Devi Shakuntala Thakral vs Wig Brothers (India) Pvt. Ltd. and Another

J.K. Maheshwari, J.—Assailing the order dated 21.12.2010 passed by District Judge, Jabalpur in Civil Suit No. 3-A/2008, the defendant No. 1 /appellant has filed this appeal under Order 43 Rule l(r) of CPC whereby the application under Order 39 Rule 1 and 2 read with Section 151 of CPC has been allowed granting injunction in favour of plaintiff/respondent No. 1. The plaintiff/respondent No. 1 filed a suit for declaration that the invocation of the Bank guarantee by defendant No. 1/appellant is illegal and fraudulent with a further prayer to issue perpetual prohibitory injunction against the defendants from invoking the Bank guarantees and its encashment. It is said that defendant No. 1 is a society registered under the Societies Registration Act, 1860 and the defendant No. 2 Bank issued the Bank Guarantees in favour of defendant No. 1 for and on behalf of the plaintiff. The defendant No. 1 /appellant invited bids through tender for engagement of the civil contractors, to carry out the work of construction of various buildings at Oriental Institute of Science and Technology and Oriental Engineering College, Jabalpur The plaintiff submitted its bid on 13.3.2009 of the total sum of Rs. 15,03,12,004/- which was accepted by defendant No. 1 and a Letter of Intent (in short "the LOI") was issued on 21.4.2009. In Clause 31 of LOI it is stipulated that the mobilization advance of Rs. 1.00 crore will be given to the Contractor against the Bank guarantees for an equal amount. The interest at the Bank rate applicable to Devi Shakuntala Thakral Charitable Foundation (presently @ 10%) will be chargeable from the Contractor on the said amount. The mobilization advance shall be recovered and adjusted in the running account bills @ 5% of the total amount of the bill and the balance in the settlement of final bill. As per pleadings of the plaint, settlement of the third final bill would be adjusted from third running bill onwards submitted by the plaintiff on pro-rata basis. Plaintiff agreed to furnish the Bank guarantee to defendant No. 1 for securing the mobilization advance which may be encashed after settlement of the final bill submitted by the plaintiff in terms of the contract, if any amount remains unadjusted towards mobilization advance and if the plaintiff fails to pay the same then the defendant No. 1 has been secured by the Bank guarantee. The plaintiff submitted five Bank guarantees each amounting to Rs. 20,00,000/- to defendant No. 1 issued by defendant No. 2. Out of the said five Bank guarantees, the Bank guarantee dated 28.4.2009 amounting to Rs. 20.00 lacs was returned to plaintiff on adjustment of Rs. 20.00 lacs from the running bills. The remaining four Bank guarantees amounting to Rs. 80.00 lacs were with the defendant No. 1. The plaintiff has not submitted the final bill, however the issue of determination of the remaining unadjusted amount against mobilization advance does not arise. It is said that the defendant No. 1 by its letter dated 19.7.2010 wrongly, fraudulently and illegally invoked all the four remaining Bank guarantees for the reason of unsatisfactory performance of the contract. It is submitted that the Bank guarantees were given to secure re-payment of the mobilization advance and not for the performance of the work, however such Bank guarantees cannot be invoked or encashed due to the alleged non-performance. It is further said that the Bank guarantee was conditional Bank guarantee and its invocation is contrary to the contract and wholly illegal. The defendant No. 2 Bank by its letter dated 26.7.2010 informed the plaintiff regarding the letter of invocation issued by the defendant No. 1 and requested to respond to the same. A detailed reply was submitted by the plaintiff vide letter dated 27.7.2010 to the defendant No. 2 explaining that the invocation of Bank guarantee by defendant No. 1 is illegal, fraudulent and wrong. It is further said that if defendant No. 2 proceeds for encashment of the said Bank guarantee in favour of defendant No. 1, it will cause a serious prejudice to the goodwill of the plaintiff. It is also said that the conduct of the defendant No. 1 is completely dishonest and he has also made an attempt to commit the similar fraudulent act with M/s. L & T and M/s. Datt Builders in relation to which legal proceedings are pending in various Courts. Thus special equities lie in favour of the plaintiff and in fact he shall suffer irretrievable injustice if the invocation of the Bank guarantees is allowed. In these circumstances, prayer was made to grant injunction restraining the defendants from invoking or encashing the Bank guarantees during the pendency of the suit.

