Kalpavriksha Engineers vs National Projects Construction ...
1995 Latest Caselaw 239 Del

JUDGMENT

Devinder Gupta, J.

(1) A contract was entered into between the petitioner and the respondent after the petitioner had been award the work of "providing project management consultancy services for Lower Periyar Hydro-electric Project in Kerala". The work was allotted through letter dated 23.5.1989. One of the terms of the agreement required the respondent to pay to the petitioner 10% of the total fee amounting to Rs.2.25 lakhs as initial amount against the petitioner furnishing a bank guarantee. The initial payment was to be adjusted from out of the running payments of the work on pro rata basis. The bank guarantee was furnished which was issued on 23.5.1989 by New Bank of India, Nehru Place Branch, New Delhi (hereinafter referred to as `the Bank') for a sum of Rs.2.25 lakhs in favor of the respondent. The respondent invoked the bank guarantee for the balance amount of Rs.2,13,130.27, which remained due and unadjusted from the running account bills of the petitioner. A dispute at that stage arose. The petitioner in terms of the agreement filed an application under Section 20 of the Arbitration Act (Suit No.2154/91) seeking the filing of arbitration agreement in court and for referring the disputes mentioned therein for adjudication by an arbitrator. An application for interim relief was also made restraining the respondent from invoking and encashing the bank guarantee. On such interim application (IA 8462/91) an injunction was issued restraining the respondent from encashing the bank guarantee. On 20.2.1992 the interim injunction was vacated. It is a case of the respondent that after the interim injunction was vacated, a request was made to the bank for making the payment of the amount due under the bank guarantee but in spite of having written number of letters, the bank has failed to honour its commitment under the terms of the bank guarantee. Reliance is placed on correspondence which was exchanged between the respondent and the Bank. As per the averments made in the application the Branch Manager of the respondent bank through his letter dated 5.5.1992 has declined to make the payment for the reasons stated in the said letter. This act of the bank in not making payment to the respondent, according to the stand taken by the respondent amounts to disobeying the orders of the court and in this background the respondent has filed Ia 8689/92 praying that the bank be directed to make payment of the balance amount of Rs.2,13,130.27, as per the terms of the bank guarantee. Ccp 58/92 has been moved by the respondent for initiating proceedings for contempt against the bank and the Senior Manager and other officials of the bank who, according to the respondent, have disobeyed the orders of the court.

(2) I have heard learned counsel for the respondent at length, who has contended that on the vacation of order of injunction the bank was bound to make the payment of the amount due under the bank guarantee to the respondent, who is a beneficiary named in the Bank Guarantee. According to the submissions made by the learned counsel for the respondent, mandatory injunction in the facts and circumstances can be issued against the bank for making the payment on the principle that he who seeks equity must do equity and also to avoid unjust enrichment by the bank as a result of the order of injunction. Reliance has been placed on few decisions, viz., U.P. Co-operative Federation Ltd. v. Singh Consultants & Engineers (P) Ltd. ; Mrs. Vijay Srivastav, R. Adm. Sood v. Mirahul Enterprises (1988 Rlr 7); United States of Amercia v. Master Builders (1991 - 1 Delhi Lawyer 206); and Smt. Maya v. Brij Nath (AIR 1982 Del. 240). After having considered the submissions made and having gone through the decisions, I do not find any relevancy of the said decision to the facts and circumstances of the instant case.

(3) The bank was not a party to the proceedings initiated by the petitioner against respondent under Section 20 of the Arbitration Act in which interim relief was also prayed. In the said proceedings, on 25.7.1991 no order was made against the bank. The order was passed against the respondent restraining it from encashing the bank guarantee till next date of hearing. The petitioner was directed to keep the bank guarantee renewed during pendency of the case. On 19.2.1992 interim injunction was vacated. Disputes which had arisen amongst the petitioner and the respondent were referred to the sole arbitration of Mr. Justice J.D. Jain, a former Judge of this Court. There was no direction issued by this court by which the bank was obliged to make payment to the respondent on vacation of the order of injunction.

(4) Bank guarantee is a separate contract between the bank and the respondent. Though it was issued by the bank at the behest of the plaintiff and thee respondent is the beneficiary but the rights and obligations vis-a-vis the respondent and the bank are governed by the terms of guarantee. It is also not a matter of dispute that during the continuance of the order of restraint, the respondent could not have got encashed the bank guarantee and there was a corresponding obligation on the petitioner also to keep the bank guarantee alive, which was done. In case after the removal of the restraint on vacation of the order of injunction the bank has not honoured its commitment under the terms of guarantee, the remedy of the respondent would not be to seek any direction in the proceedings which were initiated at the petitioner's behest against the respondent under Section 20 of the Arbitration Act but it will be a right independently available to the respondent to take out such other proceedings which might be available in law. At the behest of the respondent mandatory injunction also cannot be issued against the bank in these proceedings. Whether the bank is or is not justified in not making the payment cannot be a subject matter of disputes in these proceedings which have come to an end on the appoint of the arbitrator and on a reference being made to the arbitrator. For that the respondent will have to seek independent remedy for violation of the terms of the bank guarantee. The remedy chosen by the respondent is totally misconceived. On the one hand, the respondent is seeking mandatory injunction directing the bank to make payment and on the other hand a grievance is made that by not making payment the bank has disobeyed the directions of the court. There are no positive directions issued by the court till date against the bank, which the bank was obliged to obey. On vacation of the order of injunction, the respondent was free to invoke the bank guarantee and in case the bank did not make the payment, the respondent had a remedy available in law by taking out independent proceedings.

(5) The petition and Ia being totally misconceived are dismissed. No costs.