Madhya Pradesh High Court
M/S Sigma Constructions vs Madhya Pradesh Rural Development ... on 2 April, 2014
1
W. P No. 1133/12
2/04/14
Shri Girish Kekre, learned counsel for the petitioner.
Shri Vipin Mishra, learned counsel for the respondents.
Challenging the orders passed by the authorities of the Madhya Pradesh Rural Road Development Authority in terminating the contract of the petitioner, encashment and invoking of the Bank guarantee for unliquidated damages, this writ petition is filed.
The orders in question were issued vide Annexures P-1, P-2, P-3 and P-4. Even though, learned counsel for the petitioner has tried to emphasize that the action of the respondents in taking the impugned action is unsustainable and has tried to justify the claim of the petitioner for the purpose of quashing the aforesaid order.
Respondents apart from filing a detailed reply for justifying their action submit that in the matter of encashment of Bank guarantee in view of the law laid down by the Supreme Court in the case of Pimpri Chinchwad Municipal Corporation and others Vs. Gayatri Construction Company and another (2008) 8 SCC 172, Vintex Electronics Private Ltd. Vs. HCL Infosystems Ltd. (2008) 1 SCC 544 and BSES Ltd. (Now Reliance Energy Ltd.) Vs. Fenner India Ltd. and another (2006) 1 SCC 728 in the matter of encashment of bank guarantee. It is said that the writ petition is not maintainable.
As far as revocation of the contract and recovery of the damages are concerned, it is said that the petitioner has a remedy of Arbitration in accordance with the Arbitration 2 Clause available in the agreement and, therefore, the petition is not maintainable.
Inviting our attention to an order passed by us under similar circumstances in the case of encashment of bank guarantee and show-cause notice issued for termination of the contract by the Madhya Pradesh Rural Road Development Authority in W. P. No. 10279/11, Shri Vipin Mishra argues that by a detailed order passed on 21.01.14, this Court refused to interfere into the matter in a similar dispute and, therefore, this petition is also not maintainable.
Shri Girish Kekre emphasized that the Bank Guarantee could be encashed only to the extent of 50 % and the 50 % Bank Guarantee has to be released at the first stage and as this has not been done, it is said that the action is unsustainable.
Having heard learned counsel for the parties and on a perusal of the records, it is clear that in the matter of encashment of Bank Guarantee, the Supreme Court has considered the question of invoking the jurisdiction by the High Court in a petition under Article 226 of the Constitution and in the cases of BSES Ltd. (supra) and Vintex Electronics Private Ltd. (supra) the law has been crystallized and it is held that in the course of covered transaction and in dealings commercial in nature, when an unconditional guarantee has been given by way of bank guarantee, the beneficiaries entitled to the release of such guarantee in terms thereof, irrespective of the fact that some dispute between the parties is pending.
The Supreme Court has held that the bank guarantee is 3 an independent contract between the Bank and the beneficiaries and the bank is always obliged to honour it. As far as the dispute between the beneficiary and the third party is concerned, it is held by the Supreme Court that in a dispute between the beneficiary and the party in whose instance, the Bank has given the guarantee is immaterial and of no consequence.
In the matter of revocation of bank guarantee by the Bank in view of the aforesaid well settled principle of law, we see no reason to interfere into the matter with regard to the encashment of bank guarantee given by the Madhya Pradesh Rural Road Development Authority.
As far as other dispute between the parties are concerned, clause 51.2 and 52.1 contemplates a procedure for termination of the agreement and, therefore, Arbitration Clause is also provided for resolution of the dispute. Once, the contract is determined and the dispute pertains to determination of the contract, all disputes arising out of the execution of the contract has to be adjudicated by resorting to the remedy as per the agreement i.e. the Arbitration agreement and the writ petition for calling in question for the same is not maintainable. In view of the above, we see no reason to interfere into the matter.
Accordingly, granting liberty to the petitioner to take recourse to the remedy of Arbitration, this writ petition is disposed of.
(Rajendra Menon) (Anil Sharma)
JUDGE JUDGE