaintiff did not heed to the repeated requests. Therefore, a meeting was held on 15.5.2013, in which, it was mutually agreed that the second work order and the correspondent second purchase order would be withdrawn. In addition, it was mutually agreed that the advance amount of Rs.79,00,000/- would be returned. But, the same was not returned by the plaintiff. Hence, according to the first defendant, the first defendant is entitled to encash the bank guarantees. Further, according to the first defendant, a huge amount is outstanding from the plaintiff, whereas, according to the plaintiff, a sum of Rs.24,85,864/- has been adjusted by the first defendant towards mobilisation of advance and there remains only Rs.54,14,136/- balance to be adjusted towards mobilisation advance. Hence, it was decided by the parties to resolve the dispute amicably. Therefore, a meeting was held on 31.7.2013 between the representatives of the plaintiff and the first defendant. In the said meeting, it was decided to reconcile the accounts within the end of August 2013, as per clause 6(3) of the Minutes.
9. Now, it is the submission of the learned counsel appearing for the plaintiff that the bank guarantees were given only in respect of Rs.79,00,000/- paid by the first defendant to the plaintiff as mobilisation advance amount under the contract. Learned counsel appearing for the plaintiff further submitted that 5% of the amount has to be adjusted from each bill submitted by the plaintiff towards mobilisation advance amount and the balance amount would be paid to the plaintiff as per the work order. So far, a sum of Rs.24,85,864/- has been adjusted towards mobilisation advance amount. For the work executed by the plaintiff, the amount due from the first defendant far exceeds the unadjusted advance amount. Hence, without adjusting the remaining mobilisation advance amount, the first defendant cannot invoke the bank guarantee. It is an admitted position that amounts have been recovered from the running bills submitted by the plaintiff to the first defendant. Having recovered amounts towards the mobilisation advance, the first defendant is not entitled to recover further amounts over and above what has been paid as mobilisation advance. It is also pertinent to note that in such case where a portion of every running bill is deducted towards mobilisation advance, even prior to the conclusion of the entire contract, the principal would have recovered the entire mobilisation advance from the running bills submitted by the contractor. If the first respondent is liable to encash the bank guarantees irrespective of recovery of amounts from the running bills, it would lead to a situation of unjust enrichment and the first defendant would be recovering twice the amount paid as advance. Further, learned counsel appearing for the plaintiff submitted that it was mutually agreed between the parties in the meeting held on 31.7.2013 to reconcile the accounts before 31st August, 2013. Even before reconciliation, the first defendant is attempting to invoke the bank guarantees. If the bank guarantees are invoked, it would cause irretrievable injustice to the plaintiff. Further, since the first defendant is a foreign company, it would be very difficult for the plaintiff to recover the amount in future.
10. Per contra, learned counsel appearing for the first defendant submitted that the bank guarantees are unconditional and irrevocable bank guarantees. Therefore, irrespective of the dispute between the parties, when the bank guarantees are invoked, the second respondent has to pay the said amount. The validity of the invocation of the bank guarantees ought to be decided only in the terms contained therein. Normally, if the "unconditional and irrevocable" bank guarantees is invoked, the bank is bound to pay the amount covered under the said bank guarantee without any demur and only in the case where if there is an allegation of fraud as against the person who is seeking to invoke the "unconditional and irrevocable" bank guarantee or if the plaintiff establishes that in the event of invoking the bank guarantees, any irretrievable injustice would be caused to the plaintiff, then only the bank can be restrained by way of injunction from making any payment under the "unconditional and irrevocable bank guarantee". In the instant case, absolutely there is no allegation of fraud as against the first defendant. Similarly, the plaintiff is not able to show that if the bank guarantees are invoked, irretrievable injustice would be caused to them, except saying that if the bank guarantees are invoked and amount is released by the bank, it would be difficult for the plaintiff in future to recover the amount. In this regard, learned counsel appearing for the first defendant relied upon the judgment reported in (2008) 1 SCC 544 Vinitec Electronics (P) Ltd., v. HCL Infosystems Ltd.
11. Learned counsel appearing for the first defendant has further submitted that irretrievable injustice can be considered by the Court only if the plaintiff establishes prima facie egregious fraud. But, in the absence of any allegation with regard to the fraud, the submissions made by the learned counsel appearing for the plaintiff on the ground of "irretrievable injustice" cannot be considered. In support of this contention, the learned counsel appearing for the first defendant has relied upon the following decisions:-
(i) (1994) 1 SCC 50 Svenska Handelsbanken v. Indian Charge Chrome,
(ii) (2007) 6 SCC 470 Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd.
