Bombay High Court
Coal India Ltd. Kolkatta Thr. Its ... vs M/S Indo Rama Synthetics (P) Ltd. ... on 13 April, 2016
Bench: Ravi K. Deshpande
1 ao58.15.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR
APPEAL AGAINST ORDER NO. 58 OF 2015
1] Coal India Ltd.,
A Government of India undertaking
Having its Head Office at 10, Netaji
Subhash Road, Kolkatta-700 016 (WB)
through its Chairman and
Managing Director.
2]
Western Coalfields Ltd.,
A Government of India Undertaking
Having its Registered Office at Coal
Estate, Civil Lines, Nagpur-1, through
its General Manager (S&M), APPELLANTS
...VERSUS...
1] M/s. Indo Rama Synthetics (P) Ltd.,
a Company Incorporated under the
Companies Act, having its registered
Office at A-31, Butibori Industrial Complex,
Buibori, Nagpur, represented through its
Vice President (Commercial) and
Authorized Signatory Shri Jaikumar
Manmal Jain, aged about 52 years,
Occ. Service, R/o. Indo Rama Residential
Colony, A-31, Butibori, Nagpur
2] Oriental Bank of Commerce,
having one of its Branch at Nagpur
through its Chief Manager/Branch Manager,
Nagpur.
3] Bank of India, a body corporate having
one of its Branches/Regional/Zonal Office
at S.V.P.Road, King's Way,
Nagpur RESPONDENTS
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2 ao58.15.odt
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Shri A.S.Mehadia, Advocate for appellant.
Shri Shyam Dewani, Advocate for Respondent no. 1
Shri A.T.Purohit, Advocate, for Respondent No.3
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CORAM: R. K. DESHPANDE, J.
th
DATE : 13 APRIL, 2016 .
ORAL JUDGMENT
Admit.
Heard finally by consent of the learned counsels
appearing for the parties.
2] The trial Court has passed an order of injunction
restraining the appellant-employer from acting upon or giving
effect to the letter dated 03.09.2011 and from encashing the
bank guarantee dated 16.04.2010 furnished for an amount of
Rs.1,04,36,580/- till the suit is decided. The trial Court has
held that the plaintiff shall ensure that the bank guarantees
are renewed 30 days before its validity gets expired. This
order of injunction dated 11.02.2015 passed below Exh. 5 in
Special Civil Suit No. 1217 of 2011 is the subject matter of
challenge in this appeal.
3] The basic question involved is whether prima
3 ao58.15.odt
facie the bank guarantee is conditional or unconditional. If it
is found that the bank guarantee is conditional then in that
event the plaintiff would be entitled to an order of injunction if
prima facie case is made out that the conditions have not
been fulfilled. If the bank guarantee is unconditional, in that
event the plaintiff is not entitled to injunction.
4]
The trial Court has recorded the finding in
paragraph 15 as under;
"15. ................In case assured fails to fulfill all the
activities/ milestone within the total period of 24
months as specified in annexure-1, the assurer have
right to cancel or withdraw the LOA after duly
notifying the assured in writing within 7 days and
upon cancellation of LOA the assurer shall encash
the CGs including additional CGs submitted by
assured. From the perusal of LOA it is gathered that,
the assured has to fulfill all the activities/milestone
within the total period of 24 months from the date of
LOA."
According to the trial Court, the bank guarantee can be
invoked only upon cancellation of LOA, which could be done
only upon failure to fulfill the conditions of contract.
5] I have gone through the contents of the bank
guarantee in question. The relevant portion of it relied upon
by both the learned counsels is reproduced below.
4 ao58.15.odt
"We, Bank of India, 66, Janpath Branch, New Delhi-
11-001, having its Head Office at Star House, G
Block, Bandra Kurla Complex, Bandra East, Mumbai
- 400 051 (hereinafter called the Guarantor which
express hall, unless repugnant to the context or
meaning thereof, include its successors,
administrators, executors and assigns) do hereby
irrevocably and unconditionally guarantee and
undertake to pay Assurer or such other place or
places as may be directed by the Assurer all
amounts payable by the Assured to the extent of
Rs.1,04,36,580/- (Indian Rupees One Crore Four
Lacs Thirty Six Thousand Five Hundred and Eighty
Only) at any time up to 17.02.2012 (Date that is
Twenty Two (22) months from the date of issue of
the LOA) subject to the following terms and
conditions :-
1] The Guarantor shall pay to the Assurer on
demand and without any demur, reservation,
contest, recourse or protest and/or without any
reference to the Assured. As to whether the
occasion or ground has arisen for such
demand, the decision of the assurer shall be
final.
2] The assurer shall have the fullest liberty
without reference to the Guarantor and without
affecting this guarantee to postpone at any
time or from time to time the exercise of all or
any of its powers and rights under arrangement
made with the Assured, and the Guarantor
shall not be released from this guarantee by
any arrangement between the Assurer and the
Assured or any alteration thereof made with or
without the consent of the guarantor or by
exercise or non exercise by the Assurer of all
or any of its powers and rights against the
assured, or any other forbearance, act of
omission on the part of the Assurer or
indulgence granted by or on behalf of the
Assurer to the Assured, which under the law
relating to surety ship would but for this
provision have the effect of releasing the Bank
as Guarantor from their obligations under this
guarantee.
3] The guarantee herein contained shall not be
determined or affected by the winding up or
insolvency of the Assured, but shall in all
respects and for all purpose be binding and
operative until all monies due to the Assurer in
5 ao58.15.odt
respect of all liability or liabilities of the Assured
are fully paid.
