( 1 ) THE question that is posed for our consideration in this case is whether a Bank guarantee executed in performance of a contract between the parties can be invoked for non-performance of another contract between the same parties?

( 2 ) APPELLANT entered into a contract with first respondent - original petitioner of Special Civil Application No. 18347 of 2007 on 15. 2. 2005 for maintenance of Abu Road - Deesa Section National Highway No. 14, for a period of 24 months. For due performance of that contract, petitioner had submitted two Bank guarantees dated 10. 1. 2005 for a sum of Rs. 20,25,700/- and for Rs. 50,07,500/ -. Bank guarantees were initially for a period upto 31. 8. 2007, which was extended upto 29. 2. 2008. There was no dispute pertaining to the above mentioned contract between the parties. However, dispute cropped up between the same parties in respect of another contract for supply of manpower for collection of toll of Samkhyali-Gandhidham National Highway No. 8-A. Respondent No. 1 authority found that there was huge loss caused by the petitioner in respect of that contract and a notice dated 2. 6. 2007 was issued asking petitioner to pay damages. Consequently, it had invoked the Bank guarantees executed in respect of work pertaining to maintenance of Abu Road-Deesa Section National Highway No. 14. Under the circumstances, petitioner has approached this Court.

( 3 ) PETITIONER has taken up the stand that there was no justification in invoking Bank guarantees executed in respect of work relating to maintenance of Abu Road-Deesa Section National Highway No. 14 for non-performance of another contract relating to supply of manpower for collection of toll and maintenance of Samakhayali-Gandhidham Highway. Since both contracts are independent contracts and Bank guarantees were separately executed for the due performance of respective contracts between the parties, due to non-performance of one contract, Bank guarantees executed in respect of another contract cannot be invoked.

( 4 ) LEARNED Single Judge accepting contention raised by the petitioner, allowed the petition and quashed the steps taken by first respondent authority in invoking Bank Guarantees executed for due performance of the contract in respect of maintenance of Abu Road-Deesa Section National Highway No. 14, non-performance of which there is no dispute.

( 5 ) WE heard learned counsel for either side at length and have gone through the terms and conditions of both the Bank guarantees and found that the Bank guarantees have been executed between the parties for due performance of respective contracts. Unless there is a specific term in the Bank guarantee or in the contract between the parties that due to non-performance of one contract, Bank guarantee executed for due performance of another contract can be invoked, one party to the contract cannot invoke a Bank Guarantee executed in due performance of another contract. We may refer to Bank guarantee dated 10. 1. 2005 executed in respect of maintenance of Abu Road-Deesa Section National Highway No. 14. Relevant portion of the Bank guarantee is extracted below:-

"and WHEREAS it has been stipulated by you in the said contract that the Contractor shall furnish you with a Bank Guarantee by a Nationalised/scheduled bank of India for the sum specified therein as security for compliance with his obligations in accordance with the contract. "

"now THEREOF we hereby affirm that we are the guarantor and responsible to you on behalf of the contractor upto a total of Rs. 50,07,500/- (amount of guarantee) (Rupees fifty lacs seven thousand five hundred only), such sum being payable in the types and proportions of currencies in which the contract price is payable and we undertake to pay you, upon your first written demand and without cavil or argument, any sum or sums within the limits of Rs. 50,07,500 (amount of guarantee) as aforesaid without your needing to prove as to show grounds or reasons fo