The plaint allegations have been denied by the defendant No. 1 raising a preliminary objection of jurisdiction of the Court at Jabalpur. It is said that as per Letter of Intent the jurisdiction lies with the Bhopal Court and the suit cannot be maintained in view of the arbitration clause in agreement and due to which the plaintiff may raise the dispute before the arbitrator. It is said that the defendant No. 1 has not committed any fraud as alleged. In the said reply, the process of tender, issuance of common LOI and different work orders for construction of various buildings at Oriental Institute of Science and Technology and Oriental Engineering College, Jabalpur have not been disputed. It is merely said that the answering respondent has not committed any fraud. After issuance of the LOI the plaintiff has not adhered to the terms and conditions as agreed. Even on reminder and caution for unsatisfactory performance of the work, not having satisfactory progress, the mobilization amount was not being utilized in the ratio, thus the Bank guarantee has been invoked by defendant No. 1 through defendant No. 2 in accordance with law. The allegation as alleged with respect to fraud has been denied. It is said that the Bank guarantee was unconditional and irrevocable, however the defendant No. 2 is not required to go into the dispute between the plaintiff and the defendant No. 1 and rightly been encashed by the defendant No. 2 on 7.8.2010 itself prior to passing the order of injunction. In view of the said, it is urged that prayer for temporary injunction as made by the plaintiff may be refused.

The Trial Court referring the letter of invocation dated 19.7.2010 issued by defendant No. 1 and the terms of the Bank guarantee found that the Bank guarantee was issued for mobilization of the advance payment but the invocation has been prayed for due to non-performance of the satisfactory work. It has also found that for non-performance of the contract, no Bank guarantee has been issued for invocation, however recorded a prima facie finding that invocation of the Bank guarantee due to non-performance of the contract is illegal. It has further been observed that summons of the suit were received by the defendants on 5.8.2010 and the Bank guarantees were encashed on 7.8.2010 after receiving of summons, however the invocation and encashment is contrary to the purpose for which the Bank guarantee was issued, and directed to deposit the amount of Bank guarantee i.e. Rs. 80.00 lacs with interest at the Bank rate maintaining the status quo ante as prevalent on the date of filing of the suit.

Mr. Brian Da Silva, learned senior Counsel referring Clauses 31 and 33 of the LOI contends that the mobilization advance is against the Bank guarantee for an equal amount which will be recoverable and adjustable in the running bills @ 5% of the total amount of the bill and the balance in the settlement of final bill. The LOI was issued in duplicate which was signed by the plaintiff. In terms of Clause 31.1 the plaintiff has not completed the work within the time limit, however the performance remained unsatisfactory. The plea of fraud as taken is based on the surmises and unless it is established, the invocation in terms of the unconditional Bank guarantee is permissible. Learned Senior Counsel referring paras 3 and 9 of the Bank guarantee contended that the Punjab National Bank was agreed unconditionally and irrevocably to pay Rs. 20.00 lacs on first written demand made by the defendant No. 1 and without demur, the dispute raised by the contractor in any suit or arbitration or proceedings pending in any Court is irrelevant. If the written demand is made by the defendant No. 1, it shall be conclusive evidence for repayment as agreed by the said Bank guarantee. It is further submitted that the Bank guarantee was unequivocal and unconditional without demur or objection and conclusive, however on making demand, the encashment has rightly been made by the Bank in terms of the contents of the Bank guarantee. In support of the said contention, reliance has been placed on the decision of Division Bench of this Court in the case of Biaora Infrastructure Pvt. Ltd., Indore (M/s) v. State of M.P. & Others, ILR (2011) M.P. 1141 . Learned Senior Counsel further contends that in the matter of grant of injunction in the case of encashment of Bank guarantee various principles have been laid down by the Apex Court in the case of Hindustan Construction Co. Ltd. Vs. State of Bihar and Others, whereby it is clear that if the Bank guarantee is unequivocal and on unconditional terms to pay the amount without any demur or objection irrespective of any dispute, the Court would refrain from issuing the injunction. In the present case, the Bank guarantee is unconditional and unequivocal, therefore it has rightly been encashed. However, the trial Court committed an error granting injunction that too in the nature of mandatory injunction to re-deposit the encashed amount of Bank guarantee along with interest which is not in accordance to law. He further resting upon the aforesaid submissions on the Apex Court decision in the case of Reliance Salt Ltd. v. Cosmos Enterprises and Another, I (2007) SLT 343 = 1 (2007) BC 480 (SC) = (2006) 13 SCC 599, urged that mere breach of contract would not lead to conclusion of fraud. The fraud which vitiates the contract must have nexus with the acts of the parties prior to entering into the contract. In the present case, the act as alleged is subsequent to issue a Letter of Intent, therefore it would not constitute a fraud. The discrepancies in the bills or non-submission of the detailed account in respect of business cannot be a ground for denial of the encashment of the Bank guarantee at the instance of the promisor. In support of the said submission, reliance has been placed on the decision of Apex Court in the case of Mahatma Gandhi Sahakra Sakkare Karkhane Vs. National Heavy Engg. Coop. Ltd. and Another, In addition to the same, it is urged that the Bank guarantee is separate and independent contract than the contract of construction as per the judgment of the Apex Court in the case of Hindustan Construction Co. Ltd. (supra), however encashment of the Bank guarantee has rightly been allowed by the Bank in view of the unconditional, unequivocal and irrevocable Bank guarantee in favour of the defendant No. 1. The Trial Court misunderstood the aforesaid bunch of judgments of the Apex Court in the case of Hindustan Construction Co, Ltd. (supra) while granting the injunction, therefore, by allowing the appeal, the order impugned may be set aside.