4] It is also agreed that Assurer will be entitled at
its option to enforce this guarantee against the
Guarantor as principal debtor in the instance
notwithstanding any other security or
guarantee that the Assurer may have in
relation to the Assured's liability.
5] The Guarantee will remain valid for a period of
Twenty Two (22) months from the date of issue
of LoA.
6] The Guarantee shall cover all claims or
demand of Assurer to the extent of the amount
guaranteed.
7] Notwithstanding anything contained, the liability
of the Guarantor under this Agreement is
restricted to Rs.1,04,36,580/- (Indian Rupees
One Crore Four Lacs Thirty Six Thousand Five
Hundred and Eighty Only) and the same will
remain in force up to and including the day of
17.02.2012 (Date that is Twenty Two (22)
months from the date of issue of the LOA).
8] This guarantee can be enforced by Assurer
any number of times for their claim or demand
to the total extent of Rs.1,04,36,580/- (Indian
Rupees One Crore Four Lacs Thirty Six
Thousand Five Hundred and Eighty Only) as
long as it remains in force.
9] Unless a demand or claim under this guarantee
is received by the Guarantor within the period
mentioned in clause 5 and 7 hereof, all rights of
the Assurer shall be forfeited and the
Guarantor shall be relived or discharged from
all liabilities.
10] The guarantee is operative at our Bank of
India, S.V.Patel Marg, Kingway, Nagpur - 440
001, Nagpur Branch (Bank Code 8700).
Notwithstanding anything contained hereinabove,
our liability under this Guarantee is restricted to
Rs.1,04,36,580 (Rupees One Crore Four Lacs Thirty
Six Thousand Five Hundred and Eighty Only) and
this Guarantee is valid up to 17.02.2012 and we
shall be released and discharged from all liabilities
hereunder unless a written claim for payment under
6 ao58.15.odt
this guarantee is lodged on us within expiry of the
guarantee i.e. on or before 17.02.2012 irrespective
of whether or not the original guarantee is returned
to us".
Prima facie, the bank guarantee appears to be irrevocable
and unconditional. There is nothing in the aforesaid bank
guarantee to show that it can be invoked only upon the
cancellation of LOA (Letter of Assurance). The trial Court
has, therefore, committed an error in holding that the bank
guarantee was subject to cancellation of LOA in accordance
with the terms of the contract.
6] Shri Dewani, the learned counsel appearing for
the respondent-plaintiff submits that the order of injunction
passed by the trial Court is operating since 19.09.2011 and
the plaintiff has been complying with the condition of
renewing the bank guarantee before 30 days of its expiry.
He submits that the trial Court has already framed the issue
and the trial is to proceed. He submits that the trial Court
may be directed to decide the suit expeditiously within the
stipulated period and the injunction granted and operating till
this date can be continued. Shri Dewani, the learned counsel
has further invited my attention to Clause 3.4.1 contained in
7 ao58.15.odt
the LOA, which is reproduced below.
"3.4.1 Cancellation or withdrawal of LOA
In the event that any of the activities/milestones is
delayed beyond the period specified against each
such activity/milestone in Annexure 1 and the
Assured fails to furnish the additional CG to the
Assurer in accordance with Clause 3.3 hereof, or the
Assured furnishes additional CG to the Assurer in
accordance with Clause 3.3 hereof but fails to fulfill
all the activities/milestones within the total period of
twenty-four (24) months, as specified in Annexure 1,
the Assurer shall have the right to cancel or withdraw
this LOA after duly notifying the Assured in writing at
least seven (7) days in advance. For the avoidance
of doubt, all the milestones, as specified in
Annexure 1, shall need to be fully completed and
any partial completion of any activity/milestone at the
end of validity of LOA shall entitle the Assurer to
cancel or withdraw this LOA. Upon such cancellation
/withdrawal of this LOA, the Assurer shall encash
the CG including any additional CG submitted by the
Assured. It is clarified for removal of doubt that this
Clause shall survive the cancellation/withdrawal of
this LOA".
He submits that in view of the aforesaid condition, the bank
guarantee can be invoked only upon cancellation of LOA.
7] Undoubtedly, the Condition No. 3.4.1 is a
condition contained in the contract between the plaintiff and
the defendant and for breach of it, the plaintiff is entitled to
claim the damages or restoration of position, as shall be
advised. In the absence of such condition being incorporated
in the bank guarantee, it is not possible to sustain the order
of injunction restraining the appellant-defendant from
8 ao58.15.odt
invoking the bank guarantee which is prima facie
unconditional and irrevocable. The order cannot, therefore,
be sustained.
8] In the result, the appeal is allowed. The
judgment and order dated 11.02.2015 passed by the trial
Court below Exh.5 in Special Civil Suit No. 1217 of 2011 is
hereby quashed and set aside. The application for grant of
injunction at Exh. 5 is rejected. It is made clear that all the
aforesaid observations are on prima facie case, which shall
not come in the way of the parties or of the Court while
deciding the matter upon full fledged trial of the case; to take
contrary view in the matter.
9] At this stage, Shri Dewani, the learned counsel
appearing for the respondent submits that the order of
injunction passed by the trial Court is operating and there
was no ad-interim relief granted by this Hon'ble Court in this
appeal. He, therefore, submits that the judgment and order
passed by this Court be stayed for a further period of four
weeks so as to enable the respondent/plaintiff to adopt
appropriate remedy available to him in law. Shri Mehadia,
9 ao58.15.odt
the learned counsel appearing for the appellant opposes the
prayer.
10] In view of above, the judgment and order
passed by this Court shall remain stayed by further period of
four weeks, after expiry of which the same shall stand
vacated automatically without reference to the Court.
ig JUDGE
Rvjalit
