LexANSAL ENGINEERING PROJECTS LTD. versus TEHRI HYDRO DEVELOPMENT CORPORATION LTD. AND ANR.
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A B c D ANSAL ENGINEERING PROJECTS LTD. v. TEHRI HYDRO DEVELOPMENT CORPORATION LTD. AND ANR. JULY 31, 1996 fK. RAMASWAMY, S. SAGHIR AHMAD AND G.B. PATTANAIK, JJ.] Arbitration Act, 1940: Ss. 20. and 41 read with Schedule II-Bank guarante&-Letter of ill- vocation-Application by contractor for injunction to restrain the respondent Coporation fron1 invoking the bank guarantee contending that aniount due and payable should be detemiined-Held bank guarantee is an independe!lt alld disti!lct contract between bank and beneficimy and is not qualified by the underlying transaction and validity of p1in1a1y contract between the 11ar- ties-U!lless fraud or special equity is pleaded and plima facie established by strong evidence as a lliable issue, beneficia1y cannot be restrained froni encashing bank guarantee even tf a dispute hqd a1isen in pe1fonnance of contract or execution of lvork undertaken-In tenns of bank guarantee the E be!leficia1y is entitled to invoke bank guarantee and seek ellcaslunent of the an1ount specified in bank guarantee-Fina/ adjudication is not a pre-condi- tion to invoke bank guarantee and that is not a ground to issue injunction restraining the beneficiary to enforce bank guarantee-Liability of bank is absolute and unequivocal; it is not concen1ed with ultbnate decision of a F G cowt or a tlibunal as to the amount due and payable to the beneficimy-'4ny paymellf by bank would be subject to the final decision by the cowt or llibunal-No case of fraud or special injwy is made out for imeiference by way of injunction-High Cowt was 1igltt in refusing injunction. Bank guarallfee---lnvocation of-Discussed. Hindustan Steel W01kers Constmction Ltd. v. G.S. Atwal & Co. (En- gineei>) Pvt. Ltd., [1995) 6 SCC 76 and Hindustan Steel Works Constmction Ltd. v. Tarapore & Co. & Anr., JT (1996) 6 SC 295, relied on. CIVIL APPELLATE JURISDICTION: Special Leave Petition (C) \ H No. ~5878 of 1996. 226 j ; 1 ANSALENGG. PROJELlS LTD. v. TEHRI HYDRO DEV. CORPN. LTD. 227 From the Judgment and Order dated 17.1.96 of the Delhi High Court A in Suit No. 990 of 1995. Nageswar Rao, Makarand D. Adkar, S.D. Singh and Sudhanshu Atreya for tho petitioner. The following Order of the Court was delivered : This Special Lea\"e Petition arises from the order of the learned Single Judge uf the Delhi High Court dated January 17, 1996 made in Suit B No. 990/95. The petiti01,er had sought for injunction under Section 41 read with Schedule II of the Arbitration Act, 1940 (for short, the 'Act') to restrain the respondent from invoking the bank guarantee No. 33/1991 dated February 13, 1991 to encash Rs. 57,57,970 pursuant to the letter of invocation dated April 5, 1995. The facts mentioned therein are that petitioner had entered into contract on March 30, 1991 pursuant to a tender submitted by him to construct 108 residential quarters at Kalharia, Bhagirath Puram, Tehri. The construction was to be completed within D stipulated period but was not completed. In terms of the contract, the first respondent had terminated it. The petitioner availed of the remedy under Section 20 of the Act for appointment of an arbitrator for reference of the dispute in terms of the contract. Pending consideration thereof, he filed an application to restrain the respondent to encash the bank guarantee. The respondent after termination of the contract had issued a letter of invoca- tion dated April 5, 1995 calling upon the UCO Bank to pay the aforesaid amount in terms of the bank guarantee. It was contended in the High Court c E . that the amount due and payable by the petitioner should be determined in the suit. The bank guarantee could not be invoked till then and the payment thereof could not be made. The respondent had played fraud on the petitioner in entering into the contract and seeking extension of the time. There are exceptional circumstances which necessitated the petitioner to seek relief of injunction pending determination of the amount due and payable by the petitioner. The High Court rejected the contentions and dismissed the petition. Thus, this special leave petition. Admittedly, the bank guarantee given by the UCO Bank on behalf of the petitioner reads as under : F G "On production of a Bank Guarantee for the above principal amount and interest due thereon, we, UCO Bank, 5, Parliament H 228 A B c D E F G H SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R. Street, New Delhi (h
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