National Building Construction ... vs Punjab National Bank And Anr.
2002 Latest Caselaw 528 Del

JUDGMENT

Mahmood Ali Khan, J.

Admit. Arguments heard for final disposal on the request of the counsel for the parties.

1. This civil writ petition is filed under Article 226 of the Constitution of India for directing the respondent No. 1 Punjab National Bank to remit Rs. 52.50 lacs under the bank guarantee to the petitioner and quash letter of the respondent No. 1 dated 13.12.2000.

2. Briefly the facts as disclosed by the pleadings are that the Indian Railway Construction (IRCON) awarded a contract of construction of a railway station and commercial complex at Belapur to the petitioner. The petitioner in turn divided the contract into smaller parts and gave the same to sub contracts. A sub contract was given to the respondent No. 2 Puri International (P) Ltd. also. In pursuance thereof the petitioner issued the work order to the respondent No. 2 on 22.11.1990. The respondent No. 2 was entitled to receive mobilisation advance to the extent of 5% of the contract value and the said advance was payable to it against furnishing a bank guarantee issued by a nationalised/scheduled bank on the proforma provided by the petitioner. Beside this the respondent No. 2 was also required to furnish bank guarantee for security deposit for 2% of the contract value. In all 7 bank guarantees of the total amount of Rs. 52.50 lacs were issued by the respondent No. 1 on behalf of respondent No. 2 in favor of the petitioner. The bank guarantees furnished by the respondents were unconditional and payable without any demur merely on demand from the petitioner stating that the amount was due by way of loss or damage caused to or suffered by the petitioner by reason of or any breach by the respondent No. 2 failure to perform the said contract. The petitioner was also required to furnish bank guarantee of similar amount in favor of IRCON and the bank guarantees furnished by the respondent No. 2 and the petitioner were as such back to back bank guarantees.

3. IRCON on 12.2.1992 terminated the contract of the petitioner on the ground that the progress of the work was slow. The petitioner in turn terminated the contract of the respondent No. 2, being back to back, on 31.3.1992. Thereafter, by letter dated 3.3.1994 the petitioner invoked certain bank guarantees of the total amount of Rs. 17.50 lacs issued by the respondent No. 1 on the ground that the respondent No. 2 had failed to pay back the mobilisation advance taken by it with interest accrued thereon. Other bank guarantees were also invoked on different dates but the respondent No. 1 neither encashed the bank guarantee nor sent any reply nor remitted the amount claimed by the petitioner in terms of the bank guarantees. On 15.3.1995 the petitioner invoked all the bank guarantees of the total amount of Rs. 52.50 lacs and asked the respondent No. 1 to remit the amount by encashing the sum as per the terms of the bank guarantees which were unconditional and were payable without demur and merely on demand.

4. This invocation was challenged by the respondent No. 2 by filing a suit on 21.3.1995 in this court. It sought a permanent prohibitory injunction restraining the petitioner from encashing or seeking to encash the bank guarantees in whole or in part. An application for ad interim injunction for a similar relief was also filed. This court by an ex parte ad interim injunction order restrained the petitioner from encashing the bank guarantees on the condition that the respondent No. 1 would keep the bank guarantees alive. The respondent No. 2 also filed a petition under Section 20 read with Section 8(1)(b) of Arbitration Act, 1940 before this court, inter alia, praying for appointment of an arbitrator for deciding the dispute and claims of the petitioner and the respondent No. 2. It was contested by the petitioner. A Learned single Judge by order dated 31.3.1997 referred the dispute between the parties to the sole arbitrator appointed by the petitioner in terms of the arbitration clause. It also restrained the petitioner from encashing the bank guarantees till the award was given by the arbitrator and it was made the rule of the court. In the injunction suit the learned single Judge held that since the bank guarantees had not been invoked in accordance with the terms of the bank guarantees, the bank guarantees cannot be permitted to be encashed.