Per contra Mr. Jivesh Nagrath and Mr. R.K. Sanghi, learned Counsel appearing on behalf of respondent No. 1 referring various paragraphs of the plaint and Clause (31) of the LOI dated 21.4.2009 contended that the Bank guarantee is for a specific purpose i.e. "mobilization advance" as apparent from Clauses 2,3 and 4 of the Bank guarantee issued by the defendant No. 2 in favour of defendant No. 1. The said Bank guarantee cannot be invoked or encashed for non-performance of the contract satisfactorily. It is submitted that as per the letter dated 19.7.2010 issued by the defendant No. 1 for encashment of the Bank guarantee, it is clear that due to non-performance of the contract, encashment was prayed for and allowed by the defendant No. 2 Bank contrary to the terms of the Letter of Intent and Bank guarantee. It is submitted that as per paras 8 and 9 of the plaint allegations, it is clear that the Bank guarantee was executed for mobilization advance, thus encashment of the said Bank guarantee may be made when any amount remained unadjusted in final bill. In para 11, it is said that the Bank guarantee was a conditional one and it could be invoked only to adjust the unadjusted mobilization advance. Learned Counsel referring para 21 submitted that the action of defendant No. 1 is completely fraudulent, illegal and contrary to the terms of the Bank guarantees for the reasons as specified therein. In para 22 it is also said that the defendant No. 1 is in occupation to deceit other contractors also making an attempt to encash their Bank guarantees to which the disputes are pending in various Courts, however special equities lie in favour of plaintiff. In support of the said contention, reliance is placed on the decision of Hindustan Construction Co. Ltd. (supra) and urged that if the Bank guarantee has been furnished against mobilization advance then its invocation will have to be in accordance to the terms of the Bank guarantee or else it is fraudulent. It is further submitted by him that after service of summons of the suit, the Bank has encashed the Bank guarantee, however the Trial Court deriving the power under Order 7 Rule 7 of CPC passed an order maintaining the status quo ante exercising the discretion in the light of the judgment of the Apex Court in the case of Pasupuleti Venkateswarlu Vs. The Motor and General Traders, as well as the decision of this Court in the case of Ajra Habib Vs. B.K. Gupta, Divisional Commercial Manager, Central Railway, Jabalpur, Lastly, placing reliance on a decision of the Apex Court in the case of Wander Ltd. and Another Vs. Antox India P. Ltd., it is urged that the discretion as exercised by the Trial Court granting injunction to maintain the status quo ante is not liable to be interfered with until and unless it is shown that the discretion so exercised is arbitrary, capricious or perverse. If the trial Court has exercised the discretion reasonably in a judicious manner, the interference with the discretion exercised by the Trial Court is not permissible. In view of the foregoing, it is urged that maintaining the order passed by the Trial Court, appeal filed by the appellant may be dismissed.

