The unconditional nature of the Performance Bank Guarantee and the burden of proof on the party seeking injunction against its invocation.

JUDGMENT

Sanjeev Narula, J. (Oral)--M/s Saurabh Metals Pvt. Ltd, a Micro Small and Medium Enterprise ["MSME"] unit, has filed the present appeal against judgment dated 12th July, 2023, whereby learned Single Judge has dismissed their writ petition and upheld the decision/action of Ministry of Railways, Union of India [Respondent No. 1] to forfeit the Performance Bank Guarantee ["PBG"] of Rs.25.20 lakhs. This PBG was furnished by the Appellant on 30th November, 2021, as a part of their contractual obligations under a tender floated by Respondent No.1 [hereinafter, "impugned judgement"].

2. As the impugned judgement extensively narrates the facts of the case, we will recount only the essential facts which are necessary for contextualizing our decision:

2.1. Appellant-Company, a MSME unit engaged in the business of engineering goods, participated in Tender No. 2021/RS(WTA)-149/Tender/516 floated by Respondent No. 1 for supply of BOX N/BG Axle (22.9 Tonne Axle Load). The acceptance of their bid was communicated through letter dated 17th November, 2021, which inter alia required the Appellant to furnish a PBG for 03% of the value of the contract i.e., Rs.25.20 lakhs.

2.2. The above condition was fulfilled on 30th November, 2021 and consequently, Respondent No. 1 placed a Developmental Order on 29th December, 2021 on the Appellant. With the approval of Appellant's Quality Assurance Plan under the Developmental Order, the contract stood concluded.

2.3. However, owing to lack of necessary capital to fulfil their obligations, the Appellant wrote to Respondent No. 1, requesting them to issue a cancellation advice for the aforesaid Developmental Order with no financial repercussions, in terms of the `Vivad se Vishwas-1' scheme issued by the Ministry of Finance, Government of India on 06th February, 2023 and revised on 11th April, 2023 [hereinafter, "the Scheme"]. In response, on 08th June, 2023, Respondents declined to give the benefit of the Scheme and cancelled the Developmental Order, thus forfeiting and invoking the PBG, as per clause 0504 of the Indian Railway Standard Conditions.

2.4. The Appellant challenged the aforesaid communication in W.P.(C) 8456/2023, wherein on 13th June, 2023, the Court granted an interim order restraining invocation of the PBG. Later, the writ petition was dismissed through the impugned judgment, holding as under:

"10. As far as performance security is concerned, paragraph 2(iv) of the Scheme requires the original delivery period/completion period to be between 19.02.2020 and 31.03.2022. Admittedly, the present case does not fall within these parameters. I am therefore of the view that the contention of the Government of India in its communication dated 22.05.2023 to this effect cannot be faulted.

11. I am also of the prima facie view that Ms. Gupta's reliance upon paragraph 2(v) of the scheme is misplaced. The aforesaid clause applies to cases of forfeiture of bid security [earnest money deposited or action for debarment of tender]. In the present case, the bank guarantee in question was submitted under Clause 13 of the "Instructions to Tenderers", and was to secure performance of the contract. Clause 11 of the Instructions to Tenderers specifically provides that earnest money deposit was not required. The case therefore falls within paragraph 2(iv), which covers "performance security", rather than paragraph 2(v) of the Scheme.

12. In the absence of the benefit of the Scheme being available to the petitioner, I do not find any ground of fraud or special equities to justify an injunction against the invocation of the bank guarantee. The petitioner's own case is that it was unaware of the infrastructure required for compliance of its contractual obligations. It is stated in the writ petition that the petitioner submitted a tender for supply of 1000 axles only on account of the fact that a quotation for less than 50% of the tendered quantity was deemed to be unresponsive. I am unable to accept, at least at thi