5. The petitioner challenged this order dated 31.3.1997 before the Division Bench. In the meantime IRCON invoked the bank guarantee furnished by the petitioner amounting to Rs. 6.09 crores on 25.7.1997. The petitioner on 1.8.1997 filed an application bearing OMP No. 147/97 under Section 9 of the Arbitration and Conciliation Act 1996 and prayed for injunction against encashment of the bank guarantees. The learned single Judge vide order dated 1.8.1997 dismissed the said application as not maintainable. An appeal was preferred against this order and the Division Bench dismissed the appeal on 21.8.1997 observing that in view of the nature of the bank guarantees involved in the present case it was not possible for the appellant to sustain the argument that the bank guarantees had not been properly invoked or that they have not been invoked in accordance with their tenor. The special leave petition filed by the petitioner was disposed off by the Supreme Court by order dated 21.8.1997 on the basis of an undertaking of the petitioner to pay back amount of Rs. 6.09 crores in six equal Installments. A copy of the order of the Division Bench dated 17.9.1997 was then filed in the appeal pending against the respondent No. 2 but the Division Bench dismissed the appeal holding that the petitioner was not entitled to encash the bank guarantees as it had not quantified the liability and recited the amount which was actually due in the letter of invocation. The petitioner pursued it in an SLP before the Supreme Court.

6. In the meantime the petitioner served a fresh notice dated 15.11.2000 on the respondent No. 1 invoking the bank guarantees and demanding encashment thereof. In the invocation letter the petitioner had incorporated all the liabilities and the cause of damages suffered by it due to the failure on the part of the respondent No. 2 to discharge its various obligations under the contract. In view of the fresh letter of invocation all the bank guarantees, the SLP became infructuous. The Supreme Court on 1.12.2000 dismissed the SLP on the statement made by the counsel for the petitioner that the petitioner had already issued a fresh letter of invocation to the respondent. Thereafter, the petitioner had issued various reminders to the respondent for remitting the amount of the bank guarantee pursuant to the fresh invocation letter but of no avail. Later by letter dated 13.12.2000 the respondent No. 1 had turned down the payment of the petitioner on the ground that the SLP had been dismissed by the Supreme Court. The petitioner has sought quashing of the letter dated 13.12.2000 by which the respondent No. 1 refused to pay the amount under the Bank guarantees and for direction to the respondent No. 1 to pay the amount of Rs. 52.50 lacs vested under the bank guarantee to the petitioner.

7. On noticing Mr. Sushil, chief manager of Punjab National Bank, respondent No. 1 filed his counter affidavit in which a preliminary objection was raised as to the maintainability of the petition. It was contended that the writ petition arose out of the contract of bank guarantees issued by the respondent No. 1 in favor of the petitioner at the instant of the respondent No. 2 and the dispute fell within the jurisdiction of the civil court, therefore, the remedy for enforcement of the rights under the contract was by way of filing a civil suit in a civil court and that extraordinary discretionary jurisdiction of the court under Article 226 of the Constitution could not be invoked by the petitioner since the disputed question involved is whether such a right was enforceable on the facts and circumstances of the case. On merit it was submitted that 15 bank guarantees particulars of which were mentioned in sub para B of para 3 of the counter affidavit were issued. These bank guarantees have been extended from time to time. In so far as the encashment of the bank guarantees by the petitioner is concerned, it was a subject matter of an earlier suit No. 691/95, FAO(OS) No. 127/97 and SLP No. 18959/00. The invocation letter dated 15.3.1995 was not in terms of the bank guarantees, therefore, the monies due there under was not payable. In the meantime respondent No. 2 filed civil suit and obtained a temporary injunction against payment of the amount of those bank guarantees. On the dismissal of the SLP filed by the petitioner the ad interim injunction order granted in favor of the respondent No. 2 in the earlier suit was not disturbed, therefore, the law division at the head office of the respondent No. 1 had advised that even on the fresh invocation of the bank guarantee on 15.11.2000, payment could not be made.

