Bank guarantees are independent contracts and can only be restrained in exceptional cases of fraud or irretrievable injustice.

ORDER

1. The instant petition preferred under Section 9 seeks a restraint upon the Respondent from enchasing Bank Guarantees [BGs] which have been set forth in paragraph 8 of the petition. The facts in brief which merit notice are the following.

2. The Petitioner is stated to have been awarded an Erection and Supply Contract on 13 July 2018. According to the Petitioner, the contract itself was for the establishment of the Goa Tamnar Transmission Project Limited and which entailed the construction of sub-stations under transmission project system. The contracts were initially awarded to ABB India Limited. However, and subsequently on 19 June 2020 in terms of the Novation Agreement, the Petitioner [earlier known as ABB Power Products and Systems India Limited] stepped into its shoes for the purposes of execution of the Erection and Supply Contracts.

3. It becomes pertinent to note that the Erection Contract was awarded on a lump sum and turnkey basis. Pursuant to the provisions made in both the contracts, the Petitioner was also called upon to submit Performance Bank Guarantees [PBGs] and Advance Bank Guarantees [ABGs]. Those are stated to have been deposited on 22 July 2020 and 28 September 2020. It is asserted that the validity period of all the BGs was to expire on 31 May 2022.

4. The Petitioner contends that no demands were raised against any of the BGs and thus the Respondent is clearly disentitled from taking any steps for encashment of those guarantees. As per the Petitioner's own admission, the Respondent by its letter of 17 August 2022 unilaterally extended the validity period of both the contracts till 30 October 2022. The aforesaid unilateral extension was assailed by the Petitioner in terms of their communication dated 25 August 2022. Despite the said letter, the Respondent in terms of their communication of 28 August 2022 insisted upon the Petitioner to accept the provisional extension of both the contracts up to 30 October 2022. The Petitioner is thereafter stated to have submitted its acceptance on 29 August 2022.

5. The Respondent, however, in terms of its letter of 13 October 2022 issued a termination notice. As would be evident from a reading of the aforesaid communication, the said termination notice was based on an advisory issued by the Central Electricity Authority which appears to have mandated minimizing land usage for construction of 400/220 KV green field AIS sub-stations to GIS sub-stations in Goa. It was in the aforesaid backdrop that the Respondent proceeded to terminate both the contracts in terms of Clause 27.1 of the Supply Contract and Clause 28.1 of the Erection Contract. The amicable resolution process which was envisaged under both the contracts also did not bear fruit. It is thereafter that the instant petition came to be filed.

6. Learned counsel appearing for the Petitioner has submitted that once the period of the contract had come to an end and the Respondent had failed to raise any demand in connection therewith, the retention of the BGs as well as the apprehended invocation thereof would cause irreparable loss and injury to the Petitioner. It was further submitted that a reading of the termination letter itself would show that it is not based on any alleged wrongdoing on the part of the Petitioner or a failure to comply with contractual obligations.

7. From the objections which have been filed on behalf of the Respondent, the Court notes that it is firstly urged that the Bank Guarantees in question constitute a separate contract and that such an injunction is not liable to be granted in the absence of any irretrievable injury or special equities having been established. It was also emphasized that the guarantees were unconditional, irrevocable and irreversible.

8. The Respondents have additionally referred to the relevant provisions of the Erection Contract and the Supply Contract. Articles 10 and 12 to the extent they would be relevant for our purposes are being reproduced here