( 1 ) [ed. facts : Petitioner had entered into a contract with respdt. for special repairs of Main Runway etc. at IGI Airport at estimated cost of more than Rs. 2. 87 crore in July, 1990. Petitioner was to get mobilisation advance against ace Bank Guarantee. The advance was recoverable from running bills. Petitioner had received sad advance of about Rs. 28 lakh and had given guarantee of about Rs. 17. 98 lakhs. The advance was recovered from running bills to fail. the extent of Rs. 22 lakh. Petitioner had also given Bank Guarantee of Rs. 1 lakh in respect of huts built by its labour as a security that huts would be removed after labour finishes its work. Petitioner had also given performance guarantee of about Rs. 5 lakh Respondent terminated the contract by letter dt. 4. 1. 92. Petitioner filed application u/s. 20, Arbitration Act and questioned the action of Respondent in invoking the various Bank Guarantees. The Court upheld its plea about guarantee relating to mobilization advance and about removal of huts]. After detailing above, Judgment is :

( 2 ) LEARNED counsel for the petitioner contended that the bank guarantee could be invoked in two cases : One, When the amount of advance had not been utilised fully or partly for the purpose of the work and secondly when then that advance is not fully recovered adjusted by the Authority. In this case, it is not the case of respondent that advance has not been utilised for the purpose of this work. Nor it is the case of the respondent that an amount of Rs. 22 lacs has not been recovered. Hence respondent could not have invoked the bank guarantee for the full amount of advance. As per the terms of the guarantee respondent was under obligation to indicate in the letter of invocation that so much is only left to be recovered against the petitioner because balance had already been recovered from the running Account Bills.

( 3 ) THE petitioner had executed the work to the tune of Rs. 80 lacs and as per the term of the contract, Rs. 3 lacs was debited from each of the seven running bills (out of nine) totalling Rs. 22 lacs approximately. Thus only a sum of Rs. 6,12,752. 00 remained outstanding as on 31. 12. 91. This fact finds support from a letter issued by Mr. Ashok Kumar, Accounts Manager of the respondent dt. 31. 12. 91. The said letter reads :

". . . IT is to state that a sum of Rs. 6,12,752. 00 is outstanding as on 31. 12. 91 against the Mobilization Advance of Rs. 28, 77, 191. 00 paid for the work special repair of Main Runway 10/28 and other operational payment at IGI Airport being executed by your firm under the agreement No. 3/tfd/90-91. . . . ,

( 4 ) THIS letter is a clear admission of the fact that after adjusting the mobilisation advance from the Running Account Bill, only a sum of Rs. 6,12,752. 00 remained outstading Therefore, it was not justified for respondent to invoke the bank guarantee to the full extent of Rs. 17,98,244. 00. Hence, the invocation is not as per the term of the bank guarantee. The bank guarantee stipulates that advance had to be recovered from the bills of contractor proportionately as the work proceeds. It was only when the authority failed to recover or adjust fully the advance then the authority could invoke the bank guarantee to the extent of the amount of of the guarantee. This finds support from the language of the bank guarantee where it is specifically mentioned that the claim made by the authority on the bank will be for the loss or damage caused to or suffered by reason of the authority not having been able to recover in full. Beside this, view can be supported from the fact that original bank guarantee was for a sum of Rs. 28,77,191. 00 which was furnished on 10. 7. 90 To it own addendum, was issued on 28. 8. 1991 extending the bank guarantee up to 31. 1. 92 but amount of guarantee was reduced to the extent of Rs. 17,98,244. 00. This was because by then from the running account of Rs. 11 lacs approximately had been recovered.

( 5 ) HE