(iii) 1998 (II) CTC 492 Premium Industries India Ltd., Calcutta v. Quality Fabricators, rep. by its Proprietor Sri Arunagiri, 404, Anna Salai, O.P. Building, II Floor, Madras-35 and 2 others.
(iv) 1999 (III) CTC 618 Hindustan Construction Co. Ltd. and others v. State of Bihar and others.
(v) (1997) 1 SCC 568 U.P. State Sugar Corpn. v. Sumac International Ltd.
12. By way of reply, learned counsel appearing for the plaintiff submitted that the bank guarantee furnished by them is not an unconditional and irrevocable bank guarantee. On the other hand, it is a conditional bank guarantee since in the preamble portion of the bank guarantee, a reference was made to the underlying contract viz., work orders dated 4.4.2012 and 5.4.2012 issued by the first defendant. The bank guarantee was issued only for the repayment of mobilisation advance paid by the first defendant to the plaintiff under the underlying contract. As per the terms of the underlying contract, 5% of the amount has to be adjusted from each bill submitted by the plaintiff towards mobilisation advance amount. Hence, without completing the adjustment towards mobilisation advance amount from each bill submitted by the plaintiff, the bank guarantee cannot be invoked. In the instant case, if 5% amount is adjusted from each bill submitted by the plaintiff to the first defendant, even thereafter, the amount due from the first defendant to the plaintiff will exceed the unadjusted portion of mobilisation advance amount. Moreover, in the Minutes dated 31.7.2013, it was agreed to reconcile the accounts between the parties on or before August 31, 2013. But, even before reconciliation, the first defendant has invoked the bank guarantees. Learned counsel appearing for the plaintiff has further submitted that the bank guarantees executed in respect of mobilisation advance amount are always conditional bank guarantees only. In this regard, the learned counsel appearing for the plaintiff relief upon the decision reported in 1999 (III) CTC 618 Hindustan Construction Co. Ltd., and others v. State of Bihar and others and 1998 (II) CTC 492 Premium Industries India Ltd., Calcutta vs. Quality Fabricators, rep. By its Proprietor Sri Arunagiri, 404, Anna Salai, O.P.Building, II Floor, Madras 35 and 2 others and submitted that even if the bank guarantee is unconditional and irrevocable bank guarantee and if the said bank guarantee refers to underlying contract, then the clauses in the bank guarantee can be looked into as a condition to revoke the bank guarantee. In the instant case, the guarantee was furnished by the bank only for due repayment of advance payment by the plaintiff to the first defendant. The preamble portion of the bank guarantee also refers to underlying contract. Hence, the bank guarantee issued by the second respondent bank has to be construed only as a conditional bank guarantee. Unless the person who revokes the bank guarantee fulfils his obligation fixed under the conditional bank guarantee, the bank is not liable to pay the amount.
13. In view of the submissions made on either side, now, the question that has to be decided is as to whether the bank guarantee furnished by the plaintiff is a conditional bank guarantee or "unconditional and irrevocable" bank guarantee and whether the bank is liable to pay the amount covered under the bank guarantee.
14. According to the plaintiff, it is a conditional bank guarantee and the first defendant, without adjusting the 5% amount from each bill submitted by the plaintiff towards mobilisation advance amount is attempting to invoke the bank guarantee. Therefore, according to the plaintiff, adjusting of 5% amount from each bill towards mobilisation advance amount is a condition fixed under the bank guarantee, since the said bank guarantee was furnished only in respect of the mobilisation advance amount paid by the plaintiff. But, whereas, according to the first defendant, the bank guarantee is an unconditional and irrevocable bank guarantee and it is an independent contract and hence the clauses in the underlying contract cannot be looked into merely for the reason that a reference was made about the underlying contract in the preamble portion of the bank guarantee. Hence, in the event of invoking the unconditional and irrevocable bank guarantee, the bank is bound to pay the amount.
