S. Ravindra Bhat, J.

1. The plaintiff in the suit seeks a decree of declaration that the first defendant (hereafter called the "NHAI") cannot invoke a bank guarantee dated 13.10.2007 - which has been kept alive and is hereafter referred to as "the guarantee", for the sum of Rs. 3 crores. Permanent injunction is sought against the NHAI from invoking the bank guarantee and a mandatory injunction is sought against the NHAI to release or return the bank guarantee issued by the second defendant, (hereafter called "the bank").

2. The facts necessary for deciding the case are that the plaintiff successfully bid for construction work tendered by the NHAI. The plaintiff and the NHAI entered into a contract on 25.11.2005; in terms of the contract, the work commenced on 29.12.2005 and had to be completed within 18 months, i.e. 28.06.2007. The plaintiff contends that right from inception, the National Highways Authority of India, (hereafter referred to as "NHAI") was guilty of a series of omissions, which hindered the smooth progress of the work. These included delay in handing-over the site. The plaintiff alleges that despite the obligation to hand-over the site within 18 months, the NHAI dithered and despite reminders and meetings, no action was forthcoming and that instead a series of letters were issued by the NHAI, on 27.05.2006, 30.03.2007 and 11.06.2007, leveling baseless allegations.

3. The plaintiff next submits that other important obstructions and hindrances were not attended to by the NHAI, which included existence of electric poles, that were removed as late as October-November 2008, non-adherence to the traffic diversion plan agreed upon to ease and facilitate smooth work, delayed submission of drawings and hindrance on account of unfulfilled statutory obligations such as clearance from the Pollution Control Board, Irrigation Department, that were not forthcoming from the NHAI. It is submitted that these omissions went into the root of the performance of the contract itself and amounted to fundamental breaches of the agreement which altered, if not altogether, relieved the time schedule. The plaintiff argues that in terms of the contract (Clause-60.6, pertaining to advance payments), the NHAI was asked to release Mobilization Advance to the tune of Rs. 7.5 crores, in September 2007, although it (the plaintiff) was entitled to an amount equivalent to 10% of the contract value. The contract value was Rs. 93 crores. The NHAI, however, unjustifiably, truncated the amount and directed the plaintiff to furnish bank guarantee for Rs. 3 crores, which was apparently secured from the bank on 13.10.2007. The plaintiff contends that despite furnishing the guarantee, the NHAI released the amount after a lapse of more than five-and-half months, on 10.03.2008, which also displays delaying tactics on part of the latter. It is claimed that the tenure of the bank guarantee was initially upto 12.04.2008, but was later extended to 11.01.2009. The plaintiff refers to extension of time for performance of the contract and states that the NHAI's engineers, despite request, extended it only upto 25.11.2008. It is contended that the NHAI's engineers, by letter dated 09.02.2008 informed that the period of extension upto 31.12.2008 was recommended provided liquidated damages were paid with effect from 24.07.2008.

4. The plaintiff claims that the entire amount of Mobilization Advance given by the NHAI was adjusted in various bills issued between April and November 2008, and specifically mentions five Interim Payment Certificate Nos. 24 to 28 that made the deductions to a total amount of Rs. 3 crores. It is claimed that the NHAI, however, did not release the bank guarantee. The plaintiff wishes to know the status of the Mobilization Advance on 03.12.2008, which the consultant of the NHAI (hereafter referred to as "RITES"), admitted as having been adjusted. Strong reliance is placed upon letter dated 04.12.2008, written by RITES Ltd, which is in the following