1999 (10) TMI 760 - SC - Companies Law

Summary

Issues Involved:
1. Invocation of "Mobilisation Advance" Bank Guarantee.
2. Invocation of "Performance Guarantee" Bank Guarantee.

Summary:

1. Invocation of "Mobilisation Advance" Bank Guarantee:
Hindustan Construction Company Limited (HCCL) was awarded a contract by the State of Bihar for the construction of Icha Dam. HCCL furnished a "Mobilisation Advance" Bank Guarantee as required. The defendants invoked this Bank Guarantee, leading HCCL to file a suit seeking an injunction against the invocation. The Single Judge granted the injunction, but the Division Bench vacated it. The Supreme Court held that the Bank Guarantee could be invoked only if the conditions in Clause 9 of the principal contract were met, which was not the case here. Therefore, the invocation was deemed improper, and the injunction granted by the Single Judge was restored.

2. Invocation of "Performance Guarantee" Bank Guarantee:
HCCL also furnished a "Performance Guarantee" Bank Guarantee. The defendants invoked this Guarantee, and the Single Judge granted an injunction against its invocation, which was upheld by the Division Bench. The Supreme Court noted that the "Performance Guarantee" was an independent contract between the Bank and the Chief Engineer. Since the Guarantee was furnished to the Chief Engineer, it could only be invoked by him and not by the Executive Engineer. The invocation by the Executive Engineer was thus invalid. The Supreme Court maintained the injunction order granted by the Single Judge.

Conclusion:
The Supreme Court allowed the appeal regarding the "Mobilisation Advance" Bank Guarantee and restored the injunction order. The appeal concerning the "Performance Guarantee" Bank Guarantee was dismissed, maintaining the injunction order. No costs were awarded.