Wipro Ge Healthcare Pvt. Ltd. vs Medical Superintendent Deen ...
2009 Latest Caselaw 2947 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  OMP No.645/2008

%                                  Date of decision: 31ST July, 2009

      Wipro GE Healthcare Pvt. Ltd.                           ....Petitioner
                        Through: Mr. V.Sheshagiri and Mr. Arunabh Suman, Advocates


                                   Versus

      Medical Superintendent Deen Dayal
      Upadhyay Hospital & Others                            ... Respondents
                        Through: Ms. Jyoti Singh, Advocate for respondents No.1
                                 & 2.



CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment? No

2.    To be referred to the reporter or not? No

3.    Whether the judgment should be reported
      in the Digest? No


RAJIV SAHAI ENDLAW, J.

1 Petition under Section 9 of the Arbitration Act, 1996 seeking

the relief of restraining the respondents No.1 and 2 i.e. Medical

Superintendent Deen Dayal Upadhyay Hospital, Delhi and the

Secretary, Health and Family Welfare, Government of NCT of Delhi,

from encashing the Performance Bank Guarantee No.CBG 343/2004

dated 12th November, 2004 in the sum of Rs.25,53,750/- issued by

the respondent No.3 Corporation Bank, Bangalore at the instance of

the petitioner in favour of respondent No.1 i.e. Medical

Superintendent, Deen Dayal Upadhyay Hospital, Delhi, is sought.

Disputes and differences are stated to have arisen between the

petitioner and the respondents No.1 & 2 out of a purchase order

placed by the respondents No.1 and 2 on the petitioner. The said

purchase order is stated to be containing a clause for arbitration.

2 In terms of the aforesaid purchase order, 80% of the price of

equipment to be supplied by the petitioner was to be paid by the

respondents No.1 and 2 to the petitioner against shipping documents

and the balance 20% within 30 days of i) due certification of the

successful completion of proving test in which the performance of

the machines supplied was to be demonstrated after commissioning

at the premises of the respondent No.1; and ii) the submission of

bank guarantee for 10% of the value of the contract indemnifying the

purchaser against all losses during the guarantee period stipulated

in the warranty clause.

3 The petitioner arranged for the issuance of the bank

guarantee, encashment whereof is sought to be restrained in

pursuance to the above.

4 The petitioner has received 80% payment. It is the case of the

petitioner that not-with standing the petitioner having furnished the

bank guarantee, the respondents No.1 and 2 have not released the

balance 20% payment to the petitioner. Attention is invited to the

language of the performance bank guarantee which in recitals states

that the same was being issued in consideration of the respondents

No.1 and 2 having agreed to pay the balance contract price to the

petitioner. Else the said guarantee is unconditional, guaranteeing

payment of the amount thereof to the respondent No.1 on demand

and without demur and merely on receipt of intimation that the

supplier i.e. the petitioner has committed a breach of any of the

contractual obligations.

5 The counsel for the petitioner has contended that since the

consideration for furnishing the bank guarantee was the release of

the balance 20% payment and which has admittedly not been

released, the petitioner has become entitled to the order restraining

the encashment of the bank guarantee. That is the case set up in the

petition also.

6 This court vide ex-parte order dated 28th November, 2008

restrained the encashment of the bank guarantee. Since the bank

guarantee was taken to be valid till 9th November, 2009, perhaps

need was not felt to make the said order conditional to keeping the

bank guarantee alive.

7 The respondents No.1 and 2 have filed a reply to the petition.

They have contended that the balance 20% payment was not

released to the petitioner because the equipment supplied was in

fact not the equipment ordered and had several deficiency and

missing parts and had also failed to perform as per the specification.

It is further the case of the respondents No.1 and 2 that though the

maintenance charges have also been charged by the petitioner in

advance but the petitioner has failed to provide any maintenance

services whatsoever. The respondents No.1 and 2 thus justified the

issuance of the letter dated 7th November, 2008 to the respondent

No.3 bank intimating that the petitioner had failed to fulfill the

contract obligations and requiring the respondent No.3 bank to

release the amount of bank guarantee in favour of the petitioner.

8 The counsel for the petitioner at the outset stated that he has

filed the rejoinder to the reply of the respondents No.1 and 2.

However the said reply was not on record. Since there was an ex-

parte order restraining encashment of bank guarantee, it was not

felt prudent to adjourn the matter and a photocopy of the rejoinder

has been taken on record in the court and kept on file. The counsel

for the respondent No.3 bank stated that he did not need to file any

reply and will be bound by the orders of this court. The counsels for

the parties have been heard. The counsel for the petitioner has

reiterated that the respondents No.1 and 2 having not released the

balance 20% payment of the equipment and which was the

consideration for issuance of the bank guarantee are not entitled to

encash the same. The counsel for the respondents No.1 and 2 has

read from her reply.

