LexLARSEN AND TOUBRO LTD. versus MAHARASHTRA STATE ELECTRICITY BOARD AND ORS.
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LARSEN AND TOUBRO LTD. v. MAHARASHTRA STATE ELECTRICITY BOARD AND ORS. SEPTEMBER 13,1995 [J.S. VERMA AND K.S. PARIPOORNAN, JJ.] Civil Procedure Code, 1908, Order-39, Rules I and 2-Bank Guaran- tees-Fumished under the contract Injunction against invocation of-A con- fi1med bank guarantee can not be inte1f ered with, unless there is an established fraud and iJTetrievable injustice involved in the case. A contract was executed between the parties upon furnishing Bank Guarantees by appellants viz. security against advance, performance, two guarantees for partial release of retention money and security against liquidated damages. A B c D As per contract clauses, after taking trial and performance test, the Plant was taken over by the respondent Electricity Board and a taken over certificate was issued in favour of appellant. For the settlement of its claim, appellant invoked the arbitration clause as per contract. Meeting of ar- bitrators took place and certain directions were passed by them for filing E the respective claims of the parties to contract. prior to filing its claim, respondent no.I invoked all the Bank Guarantees except performance guarantee. Appellant filed arbitration petition contending that Bank Guarantees have been fraudulently and dishonestly invoked and that also after the date of expiry of said guarantees. Petition was dismissed by the High Court holding only in the event of fraud or irretrievable injustice, the F court would be entitled to interfere in a transaction involving a Bank Guarantee and under no other circumstances; No fraud or irretrievable injustice have been made out; Relief regarding the amount wrongly recovered from the appellant can be claimed before arbitrator by way of damages; and that Communication by the respondent to the appellant and G Bank concerned requesting for extension of expiry date serves the purpose of notices for invocation of Bank Guarantee, so it can not be said that invocation was after the date of expiry of the said guarantees. Against the Order of High Court Appellant preferred an appeal by way of special leave, contending that Bank Guarantees have been H 615 616 SUPREME COURT REPORTS (1995] SUPP. 3 S.C.R. A fraudulently and dishonestly invoked, and that as far as Bank Guarantee towards advance was concerned, no amount remained balance towards advance, rather they have to recover some amount from respondent no. l. Contention with regard to two bank guarantees towards retention money was that respondent no. 1 was bound to return the retention money as per B c clause of contract when plan was taken over by them after taking trial r..:ad performance test. Regarding Guarantee towards liquidated damages it was contended that damages should be proved and be quantified before invoca- tion of Bank Guarantees. Allowing the appeal in part, this Court HELD : 1. Invocation of advance Bank Guarantee was in proper time. [624-B] 2. No fraud of irretrievable injustice have been made out by invoca- tion of Bank Guarantees regarding partial retention money and security D against liquidated damages. [624-H] 3. Guarantee dealing with partial release of retention money fur- nished by Citi Bank, N.A. was a conditional guarantee, and will ensure only till successful completion of the trial operation and plant is taken over by first respondent. Since stipulation as per clauses of agreement have been E successfully, fulfilled and plant was admittedly taken over by the first respondent that event having ensured, the invocation of Bank Guarantee is not encashable on its terms. [624-E] F 4. The appellant is entitled to an order of injunction, to a limited extent, against respondent nos. 1and4 (Citi Bank, N.A.), restraining them from invoking the Bank Guarantee given by the 4th respondent-citi Bank, N.A. dated 10.5.1989. [626-B] Savenska Handelsbaken v. Indian Charge Chrome a~id Others, [1994] 1 SCC 502; United Commercial Bank v. Bank of India and Others, [1981] 2 G SCC 766; UP. Cooperative Federation Ltd. v. Singh Consultants & Engineers (P) Ltd., [1988] 1 SCC 174; General Electlic Technical Services Company Inco. v. Pwzj Sons (P) Ltd. and Anr., [1991] 4 SCC 230 and Elian and Rabbath v. Matsas and Mat.ms, [1966] 2 Lloyd's Report 495, referred to. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 8254.of H 1995. L.T. LTD. v. MAHARASHTRA STATE ELECTRICITY BD. (PARIPOORNAN, J.) 617 From the Judgment and Order dated 20.
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