M/S Gayatri Projects Limited vs M/S Enseft Bituminous Products ...
2012 Latest Caselaw 5206 Del

*          HIGH COURT OF DELHI: NEW DELHI

%                                           Judgment pronounced on: 03.09.2012

+              I.A. No.12470/2009 in CS(OS) No.1825/2009

       M/S GAYATRI PROJECTS LIMITED                 ..... Plaintiff
                     Through: Mr. Arun Kathpalia, Adv. with
                              Mr. Angad Mehta, Advocate

                       versus

       M/S ENSEFT BITUMINOUS PRODUCTS PVT LTD & ANR
                                                 ..... Defendants
                     Through: Mr. G.L.Rawal Sr. Advocate with
                              Mr. Satish Kr. Bhatti, Advocate for
                              D-1.
                              Mr. Vipin Jai, Advocate for D-2.

CORAM:
HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J.

1. The suit along with the interim application first time came up before the Court on 23rd September, 2009. The Court issued summons in the main suit and notice in the interim application. The ex parte ad-interim injunction order was also issued against defendant No.1 restraining it from encashing the impugned Bank Guarantee issued by defendant No.2 and the defendant No.2 was also restrained from making any payment under the said Bank Guarantee to defendant No.1.

2. After the admission/denial of the documents, the matter came up before the Court for framing of issues as well as for hearing of the interim

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.1 of 20 application. While hearing of the interim application earlier it was agreed by both the parties to the effect that instead of hearing the injunction application, let the arguments be heard in the main suit itself, as it involved purely legal issue. However, the said statement was withdrawn later on in view of various documents filed during the course of hearing. Thus, I propose to decide only the interim application being I.A. No.12470/2009.

3. The plaintiff filed the suit for permanent injunction restraining defendant No.1 from encashing the Bank Guarantee No.2521IGFIN001208 dated 22nd September, 2008 issued by defendant No.2. A prayer is also made for restraining defendant No.2 from making any payment to defendant No.1 under the said Bank Guarantee and a decree for declaration is sought declaring the invocation dated 19th September, 2009 to be illegal.

4. The brief facts as per the plaint are as under:-

(a) That after negotiations, the plaintiff issued two purchase orders Nos.GPL:CO:CCT:PO:EBPPL:08-09:038 and GPL:CO:CCT:PO:EBPPL : 08-09:039, both dated 2nd August, 2008 on defendant No.1 for supply of PMB-40 (SBS) (Bulk). The defendant No.1 accepted the terms and conditions of the aforementioned purchase orders. The main common terms and conditions of two purchase orders are mentioned below :

1. Scope of supply 6000 MT (we will confirm to place the total requirement of 13000 MT but P.O.‟s will be released on piecemeal)

2. Delivery As per our indent depends on the progress of the work.

3. Payment 30 days interest free credit. The payment for the supplies of the calendar (1st to 30th) month shall be paid on or before 15th of the following month. A Bank Guarantee will be provided equivalent to the value of our average monthly consumption.

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.2 of 20

4. Other terms If there is any upward or downward change in the price of Bitumen 60/70, the price of PMB-40 will also change accordingly. All disputes are subject to Jhansi jurisdiction.

Force Majeure clause applicable.

(b) As per the purchase orders, the defendant No.1 was to supply 6000 MT. of PMB-40 (with SBS) (bulk) as per IRC:SP:53:2004 and IS:15462 made out of Bitumen 60/70, for UP-2 and UP-3 Road Project Works. Further, the defendant No.1 was to supply the material only upon receipt of and as per the indent of the plaintiff, depending on the progress of the works.

(c) That the time was not the essence of the contract, as the plaintiff had not committed any specified period for procurement of 6000 MT of Bitumen product. Similarly, defendant No.1‟s obligation to supply the product and the plaintiff‟s liability to pay would arise only on an indent being placed by the plaintiff. The agreement also provided a clause that defendant No.1 would give 30 days‟ interest free credit and the parties agreed to adjust price variation of Bitumen product of the purchase order dated 2 nd August, 2008. As security towards the credit, the plaintiff was to furnish a Bank Guarantee equivalent to the value of average monthly consumption.

