Bank guarantees are independent contracts between the bank and the beneficiary and can only be challenged on the ground of fraud and irreparable injury. The pendency of arbitration proceedings is not a ground to restrain the invocation of bank guarantees.

DEEPA SHARMA, J.

1. The present petition has been filed by the petitioner with the prayer that the respondent no.1 be restrained from invoking and encashing the bank guarantee and respondent no.2 from making payment to respondent no.1 in respect of bank guarantees.

2. The admitted facts of the case are that the petitioner was awarded the township work in the vicinity of power plant on a turnkey basis with residential and non-residential buildings and other services vide LPA No. NTECL/C&M/Township (CS-0260- 364-9)/ LOA/09-10/201 dated 30.01.2010 by respondent no.1. Thereafter the agreement/contract was drawn on 25.03.2010. The work was for a value of Rs.137.847 Crores. The completion period was 24 months. However, since the work could not be completed within 24 months, the period was extended by respondent no.1 from time to time but the work could not be completed even after expiry of 53 months. The petitioner could complete the work worth of 35% of the awarded contract valueby April, 2014.

3. At the time when the contract was drawn, the petitioner had furnished security in the form of bank guarantees, the details of the bank guarantees are reproduced as under:-

S. No. Date Nature of B.G. Bank Guarantee No. Amount

1. 10.02.2010 (Bank guarantees as on date extended upto 27.10.2014) B.G. for Security

Deposit 1015/1LG/5/10-11

3,06,33,000/-

2. 22.10.2013 (Bank guarantees as on date extended upto 19.10.2014 Security

Deposit

5/2013

4,41,63,765/-

3. 27.02.2013 (Bank guarantees as on date extended upto 25.08.2014 Additional

Security

Deposit 9/2013

1,25,00,000/-

4. 02.04.2014 (Bank guarantees as on date extended upto 03.10.2014 Additional

Security

Deposit ILG 42/14

3,00,00,000/-

4. After April, 2014, the petitioner wrote a letter dated 02.06.2014 for further extension of time for completing the work. The respondent no.1 rejected the request of the petitioner for extension. The case of the petitioner is that the respondent threatened to encash the bank guarantee. Thereafter vide letter dated 28.08.2014 the respondent o.1 terminated the agreement. Before that the petitioner had moved this court seeking restrain on encashment of the above mentioned bank guarantees and the matter was listed before this court on 08.08.2014. The respondent was represented in court on that date through counsel on caveat and informed the court that they were not likely to invoke the bank guarantees until the next date of hearing. Meanwhile the respondent had moved an application being I.A. No. 16356 of 2014 and the petitioner also filed the reply of the said application. During the pendency of the present petition also vide its letter dated 05.09.2014, the petitioner invoked the arbitration clause and raised a summary of claims worth of Rs.15,87,33,026.90/- (Rupees fifteen crores eighty seven lacs thirty three thousand and twenty six and ninety paise). In reply to the said invocation the respondent no.1 vide its letter dated 01.10.2014 appointed Mr. Rakesh G. Samuel, GM (Vallur Project), Project-in-Charge of the Vallur Thermal Power Project, as the Arbitrator to decide disputes between the parties.

5. The case of the petitioner is that the said invocation of the bank guarantees is bad in law and contrary to the provisions of the contract. It is submitted that bank guarantees were deposited towards security deposit in terms of clause 9.1 of the GCC. It is submitted that these bank guarantees are not performance bank guarantees and therefore cannot be invoked. It is further submitted that under clause 9.4 of GCC, respondent no.1 is empowered to deduct all compensation or other sums of money payable by the contractor from security deposit and this clearly indicates that without determining the amount payable by the petitioner, the respondent no.1 cannot invoke the bank guarantees. It is also submitted that in view of clause 9.7 of GCC read with Condition 33 of the GCC, respondent no.1 had to give 7 days’ notice for curing the defects and thereafter adjust the outstan