LexGENERAL ELECTRIC TECHNICAL SERVICES COMPANY INC. versus PUNJ SONS (P) LTD. AND ANOTHER
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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GENERAL ELECTRIC TECHNICAL SERVICES
COMP ANY INC.
v.
PUNJSONS (P) LTD. AND ANOTHER
AUGUST 7, 1991
[K. JAGANNATHA SHETTY, V. RAMASWAMY AND
YOGESHWAR DAYAL, JJ.]
Cnntract-Termination due to failure to comply specifications-
Bank guarantee-Claim for encashment-Liability of Bank-Order
restraining Bank from making payment-Legality of.
The appellant's contract with Indian Airlines included the
construction and fabrication of air craft testing-~•ntre/epgine repair
centre in Delhi. For getting that work done, the appellant eiilUed into a
contract with the tespondent-I.
As per the contract, respondent-I was require'd to provide
performan.:e boml equal to 30 per cent of the total value of contract
price, which was to be split up into two performance bonds partly to be
released on completion of the F'roject, and the balance upon the expira-
tion of the warranty, and to furnish a Bank guarantee to secure the
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mobilisation advance of 25 per ''ent of contract value.
Respondent-I, instead of furnishing the two performance bonds,
wrote a letter for a revised proposal, which was accepted by the
appellant.
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As the respondent-I failed to complete the project within the
stipulated time, as per contractual specifications, despite repeated
opportunities, the appellant terminated respondent-l's right •O con-
tinue the project and sought for encashment of the Bank guMantee for
Rs.I,06,I2,500, which was issued to the appellant by the Bank.
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The respondent-I filed a suit for injunction against the appellant
and the Bank in the High Court and obtained an ex-parte injunction
from the Single Judge, restraining the Bank and the appellant from
encashing the Bank guarantee.
When the ex-parte injunction was vacated, respondent-I prefer-
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red an appeal to the Division Bench of the High Court. The Division
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ELECTRIC CO. v. PUNJ. SONS
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Bench allowed the appeal, staying the encash1uent of the 6ank
guarantee till the disposal of the respondent's suit.
On the question, whether the Court was justified in restraining
the Bank from paying the appellant under the Bank guarantee at the
instance of respondent-1, allowing the appeal of the appellant-
company, this Court,
HELD: 1. In the instant case, the High Court has misconstrued
the terms of the Bank guarantee and the nature of the inter-rights of the
parties under the contract. The mobilisation advance is required to be
recovered by the appellant from the running bills submitted by the
respondent. If the full mobilisation advance has not been recovered, it
would be to the advantage of the respondent. Secondly, the Bank is not
concerned with the outstanding amount payable by the appellant under
the running bills. The right to recover the amount nnder the running
bills has no relevance to the liability of the Bank under the guarantee.
The liability of the Bank remained intact irrespective of the recovery of
mobilisation advance or the non-payment under the running bills. The
failure on the part of the appellant to specify the remaining mobilisation_
advance in the letter for encashment of Bank guarantee is of little
consequence to the liability of the Bank under the guarantee. The
demand by the appellant is under the Bank guarantee and as per the
terms thereof. The Bank has to pay and the Bank was willing to pay as
per the undertaking. The Bank cannot be interdicted by the Court at the
instance of respondent-1 in the absence of fraud or special equities in
the form of preventing irretrievable injustice between the parties. The
High Court in the absence of prima facie case on such matters has
committed an error in restraining the Bank from honouring its commit-
ment under the bank guarantee. [421E-422A]
U.P. Cooperative Federation Ltd. v. Singh Consultants and
Engineers (P) Ltd., [1988] 1SCC174, Followed.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3087
of 1991.
From the Judgment and Order dated 23.11.1990 of the Delhi
High Court in F.A.0. (O.S.) 123 of 1989.
Kapil Sibal, D.D. Thakur. Ms. Lira Gos_;,amy. A.K. Mahajan,
A.S. Chandhoik, Ms. Meera Chibber and Dinesh Agnani for the ap-
pearing parties.
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SUPREME COURT REPORTS
[ 1991) 3 S.C.R.
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The Judgment of the Court was delivered by
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K. JAGANNATHA SHETTY, J. We grant special leave and
proceed to dispose of the appeal.
The General Electric Technical Services Company ('GETSCO')
had entered into a contract with IndianExcerpt shown. Read the full judgment & AI analysis in Lexace.