15. In view of the said submissions made by either side, it would be appropriate to extract the relevant portion from the bank guarantee and the same is extracted hereunder:-
"BANK GUARANTEE FOR ADVANCE PAYMENT"
" In consideration of M/s.Lodge Cottrell India Pvt. Ltd., Spazedge 5th Floor, Tower-B, Suite No.502-504, Gurgaon-Sohna Road, Sector 471-M, Near Malibhu Town, Gurgaon 122002, Haryana State (hereinafter referred to as the 'Employer' which expression shall, unless repugnant to the context or meaning thereof include its successors, administrators and assigns) having awarded to M/s.V.D.Swami and Company Private Limited, VDS House, Shree System Chamber, 190, Shopping Centre, Kota 324 007, Rajasthan State (hereinafter referred to as the 'Contractor' which expression shall unless repugnant to the context or meaning thereof, include its successors, administrators, executors and assigns), a contract, by issue of Employer's notification of award No.LCIN/EPOO5/WO/12-13/025 dated 5.4.2012 and the same having been unequivocally accepted by the Contractor, resulting into a contract bearing No.LCIN/EPOO5/WO/12-13/025 dated 5.4.2012 INR for Rs.52,00,000/- (Hereinafter called the 'Contract') and the employer having agreed to make an advance payment to the contractor for performance of the above contract amounting INR Rs.5,20,000/- (Rupees five lacs twenty thousand only) as an advance against bank guarantee to be furnished by the Contractor.
We, AXIS BANK LIMITED, a banking company incorporated under the Companies Act, 1956 and carrying on Banking Business under the Banking Regulation Act, 1949, and having its registered office at "Trishul", 3rd Floor, opposite Samartheshwar Temple, Law Garden, Ellis Bridge, Ahmedabad 380 006, Gujarat and one of its branch offices called Corporate Banking Branch office at Ground floor, Karumuthu Nilayam, No.192, Anna Salai, Chennai-600 002 (hereinafter referred to as THE BANK which expression shall include its successors, administrators, executors and assigns in business) do hereby guarantee and undertake to pay the Employer, immediately demand any or, all monies payable by the Contractor to the extent of INR as aforesaid at any time upto 31.10.2013 without any demur, reservation, contest, recourse or protest and / or without any reference to the contractor. Any such demand made by the employer on the bank shall be conclusive and binding notwithstanding any difference between the employer and the contractor or any dispute pending before any Court, Tribunal, Arbitrator or any other Authority. The bank undertakes not to revoke this guarantee during its currency without previous consent of the Employer and further agrees that the guarantee herein.
Contained shall be enforceable till 31.10.2013.
The employer shall have the fullest liberty without affecting in any way the liability of the bank under this guarantee, from time to time to vary the advance or to extend the time for performance of the contract by the contractor. The employer shall have the fullest liberty without affecting this guarantee, to postpone from time to time the exercise of any powers vested in them or of any right which they might have against the contractor, and to exercise the same at any time in any manner, and either to enforce or to forbear to enforce any covenants, contained or implied, in the contract between the employer and the contractor or any other course or remedy or security available to the employer. The Bank shall not be release of its obligations under these presents by any exercise by the employer of its liberty with reference to the matters aforesaid or any of them or by reason of any other act or forbearance or other acts of omission or commission on the part of the employer or any other indulgence shown by the employer or by any other matter or thing whatsoever which under law would but for this provision, have the effect of relieving the bank.
The Bank also agrees that the employer at its option shall be entitled to enforce this guarantee against the bank as a principal debtor, in the first instance without proceeding against the contractor and notwithstanding any security or other guarantee that the employer may have in relation to the contractor's liabilities."
16. A careful reading of the terms of the bank guarantees would show that "any such demand made by the employer on the bank shall be conclusive and binding notwithstanding any difference between the employer and the contractor or any dispute pending before any Court, Tribunal, Arbitrator or any other authority". Therefore, the bank undertakes to pay the amount unconditionally irrespective of the difference between the parties and the dispute pending before any Court, in the event of invoking the same by the first defendant. Whereas, according to the plaintiff, since a reference was made in the preamble portion of the bank guarantee in respect of mobilisation amount paid by the first defendant under the underlying contract, the bank guarantee has to be construed only as a conditional bank guarantee. Therefore, without adjusting the entire mobilisation advance amount from the bills submitted by the plaintiff as agreed upon under the underlying contract, the first defendant cannot invoke the bank guarantee as against the plaintiff. But, in the instant case, if the amount is so adjusted from each bill submitted by the plaintiff to the first defendant, still amount is due only from the first defendant which would exceed the unadjusted portion of mobilisation advance. Hence, the second defendant Bank has to be restrained from making payment under the bank guarantee. To this submission of the learned counsel appearing for the plaintiff, the judgment relied upon by the learned counsel appearing for the first defendant reported in (2008) 1 SCC 544 Vinitec Electronics (P) Ltd. v. HCL Infosystems Ltd, gives a fitting answer. The relevant portion is usefully extracted hereunder:-
" 22. In the present case, the amended clause does not refer to any of the clauses specifically as such but on the other hand the Bank had undertaken responsibility to pay any sum or sums within the guaranteed limit upon receipt of written demand from the Company. The operative portion of the bank guarantee furnished by the Bank does not refer to any of the conditions for payment under the bank guarantee. It is true that the bank guarantee furnished makes a reference to the principal agreement between the parties in its preamble. Mere fact that the bank guarantee refers to the principal agreement in the preamble of the deed of guarantee does not make the guarantee furnished by the Bank to be a conditional one unless any particular clause of the agreement has been made part of the deed of guarantee.
