Encashment of unconditional bank guarantees is permissible unless accompanied by established fraud or irremediable injustice; financial difficulties do not justify injunctions against such guarantees.

JUDGMENT

Vibhu Bakhru, J. (Oral)--The appellant has filed the present appeal impugning an ex-parte order dated 12.03.2021 passed by the learned District Judge, inter alia, directing that the status quo be maintained in respect of the Performance Bank Guarantee no. 3178120BG0000192 dated 21.08.2020 and the Security Deposit Bank Guarantee No.3178120BG0000272 dated 06.10.2020 (hereafter `the PBG' and `SDBG' respectively).

2. Respondent no.1 (M/s Shivakriti International Ltd. - hereafter `SIL') filed a suit, inter alia, praying for a decree of permanent injunction restraining the appellant (hereafter `Concor') from invoking and encashing the PBG and SDBG. SIL further sought a decree of permanent injunction restraining respondent no.2 (State Bank of India) from acting upon any letter received from Concor demanding the invocation of the two bank guarantees in question.

3. The case set up by SIL in its plaint is briefly stated as under:

3.1. Concor issued a Letter of Acceptance (LoA) dated 06.02.2017 awarding the work pertaining to Signalling and Telecommunication at Khemli Station on Chittorgarh-Udaipur Section of Ajmer Division on North Western Railway. SIL signed the said LoA on 01.03.2017. In terms of the LoA work was to be commenced on or before the 15th day of the issuance of the LoA.

3.2. On 04.03.2017, SIL furnished a Performance Bank Guarantee issued by State Bank of India for a sum of Rs.34,64,482/- being 5% of the contract value. Thereafter, on 23.03.2017, Concor and SIL entered into a formal contract. It was stipulated that the work would be completed within a period of six months from the date of commencement (that is, six months from the 15th day of issuance of LoA). SIL claims that Concor had failed and neglected to perform its obligations under the contract and consequently, the work could not be completed within the stipulated period of time. The time for completing the contract was extended and SIL was constrained to extend the term of the Performance Bank Guarantee. SIL has averred in its plaint that despite all obstacles, it continued to perform its obligations within the limited scope as available. However, it was unable to perform substantial work due to alleged inaction on the part of Concor. SIL set out various reasons resulting in delay in completion of the said works including the delay for a period of almost 6 months on the part of Concor in deciding the supervising agency; design and drawings submitted to the Sr. DTSE Ajmer had not yet been approved; and station building for signalling and telecommunication need had not been handed over as yet. It claims that in the circumstances, it sought a short closure of the contract in question but did not receive any response to the request. It claims that in order to avoid forfeiture of the security deposit and earnest money deposit, SIL sought extension of the contract up to 31.03.2019. The same was granted initially by Concor without levy of liquidated damages.

4. SIL raised Running Bills from time to time. However, there were considerable delays in releasing payment against the said bills. SIL claims that 4th RA Bill for a sum of Rs.55,37,878.83/- was submitted in June 2018 but remained unpaid for several months. In the circumstances, SIL once again sought for short closure of the contract on `as is where is basis', as it was unable to carry out further works.

5. SIL claims that on insistence of Concor, it continued to extend the term of the Performance Bank Guarantee.

6. Ministry o