(d) Pursuant to the same, a Bank Guarantee No.2521IGFIN001208 dated 22nd September, 2008 for sum of Rs.2.5 crores was issued by defendant No.2 in favour of defendant No.1 against the PMB-40 to be supplied on credit with respect to purchase orders dated 2nd August, 2008 which was valid upto 21st September, 2009.

(e) The plaintiff‟s case is that as per negotiations the defendant No.1 was to supply PMB-40 (SBS) as per the standard specifications to the satisfaction of NHAI who had to approve the job mix formally submitted to

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.3 of 20 it by the plaintiff, and only upon such clearance being granted by NHAI could the plaintiff use the job mix formally for the execution of road works. Therefore, unless the NHAI granted an approval, no indent could be placed upon defendant No.1. The plaintiff submits later on it was permitted by the NHAI to use PMB-40 (Plastomer) instead of PMB-40 (SBS) and in view thereof, plaintiff and defendant No.1 started negotiating for supply of PMB (Plastomer) instead of PMB-40 (SBS). After discussing many times, vide an email dated 15th April, 2009 defendant No.1 submitted its final offer for supply of PMB-40 (Plastomer). The said email also takes note of discussions for supersession of the purchase orders dated 2 nd August, 2008. The plaintiff accepted the terms of the offer and issued a P.O. No.GPL:CO:CCT:PO:EBPPL:09-10:010 dated 24th April, 2009 for the supply of PMB-40 (Plastomer). Fresh purchase order dated 24th April, 2009 issued by the plaintiff clearly contained the clause that the earlier two purchase orders dated 2nd August, 2008 stood withdrawn and nullified. There was no protest and objection raised by the defendant No.1 in this regard against the clause of supersession.

5. The plaintiff received a letter dated 19th September, 2009 from defendant No.1 who sought to invoke the Bank Guarantee given by the plaintiff under the erstwhile purchase orders dated 2nd August, 2008. Therefore, a cause of action was arisen to file the present suit.

6. Mr. Rawal, learned Senior counsel appearing on behalf of defendant No.1 has made his submissions on the basis of following defences :

(a) The defendant No.1 in view of purchase orders dated 2nd August, 2008 manufactured the goods but the same were not lifted by plaintiff resulting losses more than the amount of the Bank

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.4 of 20 Guarantee. The said goods of the nature of the contract were tailor made goods and cannot be put to use by others. The details of which are mentioned in paras 2 to 5 of the written statement. It has been pleaded therein that the defendants have suffered losses of about Rs.5 crore. It is also contended in the written statement that the plaintiff is guilty of suppression of facts as it has placed order in pursuance to the contract of 2nd August, 2008 for not only manufacturing of the goods but fixed the schedule for supply. These material facts have been concealed which itself disentitled the plaintiff to have any relief of injunction which is of discretionary nature.

(b) Defendant No.1 also contended that the alleged purchase order of 24th April, 2009 is a counter offer and not contract and contended that the offer was made by defendant No.1 to the plaintiff vide email of 15th April, 2009 and that proposal was conditional and the order must be placed of the entire quantity of 13000 MT whereas the alleged purchase order allegedly of 24th April, 2009 was not for entire 13000 MT and rather for 5500 MT. Thus, it was a counter offer till it was not accepted as it was, as it appears from the bottom of the alleged purchase order itself where the plaintiff requested while saying therein "kindly return the duplicate copy of the order duly signed as a token of acceptance". Admittedly, it was never sent back and not signed as it was a counter offer and different to conditional offer of defendant No.1 dated 15 th April, 2009 and was not acceptable. Hence, no fresh contract was arrived upon.

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.5 of 20

(c) The invoices as printed are sales-tax invoices which have been cut and have been converted into proforma invoices. The same is sort of offer for particular type of goods for consideration. If it was actually a contract of 24th April, 2009 as contended by the plaintiff, there was no occasion of issuing proforma invoice rather normal invoice would have been issued.

7. It is argued by Mr. Rawal that the plaintiff is also guilty of concealment of material facts. Thus, the plaintiff is not entitled for any relief. Reliance is placed upon the documents on this aspect which was not pleaded in the written Statement but placed on record i.e. email of 20th September, 2008 by virtue of which an offer was placed by plaintiff in implementation of the contract of 2nd August, 2008 for the supply of quantity of 2000 MT with a schedule of supply of October, November, December, 2008 and January, 2009 (wrongly printed as January, 2008). There is another document dated 19th October, 2008 referred by defendant No.1 where the plaintiff intended to change the schedule of supply and similar position of the 2nd December, 2008.