After having heard learned Counsel appearing on behalf of the parties and before dealing with the issue raised in the appeal, it is desirable to consider the principle of law laid down by the Apex Court in the matter of grant of injunction for invocation of the Bank guarantee. The Apex Court in the case of Hindustan Construction Co. Ltd. (supra) has observed in paras 14, 21 and 22 as under:

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 mobilization loan" to the Executive Engineer only if the obligations under the contract were not fulfilled by HCCL or the HCCL has misappropriated any portion of the "advance mobilisation 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 whenever 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.

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As pointed out above, Bank Guarantee constitutes a separate, distinct and independent contract. This contract is between the Bank and the defendants. It is independent of the main contract between HCCL and the defendants. Since the Bank guarantee was furnished to the Chief Engineer and there is no definition of "Chief Engineer" in the Bank guarantee nor is it provided therein that "Chief Engineer" would also include Executive Engineer, the Bank guarantee could be invoked by none except the Chief Engineer. The invocation was thus wholly wrong and the Bank was under no obligation to pay the amount covered by the "performance guarantee" to the Executive Engineer.

We have scrutinised the facts pleaded by the parties in respect of both the Bank guarantees as also the document filed before us and we are, prima facie, of the opinion that the lapse was on the part of the defendants who were not possessed of sufficient funds for completion of the work. The allegation of the defendants that HCCL itself had abandoned the work does not, prima facie, appear to be correct and it is for this reason that we are of the positive view that the "special equities" are wholly in favour of HCCL.

In the case of Reliance Salt Ltd. (supra), the Apex Court held as under:

A bare perusal of the contents of the Bank guarantee shows that there is no escape from arriving at a conclusion that the guarantee furnished was an unconditional one. It not only provided for loss or damage in case of breach of contract, but also loss or damage by reason of non-settlement of bills. Such bills under the agreement of consignment were to be settled within a period of 30 days. In the event the bills are not settled within the period stipulated in the agreement, the parties intended, as it appears from the tenor of the Bank guarantee, that the same would constitute a breach of contract.

A claim which is denied or disputed, in the event of necessity for determination of the lis, may not be found to be correct. If appellant was to allege a breach of contract in a properly framed suit, Respondent 1 could also allege the breach of contract on the part of appellant herein. Breach of contract by reason of supply of inferior quality of tea or salt or delay in supply or a short supply may render a party responsible for damages for commission of breach of contract, but, breach of contract alone does not lead to the conclusion that a fraud had been committed thereby. It is contended that commission of fraud would include any act to deceive but then such act must be confined to acts committed by a party to a contract with intention to deceive another party or his agent or to induce him to enter into a contract. Fraud, which vitiates the contract, must have a nexus with the acts of the parties prior to entering into the contract. Subsequent breach of contract on the part of a party would not vitiate the contract itself.

Although, the learned trial Judge as also the High Court observed that the Bank guarantee was irrevocable after lapse of 30 days from date of the bill, as stipulated therein, on its own terms the Bank was bound to pay the amount in question on its invocation, subject of course to the fulfilment of the other conditions laid down therein. It could not have refused to honour its commitment only because the purported accounts were not settled between the parties or the accounts furnished to the Court were wrong ones.

In the case of Mahatma Gandhi Sahakra Sakkare Karkhane (supra), the Apex Court has held as under:

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.

What is relevant are the terms incorporated in the guarantee executed by the Bank. On careful analysis of the terms and conditions of the guarantee in the present case, it is found that 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. The 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 case of Daewoo Motors India Ltd. Vs. Union of India (UOI) and Others, , the Apex Court has held as under: -

For encashment of Bank guarantee the Bank cannot have any valid resistance, except of course, in a case of fraud. The Bank guarantee furnished by the Bank is an unconditional and absolute Bank guarantee. The clause in the Bank guarantee specifically provides that the demand made by the President of India shall be conclusive as regards the amount due and payable by the Bank under this guarantee and the liability under the guarantee is absolute and unequivocal. In the face of the clear averments, it is trite to contend that the Bank guarantee is a conditional Bank guarantee. Therefore, the Bank has no case to resist the encashment of the Bank guarantee. It is true that the Bank guarantee has to be read in conjunction with the terms of the contract but when the Bank guarantee itself is in absolute terms, the agreement between the Company and the first respondent would be of no avail to the Bank.

