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Gujarat High Court
Judgename :C.K.THAKKER
VIJAYSINH AMARSINH AND CORPORATION,jamnagar - Appellant
Versus
HINDUSTAN zinc LTD.UDAIPUR - Respondent
C.A. 186 of 1992
Decided On : 04/03/1992
Constitution of India – Suit for declaration and for permanent injunction - Restraining the defendants from encashing and invoking Bank guarantee -Bank – Along with plaint he filed an application for interim injunction restraining defendant from invoking Bank guarantee during the pendency of the suit – It appears that initially ad-interim relief was granted by trial court which was continued from time to time – Finally however after hearing parties by the impugned order came to be dismissed and the order of status quo which was granted by Court earlier came to be vacated – Learned Counsel for the appellant contended that it is clear from the facts stated in the plaint and established from the documentary evidence on record that contract was in two stages – Stages I and II. A Bank guarantee of came to be furnished by the present appellant because he was to be allowed to undertake and complete contract of both the stages – Since contract of stage II has not been given by defendant No. 1 to plaintiff defendant No. 1 has no right to invoke bank guarantee in its entirety –Learned Counsel for respondent defendant, on other hand, supported the order passed by trial Court submitted that the order is in accordance with law and in consonance with decision of Supreme Court in a number of cases – He also submitted that the contract is one and indivisible – Two stages have been mentioned because of nature of work to be undertaken by contractor fact however remains that contract is a complete contract which has been entered into between the parties and for that contract, one bank guarantee of considering total amount has been furnished by plaintiff – It is not that there were two contracts and two bank guarantees came to be furnished treating two projects as separate and independent further submitted that there is no murmuring of fraud in case put forth by plaintiff – Held, Court opinion as per well settled principle of law Courts should not normally grant injunction restiaining performance of the contractual obligations arising out of a letter of credit or a bank guarantee – For applications of this doctrine it is immaterial whether such contract is between a banker and a banker on the one hand or a banker and a customer on other hand – Commercial transactions are commercial transactions. Commitments of banks must be honoured free from interference by Courts – Banks are life blood of international commerce – Indiscriirate interference by Courts in such matters would cause irreparable damage to commercial world as a whole – Courts are indeed ill-suited for getting contractual obligations between a buyer and a seller fulfilled in such cases – Applying above principles to facts of case it cannot be said that the learned Judge has committed any error of law in refusing injunction as prayed by the plaintiff – In a well considered order, after appreciating all the material facts he recorded a finding that plaintiff had not come with clean hands and that neither in law nor in equity it was a fit case to grant interim relief restraining defendant from invoking or encashing bank guarantee – Appeal is dismissed.
( 1 ) THIS appeal is filed against an order below Exh. 6 in special Civil Suit No. 104 of 1988 passed by the Second Jt. Civil Judge (Senior Division), Jamnagar on 12/03/1992.
( 2 ) THE appellant is the original plaintiff, who was given a contract by hindustan Zinc Limited, first respondent (Ori. Defendant No. 1) for construction of besunda Dam situated in Udaipur District of Rajasthan State after inviting tenders from general public. The plaintiffs tender was accepted and the contract was entered into between the plaintiff and the defendant No. 1. The contract was for Rs. 2. 49 crores. As per the condition of contract, 10% of the tender amount was agreed to be given by way of Bank guarantee and accordingly the plaintiff gave Bank guarantee of Rs. 25 lacs on 17/03/1987 of the defendant No. 2-Bank. It is the case of the plaintiff that the contract was in the two parts and the work was to be completed in two stages. So far as the first stage was concerned, it was a substantial one; while the second stage was only of Rs. 30 lacs. It is his case that he has completed first stage of the contract to the satisfaction of the first respondent. However, so far as the second stage is concerned, even though the plaintiff was ready and willing to do that work, it was not given to him and therefore, he could not do that work. He was constrained to revoke the work of the second stage of the contract by a notice dt. 8/08/1988. The plaintiff also contended that since contract of stage II was not given to him, an agreement for that part of the contract was without any consideration and, therefore, void. The plaintiff, therefore, filed a suit for declaration and for permanent injunction restraining the defendants from encashing and/or invoking the Bank guarantee given to defendant No. 1 by defendant No. 2-Bank. Alongwith the plaint, he filed an application Exh. 6 for interim injunction restraining defendant No. 1 from invoking Bank guarantee during the pendency of the suit. It appears that initially ad-interim relief was granted by the trial court which was continued from time to time. Finally, however, after hearing the parties by the impugned order dt. 12/03/1992 application Exh. 6 came to be dismissed and the order of status quo which was granted by the Court earlier came to be vacated.
( 3 ) IT is against this order that the present Appeal From Order is filed by the original plaintiff.
( 4 ) MR. S. B, Vakil, for Mr. P. B. Majmudar, the learned Counsel for the appellant contended that it is clear from the facts stated in the plaint and established from the documentary evidence on record that the contract was in two stages; stages I and II. A Bank guarantee of Rs. 25 lacs came to be furnished by the present appellant because he was to be allowed to undertake and complete the contract of both the stages. Since the contract of stage II has not been given by defendant No. 1 to the plaintiff, the defendant No. 1 has no right to invoke the bank guarantee in its entirety.
( 5 ) HE submitted that the appellant has completed the contract work of stage I satisfactorily. Therefore, even if it is assumed for the sake of argument without admitting it that the appellant has failed to carry out the work as per contract, the defendant No. 1 can, at the most, invoke bank guarantee to the tune of Rs. 3 lacs only, i. e. , of the second stage of the contract.
( 6 ) HE further submitted that there is fraud on the part of the first respondent in not allowing the plaintiff to complete the contract in its entirety and as per the settled law and the decision of the Supreme Court as well as other Courts, the first defendant should be restrained from invoking bank guarantee.
( 7 ) HE also submitted that arbitration proceedings are pending. It is the case of the plaintiff that breach of contract has been committed by defendant No. 1 and, therefore, the plaintiff would be entitled to get a substantial amount by way of damages from the defendant No. 1; and durin
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