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TMI Blog1995 (9) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... Citi Bank, N.A., branch Bombay and (5) Bank of Baroda, branch Bombay. The first respondent invited tenders for supply and commission of Coal Handling Plant. The appellant s tender, which was accepted, culminated in a contract, executed between the parties, dated 9.3.1989. The value of the contract was ₹ 61,11,07,200/-. The appellant furnished the following five Bank Guarantees : Name of Bank No of the Bank Guarantee Nature of Bank Guarantee Amount of the Bank Guarantee in Rs. Last the the extended date 1. Standard Chartered Bank/Respondent No. 2 529/88/153 Security against advance payment 5,50,30,000 31.5.94 2. ANZ Grindlays Bank, PLC Respondent No. 3. 1101/88/384/G Performance 6,17,28,000 31.3.95 3.Citi Bank, N.A. Respondent No. 4 26247 Partial release of retention money 2,72,39,850 19.11.94 4. Bank of Baroda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rged before us by Counsel for the parties, it will be useful to bear in mind the salient principles to be borne in mind by the Court in the matter of grant of injunction against the enforcement of a Bank Guarantee/irrevocable Letter of Credit. After survey of the earlier decisions of this Court in United Commercial Bank v. Bank of India and ors., 1981 (2) SCC 766, U.P. Cooperative Federation Ltd. v. Singh Consultants Engineers (P) Ltd., 1988 (1) SCC 174, General Electric Technical Services Company Inc. v. Punj Sons (P) Ltd. and anr., 1991 (4) SCC 230 and the decision of the Court of Appeal in England in Elian and Rabbath v. Matsas and Matsas, 1966 (2) Lloyd s Report 495 and a few American decisions, this Court in Svenska Handelsbanken v. M/s. Indian Charge Chrome And Others, 1994 (1) SCC 502, laid down the law thus :- ...... in case of confirmed bank guarantes/irrevocable letters of credit, it cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud. ...... (p.523) ....... irretrievable injustice which was made the basis for grant of injunction really was on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unications addressed to the respective banks prior to the Guarantees would serve the purpose of notice to the banks and so it cannot be held that the invocation was after the date of expiry of the said Guarantees. Having heard Counsel and on perusing the relevant records, we are of the view that the order of the Court below regarding Item No. 3 - Partial relase of retention money in the sum of ₹ 2,72,39,850/-, Guarantee given by the Citi Bank alone requires modification. We will deal with the various items in seriatim : ITEM NO. 1: Security against advance payment (Advance Bank Guarantee). The Guarantee given on this count by the Standard Chartered Bank for a sum of ₹ 5,50,30,000 is contained in paper book Volume II at pages 109 to 113. It was agreed at the bar that the Bank Guarantee has not been invoked for the entire sum of ₹ 5.50 crores but is limited to a sum of ₹ 8 lakhs only. We find that dispute exists with regard to the said subject matter, as is evident from the relevant papers -- (Volume II pages 312 and 316). It is seen from the communication dated 10.5.1994 addressed by the first respondent to the appellant, with an endorsement to the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108, contains a copy of the Agreement executed between the appellant and the first respondent Board. The following clauses therein at paragraphs 70.1, 70.2, 70.3 and 70.4.01, appearing at pages 92 to 95, are relevant in this connection. They are as follows : 70.1 i).......... ii).......... iii) After the precommissioning tests are satisfactorily completed equipment shall be considered ready for initial operation. During initial operation, the complete equipment shall be operated integral with sub-system and supporting equipment as a complete plant. 70.2 TRIAL OPERATION: i) After satisfactory initial operation, the Plant shall then be put on trial operation. The period of trial operation shall be 30 days from the date of completion of initial operation. During the period of trial operation, all the necessary adjustments in the plant/equipments shall be made by the Contractor and make ready the same in all respects for performance and guarantee test. Out of the total period of 30 days of trial operation, the plant shall run for atleast a period of 100 hours at the rated capacity. Out of these 100 hrs. a minimum of 20 hours of operation at the rated lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the first respondent. The Guarantee given by the Citi Bank, N.A. dated 10th of May, 1989 appearing in Volume II at pages 122 to 126 will enure only till successful completion of the trial operations and the plant is taken over. That event having ensued, the invocation of the Guarantee given by the Citi Bank dated 10.5.1985 in the sum of ₹ 2.72 crores is not encashable on its terms and in order to prevent irretrievable injustice, an injunction as prayed for, to respondents 1 and 4 deserves to be issued on that score. The Court below was in error in not doing so. We hereby restrain respondents 1 and 4 from invoking the Bank Guarantee aforesaid. But item No. 5 partial release of retention money, for which the second respondent, Standard Chartered Bank has given a Bank Guarantee for ₹ 1,12,00,000 (Rs. 1.12 crores) stands on a different footing. The relevant Guarantee is contained in paper book Volume II at pages 134 to 138. The first respondent made an ad hoc payment of ₹ 1.11 crores out of the total retention amount for which the Guarantee was furnished by the Standard Chartered Bank. It is an unequivocal and unconditional Guarantee. We hold that no fraud or i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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