The strict compliance with the terms of the Performance Bank Guarantee is mandatory, and the invocation must adhere to the terms and conditions of the guarantee. The binding effect of PBG terms on all parties involved and the limited judicial interference in the enforcement of bank guarantees were central legal principles established in the judgment.

ANOOP V. MOHTA, J.

1. The present Appeal is filed by the Appellant-Original Plaintiff challenging an adinterim order of the learned Single Judge, in the matter of invocation of performance bank guarantee and against the direction to deposit the proceeds in the account of third party and not of the beneficiary.

2. On 9 March 2016, in view of urgency expressed and as the regular Bench could not take this matter, it was heard substantially and kept on 23 March 2016. The parties have no objection for hearing of this Appeal finally at admission stage itself. It was heard from time to time, accordingly.

3. The Appellant/Plaintiff (Subcontractor), Larsen & Toubro Limited (for short, “L & T”), a company engaged in business of construction of large infrastructural projects, has filed this Appeal and challenged Judgment and order dated 29 February 2016 passed by the learned Single Judge, pending the Notice of Motion in the Suit. The Appellant's Application for an adinterim relief restraining Respondent No.1 (for short, “the Bank”), Respondent No.2 GVK Projects & Technical Services Limited (Contractor) (for short, “GVK Projects”) and Respondent No.3 GVK Ratle Hydro Electric Project Private Limited( for short, “GVK Ratle”) (“the owner”) from acting in furtherance of the purported invocation of Performance Bank Guarantee (for short, “PBG”) dated 11 July 2013 issued by the Bank in favour of GVK Projects for Rs.98,35,00,000/- is rejected.

4. The learned Single Judge, pending the Notice of Motion, granted protective relief on 14 January 2016. It has been extended from time to time. The Appellant preferred the Appeal on 3 March 2016, along with Notice of Motion for stay of the Judgment. The Appellate Bench has also extended the said protection, pending the final disposal of the Appeal.

5. The learned Senior Counsel for Respondent Nos. 2 and 3 opposed the Appeal and so also the prayers made in Notice of Motion for stay/interim reliefs. Respondent-Bank, however, though has not filed a separate Appeal, supported the submission of the Appellant, so far as the directions of releasing PBG amount in favour of GVK Ratle, as PBG terms and conditions provides for release of amount in favour of GVK Projects. The learned counsel for the parties submitted their written submissions also in support of their respective contentions.

6. On 20 July 2012, GVK Ratle, awarded a contract to the GVK Projects, for execution of Civil and Hydro Mechanical Works of 850 MW Ratle Hydro Electric Project on the Chenab River, Drabshala Village, District Kishtwar, Jammu and Kashmir (for short, “the project”). GVK Projects awarded the subcontract to the Appellant, on 5 July 2013, for certain work.

7. At the instance and request of the Appellant, the Bank has sanctioned PBG facility on 10 October 2011 on the terms and conditions as agreed between the parties. The Appellant has also executed a counter Guarantee/Indemnity in favour of the Bank along with the necessary documents. By letter dated 9 July 2013, the Appellant/Borrower requested to issue PBG of Rs.98.35 Crores in favour of GVK Projects. It was issued accordingly. GVK Projects, is the beneficiary of PBG. GVK Ratle being the owner of the project is also signatory to the terms and conditions of PBG.

8. As per the Appellant, based upon the subsequent events and as reflected in the correspondence/communications, the project work was required to be stopped. Though requested, but for want of further communications and non-cooperation of others and inspite of the repeated representations even by the owner, the Appellant could not resume its work. There were allegations and counter allegations with regard to “no progress” of the project work. The Appellant's case was that the work was suspended from 11 July 2014 due to a hostile and insecure atmosphere and frequent local disturbance at the Project area. The Owner-contractor, however, denied the same. Those communications are read and referred by the learned Senior Counsel in s