In view of the foregoing, it is well settled that in the case of unconditional Bank guarantees, interference by the Court is warranted only when there is established fraud and irretrievable damage to the promisee. The terms of the Bank guarantee are extremely material since the Bank guarantee is the independent contract between the Bank and the beneficiary, however both the parties would be bound by the terms thereof. An unconditional Bank guarantee could be invoked in terms of the said Bank guarantee by the person in whose favour it was given. The Bank guarantee cannot be encashed if it is conditional and for the inconsistent purpose. The breach of the terms of the contract alone does not lead to a conclusion that a fraud has been committed. The discrepancies in the bills or non-submission of the detailed account in respect of business would not be a ground for denial of the encashment of the Bank guarantee. Thus in view of the aforesaid principle of law, it is to be seen whether the injunction granted by the Trial Court due to violation of the terms of the Bank guarantee on making the demand for encashment due to satisfactory non-performance of the contract to which no Bank guarantee was furnished is justified. It is to be further seen whether the status quo ante granted by the Trial Court maintaining the position as exists on the date of filing of the suit exercising the discretion is reasonable and judicious or not.

In view of the aforesaid legal position, the facts of the present case, conditions of the Bank guarantee, the demand for which the encashment is prayed for is required to be seen. Undisputedly, the plaintiff was assigned the construction work after following the due process of tender and the LOI was issued on 21.4.1999. Clause 31 of the said LOI is relevant which relates to the mobilization advance for which the Bank guarantee was furnished by the plaintiff. Clause 31 of the LOI is reproduced as thus:

31.0 A mobilization advance of Rs. 1.00 crore only (Rupees one crore only) will be given to the Contractor against Bank guarantee for an equal amount. An interest at the Bank rate applicable to Devi Shakuntala Thakral Charitable Foundation (presently @ 10% will be chargeable from the Contractor. The advance will be recovered and adjusted in the running account bills @ 5% of the total amount of the bill and the balance in the settlement of final bill.

In furtherance to the said clause Rs. 1.00 crore mobilization advance was received by the plaintiff from the owner and in lieu thereof five Bank guarantees each consists of Rs. 20.00 lacs were furnished in favour of the owner. In terms of Clause 31 of LOI, one Bank guarantee of Rs. 20.00 lacs was returned because the said amount was adjusted as specified in the said clause. All the Bank guarantees are of similar terms, however to determine the issue that such Bank guarantee was a conditional one, or unconditional one, is required to be taken note of. The relevant terms of the Bank guarantee are reproduced as under:-

Whereas M/s. Wig Brothers (India) Pvt. Ltd. having its Head Office at 618, Sector-21A, Faridabad - 121001 (hereinafter called "The Contractor") has undertaken, in pursuance of Letter of Intent (LOI) No. DSTCF/2009/JBP/ WO/12717 dated 21.4.2009 to execute the work of construction of various buildings at Oriental Institute of Science and Technology and Oriental Engineering College at Jabalpur pertaining to Devi Shakuntala Thakral Charitable Foundation, Bhopal (hereinafter called "The Owner") And WHEREAS it has been stipulated by you in the said LOI that the Contractor shall furnish you with Bank guarantees of equivalent amount by recognized Bank for mobilization advance of Rs. 1,00,00,000/- only (Rupees one crore only) equivalent to five percentage of the contract value to be paid by M/s. Devi Shakuntala Thakral Charitable Foundation to M/s. Wig Brothers India Pvt. Ltd. An interest at the Bank rate applicable to Devi Shakuntala Thakral Charitable Foundation (presently 10% per annum subject to change from time to time) will be chargeable from the Contractor on reducing balance. The advance will be recovered and adjusted in the running account bills @ 5% of the total amount of the bill, on pro rata basis.

Against the payment of mobilization advance to the contractor by the owner this deed of guarantee executed by the Punjab National Bank, constituted under the Banking Regulation Act, 1949 having its Central Office at 7, Bhikajikama Place, New Delhi and a Branch at 74, Janpath, New Delhi (hereinafter referred to as "The Bank") in favour of Devi Shakuntala Thakral Charitable Foundation for an amount not exceeding Rs. 20,00,000/- only (twenty lacs only) part of Rs. 1,00,00,000/- only (Rupees one crore only) at the request of M/s Wig Brother (India) Pvt. Ltd. a Company duly regulated under the Companies Act, 1956 and having head office at Wig House 618, Sector-21A, Faridabad (hereinafter referred to as "The Contractor").

Therefore We, Punjab National Bank, hereby affirm that we Guarantors and responsible to you, on behalf of the "Contractor" upto a total of Rs. 20,00,000/- only (Rupees twenty lacs only) limited to the balance of the unadjusted agreed advance and interest thereof.