23. The recitals in the preamble in the deed of guarantee do not control the operative part of the deed. After careful analysis of the terms of the guarantee we find the guarantee to be an unconditional one. The appellant, therefore, cannot be allowed to raise any dispute and prevent the respondent from encashing the bank guarantee".
The dictum laid down in the said judgment would show that since a reference about the principal agreement entered into between the parties was referred to in the bank guarantee, it cannot be said that the bank guarantee is a conditional bank guarantee. To make a bank guarantee as conditional bank guarantee, a particular clause of the underlying contract has to be made as part of the deed of guarantee. In the instant case, no clause from the underlying contract was incorporated in the bank guarantee to make it as a conditional bank guarantee. Therefore, I am not inclined to accept the submission of the learned counsel appearing for the plaintiff in this regard. Hence, I am of the opinion that the bank cannot be restrained from making payment covered under the bank guarantee. Merely because a reference was made in the preamble portion of the bank guarantee with regard to underlying contract, it does not mean that the clauses in the underlying contract has to be taken into consideration as a condition for invoking the bank guarantee. Further, I am of the opinion, as contended by the learned counsel appearing for the first defendant, the bank guarantee is an independent contract and unless the clause in the underlying contract is incorporated in the bank guarantee as a condition to make payment, it cannot be said that the bank guarantee is a conditional bank guarantee.
17. But the learned counsel appearing for the plaintiff by relying upon the judgment reported in 1999 (III) CTC 618 Hindustan Construction Co. Ltd. and others v. State of Bihar and others, submitted that in that case, though the guarantee was termed as unconditional and irrevocable bank guarantee, the Hon'ble Supreme Court has come to the conclusion that a reference to the underlying contract was made in the bank guarantee as a condition precedent to make payment and hence, though the bank guarantee was termed as unconditional and irrevocable bank guarantee, the said bank guarantee cannot be said to be unconditional bank guarantee. The relevant portion of the said judgment is as follows:-
" 12. It was in terms of the above clause that the Bank Guarantee was furnished by the HCCL. It provides as under:-
"The Executive Engineer, Kharkai Dam Division II, Icha, Chaliama, Post Kesargarhia, Dist. Singhbhum, Bihar.
Ref: Construction of Icha Dam Subernarekha Multipurpose Project Contract/Tender Notice No.SMP/ICC/CE-8/87 Adityapur dt. 23.10.1987. . . . . . .
In accordance with the provisions of the Conditions of Contract, Clause 9 (Advance Mobilization Loan) of the abovementioned contract, the Hindustan Construction Co. Ltd., incorporated in Bombay under the Companies Act, 1956, and having their registered office at Construction House, Walchand Hirachand Marg, Ballard Estate, Bombay 400 038 (hereinafter called 'the Contractor') shall deposit with the Executive Engineer, Kharkai Dam Division II, Icha, Chaliama, Post Kesargaria, Dst. Singhbhum, Bihar, a bank guarantee to guarantee their proper and faithful performance under the said clause of the contract in an amount of Rs.10,00,000/- (Rupees Ten lakhs only).
We, the State Bank of India, incorporated under State Bank of India Act, 1955, and having one of our branches at Nyayamurti C.N. Vaidya Marg, Fort, Bombay 400 023 (hereinafter referred to as 'the said Bank'), as instructed by the Contractor, agree unconditionally and irrevocably to guarantee as primary obligator and not as Surety merely the payment of the Executive Engineer, Kharkai Dam Division II, Icha, Chaliama, Post Kesargarhia, Dist. Singbhum, Bihar, on his first demand without whatsoever right of objection on our part and without his first claim of the contractor, in the amount not exceeding Rs.10,00,000/- (Rupees Ten Lakhs only) in the event that the obligations expressed in the said clause of the abovementioned contract have not been fulfilled by the contractor giving the right of claim to the employer for recovery of the whole or part of the Advance Mobilization Loan from the contractor under the contract.