8. The respondent No. 2 has not filed any reply. But after the case was reserved for orders written submissions on behalf of the respondent No. 2 were made. The written submissions filed behind the back of the other two parties should not be taken into consideration but the submission made therein is basically legal and identical to the pleadings of respondent No. 1, therefore, even if it is mentioned here it will not cause any prejudice to any of the parties. It was stated that the dispute has already been referred for arbitration which included the question of invocation of bank guarantees and the award has not been made and published as yet. Ad interim injunction was granted in a civil suit filed by the respondent No. 2 on 31.3.1997 restraining the petitioner from encashing the bank guarantees furnished by the respondent No. 1 in favor of the petitioner and the respondent No. 2 was directed to keep the bank guarantees alive till the award was made the rule of the court. The invocation of the bank guarantees by the petitioner by fresh invocation letter is an abuse of the process of law since it was restrained from invoking the bank guarantees till the award was made the rule of the court. Lastly it was stated that Article 226 of the Constitution of India was not available for enforcing contractual obligations between the parties.

9. Resistance of the respondent No. 1 to the invocation of the bank guarantees by a fresh letter dated 15.11.2000 is not on the ground that the invocation is not in terms of the bank guarantees but on the ground that in the earlier civil suit filed by the respondent No. 2, the petitioner was restrained from invoking the bank guarantees on the basis of the invocation letter dated 15.3.1995 since it was not in accordance with the terms of the bank guarantees. However, no such infirmity has been pointed out in the fresh invocation letter dated 15.11.2000. There is no plea of any of the respondents that it is not in accordance with the terms and conditions of the bank guarantees.

10. The respondent No. 1 has refused to pay the amount of the bank guarantees pursuant to the fresh invocation letter dated 15.11.2000 on the ground that it has been restrained by an interlocutory injunction order passed in a civil suit from making the payment and that it has been directed to keep the bank guarantees alive during the pendency of the arbitration proceedings till the award was not made the rule of the court. It was stated that an appeal to the Division Bench and an SLP to the Supreme Court filed by the petitioner have failed and the ad interim injunction order is still in operation. Therefore, the law department of the respondent No. 1 had advised it against honouring the invocation letter dated 15.11.2000.

11. The preliminary objection raised on behalf of the respondent goes to the very root of the power and jurisdiction of this court and maintainability of the petition under Article 226 of the Constitution, therefore, it needed to be attended to first.

12. The preliminary objection raised by the respondent is that the dispute about invocation of the bank guarantees or the non payment of the money due under it has arisen out of a private contract between the petitioner and the respondent No. 1. Therefore, the appropriate remedy for raising the dispute the decision would be in a civil suit filed before a civil court and not by way of invocation of extraordinary discretionary jurisdiction vested in this court by Article 226 of the Constitution of India. He argued that a writ of mandamus cannot be issued to enforce a private right.

13. The counsel for the petitioner has however urged that since the respondent is an instrumentality of the state its committing a breach of the agreement and refusing to pay the amount under the bank guarantees could be assailed in a civil writ under Article 226. He has referred to the judgment of this court in Access Maritime Corporation v. Syndicate Bank and Anr., . Reference was also made to the judgment of the Supreme Court in J.S. Parihar v. Ganpat Duggar and Ors. . On the other hand the counsel for the respondent No. 1 sought support from the judgment of the full Bench of the Kerala High Court in Indo-Mercantile Bank Ltd. v. Commissioner, . He has also referred to the judgment of the Kerala High Court in Mrs. Sheela Thomas and Ors. v. The State of Kerala and Anr. .

14. The dispute between the parties relate to and arise out of a private contract between the parties. The respondent No. 1 has refused to pay the amount of the bank guarantees on its invocation by the petitioner in terms of the bank guarantees. The question which arises for consideration is whether such a dispute could be raised for decision in the extraordinary discretionary jurisdiction of this court under Article 226 and a writ of mandamus can be issued for enforcing it.

