TaxTMI 
TaxTMI 
2015 (2) TMI 486
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.... be completed within 24 months, the period was extended by respondent no.1 from time to time but the work could not be completed even after expiry of 53 months. The petitioner could complete the work worth of 35 % of the awarded contract value by April, 2014. 3. At the time when the contract was drawn, the petitioner had furnished security in the form of bank guarantees, the details of the bank guarantees are reproduced as under: S.No. Date Nature of B.G. Bank Guarantee No. Amount 1. 10.02.2010 (Bank guarantees as on date extended upto 27.10.2014) B.G. for security deposit 1015/1LG/5/10-11 3,06,33,000/- 2. 22.10.2013 (Bank guarantees as on date extended upto 19.10.2014 Security Deposit 5/2013 4,41,63,765/- 3. 27.02.2013 (Bank guarantees as on date extended upto 25.08.2014 Additional security deposit 9/2013 1,25,00,000/- 4. 02.04.2014 (Bank guarantees as on date extended upto 03.10.2014 Additional Security Deposit ILG 42/14 3,00,00,000/- 4. After April, 2014, the petitioner wrote a letter dated 02.06.2014 for further extension of time for completing the work. The respondent no.1 rejected the request of the petitioner for extension. The case of the ....
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.... It is further submitted that under clause 9 of GCC, the respondent no.1 is only required to deduct from the security deposit on a proportionate basis and therefore, the respondent no.1 cannot invoke entire security deposit. It is further submitted that the petitioner herein was facing hardships. The site was situated in a low lying area and in a coastal region and during the monsoons there was water logging and because of this nature of the site and the climatic conditions of the region delay was caused in construction. This issue was brought to the notice of the respondent vide several letters dated 12.03.2010, 18.03.2010, 19.03.2010, 12.05.2010, 17.05.2010, 09.01.2012, 11.01.2012, 29.03.2012, 25.02.2013, 17.05.2014, 04.03.2014, 08.04.2014, 19.04.2014 and 02.06.2014. The delay had also occurred on account of respondent no.1 failing to clear bills raised by the petitioner. This fact was also brought to the notice of the respondent. It is submitted that approval for work programs, drawing etc. and clearance and instructions could not be obtained in time during the first two years of the contract and this had affected the petitioner's work progress to a great extent. It is submitted....
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....no.1 to cancel the contract by written notice in case the contractor fails to complete the work within stipulated period. It is argued that existence of any pending dispute between the parties cannot be a ground for preventing the invocation of the bank guarantee. Reliance has been placed on Vinitec Electronics Private Ltd. v. HCL Infosystems Ltd. reported in (2008) 1 SCC 544 and U.P.State Sugar Corporation's case (supra). It is further argued that the invocation of the bank guarantee can be challenged only on the ground of fraud and irreparable injury and the nature of irreparable injury has been defined by the Supreme Court in U.P.State Sugar Corporation's case (supra) and Itek Corporation vs. First National Bank of Boston reported in 566 F.Sup.1210. It is submitted that the petitioner has failed to show that it has suffered irreparable loss and injury and therefore is not entitled for the relief. It is submitted that the security has been furnished by the petitioner in the form of unconditional bank guarantee and the bank guarantee is an independent contract between the bank and the beneficiary and its invocation cannot be stopped. It is further submitted that it was the petitio....
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....rms thereof irrespective of any pending dispute between the person on whose behalf the Guarantee was given and the beneficiary. In contracts awarded to private individuals by the Government, which involve huge expenditure, as, for example, construction contracts, Bank Guarantees are usually required to be furnished in favour of the Government to secure payments made to the contractor as "advance" from time to time during the course of the contract as also to secure performance of the work entrusted under the contract. Such Guarantees are excusable in terms thereof on the lapse of the contractor either in the performance of the work or in paying back to the "Government Advance", the Guarantee is invoked and the amount is recovered from the Bank. It is for this reason that the Courts are reluctant in granting an injunction against the invocation of Bank Guarantee, except in the case of fraud, which should be an established fraud, or where irretrievable injury was likely to be caused to the Guarantor. This was the principle laid down by this Court in various decisions. In U.P. Cooperative Federation Ltd. v. Singh Consultants & Engineers Pvt. Ltd.: [1988]1SCR1124, the law laid down in ....
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....tees. Whether this constitutes irreparable injury of the nature which is sufficient to restrain the respondent from invoking the bank guarantees is the matter which requires consideration. Now what is an irreparable loss and injury on the basis of which court can restrain the respondents, has been discussed and the principle laid down by the supreme court in the U.P.State Sugar Corporation's case (supra). The petitioner has also relied on this case. The Supreme court has held as under: "on the question of irretrievable injury which is the second exception to the rule against granting of injunctions when an unconditional bank guarantees are sought to be realised the irretrievable injury must be of the kind which was the subject matter of the decision in the Itek Corporation Case. 14. In Itek Corporation v. First National Bank of Boston 566 F.Supp. 1210, the Masachusetts District Court of the United States has held as follows: "at the risk of stating the obvious, I take judicial note of the fact that conditions in Iran has changed radically since that tim....
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....ing in writing that the work has been completed as per condition 31 hereof etc." 18. This clause clearly contemplates that the security deposit is refundable only on completion of the work and after the engineer-in-charge certifies in writing that the work has been completed as per the condition 31. Admittedly, in the present case the petitioner has only completed work of 35% worth of contract amount and thus in view of clause 9.6 of GCC the petitioner is not entitled for the refund of security deposit and the security deposit is to remain with respondent no.1. For this reason also the petitioner is not entitled for the relief. 19. Mere pendency of a reference before the arbitrator is also not a ground to issue restrain order to the bank guarantee. 20. This Court in a recent judgment Consortium of Deepak Cable India Limited (supra), has held as under:- "145..............Disputes pertaining to the main contract cannot be considered by a court when a claim under a bank guarantee is made and the court would be precluded from embarking on an enquiry pertaining to the prima facie nature of the respective claim ....