JUDGMENT Shiv Narayan Dhingra, J.
1. This suit was filed by the plaintiff for permanent and prohibitory injunction wherein plaintiff claimed that plaintiff was awarded work of a group of 1080 LIG Houses on 'Design and Construct Basis' as per approved architectural drawing of the total value of Rs. 9 crores. The work was required to be started on 9.9.2003 and stipulated date of completion was 8.9.2005. In terms of the contract plaintiff got furnished a Bank Guarantee No. 34/03-04 dated 17.10.2003 for a sum of Rs. 20,00,000/- through defendant No. 2 in favor of defendant No. 1. It is stated that the contract was based on mutual compromises. There were promises by the plaintiff and there were promises by defendant No. 1. Without both the parties complying with their respective obligations under the contract, the work could not be completed. It is alleged that defendant No. 1 was found wanting in its obligations under the contract. The site on which flats were to be constructed was inaccessible due to standing crops and existence of deep Nallah(Drain), area was flooded due to heavy rains and the site was inaccessible. Plaintiff wrote two letters explaining this position and put defendant No. 1 to the notice of impediments. Under the contract, the foundation design was to be approved by the defendant No. 1. The obligation of the plaintiff was to submit the design and depth of foundation which plaintiff did by letter dated 15.10.2003 and 28.11.2003. The approval thereto was given belatedly by defendant No. 1 as a consequence thereof the work was held up. Unknown to the plaintiff the area had a high water table. In normal circumstances the plaintiff would have excavated the foundation quickly and the work could have progressed expeditiously. However, due to high water table the job became tedious requiring continuous de-watering and thus the time in such circumstances taken was two and a half times the normal time. The defendant No. 1 prescribed brands of cement to be used as LandT, Ambuja, Vikram, Jaypee, Reva and Birla Uttam. Unfortunately due to increased demand these brands were unavailable at the relevant time and plaintiff wrote letters to defendant No. 1 DDA asking them to approve more brands. The said impediment was removed on 1.4.2004 including two more brands of cement. By the same letter DDA also resolved the problem of shortage of TMT steel as TMT steel was not available from the main producers and had to be purchased from the agent/secondary purchaser. DDA gave permission for this only after much persuasion in respect limited quantities on 28.6.2004 The other ground taken is that under the contract concrete of design mix M-25 was to be used in RCC structural members including raft. Plaintiff's design was submitted to National Council for Cement and Building, Ballabhgarh for approval. The agency took considerable time to approve the same and report in this respect was submitted to Engineer In-charge on 10.1.2004 The report was accepted on 8.4.2004 but it was again objected to and finally design was approved on 30.9.2004 It is submitted that DDA also failed to obtain approval of structural design from the CDO (DDA) expeditiously. Plaintiff submitted design in July 2004 and it was approved after a long time. The work also suffered due to heavy rainfall on 22.8.2004 and due to indefinite strike of trucks since 20.8.2004 On this account work suffered for 15 days. The work also suffered on account of steel not being available in required quantity. All these problems faced by the plaintiff were serious in nature. There were also crises in respect of the bricks as the Hon'ble Supreme Court had directed mixing of 25% fly ash with ordinary clay of bricks for manufacturing bricks and as a result thereof manufacturing of bricks was seriously affected. In the matter of window grills plaintiff submitted designs on 30.11.2004 and the approval was not forthcoming even after lapse of 9 months. Similar was situation in respect of other things like floor panels in rooms and kitchen drawings door window frame and sanitary stacks for WC, bath, kitchen stacks etc. It is stated that defendant No. 1 had not made requisite payment to the plaintiff in time. The rates of steel had gone up. At the time of bid rate of steel was Rs. 18,775/- per MT and at the time of filing suit the rate of steel was Rs. 29,500/-, the work has wholly unworkable. Plaintiff repeatedly requested the defendants to reimburse, but defendant No. 1 failed to address the said plea. Defendant No. 1 gave a notice to the plaintiff on 6.4.2005 stating that stipulated completion was to be done by 8.9.2005 and work done was below the target calling upon the plaintiff to show cause as to why the penalty should not be levied for delay. This notice was replied. Plaintiff continued to execute the work. However, vide letter dated 10.8.2005 DDA invoked the performance bank guarantee given by the plaintiff. Such invocation was fraudulent and fraud was of egregious nature vitiating the entire contract. It is stated that the DDA was fully conscious of the reasons of delay in executing the work and DDA was not entitled to invoke the bank guarantee. The contract was based upon reciprocal promises and the defendant No. 1 cannot ask for performance by the plaintiff without carrying on its reciprocal promises. The bank guarantee was furnished by the plaintiff as security for its performance. It was to guard against failure of the plaintiff. The work was in progress but the contract was terminated by the defendant unlawfully. The invocation of bank guarantee was contrary to law and liable to be stayed. Said invocation shall cause irreparable loss and injury which cannot be compensated in money. It is stated that plaintiff was also apprehending rescinding of contract without reasons or justification. The plaintiff made a prayer for issuance of a permanent prohibitory injunction restraining the defendant No. 1 from invoking the Bank Guarantee No. 34/03-04 dated 17.10.2003 issued by defendant No. 2 in favor of defendant No. 1 at the instance of plaintiff and for relief of prohibitory injunction restraining defendant No. 1 from rescinding the contract for the work of a group of 1080 LIG Houses on 'Design and Contr* Basis'. Plaintiff also sought prohibitory injunction restraining the defendant No. 2 from making the payment of the amount under bank guarantee and restraining defendant No. 1 from encashing cheque/demand draft issued to it by defendant No. 2 against invocation of bank guarantee.