8. It is argued that even after invocation of Bank Guarantee by defendant No.1s‟ letter of 19th September, 2009, plaintiff made offer in writing to defendant No.1 by means of three communications to defendant No.1 i.e. of 20th September, 2009, 21st September, 2009, and 22nd September, 2009 wherein, as demonstrated before this Court that in the said letter written by DGM (Purchase) of plaintiff stating therein that the Bank Guarantee can further be renewed for a further period of 3-6 months and wanted to have indulgences of the defendant No.1 to postpone encashment of Bank

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.6 of 20 Guarantee. These letters have been filed by defendant No.1 during the course of hearing of interim application.

9. Lastly, it was argued that the Bank Guarantee has been invoked by letter dated 19th September, 2009 strictly in terms and conditions of the Bank Guarantee. He referred para Nos. 1 and 2 of the Bank Guarantee in order to impress the court that same was invoked strictly as per terms and conditions whereby the defendant No.2 undertakes to pay amount due and payable under the guarantee without any demure merely on a demand from seller also stating that amount claimed is due by way of loss or damages caused to or would be caused to or suffered by the seller by reason of breach of the said buyer of any terms and conditions contained in the agreement. As the defendant No.1 has suffered loss and damages caused, the defendant No.1 was fully justified in invoking the Bank Guarantee in question which is an independent contract and has nothing to do with underlying dispute between the parties. The defendant No.1 is obliged to release the payment. The plaintiff, if having any grievance with regard to the two purchase orders may initiate the separate proceedings for recovery of the amount and the same would be decided by the court as per its own merit.

10. As far as the proposition of law on the issue of invoking the Bank Guarantee is concerned, as argued by Mr. Rawal, there is no dispute between the parties. I also agree with Mr. Rawal that it is an independent agreement which has nothing to do with merit of the case and underlying of condition in case the Bank Guarantee is unconditional as bank guarantee is separate, distinct and independent contract of the main contract.

11. There are two exceptions to the general rule that the Court should not interfere with the encashment of the Bank Guarantee, first being fraud which

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.7 of 20 must be of egregious nature or grossest of the proportion as distinguished from the ordinary fraud and second; being special equities/irretrievable injury. Both the exceptions are interdependent of each other meaning thereby that absence of fraud will not lead to irretrievable injury.

12. The first exception which has been carved out by the Courts is the case of fraud of egregious nature meaning thereby that the said fraud must be the fraud of gross nature which shakes the conscience of the Court and the said fraud must be known to the parties including party representing as well as to the bank. Under the said circumstances, if the said fraud is established, the Court can interfere with the bank guarantee. The legal proposition on the fraud has been laid down in (1988) 1 SCC 174, UP Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. in which has been elaborated by his Lordship Jagannath Shetty (as his Lordship then was) by stating the following :

"The wholly exceptional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the bank to have it discharged."

13. Under these circumstances, it is settled law that the plea of fraud must be in the nature of an egregious nature as to vitiate the entire underlying transaction of the bank guarantee. It is fraud of the beneficiary and not the fraud of somebody else that would make the Court to grant the order of

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.8 of 20 injunction as asked for. If the bank detects with the minimal investigation, the fraudulent action of the seller, the payment could be refused.

14. The said legal proposition has been reiterated by the Supreme Court in (1994) 6 SCC 597, State Trading Corporation of India Ltd. v. Jainsons Clothing Corporation & Another, the relevant paragraphs of the judgment are worth mentioning:

"8. The grant of injunction is a discretionary power in equity jurisdiction. The contract of guarantee is a trilateral contract which the bank has undertaken to unconditionally and unequivocally abide by the terms of the contract. It is an act of trust with full faith to facilitate free flow of trade and commerce in internal or international trade or business. It creates an irrevocable obligation to perform the contract in terms thereof. On the occurrence of the events mentioned therein the bank guarantee becomes enforceable. The subsequent disputes in the performance of the contract does not give rise to a cause nor is the Court justified on that basis, to issue an injunction from enforcing the contract, i.e. bank guarantee. The parties are not left with no remedy. In the event of the dispute in the main contract ends in the party's favour, he/it is entitled to damages or other consequential reliefs.