15. Article 226 of the Constitution of India gives extraordinary discretionary jurisdiction to this court to give relief to the person who is aggrieved from infringement of any of his fundamental rights and on account of omission and commission of the instrumentality of the State. The writ jurisdiction of the court being extraordinary remedies are intended to be applicable to exceptional cases in which ordinary remedies are not adequate. The grievance under a private contract will not fall within the purview of this article. In State of U.P and Ors. v. Bridge and roof Company (India) Ltd. a public sector Corporation entered into a work contract with the Government of U.P. for rehabilitation and improvement of certain stretch of road in the State. A dispute arose between them about certain terms and conditions of the contract and also the State Government's retaining the benefit of reduction in the rate of sales tax and not passing it on to the Corporation. The Supreme Court made the following observations which are aptly applicable to the facts of the present case also:-

"In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings, i.e. in the writ petition filed by it. The High Court appears to be right in nor pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the other of the Deputy Commissioner made under the proviso to Section 8-D(1).

Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may be. Whether any amount is due to the respondent from the appellant-Government under the contract and, if so, how much and the further question whether retention or refusal to pay any amount by the Government is justified, or not, are all matters which cannot be agitated in or adjudicated upon in a writ petition. The prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioner's bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayer.

Secondly, whether there has been a reduction in the statutory liability on account of a change in law within the meaning of Sub-clause (4) of Clause 70 of the contract is again not a matter to be agitated in the writ petition. That is again a matter relating to interpretation of a term of the contract and should be agitated before the arbitrator or the civil court, as the case may be. If any amount is wrongly withheld by the Government, the remedy of the respondent is to raise a dispute as provided by the contract or to approach the civil court, as the case may be, according to law. Similarly if the Government says that any overpayment has been made to the respondent, its remedy also is the same.

Accordingly, it must be held that the writ petition filed by the respondent for the issuance of a writ of mandamus restraining the Government from deducting or withholding a particular sum, which according to the respondent is payable to it under the contract, was wholly misconceived and was not maintainable in law. The writ petition ought to have been dismissed on this ground alone".

16. In the case of the Kerala State Electricity Board v. Kurien E. Kalathil and Ors., there was an agreement between the parties for construction of a dam. The Government enhanced the minimum wages payable to the employees employed in the work but later on clarified that it will not be applicable to the labourers employed for construction of the dam. In the meantime, labour escalation charges for a certain period were paid by the Kerala State Electricity Board which on receipt of subsequent notification were discontinued. The dispute arose between the parties relating to the interpretation of a clause in the contract and implementation of such clause. It was argued on behalf of the petitioner that such dispute was not a subject matter of writ petition and the remedy of the aggrieved person lies in approaching the civil court or some other appropriate forum. The Supreme Court held as under:-

"We find that there is a merit in the first contention of Mr. Raval. Learned counsel has rightly questioned the maintainability of the writ petition. The interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition.

Whether the contract envisages actual payment or not is a question of construction of contract. If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226".

17. The law enunciated in the above two judgments is fully applicable on the facts of the present case also. The bank guarantee furnished by the respondent No. 1 in favor of the petitioner at the instance of the respondent No. 2 is a private contract and not a statutory contract. It is governed by the provision of the Contract Act. The dispute relating to the interpretation of the terms and conditions of such contract and the validity of the invocation of the bank guarantee and whether the amount was payable by the respondent No. 1 on such invocation of the bank guarantee are the questions which were agitated in a writ petition. It is a matter either of arbitration as provided by the contract or for the civil court or any other appropriate forum to decide these questions.