This guarantee shall come into force simultaneously with the receipt of the advance payment or part thereof by the contractor and the liability of the Bank shall start, but will be limited to cover the only the unadjusted amount of the advance and interest secured to the respective guarantee that may be actually remaining to be recovered by the owner from the Contractor.

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In view of the foregoing facts it is apparent that in terms of Clause 31 of LOI the Bank guarantee was furnished by the plaintiff. As per Clause (2) of the Bank guarantee it is clear that it is against the payment of the "mobilization advance". The Punjab National Bank unconditionally and irrevocably agreed to pay the amount of Rs. 20.00 lacs on written demand without demure an amount as specified therein "limited to the balance" of the unadjusted agreed advance and interest thereof. Clause (4) makes it clear that encashment would be "limited to cover the only unadjusted amount of the advance and interest secured to the respective guarantee and may be actually remaining to be recovered by the owner from the contractor". The said Bank guarantees have been encashed by the Bank in view of the letter of demand dated 19.7.2010 written by the President for Devi Shakuntala Thakral Charitable Foundation. By the said letter the demand has been made in the following terms:

I K.L Thakral, son of late Shri H.R. Thakral, resident of Devi Shakuntala Thakral Charitable Foundation, Oriental Campus, Thakral Nagar, Raisen Road, Bhopal- 462021 (M.P.) hereby invoke the encashment of all the above mentioned four Bank guarantees. Each Bank guarantee is of the value of Rs. 20.00 lakh, thus you have to remit us full amount of Rs. 80.00 lakh (Rs. eighty lakh only) for these four Bank guarantees.

I would like to add here that I am duly authorized by Devi Shakuntala Thakral Charitable Foundation to invoke the encashment of these Bank guarantees. As the Contractor has not given due performance under the Contract, it has been decided that these Bank guarantees should be invoked and the Bank may be requested to remit full amount of the Bank guarantees.

You are requested to kindly take immediate necessary action and remit the amount of Rs. 80.00 lakh to our Account No. 52741010000040, IFSC Code: ORBC 105274, Oriental Bank of Commerce, E.C. Oriental Institute of Science & Technology, Thakral Nagar, Bhopal.

In the facts of the present case, as stated in Paras 8 and 9 of the plaint, it is apparent that the Bank guarantee has been given for mobilization advance with a view to secure the said amount. If any amount remains unadjusted towards mobilization advance after settlement of the final bill then only the Bank guarantee may be invoked. As per Para 9 of the plaint, the said mobilization advance @ 5% is required to be deducted from the third running bill which is continuing and the final bill has not yet been commenced. From para 11, it is clear that five guarantees were given out of which one has been returned on adjustment of the mobilization advance to the extent of such amount and four are remaining which have been encashed. In para 2 i (c) it is said that the Bank guarantee cannot be invoked due to non-performance. All these facts have not been specifically denied in the written statement and it is merely stated that the said averments are admitted in the context of the documents. Thus it is clear that the encashment of the Bank guarantee has been done for non-performance of the contract while the Bank guarantee was given towards mobilization advance.

In view of the foregoing, it is apparent that the invocation of the Bank guarantee was sought for by defendant No. 1 due to satisfactory non-performance of the contract as per the decision taken by the Board of Directors of Devi Shakuntala Thakral Charitable Foundation. Thus, it can safely be held that the Bank guarantee was not unconditional, and, in fact, it was unconditional Bank guarantee for the specific purpose of mobilization advance and its encashment is only for a limited purpose to balance the unadjusted agreed advance and interest thereof. From the demand letter and as per the reply filed by the defendant No. 1 in the Court, it is apparent that the encashment was sought for satisfactory non-performance of the contract making various allegations. Thus, in the facts of the present case and in view of the law laid down by the Apex Court in the case of Hindustan Construction Co. Ltd. (supra), in the opinion of this Court, the Trial Court has not committed any error restraining defendants from invocation and encashment of the Bank guarantee. In the said case, the Apex Court held that the Bank guarantee constitute a separate distinct and individual contract between the Bank and to the beneficiary. Both the parties are bound by the terms of the said Bank guarantee. If it is encashed contrary to the said terms, injunction granted by the Single Bench restraining encashment was found justified. The judgments as relied upon by the learned Counsel Shri Brian Da Silva, Reliance Salt Ltd. (supra), Daewoo Motors India Limited (supra) and Mahatma Gandhi Sahakra Sakkare Karkhane (supra) are distinguishable on facts because in those cases unconditionally the Bank guarantee was revoked for the purpose to which it was furnished. As discussed herein above, in the facts of the present case the Bank guarantee so furnished by the plaintiff is a conditional one which cannot be invoked or encashed other than the purpose for which it was furnished. Thus it is a clear violation of the terms of the Bank guarantee to which the injunction has rightly been granted by the Trial Court.