We further agree that no change or addition to or other modification of the terms of the contract or of works to be performed thereunder or of any of the contract documents which may be made between the Executive Engineer, Kharkai Dam Division II, Icha, Chaliama, Post Kesargarhia, Dist. Singbhum, Bihar, and the contractor, shall in any way release us from any liability under this guarantee, and we hereby waive notice of any such change, addition or modification.
Our liability under this guarantee is restricted to an amount not exceeding Rs.10,00,000/- (Rupees Ten Lakhs only) and the said guarantee shall remain in full force upto 11 October, 1990 with a claim period of six months thereafter i.e. upto 11 April, 1991 twelve months after the issuing of maintenance certificate, whichever is earlier. Unless demand or claim under this guarantee is made on us in writing on or before 11th April, 1991 we shall be relieved and discharged from all liabilities thereafter.
This guarantee shall remain valid and in full effect from the date of the advance payment under the contract until the Executive Engineer, Kharkai Dam Division II, Icha, Chaliama, Post Kesargarhia, Dist. Singbhum, Bihar, receives full repayment of the same amount from the contractor, but not later than 11 April, 1991 any case.
Dated at Bombay this 12th October, 1989.
FOR STATE BANK OF INDIA Sd/-
MANAGER Commercial Branch Bombay 400 023."
13.The Bank, in the above Guarantee, no doubt, has used the expression "agree unconditionally and irrevocably" to guarantee payment to the Executive Engineer on his first demand without any right of objection, but these expressions are immediately qualified by following:-
".............in the event that the obligations expressed in the said clause of the abovementioned contract have not been fulfilled by the contractor giving the right of claim to the employer for recovery of the whole or part of the Advance Mobilization Loan from the contractor under the contract."
14.This condition clearly refers to the original contract between the HCCL and the defendants and postulates that if the obligations, expressed in the contract, are not fulfilled by HCCL giving to the defendants the right to claim recovery of the whole or part of the "Advance Mobilization Loan", then the Bank would pay the amount due under the Guarantee to the Executive engineer. By referring specifically to Clause 9, the Bank has qualified its liability to pay the amount covered by the Guarantee relating to "Advance Mobilizatiion Loan" to the Executive Engineer only if the obligations under the contract were not fulfilled by HCCL has misappropriated any portion of the "Advance Mobilization Loan". It is in these circumstances that the aforesaid clause would operate and the whole of the amount covered by the "Mobilisation Advance" would become payable on demand. The Bank Guarantee thus could be invoked only in the circumstances referred to in Clause 9 whereunder the amount would become payable only if the obligations are not fulfilled or there is misappropriation. That being so, the Bank Guarantee could not be said to be unconditional or unequivocal in terms so that the defendants could be said to have had an unfettered right to invoke that Guarantee and demand immediate payment thereof from the Bank. This aspect of the matter was wholly ignored by the High Court and it unnecessarily interfered with the order of injunction, granted by the Single Judge, by which the defendants were restrained from invoking the Bank Guarantee. "
18. The factual aspect of that case would show that the bank guarantee was furnished in respect of an advance mobilisation loan. In the said bank guarantee, the bank agreed unconditionally and irrevocably to guarantee as principal obligator. In the said case, though the bank unconditionally and irrevocably agreed to guarantee, a condition was incorporated in the bank guarantee to the effect that "in the event the obligation expressed in the contract have not been fulfilled by the contractor giving a right of claim to the employer for recovery of the whole or part of the advance mobilisation loan from the contractor under the contract". Therefore, in that case, a reference to the underlying contract was made to the effect that if the obligations expressed in the contract have not been fulfilled by the contractor, then, it will give rise a right to the employer to recover a whole or part of the advance mobilisation amount. Only based on the said condition, the Hon'ble Supreme Court has held that the bank guarantee in that case cannot be said to be an unconditional bank guarantee, though in the bank guarantee it has been stated that it is an unconditional and irrevocable bank guarantee. The factual aspect of the said case is totally different from the facts of the present case. In the present case, absolutely none of the clauses of the underlying contract was incorporated in the bank guarantee to make the guarantee as conditional bank guarantee.
