The court ruled that the plaintiff's failure to disclose material facts and the express stipulation that time was of the essence justified the invocation of the bank guarantee.

JUDGMENT :

Soumen Sen, J.

1. An order of injunction restraining the appellant from operating the bank account without leaving a sum of Rs.7,75,44,000/- crores realised by the appellant upon invocation of the bank guarantee is the subject matter of challenge in this appeal.

2. The impugned order was passed on 27th November 2024 read with an order dated 28th November 2024 in an application for being money Suit (com) 160 of 2024 injunction and attachment before judgment being I.A. No.01 of 2024 in the suit filed by the respondent/plaintiff praying, inter alia, for a declaration that the bank guarantee dated 18th January 2023 is null and void and the appellant/defendant is entitled to a money decree of Rs.8,99,34,044/- crores realized by the appellant on invocation of the bank guarantee and a sum of Rs.115,57,28,449/- on account of the damages suffered by reason of termination of the contract.

3. Briefly stated, on March, 2022 the Railway Board, Ministry of Railways, Government of India issued an approval for procurement and operation of 05 rakes of BOXNHL wagons (with 01 brake van per rake) by the defendant under the General Purpose Wagon Investment Scheme (GPWIS).

4. The plaintiff represented that it is a leading rolling stock manufacturer in India and Europe and is capable of executing the contract if awarded. On August 8, 2022, the plaintiff submitted its techno-commercial proposal, for manufacturing and supplying 62 railway wagons comprising of 61BOXNHL wagons and one BVCM (brake van) wagon, before the defendant. The plaintiff represented that the delivery schedule would be within 6 months from date of receipt of advance payment. The techno-commercial offer contains payment terms which reads as follows:

“Clause 4. Mobilization Advance 40% of the Basic price to be released along with Techno-commercial clear purchase Order. Mobilization Advance for cost effective production and timely delivery of product.”

5. Pursuant to negotiations between the parties through emails dated August 26, 2022, September 7, 2022, October 10, 2022, November 5, 2022 and December 7, 2022, the appellant/defendant issued a Purchase Order No. OMPL/TTGWL/2022 dated December 30, 2022 upon the plaintiff for manufacture and supply of 62 numbers wagons (61 BOXNHL wagons and 1 BVCM brake van) (hereinafter referred to as ‘purchase order’) in a time bound manner and the delivery of the wagons are to be completed within May, 2023. The purchase order stipulates that time is the essence of the contract and supplier has to confirm the delivery schedule without fail and in any case delivery date cannot be extended beyond May, 2023.

6. On 15th December, 2022 Research Designs and Standards Organisation (RDSO), Government of India, Ministry of Railways issued an instruction whereby all wagon builders were advised to attend the scheduled meeting on 27th December, 2022 to discuss the cut-off date which should not be later than 1st February, 2022 and other related issues with regard to blocking of two doors in BOXNHL wagons. On 27th December, 2022, a meeting was held in which it was decided that wagon manufacturers can manufacture wagon with four doors only if specifically asked by the private party. Considering the inability of the private orders to change manufacturing process before February, 2023, it was decided that the cut-off date for manufacturing process in respect of private orders should be extended till 1st March, 2023. Hence, the cut-off date for implementation of change requested by the wagon manufacturers had been extended till 1st March, 2023.

7. The plaintiff on 30th December, 2022 requested the delivery period to be extended till June, 2023. The defendant accepted the said request and confirmed the said date through e-mail sent on even date. This extension was treated as an addendum to the purchase order. On January, 20, 2023 the plaintiff submitted Proforma Invoice and unconditional bank guarantee for Rs.7,75,44,000/- bearing reference number 68840IGL00001523 da