Back
SUPREME COURT OF INDIA
J. CHELAMESWAR, ABHAY MANOHAR SAPRE, JJ.
M/s Gangotri Enterprises Ltd. – Appellant
Versus
Union of India & Ors. – Respondents
Civil Appeal No. 4814 of 2016 (Arising out of SLP(C) No. 27052 of 2012)
Decided On : 05-05-2016
(1974) 2 SCC 231 – Relied upon
AIR 1954 Bom. 423 – Cited with approval
AIR 2007 SC 2798; (1997) 1 SCC 568 – Distinguished
(b) Code of Civil Procedure, 1908 – Section 11 – Res judicata – First suit for injunction allowed and decreed in favour of appellant – Attaining finality – Subsequent suit for same relief between the same parties dismissed – Not permissible – First suit was binding on the parties. (Para 44)
(c) Administration of justice – Injunction – Appellants making out a prima facie case for grant of injunction in their favour – They also made out case of balance of convenience and irreparable loss in their favour – Held, appellants entitled to claim injunction against the respondent in relation to encashment of Bank Guarantee no. 12/2006 dated 04.08.2006. (Para 45)
Facts of the case:
The respondents North Central Railway invited tender in connection with laying down of Agra-Etawah new BG Rail Line. Tender of the appellant, a Limited Company, was accepted by the respondents. The total value of the contract was Rs.14,62,46,742/-, the date of commencement of work was 14.03.2005 and the date of completion of work was 13.03.2007.
The work could not be completed within the prescribed time and the period of completion of work was extended twice by the respondents, firstly, from 14.03.2007 to 31.12.2007 and again upto 30.09.2008 without levy of penalty and with price variation clause benefit.
On 14.07.2006, the appellant-Company was granted another work by the respondents-North Central Railway for construction of New Station Building etc. at Anand Vihar (East Delhi). In connection with the grant of the Anand Vihar works, the appellant-Company submitted a Bank/Performance Guarantee bearing dated 04.08.2006 from its banker Indian Mercantile Co-operative Bank Ltd., Cantt. Road, Lucknow for a sum of Rs.1,32,78,820/-.
The Agra-Etawah contract dated 22.08.2005 was terminated by the respondents vide its letter dated 30.04.2009. After inviting fresh tenders, the rest of the work was allocated by the respondents to another Company, namely, M/s Hanu Infrastructure Pvt. Ltd. Kasganj, Kashiram Nagar for approximately Rs. 11 Crores on 10.06.2011 without giving any information to the appellant-Company.
The Anand Vihar works was completed vide completion certificate dated 30.09.2010 and the defect liability period of six months came to an end on 30.03.2011.
On 27.06.2011, the appellant sought return of the Bank/Performance Guarantee No. 12/2006.
On 30.11.2011, the respondents wrote a letter to the Bank for the encashment of the said Bank Guarantee.
On 02.12.2011, the final bill for the Anand Vihar works was cleared by the respondents and the payment for the same was released by the respondents.
Since the disputes had arisen between the parties in relation to and arising out of the contract dated 22.08.2005, the appellant invoked arbitration clause.
After initiation of the arbitration, the appellant, on 04.01.2012, moved an application under Section 9 of the Arbitration and Conciliation Act, 1996 before the District Judge, seeking injunction on encashment of the Bank Guarantee deposited by it in the Anand Vihar works, against the respondents.
The District Judge allowed the application made by the appellant and restrained the respondents from encashing Bank Guarantee till appointment of arbitrator or constitution of Arbitral Tribunal. This order attained finality.
The appellant requested the respondents for return of its Bank Guarantee.
On 13.03.2012, an arbitration Tribunal was constituted. The arbitration proceedings are pending.
On the request of the Deputy Chief General Manager/Const./SE Rd/NDLS the period of Bank Guarantee was extended for another six months, i.e., upto 13.07.2012.
On 04.04.2012, the respondents wrote a letter to the Branch Manager of the Bank to encash the said Bank Guarantee in their favour.
Since the respondents went on insisting for encashment of the Bank Guarantee again and again the appellant again filed a petition under Section 9 of the Act seeking injunction against the respondents from encashing the Bank Guarantee.
By order dated 12.07.2012, the District Judge dismissed the petition and declined to grant injunction to the appellant.
The High Court concurred with the view taken by the District Judge and dismissed the appellant’s appeal.
Finding of the Court:
Courts below erred in law.
Result: Appeal allowed.