2. In the written statement by defendant No. 2, defendant No. 2 submitted that the bank guarantee was issued by it in favor of defendant No. 1 on 17.10.2003 for a sum of Rs. 20,00,000/- and it was valid up to 9.9.2006. The bank guarantee was invoked by defendant No. 1 vide its letter dated 11.8.2005 for a sum of Rs. 20,00,000/- i.e. within the validity period and pay order in respect of the same was prepared. In the meanwhile this Court passed an order dated 12.8.2005 directing the answering defendant to maintain status-quo with regard to the bank guarantee. Accordingly the pay order already prepared, was not handed over to defendant No. 1 and was being retained. The defendant No. 2 was not concerned with the other averments made by the plaintiff and therefore, has not admitted or denied any thing in respect of other averments concerning the contract.
3. Defendant No. 1 in its written statement raise preliminary objection that suit was not maintainable due to the fact that bank guarantee furnished by the plaintiff was unconditional. The amount of Bank Guarantee was to be paid to the defendant No. 1 by defendant No. 2 without demur or objection. It is also submitted that the suit was not maintainable in view of the provisions of Section 53B(1) of DDA Act, since the plaintiff has failed to serve the mandatory notice as contemplated under the above provision. Also in terms of Clause 24 of the Agreement, in case of any dispute the decision of Chief Engineer was binding and conclusive on the parties. It is further stated by defendant No. 1 that the plaintiff did not approach the Court with clean hands and concealed the material facts. As per terms of the contract, the plaintiff was required to complete 75% of the work before 3/4th of the time as stipulated in the contract. The time stipulated in the contract was two years and the plaintiff achieved only 8% progress in 3/4th time in respect of the work to be executed. The plaintiff miserably failed to perform in terms of the conditions of the contract. The defendant No. 1 had no option but to invoke the bank guarantee. A number of notices were served upon the plaintiff by the defendant No. 1 for slow progress of work in terms of Clause 15 and 16 of the Agreement, but plaintiff failed to achieve the desired progress. Hence suit was not maintainable. It is pleaded that it was a lump sum contract inclusive of all material, labour cost, with no escalation clause and everything was to be furnished by the plaintiff themselves. Plaintiff lacked sufficient resources for timely execution of the work. Looking at the fact that only 8% of the work was done in 1 ' years, the defendant No. 1 had no option but to cancel the contract.
4. Replying on merits it was stated that the plaintiff has made bald allegations of fraud without substantiating the same. The allegations of fraud are not even supported by the facts as stated in the plaint itself.