19. In another judgment relied upon by the learned counsel appearing for the first respondent / plaintiff is reported in 1998 (II) CTC 492 - Premium Industries India Ltd., Calcutta vs. Quality Fabricators, rep. By its Proprietor Sri Arunagiri, 404, Anna Salai, O.P.Building, II Floor, Madras 35 and 2 others, wherein, in para 5, it has been observed as follows:-
" 5. The clause in the bank guarantee which was dated 17.8.1994, which is marked as Ex.P.18 is as follows:-
And whereas the purchaser has agreed to advance an amount of Rs.30,00,000/- (Rupees thirty lakhs only) to the contractor exclusively for the purpose of aforesaid upon the contractor furnishing to the purchaser an irrevocable bank guarantee of Rs.20,00,000/- in such form and content as the purchaser shall prescribe from any of the schedule banks.
In view of the abovesaid clause, it will be clear that the bank guarantee of Rs.20,00,000/- was furnished only to safeguard the advance payment of Rs.30,00,000/- to the plaintiff. The said bank guarantee is an independent contract and non-performance of the main contract entered into between the parties will not have any bearing to invoke the bank guarantee given under Ex.P.18. Since the petitioner / first defendant has not discharged his obligation by paying the said sum of Rs.30,00,000/- to prevent the irretrievable injustice, the plaintiff is seeking an order of injunction from enforcing the said bank guarantee. Without even performing his obligation by paying the corresponding amount of Rs.30,00,000/- to the first respondent / plaintiff, if the petitioner is allowed to enforce the bank guarantee it would cause irretrievable injustice to the first respondent / plaintiff and the suit itself will become infructuous."
20. A reading of the dictum laid down in the above judgment would show that the defendant in that case has agreed to advance an amount of Rs.30,00,000/- to the plaintiff and for the said purpose, the plaintiff furnished an irrevocable bank guarantee of Rs.20,00,000/-. Subsequently, the defendant has not discharged his obligation by paying the said sum of Rs.30,00,000/-. The plaintiff in that case, sought for interim injunction from enforcing the said bank guarantee. A reading of the above judgment would show that a condition was incorporated in the bank guarantee on the part of the defendant. On failure to perform such condition, the interim injunction was granted by the Court. But, the said judgment also cannot be made applicable to the facts of the present case. Hence, I am of the opinion that whether the bank guarantee is a conditional bank guarantee or unconditional and irrevocable bank guarantee has to be decided only based on the terms of the bank guarantee. In the instant case, absolutely no condition was incorporated in the bank guarantee to make the payment. Therefore, the bank is bound to pay the amount when the first defendant revokes the bank guarantee. In this regard, a reference could be placed decision reported in (2007) 6 SCC 470 Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd., it has been held as follows:-
" 21: In General Electric Technical Services Co. Inc. v. Punj Sons (P) Ltd. ((1991) 4 SCC 230) this Court observed: (SCC pp. 237-38, paras 9-10) "If the documentary credits are irrevocable and independent, the Bank must pay when demand is made. Since the bank pledges its own credit involving its reputation, it has no defence except in the case of fraud. The Bank's obligations of course should not be extended to protect the unscrupulous party, that is, the party who is responsible for the fraud. But the banker must be sure of his ground before declining to pay. The nature of the fraud that the Courts talk about is fraud of an 'egregious nature as to vitiate the entire underlying transaction'. It is fraud of the beneficiary, not the fraud of somebody else. ... The Bank cannot be interdicted by the Court at the instance of (purchaser) in the absence of fraud or special equities in the form of preventing irretrievable injustice between the parties.
22. In our considered opinion if the bank guarantee furnished is an unconditional and irrevocable one, it is not open to the bank to raise any objection whatsoever to pay the amounts under the guarantee. The person in whose favour the guarantee is furnished by the bank cannot be prevented by way of an injunction in enforcing the guarantee on the pretext that the condition for enforcing the bank guarantee in terms of the agreement entered between the parties has not been fulfilled. Such a course is impermissible. The seller cannot raise the dispute of whatsoever nature and prevent the purchaser from enforcing the bank guarantee by way of injunction except on the ground of fraud and irretrievable injury.