9. It is settled law that the Court, before issuing the injunction under Order 39, Rules 1 and 2, CPC should prime face be satisfied that there is triable issue strong prima facie case of fraud or irretrievable injury and balance of convenience is in favour of issuing injunction to prevent irremediable injury.

The Court should normally insist upon enforcement of the bank guarantee and the Court should not interfere with the enforcement of the contract of guarantee unless there is a specific plea of fraud or special equities in favour of the plaintiff. He must necessarily plead and produce all the necessary evidence in proof of the fraud in execution of the contract of the guarantee, but not the contract either of the

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.9 of 20 original contract or any of the subsequent events that may happen as a ground for fraud."

15. Now, I have to consider as to whether the plaintiff‟s case is covered in any of the exceptions i.e. case of fraud or special equities or not.

16. In a nutshell, the case of defendant No.1 is that there existed no concluded contract between parties in respect of the purchase order dated 24th April, 2009 for PMB (Plastomer) and the purchase order bearing No.GPL:CP:CCT:PO:EBPPL:09-10:010 dated 24th April, 2009, proforma invoices dated 12th August, 2009 and 26th August, 2009 were only offers and counter offers, as the purchase order dated 24th April, 2009 had never been counter-signed by defendant No.1. Thus, no concluded contract subsists.

17. The issue before this Court in the present case for consideration is whether, in fact and in law, the earlier two purchase orders dated 2 nd August, 2008 stood superseded and withdrawn by the later purchase order dated 24th April, 2009 and whether the invocation of the Bank Guarantee is illegal and fraudulent.

18. Admittedly, after the two purchase orders dated 2 nd August, 2008 issued, the Bank Guarantee was issued by defendant No.2 in favour of defendant No.1 on 22nd September, 2008 in pursuance of two purchase orders. It appears from the record that an e-mail was issued by defendant No.1 to the plaintiff‟s representative Mr.S.K.Soni dated 15th April, 2009 with regard to supply of PMB-40 (Plastomer), the relevant extracts of which read as under:-

"2. Supply of PMB (Plastomer) as per performance specifications We can also offer your company a conversion price of INR

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.10 of 20 5140 \ MT for above mentioned item. The specifications for the same are as per relevant IRC & IS Codes. The above offer is conditional for the entire contract of 13,000 MT being offered to us. We have on all fronts, so far, supported your company in every way possible and have provided the best terms & conditions available in the industry. To remind you again, we have also invested heavily in material, finance & commitments based on your requirements and for which, we expect your company to put its best foot forward to resolve issues pertaining to this contract in view of mutual benefit to both sides.

In addition to the above, our management has agreed to provide an additional discount of 1.5% of the above values with advance payment one week before scheduled supply. We await for your early response."

19. The plaintiff has placed on record the purchase order dated 24th April, 2009 issued to defendant No.1 which contains the clause that "due to change in the decision for using PMB-40 (P) in place of PMB-40 (with SBS) and to the discussion the plaintiff had with the defendant No.1, therefore, they placed their order for supply of PMB-40 (Plastomer) (Bulk) as per IRC:SP:53:2004, on EX MI basis from defendant No.1‟s Chhata works to the plaintiff‟s UP-3 Road Project Works. By reason of the effect duly explained and as agreed, the P.O Nos.GPL:CO:CCT:PO:EBPPL:08- 09:038 and GPL:CO:CCT:PO:EBPPL:08-09:039, both dated 2nd August, 2008 have been withdrawn and nullified". The terms and conditions are mentioned in the Purchase Order dated 24th April, 2009.