9 At the outset I may state that the law with regard to

injunctions in the matter of bank guarantees is now well settled. The

Supreme Court and the other courts have laid down that the courts

ought not to interfere lightly in the same and only ground in fact laid

down for interference by the court is, a fraud of egregious nature so

as to vitiate the underlying transaction and the very issuance of bank

guarantee. The said fraud is not to be in the encashment of the bank

guarantee but has to be in obtaining the bank guarantee. Reference

in this regard can be made to Himadri Chemicals Industries Ltd.

Vs. Coal Tar Refining Company AIR 2007 Supreme Court 2798

and UP Co-operative Federation Limited Vs. Singh Consultants

& Engineers PA Limited, 1988 (1) SCC 174 and UP State Sugar

Corporation Vs. Sumac International Limited 1997 (1) SCC 568

amongst others.

10 What is peculiar to the present case is that even in the petition

there are no averments of fraud of such nature. In the absence of

fraud, merely because the disputes have arisen between the parties

and the beneficiary is alleged to be fraudulently encashing the bank

guarantee does not become a ground for the court to restrain

encashment thereof. If that were to be permitted, it would interfere

with the very fabric of commerce and trade. Such unconditional bank

guarantees are generally taken to protect the beneficiary, when

payments are being made in advance, as in this case also.

11 Though in the absence of any averments of fraud, the petition

ought to be dismissed summarily but since the courts have in a few

cases held special equities to be also a ground for interfering in the

bank guarantee need is felt to discuss the ground taken by the

petitioner for restraining encashment.

12 The contention of the petitioner of the consideration for the

issuance of bank guarantee being the release of balance 20%

payment is not found to be correct. The balance 20% payment was

to be released subject to the petitioner satisfying two conditions i.e.

furnishing the bank guarantee and secondly obtaining due

certification of successful completion of machines performance after

commissioning. There is no averment that such certification has

been obtained by the petitioner. While the petitioner blames

respondents No.1 and 2 for the same, the said respondents contend

otherwise. That is to be gone into in the arbitration proceedings and

not in these proceedings.

13 Though undoubtedly the bank guarantee mentions only the

release of balance 20% payment as the consideration therefore but

in my view the said bank guarantee cannot change the agreement

between the parties. The bank guarantee is neither signed by the

petitioner nor by the respondents No.1 and 2. Thus it cannot change

the agreement between the parties.

14 The mere fact that the bank guarantee does not mention the

complete agreement between the parties or mentions only a part of

the consideration is no ground in equity or otherwise for interfering

with the same.

15 Even otherwise the mentioning of a wrong consideration in a

document does not prevent the parties from showing the real

consideration. In this regard see State Bank of India Vs. Premco

Saw Mill AIR 1984 Guj. 93 (DB).

16 Moreover we are in this case not concerned with what was the

consideration for issuance of the bank guarantee. It is not the case

where the bank guarantee is being sought to be voided for being

without consideration. Payment under the bank guarantee is sought

to be restrained. In judging the same, the reason for issuance of the

bank guarantee is not material.

17 The result of the aforesaid discussion is that the petitioner is

not entitled to the relief claimed in as much as no case for

restraining encashment of bank guarantee is made out.

18 The counsel for the petitioner has during the hearing

contended that the respondent No.3 bank had pursuant to the letter

of invocation of the petitioner debited the account of the petitioner

with the amount of the bank guarantee. However payment under the

bank guarantee could not be made to the respondents No.1 and 2

owing to the ex-parte order aforesaid of this court. During the

hearing it has transpired that respondent No.3 bank has kept the

amount of the bank guarantee in a FDR. The Supreme Court recently

in Abhimanyoo Ram Vs. State of U.P. 2009 (III) Apex Decisions

(SC) 41 has upheld the order of the High Court holding that the

petitioner cannot be permitted to draw the benefit of interim order

when petition is finally dismissed. I have also in Green Delhi BQS

Ltd. Vs. DTC OMP No.614/2008 decided on 26th March, 2009 while

finally dismissing the petition seeking restrain on encashment of

bank guarantee imposed interest @ 9 % per annum on the petitioner

for delay occasioned in the beneficiary receiving the amount of the

bank guarantee owing to ex-parte order obtained from the court.

Following the said dicta, I hold that the respondent No.3 bank shall

along with the amount of the bank guarantee also pay to the

petitioner the interest accrued on the FDR made of the amount of

the bank guarantee.

19 The petition is dismissed. The respondents No.1 and 2 are also

held entitled to costs of these proceedings of Rs.25,000/- from the

petitioner.

RAJIV SAHAI ENDLAW (JUDGE) July 31, 2009 J