28. The learned counsel in support of his submission relied upon the decision of this Court in Hindustan Construction Co. Ltd., v. State of Bihar ((1999) 8 SCC 436. This Court in Hindustan Construction Co. having referred to the terms of clause (9) of principal contract between the parties therein came to the conclusion that the bank guarantee specifically refers to the original contract and postulates that if the obligations expressed in the contract, are not fulfilled by HCCL, the right to claim recovery of the whole or part of the 'advance mobilisation' then alone the bank was liable to pay the amount due under the guarantee to the Executive Engineer. The Court found that the bank guarantee specifically refers to clause (9) of the principal agreement and it is under those circumstances it came to the conclusion that the amount covered by the bank guarantee becomes payable and the same could be invoked only in the circumstances referred to in clause (9) of the principal agreement. The bank guarantee executed by the bank in the instant case in favour of the appellant herein does not contain any such clause. Mere fact that the bank guarantee refers to the principal agreement without referring to any specific clause in the preamble of the deed of guarantee does not make the guarantee furnished by the bank to be a conditional one. In the very said judgment this Court observed that : (SCC p.422 pare 9) "9. What is important, therefore, is that the bank guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee or the person on whose behalf the guarantee was furnished. The terms of the bank guarantee are, therefore extremely material. Since the bank guarantee represents an independent contract between the bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the terms of the bank guarantee, or else, the invocation itself would be bad".
(emphasis supplied) What is relevant, therefore, is the terms incorporated in the guarantee executed by the bank. On careful analysis of the terms and conditions of the guarantee, we find the guarantee to be an unconditional one. The respondent, therefore, cannot be allowed to raise any dispute and prevent the appellant from encashing the bank guarantee."
A reading of the above judgment would show that the terms of the bank guarantee is very much material to find out whether the bank guarantee is an unconditional one or not. Keeping the principles laid down in the above judgment, if we read the terms and conditions of the subject bank guarantee, it could be seen that absolutely no clause from the underlying contract was incorporated in the bank guarantee as a condition to make payment. Hence, I am of the opinion that the present bank guarantee is an unconditional and irrevocable bank guarantee. Hence, it is not open to the bank to raise any objection whatsoever to pay the amount under the bank guarantee when it is revoked.
21. Yet another submission of the learned counsel appearing for the first defendant is that unconditional bank guarantee can be invoked only in two circumstances viz., if there is any allegation of fraud as against the person, who is invoking the bank guarantee or if any irretrievable injustice is going to be caused to the plaintiff by invoking the bank guarantee by the first defendant. But, in the instant case, absolutely there is no allegation with regard to the fraud as against the first defendant. So far as the irretrievable injustice is concerned, it is the submission of the plaintiff that if the amount is paid by the bank to the first defendant, then it will be very difficult for the plaintiff to recover the amount from the first defendant after reconciliation of accounts, since the first defendant is a foreign company within Indian investment. But, it is well settled legal principle that the issue of irretrievable injustice could be considered by the Court only if the plaintiff prima facie establishes the egregious fraud. In this regard, learned counsel appearing for the first defendant relied on the decision reported in (1994) 1 SCC 50 Svenska Handelsbanken v. Indian Charge Chrome, wherein it has been held that without establishing the prima facie case for fraud, mere making the allegation of irretrievable injustice has no sequence to restrain the enforcement of the bank guarantee.
22. Now, according to the learned counsel appearing for the plaintiff, since the first defendant is a foreign company with Indian investment, the plaintiff would find it difficult to recover the amount in future and in that way, irretrievable injustice would be caused to the plaintiff, if the amount under the bank guarantee is paid to the first defendant. But, in my considered opinion, the submission made by the learned counsel appearing for the plaintiff on the ground of irretrievable injustice is only mere apprehension of the plaintiff. Further, in the absence of any allegation of fraud as against the first defendant, I am of the opinion that no prima facie case has been made out by the plaintiff on the ground of "irretrievable injustice" to restrain the second defendant from making payment to the first defendant or his men and agents pursuant to any invocation of the four guarantees dated 5.5.2012 and 16.5.2012 by the first defendant. In this regard, a reference could be placed in the judgment reported in (1994) 1 SCC 50 Svenska Handelsbanken v. Indian Charge Chrome, wherein it has been held as follows:-
" 72. Again in this very judgment Shetty, J referred to the observations of Mukharji, J that there should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Mere irretrievable injustice without prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee".
A reading of the above judgment would show that without making prima facie case of fraud as against the party, who is seeking for invoking the bank guarantee, the plaintiff cannot ask for injunction on the ground that if the bank guarantee is invoked, irretrievable injustice would be caused to them. In the instant case, absolutely there is no allegation of fraud as against the first defendant. Therefore, the question of considering the case projected by the learned counsel for the plaintiff on the ground of irretrievable injustice cannot be accepted. Hence, I am of the opinion that no prima facie case has been made out by the plaintiff to restrain the second defendant bank from making any payment to the first defendant or its men and agents pursuant to the revocation of the four bank guarantees dated 5.5.2012 and 16.5.2012 by the first defendant.