18. It cannot be denied that the normal remedy for enforcing a right for payment under the private contract like the bank guarantees in question from the State or from the instrumentality of the State was by filing a civil suit in the civil court. The full Bench of the Kerala High Court in Geetha Timbers v. State of Kerala 1990(1) KLT 402 made the following observation:-

"This Court has held time and again that in contractual matters writ petition will not normally be entertained. For enforcement of contractual rights parties should avail remedies by way of civil suit and should not invoke the extraordinary jurisdiction available under Article 226 of the Constitution of India".

19. The counsel for the petitioner has argued that where the instrumentality of the State has refused to act in accordance with the contract the court has ample power to exercise its discretion vested by Article 226, and issue mandamus. He relied upon the judgment of this court in Access Maritime Corporation (Supra) in which a dispute relating to the invocation of the bank guarantee was raised in a civil writ and the court had allowed the writ petition and directed the bank to encash the bank guarantee. It was observed as under:-

"Respondent No. 1 Bank accepted the invocation of Bank guarantee and responded to the communication of the petitioner by stating in letter dated 8th October, 1997 that the claim was under process. Thereafter on 10 October, 1997 the Bank was willing to remit the amount of US $ 15,700/- but completely changed its stand and outright rejected the claim of the petitioner by communication dated 18th November, 1997. This is clearly a malafide approach as the respondent bank obviously acted on the initiative of respondent No. 2 by declining to honour the bank guarantee which it had no jurisdiction in law to do. The respondents were also aware of the judgment of this Court in IA No. 10449/97 in Suit No. 2262/97 dated 4th November, 1997 wherein the conduct of the respondent bank was criticised. The respondent could not in law refuse to honour the statutory obligations and deprive the petitioner of its right to invoke the bank guarantee on the basis of the settled law by the Supreme Court which has already been referred to. The plea that the order passed by this Court on the original side was not reacquired to be implemented and the petitioner was at liberty to take recourse to any other proceedings such as a suit to recover the amount is clearly misconceived and an abuse of the process of Court. The respondents having voluntarily invited a decision from this Court could not subsequently resile from the same and argue that the present petition is not maintainable.

Respondent No. 1 is a Nationalised Bank and is an instrumentality of State and, therefore, amenable to writ jurisdiction. The conduct and functioning of the Bank which is a nationalised Institution must be above board and in public interest. The facts of the case will establish that the respondent bank refused to accept the judgment of this Court and acted in collusion with respondent No. 2. The conduct is reprehensible and cannot be appreciated.

20. The observations as reproduced above clearly show that the court had exercised extraordinary jurisdiction under Article 226 in the cited case in the peculiar facts and circumstances of the case. It found that the respondent had refused to honour the statutory obligations and wanted to derive the petitioner to file a civil suit refusing to implement an order passed by the court in the civil suit which the court considered to be a clear malafide action on the part of the bank. The court also found that the bank, which was an instrumentality of the State, had refused to accept the judgment of the High Court and had acted in collusion with the respondent at whose instance the bank guarantees were given and the conduct of the bank was reprehensible and not appreciable. Thus the court found it to be fit and proper to invoke this power under Article 226 and grant appropriate writ for payment of the bank guarantees. The facts of the case in hand turns on their distinguished facts. Here the earlier invocation of the bank guarantees by letter dated 15.3.1995 was held to be not in terms of the bank guarantee. So an interlocutory injunction was granted restraining the respondent No. 1 bank from making the payment due under the bank guarantee to the petitioner. This order was upheld in the appeal and was not even disturbed in the SLP. The additional ground on which the SLP was dismissed was that in the meantime the petitioner had served another letter dated 15.11.2000 invoking the bank guarantees and demanding the money due under them from the respondent No. 1. Therefore, the proper remedy for the petitioner to claim money under the bank guarantee from the respondent and the latter's refusing to honour the letter of invocation was by way of a civil suit or any other proceeding before a civil court or any other appropriate forum. It could not have come to the court against the decision of the respondent No. 1 refusing to pay in a civil writ. The view taken by this court is fortified by the law enunciated by the Supreme Court in the above cited judgments.

