Calcutta High Court
Government Of West Bengal vs Consulting Engineering Services ... on 16 December, 2013
ORDER SHEET
GA No.3633 OF 2013
APOT No.565 of 2013
with
CS No.403 of 2013
IN THE HIGH COURT AT CALCUTTA
Civil Appellate Jurisdiction
ORIGINAL SIDE
GOVERNMENT OF WEST BENGAL
Versus
CONSULTING ENGINEERING SERVICES (INDIA)
PRIVATE LIMITED
BEFORE:
The Hon'ble JUSTICE BANERJEE
The Hon'ble JUSTICE DEBANGSU BASAK
Date : 16th December, 2013.
Mr. Ashok Kumar Banerje, Government Pleader,
Mr.Sakya Sen, Mr.Poritosh Sinha for the
appellant.
Mr.Surajit Nath Mitra, Sr.Advocate, Mr.
Arindam Mukherjee, Mr. Deepak Kr. Jain for
the respondent.
The Court : Bank Guarantee is as good as cash, so said, Lord Denning. The denial of injunction restraining invocation of bank guarantee is a rule, of course, there would be exception that too, on a limited plea of fraud and/or special equity. With great eloquence Mr. Surajit Nath Mitra, learned Senior Counsel appearing for the respondent would support the order of injunction passed by the learned Single Judge on a different pretext that is not argued before us, equally eloquent Mr. Sakya Sen is, while appearing for the appellant.
The facts would depict, the parties entered into an agreement for supervision of reconstruction of the embankment in Sundarban after the stormy cyclone commonly known as "Aila" in 2009. The Government decided to 2 reconstruct the embankment. The State of West Bengal engaged the respondent for supervisory work. Under the contract they were supposed to get commission for .8% compared to the cost of the work. The supervisor was not only to supervise the work but also to oversee the entire project starting from surveying the land, drawing up plan, preparation of tender etc. The State advanced a sum of Rs.7.5 crores known as 'mobilisation advance' against the bank guarantee executed by the respondent. It is the clear term of the contract, the mobilisation advance would be adjusted against the periodical bills that the respondent would submit with the progress of the work. If we give credence to what Mr. Mitra would say and if we look to the records, we would find, there had been initial teething problem to start the work principally on the ground of land dispute. The project was not smooth. The work is yet to be completed as the State is generous to extend the time for completion of the work as we find from the records. The present litigation would, however, stand on an absolute different premise.
The subject litigation would relate to the concerned agreement between the State and the respondent for supervision of the work. The respondent would contend, because of the delay in handing over of site and because of delay caused principally on the part of the Government, the respondent had to spend huge sums of money on account of overhead cost and other charges amounting to Rs.8.54 crores claimed in the suit as and by way of damage and/or reimbursement of the overhead cost that they spent. The correspondence would show, there had been an earlier negotiation, as a result from time to time the State agreed to extend the validity period on the understanding, tenure of the bank guarantee would be renewed. The last of such renewal was upto November 30, 2013 as we find from page 48-49 of the petition. As per the contract the dispute was to be resolved principally by the parties themselves, if not possible, through a team of reconciliators selected from retired Engineers/retired Judges. If the 3 second attempt fails, it would go to arbitration as per the arbitration law prevalent as of date. The respondent, however, did not venture for any of such course suggested. They filed a suit. We do not make any further comment. We understand the present lis as a suit for injunction restraining encashment of bank guarantee only. The claim made in the suit was a money claim for Rs.8.54 crores coupled with a prayer for perpetual injunction restraining invocation of the bank guarantee. If we leave aside the prayer for money claim to be hit by arbitration clause, the injunction would be the only prayer left to be decided. We thus concentrate ourselves on such issue.
It is common knowledge that bank guarantee is an independent contract. It is a contract independent of the matrix contract entered into by and between the parties. The present bank guarantee would appear from page 31-33 of the petition. The bank guarantee would depict, the Central Bank of India, a public sector bank executed the bank guarantee at New Delhi outside the State in favour of the Irrigation and Waterways Department of the State. Under the agreement the bank undertook to pay on demand a sum of Rs.7.5 crores without any demur, reservation, contest, recourse or protest and/or without any reference to the PMSP (the respondent herein).
The learned Judge on an application made by the respondent on couple of hours notice' on the State, passed an order of injunction that has given rise to the present appeal at the instance of the State. Learned Judge observed, the records would prima facie show, the status report would show insignificant progress. His Lordship prima facie observed, the plaintiff had no fault in the work for not commencing nor in discontinuation of the work. His Lordship further observed "at no point of time did the State attempt to terminate the contract against the plaintiff or any other contracting parties". His Lordship also observed "there was 4 not even a notice to show cause against these persons as to why the contract should not be terminated". His Lordship stopped invocation on the ground of special equity. His Lordship, however, gave direction for filing affidavits and placed the matter for hearing on a subsequent date.
The contract of guarantee would unequivocally show, the bank was supposed to honour the demand without any question being raised and without any reference to the respondent. The respondent was not a party to the contract of guarantee. It is an independent contract between the bank on the one hand being the grantor and the State on the other hand being the grantee. The respondent might have a claim against the State on account of damage and/or reimbursement of their overhead cost and/or any other cost. Mobilisation advance was supposed to be adjusted against the bills submitted for the work. No such bill has been deposited as yet. The bills submitted, if at all, would relate to the overhead cost and other cost. It was not a case of forwarding of any work bills submitted by the contractor to the respondent for onward transmission to the State. Mr. Mitra would heavily rely on a penultimate paragraph in the letter dated July 26, 2013 appearing at page 42-43. The paragraph is quoted below :
"Accordingly, you are requested to take necessary steps for extending the validity of Bank Guarantee against Mobilization Advance bearing no.014010BG0000226 dated 04.08.2010 for Rs.7,50,00,000/- till final settlement of your claim which is expected to be completed latest by 30th September, 2013."
Relying on this paragraph Mr. Mitra would contend, the State agreed to resolve the dispute once for all and requested the respondent to renew the bank guarantee. In our view, even if the State agreed to do so that would not take away their independent right accrued under the contract of guarantee that they entered into with the Central Bank of India, New Delhi. 5
The appeal succeeds and is allowed. Since short question of law would involve in this case, we do not wish to proceed further in the appeal. We set aside the interim order passed by His Lordship. However, His Lordship may proceed with the hearing of the application. Affidavit-in- opposition, if not, filed earlier must be filed positively by Thursday next; reply, if any, be filed by Friday next. Let the application be placed before His Lordship on Monday next.
There would be no order as to costs.
(BANERJEE, J.) (DEBANGSU BASAK, J.) pa