23. For the reasons stated above, I am of the opinion that the interim injunction already granted is liable to be vacated and accordingly, vacated.
24. As far as application in A.No.4351 of 20134 is concerned, which was filed to return the plaint to the plaintiff for presenting the same in the Court, it is the submission of the learned counsel appearing for the first defendant that the work orders and purchase orders were issued to the plaintiff at Kota, Rajasthan and the work was performed by the plaintiff from its office located in Kota, Rajathan and undisputedly, the work orders and purchase orders were executed in Gurgaon. In addition, the work was performed in Delhi and not in Chennai. Merely because the bank guarantees were issued by the bank located in Chennai, the jurisdiction of this Court cannot be invoked. Hence, the present suit is likely to be returned to the plaintiff in terms of Order VII Rule 10 C.P.C.
25. In this regard learned counsel appearing for the first defendant relied upon the judgment reported in (1996) 3 SCC 443 South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises (P) Ltd, and others wherein the Hon'ble Supreme Court has held as follows:-
" 3. ... In view of the admitted position that contract was executed in Bombay, i.e., within the jurisdiction of the High Court of Bombay, performance of the contract was also to be done within the jurisdiction of the Bombay High Court; merely because bank guarantee was executed at Delhi and transmitted for performance to Bombay, it does not constitute a cause of action to give rise to the respondent to lay the suit on the original side of the Delhi High Court. The contention that the Division Bench was right in its finding and that since the bank guarantee was executed and liability was enforced from the bank at Delhi, the Court got jurisdiction, cannot be sustained.
4. We, therefore, hold that the learned Single Judge was right in his conclusion that no part of cause of action had arisen within the jurisdiction on the original side of the High Court of Delhi and direct to return the plaint for presentation to the proper Court."
By relying upon the said decision, the learned counsel appearing for the first defendant prayed for return of the plaint.
26. It is the submission of the learned counsel appearing for the plaintiff that the said decision relied upon by the learned counsel appearing for the first defendant cannot be made applicable to the facts of the present case, since in the present suit, the relief sought for is only for permanent injunction restraining the second defendant from making any payment to the first defendant pursuant to any invocation of the bank guarantees. Before instituting the suit, the plaintiff has also obtained leave of this Court to institute the suit under clause 12 of the Letters Patent, where the entire cause of action arose within the jurisdiction of this Court. With regard to this submission, learned counsel appearing for the plaintiff has relied upon the Full Bench decision of the Calcutta High Court in the case of Chainrup Sampatram v. Punjab Sind Bank reported in 2009 (2) CTC 673 and submitted that different branches of a Bank are to be construed as a separate entity distinct from each other for the purpose of conferring jurisdiction. Applying the said decision to the present case, the branch of second defendant bank at Chennai has to be teated as a separate entity and therefore, the entire cause of action arose within the jurisdiction of this Court.
27. The application under Order VII Rule 10 C.P.C. has been filed solely basing reliance upon the judgment of the Hon'ble Supreme Court reported in (1996) 3 SCC 443 South East Asia Shipping Co. Ltd. v. Nav Bharat Enterprises (P) Ltd. On a perusal of the factual aspect of that case would show that the decision was rendered in the case under Section 20 C.P.C. So far as the present case is concerned, the plaintiff has obtained leave under clause 12 of the Letters Patent and the bank is also at Chennai and the bank guarantees were executed by the plaintiff at Chennai. Therefore, the said judgment relied upon by the learned counsel appearing for the first defendant cannot be applied to this case, since the plaintiff has obtained leave of this Court to file a suit under Clause 12 of Latters Patent. Therefore, I am not inclined to accept the submission made by the learned counsel appearing for the first defendant in this regard.
28. In fine, the interim injunction already granted on 6.9.2013 is vacated and the original application in O.A.No.657 of 2013 is dismissed. Application in A.No.4350 of 2013 for vacating the interim injunction is allowed and the application in A.No.4351 of 2013 for return of the plaint, is dismissed.
3.12.2013 Index:yes Internet:yes sbi R.SUBBIAH, J Pre-delivery order in O.A.Nos.657, 4350 and 4351 of 2013 in C.S.No.595 of 2013 DATED: 03.12.2013