20. Along with the said purchase order dated 24th April, 2009 an annexure containing the details of basic price of Bitumen 60/70-Bulk as on 16th April, 2009 as per IOCL-Mathura as on 24th April, 2009 was enclosed. Defendant

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.11 of 20 No.1 thereafter sent an e-mail dated 12th August, 2009 to the plaintiff attaching therewith the Proforma Invoice against the booking order dated 24th April, 2009. The description of the goods in the said proforma invoice was mentioned as "Polymer Modified Bitumen - (P) - 40" and the quantity mentioned was 30 MT for assessable value/Unit Rs.35,534/- totaling to Rs.10,66,020/-. Another e-mail dated 26th August, 2009 was sent by defendant No.1 to the plaintiff‟s representative Mr. Soni alleging therein that "Kindly do the needful at the earliest". On the next day, i.e. 27 th August, 2009, reply was given by the plaintiff to defendant No.1 to the effect that they would like to give the details of calculation for the rate.

21. Thereafter, the letter dated „Nil‟ was issued by defendant No.1 to the plaintiff. Though the said letter was not admitted by defendant No.1 at the time of admission/denial of documents.

22. The extracts of the said letter are reproduced here as under:-

"Dear Sir As per our discussions held, we were requested to supply 30 M.T. of PMB-40 (Plastomeric) the UP-3 Lalitpur Project on or before August 14th for trial usage, to be followed by major quantities of supply.

In view of the same, we requested you to kindly allow us to charge our earlier mentioned losses on purchase of bitumen via our past e-mails & letters on numerous occasions, but were refused to do so by your good-self, since you promised the issue would be dealt at a later date.

Please note that we did not receive any Bank Guarantee for the new Purchase Order given to us dated 24.04.2009, therefore, requested for an advance payment of 10,99,125/=, on or before the dispatch date, as per the value of material. A Performa Invoice was raised and mailed to your office for the same on

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.12 of 20 12th August, 2009.

The said amount was transferred into our account by your office on 22/08/09.

We had kept in stock PMB-40 (Plastomer) Approx 30 MT for supply, but you were unable to transfer the money as per our Performa Invoice dated 12th August, 2009. So, we had to sell the material to a local customer because stocking PMB at a temperature of 180 c till the day of this message would have proved very costly, for which we would definitely not be compensated (in purview of our earlier experiences).

As also known to you, I.O.C.L. Mathura has revised the price w.e.f. 16th August, 2009.

Now we are sending the revised Performa Invoice for your ready reference and request the transfer of our remaining amount, enabling us to instantly dispatch your required quantity.

Also, we request you to kindly arrange for the new Bank Guarantee and new supply schedule (which was provided earlier but not abided with)."

23. Along with the said letter, a proforma invoice was also attached by defendant No.1 to the plaintiff increasing therein the value of the product from Rs.35,534/- to Rs.38,320/- per MT, totaling to Rs.11,49,600/-.

24. Mr. Kathpalia, learned counsel appearing on behalf of the plaintiff has argued that the exception of fraud is directly applicable to the facts and circumstances of the present case. His submission is that the two purchase orders dated 2nd August, 2008 are replaced by another purchase order dated 24th April, 2009 as per the discussion and agreement between the parties and the defendant No.1 was aware about the same, as an undated letter written

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.13 of 20 by defendant No.1 to the plaintiff referring the joint meeting held at Jhansi on 7th August, 2009 is on record wherein it was mentioned that defendant No.1 was not insisting for any Bank Guarantee for the due purchase order given to it dated 24th April, 2009, rather it requested the plaintiff for an advance payment of Rs.10,99,125/- on or before the dispatch date as per the value of the material. The proforma invoice was also raised to the plaintiff‟s office on 12th August, 2009. It was also mentioned in the letter that the said amount has been transferred by the plaintiff.

25. He has also argued that in case letters dated 2 nd December, 2008, 13th January, 2009 and 15th April, 2009 read with letters dated 12th August, 2009 and 26th August, 2009 and also invoices dated 12th August, 2009 and 26th August, 2009 are read together, there is no doubt in any manner that the purchase order dated 24th April, 2009 is a concluded contract by superseding the earlier purchaser orders dated 2nd August, 2008. He further submits that the reasons submitted by him for superseding the earlier purchase orders were that after December, 2008 the parties by negotiation decided the cancellation of the purchase orders dated 2nd August, 2008 replacing the material with PMB-40 (Plastomer) on fresh terms and conditions to be agreed upon. The said letters referred by him show that various offers and counter-offers were made with regard to the price of supply as well as financial terms of offer as mentioned in the letter dated 15 th April, 2009 of defendant No.1. The plaintiff thereafter accepted the offer. He further submits that no cogent evidence has been produced by the defendant No.1 to show that the defendant No.1 has suffered any loss and damages except, it was pleaded in the written statement.

