Emco Pressmaster Pvt. Ltd. vs Union Of India (Uoi) And Anr.
1999 Latest Caselaw 6 Del

JUDGMENT

M.S.A. Siddiqui, J.

1. This order shall dispose of I.A. No. 6775/95 and 11384/95.

2. I.A. No. 6775/95 is an application under Order 39, Rules 1 and 2 read with Section 151, C.P.C. filed by the plaintiff seeking an ad interim injunction. I.A. No. 11384/95 is an application under Order 39, Rule 4, C.P.C. filed by the defendant No. 2 seeking vacation of the ex parte injunction order dated 17-6-1995.

3. The plaintiff has filed the suit for declaration that the bank guarantees No. 94/229 and 94/230 issued by the defendant No. 1 bank for Rs. 2,12,500/- and Rs. 2,67,000/- respectively are void and for an injunction against their encashment. According to the plaintiff, by the purchase orders dated 26-10-1994, defendant No. 2 agreed to purchase two mechanical presses of 125 tonnes and 160 tonnes from the plaintiff for Rs. 8,50,000/- and Rs. 10,68,000/- respectively. Terms and conditions of the said agreements were set out in the purchase orders. These machines were to be supplied to defendant No". 2 within 3-4 months from the date of purchase orders. As per terms of the agreements 25% of cost of the said machines was paid in advance to the plaintiff against the bank guarantees No. 94/229 and 94/230 furnished by the plaintiff. The plaintiff manufactured the said machines as per specifications, but defendant No. 2, even after their inspection and approval, wrongfully refused to take delivery and fraudulently invoked the aforesaid bank guarantees vide letter dated 9-6-1995.

4. According to defendant No. 2, the plaintiffs failure to deliver the machines within the period stipulated in the purchase orders dated 26-10-1994 and to manufacture the said machines as per specifications mentioned therein, led to invocation of the bank guarantees, which were obtained for securing the advance payments made to the plaintiff. It is alleged that the plaintiff has failed to make out a prima facie case for grant of the temporary injunction.

5. It is well settled that in order to restrain the operation of either irrevocable bank guarantee or letter of credit, the party seeking the injunction must establish a strong prima facie case of fraud of egregious nature, or special equities in the form of preventing irretrievable injustice between the parties. The question, therefore is whether the plaintiff has made out any case for irreparable injury by proof of special equities or fraud so as to invoke the jurisdiction of this Court by way of injunction to restrain the defendant No. 2 from encashing the bank guarantees in question?

6. From the perusal of the bank guarantees it is made out prima facie that defendant No. 1 bank has undertaken to pay to defendant No. 2 the amount mentioned therein without any demur on the demand made by defendant No. 2. The bank guarantees have to be regarded as independent of the main contract between the parties and the same can be enforced without reference of any claim or counter-claim arising out of the main contract between the parties.

7. It needs to be highlighted that it is not the case of the plaintiff that defendant No. 2 fraudulently persuaded the plaintiff to furnish these bank guarantees. On the contrary, the plaintiff's main grievance is that even after inspection and approval of the machines manufactured by the plaintiff as per specifications, defendant No. 2 did not take the delivery and thus fraudulently invoked the bank guarantees. In my opinion, the said assertion alone is not sufficient to restrain defendant No. 2 from ascertaining the bank guarantees. It is an admitted position that the contract was not performed within the stipulation period. The parties are blaming each other for delayed performance of the contract. The alleged refusal of defendant No. 2 in taking delivery of these machines does not constitute a fraud of an egregious nature as to vitiate the entire underlying contract.

8. If the defendant ultimately succeeds In proving that defendant No. 2 has committed breach of the contract, it can adequately be compensated in damages. The plaintiff has also failed to make out a case of special equities in the form of preventing irreparable injustice between the parties as noticed in the case of Itek Corporation v. First National Bank of Boston, etc. 56 Fed Supp 1210. In my opinion the plaintiff has failed to make out any case to the effect that any fraud was committed by the defendant No. 2 at the time of entering into contract or there was any fraud in execution of the bank guarantees in question. Consequently the bank (defendant No. 1) cannot be restrained from honouring its commitment under the irrevocable bank guarantees.

9. For the foregoing reasons, the application filed by the plaintiff under Order 39, Rules 1 and 2, C.P.C. Is dismissed. The interim order dated 16-6-1995 is vacated.