The main legal point established in the judgment is the requirement for clear evidence of fraud or irretrievable injury to interfere with the encashment of a bank guarantee, and the independent nature of the bank guarantee from the underlying contract.

1. The suit along with the interim application first time came up before the Court on 23rd September, 2009. The Court issued summons in the main suit and notice in the interim application. The ex parte ad-interim injunction order was also issued against defendant No.1 restraining it from encashing the impugned Bank Guarantee issued by defendant No.2 and the defendant No.2 was also restrained from making any payment under the said Bank Guarantee to defendant No.1.

2. After the admission/denial of the documents, the matter came up before the Court for framing of issues as well as for hearing of the interim application. While hearing of the interim application earlier it was agreed by both the parties to the effect that instead of hearing the injunction application, let the arguments be heard in the main suit itself, as it involved purely legal issue. However, the said statement was withdrawn later on in view of various documents filed during the course of hearing. Thus, I propose to decide only the interim application being I.A. No.12470/2009.

3. The plaintiff filed the suit for permanent injunction restraining defendant No.1 from encashing the Bank Guarantee No.2521IGFIN001208 dated 22nd September, 2008 issued by defendant No.2. A prayer is also made for restraining defendant No.2 from making any payment to defendant No.1 under the said Bank Guarantee and a decree for declaration is sought declaring the invocation dated 19th September, 2009 to be illegal.

4. The brief facts as per the plaint are as under:-

(a) That after negotiations, the plaintiff issued two purchase orders Nos.GPL:CO:CCT:PO:EBPPL:08-09:038 and GPL:CO:CCT:PO:EBPPL : 08-09:039, both dated 2nd August, 2008 on defendant No.1 for supply of PMB-40 (SBS) (Bulk). The defendant No.1 accepted the terms and conditions of the aforementioned purchase orders. The main common terms and conditions of two purchase orders are mentioned below :

1. Scope of supply

6000 MT (we will confirm to place the total requirement of 13000 MT but P.O.?s will be released on piecemeal)

2. Delivery

As per our indent depends on the progress of the work.

3. Payment

30 days interest free credit. The payment for the supplies of the calendar (1st to 30th) month shall be paid on or before 15th of the following month. A Bank Guarantee will be provided equivalent to the value of our average monthly consumption.

4. Other terms

If there is any upward or downward change in the price of Bitumen 60/70, the price of PMB-40 will also change accordingly. All disputes are subject to Jhansi jurisdiction. Force Majeure clause applicable.

(b) As per the purchase orders, the defendant No.1 was to supply 6000 MT. of PMB-40 (with SBS) (bulk) as per IRC:SP:53:2004 and IS:15462 made out of Bitumen 60/70, for UP-2 and UP-3 Road Project Works. Further, the defendant No.1 was to supply the material only upon receipt of and as per the indent of the plaintiff, depending on the progress of the works.

(c) That the time was not the essence of the contract, as the plaintiff had not committed any specified period for procurement of 6000 MT of Bitumen product. Similarly, defendant No.1?s obligation to supply the product and the plaintiff?s liability to pay would arise only on an indent being placed by the plaintiff. The agreement also provided a clause that defendant No.1 would give 30 days? interest free credit and the parties agreed to adjust price variation of Bitumen product of the purchase order dated 2nd August, 2008. As security towards the credit, the plaintiff was to furnish a Bank Guarantee equivalent to the value of average monthly consumption.

(d) Pursuant to the same, a Bank Guarantee No.2521IGFIN001208 dated 22nd September, 2008 for sum of Rs.2.5 crores was issued by defendant No.2 in favour of defendant No.1 against the PMB-40 to be supplied on credit with respect to purchase orders dated 2nd August, 2008 which was valid upto 21st September, 2009.

(e) The plaintiff?s case is that as per negotiations the defend