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.14 of 20

26. This Court is conscious about the fact at this stage, in case any issue is decided on merit, it would prejudice the case of either party. At present only a prima facie view is to be gathered from the facts of the case as to whether the plaintiff has made out any case for grant of injunction within four corners of Order XXXIX, Rules 1 and 2 CPC and whether the defendant No.1 in view of settled law has rightly invoked the Bank Guarantee or the plaintiff‟s case is covered in any exceptions i.e. case of fraud or special equity in law. While deciding the present application, only prima facie findings are to be arrived at.

27. After having gone through the entire pleadings and material placed on record, prima facie I am not inclined to vacate the interim order issued by the Court on 23rd September, 2009. My reason for continuing the interim order during the pendency of the suit are given as under :-

(a) That in the purchase order dated 24th April, 2009 there is a specific term that the earlier purchase orders dated 2nd August, 2008 have been withdrawn and nullified. The said purchase order was admittedly received by the defendant No.1 who also received part payment, despite that no goods were delivered. Further, there was no protest raised to the clause mentioned in the fresh purchase order dated 24th April, 2009 which was partly acted upon as per conduct of the parties.

(b) It was never stated by defendant No.1 even in the single communication that purchase orders of supply of PMB-40 (SBS) were not superseded. The fresh purchase order dated 24th April, 2009 is an independent contract between the parties.

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(c) In fact, under new purchase order dated 24th April, 2009 the defendant No.1 raised a proforma invoice for a sum of Rs.10,99,125/- pursuant to and with specific reference to purchase order No.GPL:CO:CCT:PO:EBPPL:09-10:010 dated 24th April, 2009 for the supply of 30 MT of PMB-40 (Plastomer) and in terms of the invoice so raised on 12th August, 2009, the plaintiff remitted a sum of Rs.10,99,125/- which was duly received by the defendant No.1 who also raised a revised proforma invoice in the sum of Rs.11,83,860/- for the aforesaid 30 MT, again with specific reference to the purchase order No.GPL:CO:CCT:PO:EBPPL:09-10:010 dated 24th April, 2009 and defendant No.1 did not deny that defendant No.1 had not received a sum of Rs.10,99,125/-. There is also a document placed on record in order to show prima facie evidence that the defendant No.1 has suffered loss and damages. No doubt, pleadings and letters are placed on record.

28. Mr. Rawal during the course of arguments has referred three letters issued by the plaintiff to defendant No.1 dated 20th September, 2009, 21st September, 2009, and 22nd September, 2009 after invoking the Bank Guarantee by defendant No.1. The said letters no doubt indicate that the plaintiff after receiving the information about the invocation of the Bank Guarantee had requested defendant No.1 to settle the dispute amicably and in the meanwhile, the plaintiff agreed to renew the Bank Guarantee for 3/6 months further.

29. Mr. Kathpalia, learned counsel for the plaintiff agrees that the plaintiff might have written those letters, which are not in his knowledge, in order to

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.16 of 20 resolve the dispute. Since the disputes could not be resolved between the parties, thus, the present suit was filed.

30. Mr. Kathpalia has argued that from the material placed on record and conduct of both parties, it is clear that the purchase order dated 24th April, 2009 constitutes a concluded contract between them as the same was acted pursuant to the said order. He has relied upon the following judgments:-

(a) M/s AP Paper Mills Ltd. vs. The Principal Secretary to Government, Hyderabad & Ors., reported in AIR 1997 AP 257, para 10;

(b) Rama Metal Works vs. The National Small Industries Corporation Ltd., reported in AIR 1977 Kant. 24, paras 2, 3, 8 & 9;

(c) Muhammad Sultan vs. Clive Insurance Co. Ltd. & Ors., reported in AIR 1934 All. 298;

(d) Hindustan Construction Co. Ltd. vs. State of Bihar & Ors., reported in AIR 1999 SC 3710;

(e) D.S. Construction Ltd. vs. Rites Ltd and Anr., reported in 127 (2006) DLT 1;