21. The petitioner's reliance on the judgment of the Supreme Court in J.S. Parihar v. Ganpat Duggar and Ors. is misplaced. The Supreme Court was dealing with a contempt petition. The Government had prepared the seniority list of the engineers in Rajasthan Civil Engineering Services (Public Health Branch). A Division Bench of the High Court declared the said seniority list prepared with retrospective effect in terms of the amended Rules as unconstitutional and accordingly it quashed the list and directed preparation of the seniority list afresh to determine the inter se seniority on that basis and to grant promotion to the appellants within a specified time. The seniority list was prepared. Thereafter contempt proceedings were initiated. The learned Single Judge held that the respondents had not willfully disobeyed the order of the court and gave certain directions. On these facts the Supreme Court observed that once there was an order passed on the basis of the directions issued by the court, there arises a fresh cause of action to seek redressal in an appropriate forum. It was further observed that the preparation of the seniority list may be wrong or may be right or may or may not be in conformity with the directions but what would be a fresh cause of action for the aggrieved party to avail of the opportunity of judicial review and that would not be a willful violation of the order of the court. The facts of the case in hand are dis-similar. The question here is whether the petitioner could seek writ of mandamus from this court directing respondent No. 1 to pay the money due under the bank guarantees. The judgment, therefore, does not advance the argument of the counsel for petitioner that such a writ would be maintainable before the court even if his contention that the fresh invocation letter dated 15.11.2000 has given rise to a new cause of action to the petition is upheld.

22. The counsel for respondent No. 1 also referred to Mrs. Sheela Thomas and Ors. (supra) where a Division Bench of the Kerala High Court relied upon the judgment of the full Bench of the same court in Geetha Timbers (supra) and held that the normal remedy for obtaining refund of excess or unauthorised collection of amounts from a person by the State or by the instrumentality of the State, was by filing a suit in the civil court and the appellant should, if at all, pursue the normal remedy open to them in a civil court. This judgment do support the case of the respondent that the civil writ is not the proper remedy for challenging the order of respondent No. 1 impugned in this petition.

23. The court, as such, could not exercise this extraordinary discretionary jurisdiction under Article 226 of the Constitution of India if an alternative efficacious remedy is available for redressing the grievance before a Civil Court or arbitral Tribunal or any other forum.

24. Moreover, in the instant case a Civil Court by way of interlocutory injunction order passed in a civil suit litigated between the parties restrained respondent No. 1 bank encashing the bank guarantees in question and remitting the money under it to the petitioner but has directed respondent No. 1 to keep the bank guarantees alive during the pendency of the arbitral proceeding. The Supreme Court had dismissed the SLP on merit. It means that the interim injunction order granted by this court in the civil proceeding is still in operation. The Supreme Court did give additional reason for dismissing the SLP against the order of the Division Bench of this court that a fresh invocation letter has been issued by the petitioner demanding money under the bank guarantees. But the fact remains that respondent No. 1 is still bound to obey the order passed by this court in exercise of its ordinary civil jurisdiction until it is recalled or modified. Any order, direction or writ issued in this petition to respondent No. 1 commanding it to pay money under the bank guarantees would be in direct conflict with that order. This court should not exercise its discretionary jurisdiction to enable a party to dis-obey the order of a court of competent jurisdiction. It was open to the petitioner or respondent No. 1 to have approached the concerned Civil Court for appropriate direction in the light of the issue of fresh invocation letter and the order of the Supreme Court in the SLP. It has not been done. For this reason also it will not be appropriate for this court under Article 226 of the Constitution of India to intervene and issue a writ of mandamus in the peculiar facts and circumstances of this case.

25. For the reasons stated above there is no escape from holding that the extraordinary discretionary jurisdiction cannot be exercised by this court in granting any relief to the petitioner in this case.

The result of the above discussion is that the petition has no merit. It is dismissed. In the facts and circumstances of the case the parties are left to bear their own cost.