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Andhra Pradesh High Court
RASHTRIYA ISPAT NIGAM LIMITED, VISAKHAPATNAM - Appellant
Versus
P. JAYANTILAL AND COMPANY PRIVATE LTD - Respondent
Decided On : 06/13/2007
Advocates Appeared :
V.RAVINDER RAO
Civil Procedure Code, 1908 – Substantial questions of law raised– Whether the courts below are correct in granting injunction from invoking the bank guarantee till the disposal of the arbitration proceedings between the parties? – Whether the courts below can grant injunction from invoking the bank guarantees in the absence of any plea or proof relating to fraud or coercion by the appellantd2, as held by the Honble Supreme Court in a catena of decisions? Appellant/d2 to recover money due in one contract from any other contract between the same parties, whether the courts below are correct in giving weightage to the fact that the works relating to the bank guarantee are completed as per the terms and conditions and hence the injunction against the said guarantees is granted till the completion of arbitration proceedings? 4. Whether the lower appellate Court is correct in disposing of the appeal without framing an appropriate point for consideration? learned counsel representing appellant-first defendant would maintain that in the absence of a plea of fraud or a plea of coercion or the like, normally a decree for perpetual injunction cannot be granted, as against the invocation of the bank guarantee learned counsel, in support of his contention, had placed reliance on several decisions learned counsel also pointed out to the nature of the decree, which was made by the court of first instance, and also the findings recorded by the appellate court in relation to bank guarantee and also in relation to bank guarantee as well learned counsel would submit that in the absence of any specific plea either relating to fraud or coercion or the like, the findings recorded by both the courts below cannot be sustained and the second Appeal to be allowed –Held, law regarding enforcement of an "on demand Bank guarantee" is very clear if the enforcement is in terms of the guarantee, then Courts must not interfere with the enforcement of Bank guarantee court can only interfere if the invocation is against terms of the guarantee or if there is any fraud. Courts cannot restrain invocation of an "on demand guarantee" in accordance with its terms by looking at terms of the underlying contract existence or non-existence of an underlying contract become irrelevant when the invocation is in terms of the Bank guarantee bank guarantee stipulated that if the bid was withdrawn within or if the performance security was not given or if an agreement was not signed, the guarantee could be enforced bank guarantee was enforced before the bid was withdrawn could not be said that the invocation of the Bank guarantee was against the terms of the Bank guarantee it was in terms of the Bank guarantee, one fails to understand as to how the High Court could say that the guarantee could not have been invoked the guarantee was rightly invoked, there was no question of directing refund as has been done by the High Court is pertinent to note that it is not as though these decisions are not brought to the notice either court of first instance or the appellate Court in fact appellate Court had referred to a couple of decisions which had been placed before this Court, but, however, recorded certain reasons and ultimately came to the conclusion that the decree and judgment of the Court of first instance cannot be disturbed the light of the clear legal position inasmuch as in the absence of either the plea of fraud or the plea of coercion or the like as against the invocation of bank guarantee, the courts normally not to interfere by issuing the relief of perpetual injunction, this court is of the considered opinion that the findings recorded by both the court of first instance and also the appellate court cannot be sustained and the appellant is bound to succeed in this Second appeal – Second Appeal is hereby allowed.
"admit on substantial questions of law raised in ground Nos. 1 to 4". The substantial questions of law raised in ground Nos. 1 to 4 are as hereunder: 1. Whether the courts below are correct in granting injunction from invoking the bank guarantee till the disposal of the arbitration proceedings between the parties?
2. Whether the courts below can grant injunction from invoking the bank guarantees in the absence of any plea or proof relating to fraud or coercion by the appellantd2, as held by the Hon'ble Supreme Court in a catena of decisions?
3. In view of the specific clause in the contract empowering the Appellant/d2 to recover money due in one contract from any other contract between the same parties, whether the courts below are correct in giving weightage to the fact that the works relating to the bank guarantee Nos. 7282 and 7283 are completed as per the terms and conditions and hence the injunction against the said guarantees is granted till the completion of arbitration proceedings?
4. Whether the lower appellate Court is correct in disposing of the appeal without framing an appropriate point for consideration?
( 2 ) IN CMP No. 6571 of 1998, on 19. 6. 1998, this court made the following order: "there shall be interim direction as prayed for until further orders".
( 3 ) SRI Ravinder Rao, the learned counsel representing appellant-first defendant would maintain that in the absence of a plea of fraud or a plea of coercion or the like, normally a decree for perpetual injunction cannot be granted, as against the invocation of the bank guarantee. The learned counsel, in support of his contention, had placed reliance on several decisions. The learned counsel also pointed out to the nature of the decree, which was made by the court of first instance, and also the findings recorded by the appellate court in relation to bank guarantee No. 7281 and also in relation to bank guarantee Nos. 7282 and 7283 as well. The learned counsel would submit that in the absence of any specific plea either relating to fraud or coercion or the like, the findings recorded by both the courts below cannot be sustained and the second Appeal to be allowed. ( 4 ) NONE represents either of the respondents.
( 5 ) THE first respondent in the Second Appeal, M/s PL. Jayalal and Company private Company Limited represented by the Director authorised representative, instituted a suit O. S. No. 246 of 1991 on the file of Second Additional subordinate Judge, Visakhapatnam praying for the relief of permanent injunction restraining the defendants 1 and 2 from invoking bank guarantee No. 7282, 7283 issued by the second defendant to the first defendant at the first instance of the plaintiff till the final disposal of the arbitration proceedings. It is brought to the notice of this Court that the arbitration proceedings as such were completed.
( 6 ) BE that as it may, before the court of first instance, no oral evidence was let in by either of the parties and Exs. A1 to A21 were marked.
( 7 ) THE learned Judge decreed the suit in part restraining the defendants, by means of permanent injunction, from invoking bank guarantee relating to Nos. 7282 and 7283 till the final disposal of the arbitration proceedings, but, however, negatived the relief in respect of the bank guarantee no. 7281. The first defendant in the said suit aggrieved by the same, carried the matter by way of appeal A. S. No. 70 of 1993 on the file of IV th Additional district Judge, Visakhapatnam and the appellate Court at para 8 framed the following point for consideration. "whether the lower court committed any material irregularity which warrants interference of this Court".
( 8 ) THE appellate Court, having referred to several decisions on the point, recorded certain findings commencing from paras 9 to 20 and, ultimately, dismissed the appeal with costs. Aggrieved by the same, the first defendant carried the matter by way of Second Appeal.
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