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(5) It appears that not being satisfied with the performance of the petitioner the respondent terminated the contract on 15 January 1997 and on the next date invoked the bank guarantee by addressing letter dated 16 January 1997 to the guarantor bank. It would be expedient to extract here the relevant portion of the letter which reads as follows :-

"AS M/s. Delkon (India Pvt. Ltd., Calcutta have defaulted in the performance, observance and discharge of the terms and conditions stipulated in L.O.I. No. Bhel Nr (BCT) Fgt : Tp : Blr : 42 (59) dated 21.06.96 and Bhel have suffered/would suffer loss - we hereby lodged our claim for encashment of the captioned Bank Guarantee. It is requested that an amount of Rs. 7,86,750.00 (Rupees seven lakhs eighty six thousand seven hundred fifty only) may be remitted to Bhel by means of Demand Draft, payable at NOIDA."

(6) It seems that the bank, instead of straight-away remitting the proceeds under bank guarantee, sought confirmation from the Bhel to the effect that revocation of the bank guarantee was in accordance with the advice of the Ministry of Finance applicable to all PSUs and the person invoking the bank guarantee was higher in rank than the officer who had accepted the guarantee. This was confirmed by the Bhel on 21 January 1997. However, the bank, vide its letter dated 22 January 1997, informed Bhel about its helplessness to honour the bank guarantee on account of the order of injunction passed by this Court. The relevant portion of the said letter having some bearing on the contention of learned counsel for the petitioner reads thus :-

(7) Being aggrieved by the decision of Bhel to rescind the contract and invoke the bank guarantee, the petitioner claims to have raised the dispute and issued a notice to Bhel under Section 11 of the Act for appointment of Arbitrator (s) and filed the present petition for interim injunction against the invocation of the bank guarantee. It is alleged that the invocation of the bank guarantee is unlawful, fraudulent and contrary to its terms, apart from being inequitable amounting to unjust enrichment on the part of the Bhel because : a) letter of invocation does not specify the/nature of claim and or penalty and or amount there of for which the bank guarantee is sought to be invoked; b) without lodging any claim whatsoever against the petitioner, who has completely discharged its obligation under the contract, the sudden invocation of the bank guarantee, is fraudulent and amounts to illegal and unjust enrichment on the part of the respondent: c) no loss has been suffered by the respondent: d) the signing of the contract after five months of the issue of letter of intent indicates that the respondent had no grievance against the petitioner and e) the respondent had itself agreed to a joint construction programme commencing from 21 December 1996 to 24 March 1997 and the petitioner had completed the construction work strictly in terms of the revised schedule on unit No. 3. It is pleaded that if the respondent is permitted to encash the bank guarant, it would suffer irreparable prejudice and injury.

(12) On the other hand, Dr. Shanker Ghosh, learned Senior Counsel for Bhel, while inviting attention of the Court to various documents, including some letters from Ntpc to Bhel, complaining about the tardy progress of the project, has contended that the petitioner had been found faulting in due performance of the sub-contract right from the beginning. It is asserted that despite rescheduling of the construction programme from December 1996, the petitioner failed to meet the revised targets. It is pointed out that the total work under the contract awarded to the petitioner was approximately 11600 metric tonnes but from July to December 1996 it had erected only 162.5 metric tonnes which shows that petitioner had failed to mobilise the site or deploy staff members as per the requirement. It is also pointed out that due to the poor performance of the petitioner Ntpc had warned Bhel of an appropriate action as per the contract if no significant improvement was observed. Learned counsel further submitted that despite poor performance of the petitioner, to give one more opportunity to it to expedite the fabrication work, vide minutes of meeting dated 22 November 1996, the petitioner agreed to execute 300 metric tonnes for the month of December 1996 and 500 metric tonnes in each further months starting from January 1997 and ending in June 1997 but the petitioner did not undertake any erection work in the month of December 1996 due to lack of resources and manpower. As regards the alleged fraud it is urged that no such allegation of fraud, as pleaded orally, has been made in the petition, apart from the fact that no particulars of fraud have been spelt out. It is vehemently contended that it is for the guarantor bank to object to the invocation of the bank guarantee if it is not in accordance with the terms of the guarantee but in the present case no such objection having been raised by the bank it could not be interdicted by the Court to not to honour its commitment. Reference is also made to the banks afore-extracted letter to show that infact the bank had not made any grievance that the invocation of the bank guarantee is not in terms thereof. It is maintained that the invocation of the bank guarantee being in order, the bank cannot be restrained from encashing the same. In support, reliance is placed on the decision of the Supreme Court in General Electric Technical Services Inc. Vs. Punj Sons Private Limited and Anr. .