Shri V.V. Gaupta vs New Delhi Municipal Council And ...
2006 Latest Caselaw 400 Del

JUDGMENT

Badar Durrez Ahmed, J.

Page 0843

1. The learned counsel for the defendants 1 & 2 submits that this application can be taken up for disposal straightway and there is no necessity for filing a reply. The defendant No. 3 is the bank which had extended the bank guarantee in question.

2. The counsel for the plaintiff pointed out that earlier, this court had, by an order dated 01.03.2006, disposed of IA Nos. 9251/2005 and IA No. 2458/2006 on the ground that those applications, which were applications where an injunction in respect of the same bank guarantee had been sought, were premature inasmuch as there had been no invocation of the bank guarantee by the defendants 1 and 2. He further pointed out that now an invocation letter has been issued by the defendants 1 and 2 on 01.03.2006 itself. According to the learned counsel for the plaintiff, this invocation letter is not in terms of the bank guarantee and, therefore, he is entitled to an injunction against the defendants from any payments being made consequent upon the invocation letter. The counsel for the defendants 1 and 2 submitted that the invocation letter of 01.03.2006 was in order.

3. It would be necessary to examine the terms of the bank guarantee as well as the invocation letter to appreciate the rival submissions made by the counsel for the parties. The first and second paragraphs of the bank guarantee are relevant for this purpose and the same are reproduced hereunder:-

1. In consideration of the NDMC, New Delhi (hereinafter called 'the Council') having agreed to exempt M/s. No. 1 Advertising and Marketing Company (hereinafter called the 'said Contractor') from the demand under the terms and conditions of an Agreement dated 29.8.2003 made between NDMC Pragati Bhawan 4th Floor, Jai Singh Road, New Delhi-110001, and No. 1 Advertising & Marketing Co. for licencing of electric poles in NDMC area, Zone I for display of Adv. Kiosks (hereinafter called 'the said Agreement' ) of license fee for the due fulfilllment by the said contractor(s) of the terms and conditions contained in the said Agreement on production of a bank guarantee for Rs. 37,00,000/- (Rupees Thirty seven Lacs only). We Corporation Bank, Branch Greater Kailash Part II, New Delhi-110048, (hereinafter referred to as the 'Bank' ) at the request of No. 1 Advertising & Marketing Co. (Contractor (s) do hereby undertake, if demanded in writing in terms thereof before the expiry of the guarantee, to pay to the Council an amount not exceeding Rs. 37,00,000/- against any loss or damage caused to or suffered or would be caused to or suffered by the Council by reason of any breach by the said Contractor (s) of any of the terms or conditions contained in this Agreement.

2. We, Corporation Bank, Branch, Greater Kailash-II, New Delhi, do hereby undertake to pay the amounts due and payable under this guarantee without any demur, merely on a demand which has to be served on us before the expiry of this guarantee, the time being the essence of this contract, from the Council stating that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the Council Page 0844 by reason of breach by the said Contractor of any of the terms and conditions contained in the said Agreement or by reason of the contractor (s) failure to perform the said Agreement. Any such demand made on us within the time stipulated above shall be conclusive as regards the amount due and payable by us under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 37,00,000/- (Rupees Thirty Seven Lacs only)....

4. The invocation letter dated 01.03.2006, which is the subject matter of the present application, reads as under:-

No. D/483/S.O. (Enf.) Dated: 1-3-06

The Senior Manager,

Corporation Bank,

M-4, Greater Kailash-II,

New Delhi-110048.

Sub:Invocation of Bank Guarantee No. PSBG-149/2003 for Rs. 37,00,000/- dated 29.8.2003 on account of M/s Number One Advertising & Marketing Co.

Whereas the license / Contract for display of advertisement on electric poles in Zone-I, NDMC area was awarded to M/s Number One Advertising & Marketing Co., at a monthly license fee of Rs. 9,25,000/- p.m. for a period of 2 years from 15.10.2003 to 14.10.2005.

Whereas Contractor M/s Number One Advertising & Marketing Co., has furnished above referred Bank Guarantee valid up to 14.10.2005 issued by your bank in term of the said Contract.

Whereas a some of Rs. 56,56,816/- of NDMC is outstanding against M/s Number One Advertising & Marketing Co., up to the period ending 14.10.2005 in respect of such Contract.

Whereas a letter vide No. D/4367/S.O. (Enf.) dated 10.10.2005 Along with original Bank Guarantee was sent to you to encash such bank guarantee in favor of Secretary, NDMC. Reminders dated 7.11.2005 & 25.11.2005 were also issued in this reference.

Whereas instead of encashment the bank guarantee in favor of Secretary, NDMC, you have furnished a extended Bank Guarantee valid up to 14.4.2006 without willingness of NDMC.

You are again requested to invoke the said Bank Guarantee and the full amount of the Bank Guarantee may be released in favor of Secretary, NDMC, immediately failing which the matter will be taken up with your senior officers as well as Bankers Grievance Cell, Governor of RBI, Finance Secretary, GOI, etc.

sd

(S.S. Rao)

(Director Enforcement)

5. It is well-settled that if the invocation of a bank guarantee is not in terms of the bank guarantee, then an injunction can be granted restraining the encashment of the bank guarantee. This position has been made clear in Page 0845 the case of Hindustan Construction Company Limited v. State of Bihar and Ors. . The bank guarantee, as indicated above, clearly states that the same could be encashed if a demand in writing is made by the beneficiary in respect of any loss or damage caused to or suffered by or would be caused to or suffered by the beneficiary by reason of any breach by the contractor (plaintiff) of any of the terms or conditions contained in the agreement. This is further strengthened by the contents of paragraph 2 of the bank guarantee which says that the invocation letter must be served on the bank before the expiry of the guarantee and that the letter must state that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the council by reason of breach by the said contractor (plaintiff) of any of the terms and conditions contained in the said agreement by reason of the contractor's failure to perform the said agreement.

6. Examining the invocation letter, one does not find any such statement. In fact, there is no reference to any breach having been committed nor is there any reference to any such breach resulting in loss or damage to the defendants 1 & 2. Therefore, this invocation letter is not strictly in terms of the bank guarantee and, accordingly, the plaintiff would be entitled to an injunction restraining the bank, i.e., the defendant No. 3 from making any payment pursuant to this invocation letter. It may be noted that a similar situation had arisen in the case of Rani Constructions Pvt. Ltd v. Pati-Bel J.V. and Anr. IA No. 3546/2005 in CS(OS) 599/2005 where by an order dated 03.03.2006, I had taken a similar view.

7. It, however, goes without saying that this order operates only with regard to this invocation letter, i.e., the invocation letter dated 01.03.2006. It is open to the defendants 1 & 2 to issue another invocation letter in accordance with law.

This application stands disposed of.

dusty.