Key Points: - The court held that damages claims must be adjudicated in arbitration before encashment of the bank guarantee (Para 42, 43, 45, 46) (!) (!) (!) (!) . - The grant of injunction depends on prima facie case, balance of convenience, and irreparable loss, following Union of India (DGS&D) precedent (!) . - The bank guarantee under consideration could not be encashed because the sum claimed was not due or payable and related to a separate contract, with arbitration pending (Para 42) (!) . - The decision distinguished prior interpretations under Clause 62 and aligned with Union of India (DGS&D) (Para 43) (!) . - The arbitral proceedings for the relevant contract remained pending, and the guarantee pertained to a different contract, affecting encashment rights (Para 42) (!) . - The High Court and District Court were deemed to have jurisdictional errors for not applying the Union of India (DGS&D) standard (Para 43) (!) . - The arbitral tribunal was constituted for claims and counterclaims, with ongoing proceedings (Para 17) (!) . - The appellant was granted injunction restraining encashment of Bank Guarantee No. 12/2006 dated 04.08.2006 (Para 46) (!) . - The case cites Union of India vs. Raman Iron Foundry and Iron and Hardware (India) Co. v. Firm Shamlal and Bros. for recovery principles (Para 32, 38-39) (!) (!) (!) . - The court emphasized that a claim for damages is not a sum presently due and payable and cannot be recovered under Clause 18/62 by appropriating other sums (Para 38-46) (!) (!) .
JUDGMENT :
Abhay Manohar Sapre, J.
1. Leave granted.
2. This appeal is filed against the final judgment and order dated 23.07.2012 of the High Court of Uttar Pradesh Judicature at Allahabad in F.A.F.O. No. 2930 of 2012 whereby the High Court dismissed the appeal filed by the appellant herein and upheld the order of District Judge which had refused to grant an interim injunction restraining encashing of the Bank Guarantee by the respondents herein.
3. In order to appreciate the issue involved in this appeal, which lies in a narrow compass, it is necessary to set out the relevant facts in brief infra.
4. The respondents, i.e., North Central Railway invited tender for doing “earth work in embankment and cutting including provision of machine crushed/blended material blanketing layer and construction of RCC Box type minor bridges at CH-84700-M to 114100-M”, in connection with laying down of Agra-Etawah new BG Rail Line. The appellant-a Limited Company applied for the said tender and its tender being the lowest one was accepted by the respondents on 14.03.2005 and accordingly the letter of acceptance was issued in appellant’s favour. The contract agreement No. CE(C) ‘North’ ALD/A-E/Contract/EW-III dated 22.08.2005 was then signed between the parties. The total value of the contract was Rs.14,62,46,742/-, the date of commencement of work was 14.03.2005 and the date of completion of work was 13.03.2007. As the work could not be completed within the prescribed time, on the request of the appellant-Company, the period of completion of work was extended twice by the respondents, firstly, from 14.03.2007 to 31.12.2007 and again upto 30.09.2008 without levy of penalty and with price variation clause benefit.
5. On 14.07.2006, the appellant-Company was granted another work by the respondents-North Central Railway vide letter No. 74-W/4/1/347/WA/ANVR/SERd./TCR for construction of New Station Building (G+2) circulating area, various service buildings, construction of platform shelters with RCC Column and beam, Underground and Overhead water storage tanks, water supply pipeline network and other misc. works in connection with the Development of New Passenger Terminal at Anand Vihar (East Delhi) [hereinafter referred to as “Anand Vihar works”]. In connection with the grant of the Anand Vihar works, the appellant-Company submitted a Bank/Performance Guarantee bearing No. 12/2006 dated 04.08.2006 from its banker Indian Mercantile Co-operative Bank Ltd., Cantt. Road, Lucknow (hereinafter referred to as ‘Bank’) for a sum of Rs.1,32,78,820/-.
6. Since the work relating to contract dated 22.08.2005 could not be completed within the prescribed time/extended time by the appellant due to non-availability of site because of the agitation of the farmers and non-supply of the specification or drawing of most of the small bridges by the respondents, as complained by the appellant, the Agra-Etawah contract dated 22.08.2005 was terminated by the respondents vide its letter dated 30.04.2009. After inviting fresh tenders, the rest of the work was allocated by the respondents to another Company, namely, M/s Hanu Infrastructure Pvt. Ltd. Kasganj, Kashiram Nagar for approximately Rs. 11 Crores on 10.06.2011 without giving any information to the appellant-Company.
7. On 30.09.2010, the appellant got the completion certification from the respondents for the Anand Vihar works with a defect liability period of six months, which also came to an end on 30.03.2011. Thus the appellant became entitled to seek the release of the Bank/Performance Guarantee No. 12/2006 submitted by it for the said work from the respondents.
8. On 27.06.2011, the appellant, therefore, wrote a letter to the respondents-North Central Railway for return of the Bank/Performance Guarantee No. 12/2006.
9. On 10.06.2011, the North Central Railway issued an internal circular to all concerned departments of the Railways for withholding of dues of the appellant-Company stating therein that the contract of the ap
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