Now the question arises regarding viability, reasonableness and the judiciousness of the order of the Trial Court in the matter of grant of injunction of status quo ante directing the defendant No. 1 to deposit the encashed amount with defendant No. 2 Bank along with the interest.

In the present case the Trial Court found a prima facie case due to violation of the terms of the Bank guarantee and its encashment after service of summon of the suit by the Bank authorities. It was found that the summon of the suit was served on 5.8.2010 while the Bank guarantee was encashed on 7.8.2010 after receiving the summon. The encashment of the Bank guarantee given for mobilization advance can be encashed only when the final bill is prepared and the amount remains to be paid by the Contractor to the owner. Undisputedly the stage of final bill has not yet resumed. In the said context, in the opinion of this Court, Rule 7 of Order 7 of CPC may be profitably referred whereby it is clear that every plaint shall state specifically the relief which the plaintiff claims either simply or in the alternative, and it shall not be necessary to ask for general or other relief which may always be given as the Court may think just to the same extent as if it had been asked for and the same rule shall apply to any relief claimed by the defendant in his written statement.

In view of the aforesaid discussions, it is apparent that even after service of summons of the suit the Bank guarantee has been encashed in favour of defendant No. 1 violating the terms and conditions of the Bank guarantee, however the Trial Court directed to maintain the status quo as it exists on the date of filing of the suit. Admittedly on the date of filing of the suit and issuance of summons the Bank guarantees were not encashed and it has been encashed later for the purpose other than to which it was furnished. In such circumstances, Apex Court in the case of Pasupuleti Venkateswarlu (supra) has held as under :

We feel the submissions devoid of substance. First about the jurisdiction and propriety vis-a-vis circumstances which come into being subsequent to the commencement of the proceedings. It is basic to our processual jurisprudence that the right to relief must be judged to exist as on the date a suitor institutes the legal proceeding. Equally clear is the principle that procedure is the handmaid and not the mistress of the judicial process. If a fact, arising after the lis has come to Court and has a fundamental impact on the right to relief or the manner of moulding it, is brought diligently to the notice of the Tribunal, it cannot blink at it or be blind to events which stultify or render inept the decretal remedy. Equity justifies bending the rules of procedure, where no specific provision or fair play is violated, with a view to promote substantial justice-subject, of course, to the absence of other disentitling factors or just circumstances. Nor can we contemplate any limitation on this power to take note of updated facts to confine it to the trial Court. If the litigation pends, the power exists, absent other special circumstances repelling resort to that course in law or justice. Rulings on this point are legion, even as situations, for applications of this equitable rule are myriad. We affirm the proposition that for making the right or remedy claimed by the party just and meaningful as also legally and factually in accord with the current realities, the Court can, and in many cases must, take cautious cognizance of events and developments subsequent to the institution of the proceeding provided the rules of fairness to both sides are scrupulously obeyed. On both occasions the High Court, in revision, correctly took this view. The later recovery of another accommodation by the landlord, during the pendency of the case, has as the High Court twice pointed out, a material bearing on the right to evict, in view of the inhibition written into Section 10(3)(iii) itself. We are not disposed to disturb this approach in law or finding of fact.

Thus, as per the processual jurisprudence if the Court has passed an order maintaining status quo ante and directed to pay the encashed amount of Bank guarantee against defendant No. 1 along with the interest, such an order appears to be just, reasonable and judicious in the facts of this case. In view of the discussion as made herein above, in the opinion of this Court, the conclusions arrived at by the Trial Court do not appear to be arbitrary, capricious or perverse warranting interference in the facts and circumstances of the case. In view of the discussions as made herein above, the appeal is devoid of any substance, hence it is dismissed upholding the order passed by the Trial Court granting injunction in favour of the plaintiff. In the facts and circumstances of the case, parties are directed to bear their own costs.