5. Reply to the allegations of causes of delay it was denied that site was inaccessible due to any reason whatsoever. The clear site was handed over to the plaintiff on 17.10.2003. The plea of the plaintiff that the site was inaccessible due to the standing crops, existence of deep Nallah or due to heavy rain were unacceptable. The plaintiff was required to acquaint himself with the site before giving bid in terms of the tender documents. The plaintiff was also to do physical inspection of the site. The existence of Nallah was clearly depicted in the 'Plan of Field Investigation' which formed part of the tender document and the lay out plan document made available along with the tender documents to the plaintiff. The plaintiff entered into the contract with the defendant No. 1 with open eyes knowing fully well about the existence of Nallah. The Clause 27 of the tender document provided for the inspection of the site, study of the drawings, soil investigation reports etc. before filing the tender document by a contractor. Page 16 of the tender document categorically provided that details regarding the site plan, lay out plan and complete architectural details have been provided along with the tender document and report was attached with the tender document. The Houses shall be designed as per the requirement of this soil investigation report and other codal provisions. No distinction was to be made in any type of foundation namely, strip footing foundation, pile foundation etc. It also provided that no extra payment shall be made for any particular type of foundation and the contractor was responsible for executing all items required for building houses in all respects making the dwelling units habitable and ready for occupation. The contractor was also to make flats environmentally fit for habitation with electrical, horticulture, rain water harvesting. Scope of work included equipments, TandP, fixtures, accessories, watch and ward staff and royalties etc. It is stated that Nallah in the site plan was completely dry and was coming only in two blocks out of total 18 blocks to be constructed by the contractor. The works in the blocks affected by the Nallah could be started after necessary soil investigation to know the bearing capacity of the soil and approval of the structural design, but work on the other blocks could be started immediately. However, no work was started by the contractor even for those blocks for which contractor had complete structural designs and drawings for foundation and super-structure, service and other structure. The defendant No. 1 submitted that foundation design for approval was submitted by plaintiff on 30.10.2003, it was returned by defendant No. 1 vide a letter immediately on 1.11.2003. Thereafter plaintiff submitted corrected designs only on 7.2.2004 which was approved by DDA and issued to the plaintiff on 21.2.2004 for execution of the work. Thus there was no delay on the part of defendant No. 1 and if there was any delay it was on part of plaintiff. The contractor was given the soil testing report as got done by the DDA in the tender documents. The tender document also clearly mentioned what would be the water level during normal season and during rainfall. It was also mentioned in the contract document that the contractor shall place the order for procurement of materials well in advance in the required quantities so as to have sufficient time in circulation and for testing of material. It was provided that sufficient storage space shall be constructed by the contractor for this purpose. However, the plaintiff did not place orders in advance and wanted cooperation of defendant for approving two additional brands of cement. Defendant No. 1, in order to cooperate, agreed for approving the additional brand as well. Similar was the situation in respect of TMT steel bars. It is stated that agreed design mix M- 25 in respect of work was not submitted by the contractor to National Council for Cement and Building Material, Ballabhgarh instead it was submitted to M/s Hindustan Preftab Ltd. The delay in sending the sample of design mix was on the part of the plaintiff as plaintiff had not brought the requisite materials, namely, stone aggregate, coarse sand at site. The design mix was received from Hindustan Prefab Ltd. on 9.3.2004 and was approved by defendant No. 1 without any delay. No structural design were submitted by the plaintiff in July 2004 No hinderence on this account can be considered as the plaintiff has not even completed the foundation work till the cancellation of contract i.e. 29.8.2005. Defendant in fact denied all other facts and stated that the entire delay was on the part of the plaintiff. Defendant denied that any letters were received by it for sanitary stacks for WC, bath and kitchen or door and window frames or floor panels of rooms and kitchen. Defendant stated that plaintiff was issued first show cause notice on 4.4.2005 by Superintending Engineer Circle-9 in terms of Clause 16 of the Agreement as the plaintiff was to produce 75 progress within 3/4th of the stipulated period. The plaintiff failed to give satisfactory answer to the show cause and the defendant No. 1 had no option but to invoke the bank guarantee.
6. It is submitted by defendant that plaintiff was not entitled to any of the reliefs claimed.
7. In the replication the plaintiff reiterated its own version; and denied the version given by defendant No. 1.
8. An interim injunction was granted in favor of the plaintiff on 17.8.2005, at the time of institution of suit.
9. Following issues were framed by the Court on 25.5.2006:
(1) Whether the invocation of bank guarantee by the defendant DDA is fraudulent, deceitful and dishonest and that the fraud is of such egregious nature that it vitiates the entire contract' OPP (2) Whether the plaintiff was prevented from performing its obligations under the contract by the defendant-DDA due to its act of omission or commission' OPP (3) Whether the present suit is not maintainable because the subject bank guarantee is unequivocal and unconditional and the invocation of the bank guarantee is as per the terms stipulated therein' OPD-1 (4) Relief.
