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Judgment
Pinaki Chandra Ghose, J.—This is an application filed by the writ petitioner, inter alia, challenging the notice of invocation of bank guarantee dated November 19, 1999, issued by respondent No. 1 and the letter dated November 25/30,1999, issued by the United Bank of India, respondent No. 2 herein, inter alia, on the ground that the petitioner is a sick industrial unit within the meaning of the West Bengal Relief Undertakings (Special Provisions) Act, 1972 (hereinafter referred to as "the said Act of 1972"), as also u/s 3(1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as "SICA of 1985"), wherein the Board for Industrial and Financial Reconstruction (hereinafter referred to as "the BIFR") has propounded a scheme for rehabilitation, and thereby the invocation of the bank guarantee dated July 11, 1999, issued by the United Bank of India has to be declared as arbitrary, motivated and/or illegal.
The facts of the case briefly are as follows :
A contract was entered into between the petitioner and respondent No. 1 being the ONGC on September 7, 1996, for complete rehabilitation work of "EE platform" for a lumpsum price of Rs. 6.99 crores inclusive of taxes and duties as applicable.
In terms of the said contract, the contractor was obliged to furnish "performance guarantee" and the "security deposit".
On July 11, 1996, the petitioner furnished a demand irrevocable bank guarantee for a sum of Rs. 69.60 lakhs to be paid without any demur, protest or reservation. The said bank guarantee was extended till May 31, 2000. Since the petitioner could not complete the work in terms of the said contract, disputes and differences arose between the parties and a meeting was held on June 10, 1999, whereupon the petitioner requested to "short close" the contract and respondent No. 1 agreed to consider the same subject to the award of left over work to an alternative agency, and also upon due analysis of payment, as per the provisions of the said contract.
Eventually, respondent No. 1 by a letter dated November 11, 1999, wrote to the United Bank of India making a demand in writing requesting to remit a sum of Rs. 69.60 lakhs, in other words, to invoke the clause for the invocation for the said bank guarantee furnished by the petitioner.
By a letter dated November 25/30, 1999, the United Bank of India addressed a letter to the petitioner, inter alia, requesting them to make immediate arrangement for the said fund. Accordingly, this writ application was filed.
Mr. Chatterjee appearing on behalf of the petitioner has submitted that the petitioner-company will suffer irreparable loss and injury if such invocation of bank guarantee dated July 11, 1996, which was for a sum of Rs. 69,60,000 is allowed to be honoured by the bank.
He further submitted that according to the said bank guarantee the respondent-corporation shall have an unqualified option under this guarantee to invoke the banker''s guarantee and claiming the amount thereunder in the event of the contractor failing to honour any of the commitments entered into under the contract.
According to him, the delay in completion of the work would not cause invocation of bank guarantee, but would extend the validity period of the said bank guarantee. Accordingly, the petitioner has extended the bank guarantee till May 31, 2000. He further submitted that the petitioner-company did not commit any wrong nor is there any case of failing to honour any of the commitments. But the letter issued by respondent No. 1 would show that they have specifically stated that the petitioner had failed to honour its contractual obligation. Therefore, according to him, the respondent has proceeded totally without any basis and has not any right to invoke the same.
He further submitted that the disputes between public sector undertakings should be decided by the Government''s own machinery of arbitration. Therefore, according to him, the two Government bodies cannot litigate with each other without going in for a negotiated settlement. He further submitted that this court has the jurisdiction to entertain this writ application inasmuch as the invocation notice was served in Calcutta. In this circumstance, he submitted that such invocation should not be given effect to at this stage.
Mr. Sen appearing on behalf of respondent No. 1 has submitted that no injunction lies against the bank guarantee. Since there is no plea of fraud or special equity, he also submitted that, there is no cause of action in the writ as framed. He also submitted that the High Court has jurisdiction since the bank guarantee stipulates that the place wherefrom tender was floated would have exclusive jurisdiction.
According to him, the plea taken in the instant writ application is since the petitioner is a "sick" unit and a declaration has been made by the said Act of 1972 and further a scheme has been propounded by the BIFR under the SICA as arbitrary, illegal and bad.
He further submitted as follows :
(i) Inasmuch as the fact that the "bank guarantee" is "separate" and "independent" of the parent contract, and the contract of bank guarantee is between the bank and the beneficiaries, the declaration of "sickness" under the said Act of 1972 or the declaration of "sickness" by the BIFR under the SICA of 1985 is, indeed, an irrelevant consideration.
(ii) The identical question came for consideration before the Division Bench presided over by the Justice Ajit Kumar sen gupta and the Justice Nitish Kumar Batabyal in connection with the appeal bearing No. 960 of 1992 between Turnkey International Ltd. v. Allahabad Bank. In the said decision the Division Bench, inter alia, held therein, as under :
". . . Semantically the contract between the bank and the relief undertaking has not brought to bear upon or put in contract or put to use or to assign or ascribe, etc. for enforcing the independent and separate contract between the bank and the beneficiaries though it may be said that the background is provided by the agreement between the bank and relief undertaking."
In view thereof, the plea of the West" Bengal Relief Undertakings (Special Provisions) Act, 1972, was rejected.
Appeal was preferred from the said Division Bench which was rejected by the Supreme Court.
He further relied upon a Division Bench judgment in Madalsa International Ltd. and others Vs. Central Bank of India, and submitted that no injunction would lie and can be issued since the bank guarantee in question has been and is unconditional and without any demur, reservation, contest, protest as clearly laid down and declared by the Supreme Court.
He further drew my attention to the said bank guarantee and the relevant clauses which are reproduced hereunder :
"Clause 2. We, United Bank of India ... do hereby guarantee and undertake to pay immediately on first demand in writing... to the extent of Indian rupee (sixty-nine lakhs sixty thousand only) Rs. 69,60,000 without any demur, reservation, contest or protest and/or without any reference to the contractor . . . The guarantee herein contained shall be irrevocable and shall continue to be enforceable until it is discharged by corporation in writing.
Clause 3. The bank also agree . . . shall be entitled to enforce this guarantee against the bank as a principal debtor in the first instance without proceeding against the contractor . . ."
He further submitted that the said bank guarantee also is unqualified and the bank''s obligation to pay is without any demur or protest. In support of his contention he relied upon the judgments in United Commercial Bank v. Bank of India [1982] 52 Comp Cas 186 (SC), General Electric Technical Services Company Inc. Vs. M/s. Punj Sons (P) Ltd. and another, , U. P. Co-operative Federation Ltd. v. Singh Consultants and Engineers (P.) Ltd. [1989] 65 Comp Cas 283 (SC), Hindusthan Paper Corporation Limited Vs. Keneilhouse Angami, .
After considering the facts and circumstances of this case, I am of the opinion that no fraud has been pleaded and no case has been made out in this petition. Further, the bank guarantee is unconditional in nature. It further appears that the Division Bench of this High Court in the case of an Appeal No. 960 of 1992 (Turnkey International Ltd. v. Allahabad Bank), has specifically held that if there is no detail of any fraud or any reference to special equity have been made, the court has no jurisdiction to interfere in respect of enforcement of bank guarantee. I do not have any hesitation to accept such contention of the respondent and I am of the opinion that the court should not interfere or pass any injunction restraining the bank from giving effect to the bank guarantee, in any manner whatsoever save and except if there is any fraud or special equity being pleaded in favour of the petitioner. In my opinion no case has been made out by the petitioner in this case and as such in my opinion this application must fail and is hereby dismissed ; however, no order as to costs.