(f) DLF Industries Ltd. vs. ABN Amro Bank and Ors., reported in 87 (2000) DLT 693;

(g) M/s Banerjee & Banerjee vs. Hindustan Steel Works Construction Ltd. & Others, reported in AIR 1986 Cal. 374;

(h) Satish Chandra Jain vs. National Small Industries Corpn. Ltd. & Ors., reported in AIR 2003 SC 623;

(i) Vishram Arjun vs. Irukulla Shankariah & Anr., reported in AIR 1957 AP 784;

(j) Andheri Bridge View Co-op. Hsg. Society Ltd. vs. Krishnakant Anandrao Deo and Others, reported in AIR 1991 Bombay 129;

(k) Vishwanath vs. Amarlal, reported in AIR 1957 MP 190; and

(l) M/s Trojan & Co. vs. Rm. N.N. Nagappa Chettiar, reported in AIR 1953 SC 235.

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31. The main contention of Mr. Kathpalia is that in case, the purchase order dated 24th April, 2009 along with documents, i.e. communication exchanged between the parties are read together, it is clear that the contracts bearing Nos.GPL:CO:CCT:PO:EBPPL:08-09:038 and GPL:CO:CCT:PO: EBPPL:08-09:039, both dated 2nd August, 2008 stood cancelled and withdrawn by the parties and stood novated by the new contract bearing No.GPL:CO:CCT:PO:EBPPL:09-10:010 dated 24th April, 2009.

32. In the present case, admittedly the Bank Guarantee No.2521IGFIN001208 dated 22nd September, 2008 was issued pursuant to the two purchase orders dated 2nd August, 2008 and in lieu of the supply of PMB-40 (SBS) on credit. Further, the Bank Guarantee was issued to secure supplies on credit. The supplies were contingent upon the plaintiff placing an indent for the same as per clause-5 of the contract dated 2nd August, 2008. Admittedly, no indent was placed or any material supplied. Prima facie, I agree with the submissions of the plaintiff that the following conditions have to be made prior to invocation of the Bank Guarantee:-

(i) An indent was to have been placed upon defendant No.1 by the plaintiff;

(ii) Goods/material ought to have been supplied by defendant No.1 to the plaintiff under these purchase orders; and

(iii) The plaintiff must have defaulted in payment of the materials supplied to it by defendant No.1 under these two purchase orders.

33. Further, it is settled law that in case, the party approaching the Court shows its case in view of special equities in its favour that if injunction is not granted it would suffer irretrievable injustice and if Court is satisfied, the Court can interfere. The fraud which is recognized as an exception to the

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.18 of 20 underlying contract a demand by the beneficiary under the bank guarantee may become fraudulent not because of any fraud committed by a party while executing the underlying contract but the same may become so due to subsequent events.

34. The present case is totally covered within the said exception as mentioned in the preceding para. In the present case, the defendant No.1 at the time of invoking the bank guarantee was fully aware of the fresh purchase order dated 24th April, 2009 as well as clause contained therein. In pursuance to the said purchase order, defendant No.1 has received the part payment. No positive evidence has been placed on record by the defendant No.1 and final goods were ready and offered for delivery to the plaintiff who failed to receive the same. There was no communication from the defendant No.1‟s side that fresh purchase order dated 24th April, 2009 is an independent contract and has nothing to do with earlier two purchase orders dated 2nd August, 2008. In the absence of above, prima facie, I am of the view that the ex-parte interim order issued earlier cannot be vacated.

35. The present application is allowed. Ex-parte order dated 23rd September, 2009 is confirmed. The application I.A. No.12470/2009 is disposed of.

36. The findings arrived at by the Court are tentative and the same shall not have any bearing when the matter would be decided at the final stage on merit.

CS (OS) No.1825/2009

37. List the matter before the Joint Registrar on 3rd October, 2012 for admission/denial of the additional documents filed by defendant No.1. Thereafter, the same shall be listed before the Court on 8th November, 2012

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.19 of 20 for framing of issues and directions for trial.

MANMOHAN SINGH, J.

SEPTEMBER 03, 2012

I.A. No.12470/2009 in CS(OS) No.1825/2009 Page No.20 of 20