10. On 25.5.2006 plaintiff was directed to file list of witnesses within 2 weeks and affidavits of witnesses within 2 weeks thereafter. After framing of issues, an adjournment slip was circulated on the next date of hearing i.e. 4.9.2006 and the matter was re-notified on 19.12.2006. This Court vide order dated 23.7.2006, after more than one year of the framing of issues, found that plaintiff has not even filed list of witnesses or affidavits of witnesses. Last opportunity was given to the plaintiff to file affidavit of witnesses before the Joint Registrar within 2 weeks and the parties were directed to appear for cross-examination of witnesses on 16.8.2007. Neither plaintiff appeared nor his counsel appeared nor a list of witnesses was filed, thus the evidence of plaintiff stood closed in terms of order dated 16.8.2007. The matter was referred to the Court and it was fixed for 24.9.2007. On that date counsel for the plaintiff appeared and sought adjournment for filing an appropriate application. The adjournment was granted subject to payment of Rs. 20,000/- as costs to be paid to Delhi High Court Legal Services Committee. Thereafter the plaintiff moved an application for review of order dated 23.7.2007 and none appeared at the time when review application was taken up. However, the review application was dismissed by this Court. Since there was no evidence of the plaintiff on record, the matter was fixed for arguments and arguments were heard in the suit and another connected suit on 24.1.2008. ISSUE No. 1:
11. In order to prove this issue, plaintiff has not adduced any evidence. It is settled law that when allegation of fraud and deceipt are made the person who alleges, fraud and deceipt has to prove the same by cogent evidence and no assumption of fraud can be made. In case of bank guarantee the fraud is to be considered of such a nature which vitiates the very foundation of bank guarantee. In the present case there is no such allegation of fraud in the suit. The plaintiff of its own admission given a bid for construction of a lot out of 1080 LIG Houses on the basis of tender document. Tender document categorically provided that the plaintiff was to inspect the site before filling the tender and was to make himself aware of the ground situation of the site. Existence of Nallah in the site is shown in the lay out plan and other Annexures with the tender document. The existence of Nallah cannot be considered as a fraud. Any person having fundamental knowledge of civil engineering would know that if there is a Nallah, the water level underneath Nallah and on the sides of Nallah may high. Falling of rain is an annual phenomena and is known to every one. Therefore, falling of rain cannot be considered as a fraud. There are no other allegations of fraud. Neither the plaintiff has examined any witness to show that there was any fraud. The plea of fraud raised by the plaintiff must therefore, fail. The Supreme Court in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and Anr. observed as under:
Numerous decisions of this Court rendered over a span of nearly two decades have laid down and reiterated the principles which the courts must apply while considering the question whether to grant an injunction which has the effect of restraining the encashment of a bank guarantee. We do not think it necessary to burden this judgment by referring to all of them. Some of the more recent pronouncements on this point where the earlier decisions have been considered and reiterated are Svenska Handelsbanken v. Indian Charge Chrome, Larsen and Toubro Ltd. v. Maharashtra SEB, Hindustan Steel Workers Construction Ltd. v. G.S. Atwal and Co. (Engineers) (P) Ltd. and U.P. State Sugar Corporation v. Sumac International Ltd. The general principle which has been laid down by this Court has been summarised in the case of U.P. State Sugar Corpn. as follows: (SCC p. 574, para 12) The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The courts should, therefore, be slow in granting an injunction to restrain the realization of such a bank guarantee. The courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee.
Hence if there is such a fraud of which the beneficiary seeks to take the advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country.
Dealing with the question of fraud it has been held that fraud has to be an established fraud. The following observations of Sir John Donaldson, M.R. in Bolivinter Oil SA v. Chase Manhattan Bank are apposite:
...The wholly exceptional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the bank to have it discharged.
The aforesaid passage was approved and followed by this Court in U.P. Coop. Federation Ltd. v. Singh Consultants and Engineers (P) Ltd.
12. I consider that the plaintiff has failed to even plead the nature of fraud required in such cases and is not entitled for issuance of an injunction against invocation of bank guarantee. The issue is decided against the plaintiff and in favor of the defendant.
ISSUE No. 2:
13. The onus of proving this issue was on the plaintiff. The plaintiff has failed to prove any fact and has not placed on record any cogent evidence to show that plaintiff was prevented from performing its obligation of contract by the defendant DDA. Existence of Nallah or rainfall cannot be considered as valid grounds as already observed by a Division Bench of this Court in Harcharan Dass Gupta v. Delhi Development Authority and Anr. FAO (OS) No. 195 of 2005 on 16.10.2006 in a similar suit in respect of the same site, as under:
The tender documents which were given to all the tenderers by respondent No. 1 before awarding the contract are part of the records. The appellant also obtained the said tender documents and on the basis of the same, its tender was submitted. In the said tender documents, lay out plan is attached to the soil inspection report at page 201. Existence of a nallah is clearly shown in the said lay out plan attached. Clause 27 of the tender documents also clearly requires the tenderer to inspect the work site and to study the drawing, soil inspection reports, tender documents and other conditions referred therein. Clause 1 of the Specifications and Conditions of the tender, which appears at page 130 of the paper book, requires the contractor to get acquainted with the proposed site of contract and study specifications and conditions carefully before tendering. The aforesaid documents, which are on record and part of the tender documents, clearly indicate that the appellant was informed about the existence of a nallah at the project site. The terms and conditions also require the tenderer to inspect the site before submitting its tender. It was also specifically stated in the terms of the tender that the tenderer should submit the tender only after getting acquainted with the site. Before submitting the tender the appellant must have meticulously followed and complied with the aforesaid conditions, including inspection of the site and, therefore, we are prima facie satisfied that the appellant had knowledge and information that there existed a nallah at the project site.
It is stated by respondent No. 1 that the pace of the work of the appellant at the site was extremely slow for which several notices had to be issued by the said respondent to the appellant. The appellant also received mobilisation advance before filing of the aforesaid suit. Therefore, it cannot be said that the appellant received mobilisation advance without having knowledge and information about the location and situation of the project site including the existence of nallah at the site. Therefore, we are satisfied that the allegation now made by the appellant that it did not have the information about the existence of a nallah at the site is an afterthought and is a ploy to get out of the contract by hook or by crook. It is also interesting to note that not a single letter was written by the appellant to respondent No. 1 prior to the receipt of the mobilisation advance that it had no knowledge regarding the site or that it had not inspected the site at all.
The contract was awarded to the appellant on 7th August, 2003 and site was handed over to the appellant on 1st November, 2003. When possession of the site was handed over to the appellant on the said date, it cannot be expected that they received possession of the site for starting construction work without having inspected the site. A letter was also written by the appellant to the DDA on 13th November, 2003 wherein also no mention was made by the appellant of the fact that the appellant was unaware of the existence of nallah at the site. Although, in the plaint, a stand is taken that the appellant became aware of the existence of the nallah only on 6th November, 2003 but the contemporaneous documents on or about the said date clearly belies the fact that the appellant had no knowledge about the existence of a nallah at the project site. The appellant also obtained mobilisation advance to the tune of Rs. 47.47 lacs from respondent No. 1 on 6th May, 2004 and it cannot be expected that the appellant had obtained the mobilisation advance without even inspecting the site in question which was handed over to it on 1st November, 2003, i.e., about six months prior to the date of release of mobilisation advance.
14. I, therefore, decide this issue against the plaintiff and in favor of the defendant.
ISSUE No. 3:
15. A perusal of Bank Guarantee No. 34/03-04 dated 17.10.2003 would show that the bank guarantee contains the following clauses:
AND WHEREAS we have agreed to give the contractor such a Bank Guarantee; amounting to Rs. 20,00,000/- (Rs. Twenty Lakh only).
NOW THEREFORE we hereby affirm that we the Guarantor are responsible to you on behalf of the contractor, up to a total of Rs. 20,00,000/- (Rs. Twenty Lakh Only) such sum being payable in the types and proportions of currencies in which the contract price is payable and we undertaken to pay you, upon first written demand and without cavil or argument, any sum or sums within the limits of Rs. 20,00,000/- (Rupees Twenty Lakh only) as aforesaid without your needing to prove or to show ground or reasons for your demand for the sum specified therein.
We hereby waive the necessity of your demanding the said debt from the contractor before presenting us with the demand.
We further agree that no change or addition to or modification of the terms of the contract or of the works to be performed there under or of any of the contract documents which may be made between you and the contractor shall in any way release us from any liability under this guarantee, and we hereby waive notice of any such change, addition or modification.
This guarantee shall be remain valid during performance of the contract valid up to 09.09.2005 from the date of the taking over and after completion of project in all respect.
The Bank Guarantee can not be revoked in any circumstances till it is released by the Engineer-in-charge.
16. The above clauses forming part of the bank guarantee make it clear that bank guarantee was absolute, unequivocal, unconditional and the amount under the bank guarantee was payable to defendant No. 1, without demur. The bank guarantee was invoked by defendant No. 1 in accordance with the terms and conditions stipulated therein. The issue is decided against the plaintiff and in favor of the defendant.
RELIEF:
17. The suit of the plaintiff is liable to be dismissed and is hereby dismissed.
18. This Court had granted a status-quo order and the defendant No. 2 is holding the bank guarantee after preparing the bank draft, the same could not be paid to defendant No. 1 because of grant of status-quo order. The defendant No. 2, bank is directed to release the amount in favor of the defendant No. 1 forthwith.