Delhi High Court
Engineering Projects(India) ... vs Mizoram Rural Bank on 10 October, 2017
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Decided on: 10th October, 2017
+ CS(OS) 2038/2009
ENGINEERING PROJECTS(INDIA) LIMITED ..... Plaintiff
Represented by: Mr. Shekhar Gupta and Mr.
Mohd. Talha, Advocates.
versus
MIZORAM RURAL BANK ..... Defendant
Represented by: Ms. Biji Rajesh and Mr.
Pushkar Taimni, Advocates.
CORAM:
HON'BLE MS. JUSTICE MUKTA GUPTA
MUKTA GUPTA, J. (ORAL)
I.A. No. 16511/2009 (under Order XXXVII Rule 3 (5) CPC)
1. The plaintiff has filed the present suit under Order XXXVII CPC
seeking a decree against the defendant bank for a sum of ₹1,18,37,396/-
which included the principal amount of ₹1,05,69,102/- along with interest
@18% per annum w.e.f. 1st January, 2009 to 31st August, 2009 amounting to
₹12,68,293/- based on the four bank guarantees issued by the defendant
bank.
2. The claim of the plaintiff in the suit is that the plaintiff is a
Government of India enterprise and a company incorporated under the
Companies Act engaged in the business of carrying out large scale contracts
of construction. The plaintiff company had awarded and issued work order
vide PO No. NRO/CON/496/0264 dated 24th January, 2006 in favour of one
M/s R.H. Construction through its proprietor Mr. Rohmingliana for
construction of border road and fencing along Indo-Bangladesh border in
Mizoram State. In terms of Clause 2 of the work order dated 24th January,
2009 the contractor was required to submit security deposit bank guarantee
equal to 5% of the contract value. Accordingly the defendant bank issued
one irrevocable and unconditional bank guarantee dated 13th January, 2006
for an amount of ₹46,40,000/- in favour of the Chairman and Managing
Director of the plaintiff company. Further in terms of Clause 8 of the work
order dated 24th January, 2006 three more irrevocable unconditional bank
guarantees were issued. Thus by the four unconditional and irrevocable
bank guarantees defendant bank had undertaken to indemnify the plaintiff
company. A letter of confirmation bearing No. VVK/BN/68 dated 20th
January, 2006 was issued to the plaintiff confirming the issuance of the first
two bank guarantees followed by another letter dated 6 th June, 2008
confirming the issuance of another two bank guarantees. However,
defendant bank issued a letter dated 12th January, 2009 informing the
plaintiff that they would not further extend the bank guarantee unless the
contractor deposits 100% security money with the defendant bank. Based
on the four bank guarantees, the plaintiff filed the present suit.
3. In the leave to defend application two stands have been taken by the
defendant bank, firstly that the four bank guarantees were executed by a
person not duly authorised hence the bank guarantees were neither valid nor
enforceable and further executed with malafide intention by the officials of
the defendant bank in collusion and in connivance with the plaintiff and the
contractor. In the affidavit and the additional affidavit filed the defendant
bank also claims that the four bank guarantees were forged and fabricated as
the inquiries revealed that no official record in respect of these four bank
guarantees was maintained.
4. The law in respect of grant of leave to defend has been settled by the
Hon'ble Supreme Court in the decision reported as 2017(1) SCC 568 IDBI
Trusteeship Services Ltd. vs. Hubtown Ltd. as under:
17. Accordingly, the principles stated in para 8 of Mechelec
case [Mechelec Engineers & Manufacturers v. Basic Equipment
Corpn., (1976) 4 SCC 687] will now stand superseded, given the
amendment of Order 37 Rule 3 and the binding decision of four
Judges in Milkhiram case [Milkhiram (India) (P)
Ltd. v. Chamanlal Bros., AIR 1965 SC 1698: (1966) 68 Bom LR
36] , as follows:
17.1. If the defendant satisfies the court that he has a substantial
defence, that is, a defence that is likely to succeed, the plaintiff is
not entitled to leave to sign judgment, and the defendant is
entitled to unconditional leave to defend the suit.
17.2. If the defendant raises triable issues indicating that he has
a fair or reasonable defence, although not a positively good
defence, the plaintiff is not entitled to sign judgment, and the
defendant is ordinarily entitled to unconditional leave to defend.
17.3. Even if the defendant raises triable issues, if a doubt is left
with the trial Judge about the defendant's good faith, or the
genuineness of the triable issues, the trial Judge may impose
conditions both as to time or mode of trial, as well as payment
into court or furnishing security. Care must be taken to see that
the object of the provisions to assist expeditious disposal of
commercial causes is not defeated. Care must also be taken to
see that such triable issues are not shut out by unduly severe
orders as to deposit or security.
17.4. If the defendant raises a defence which is plausible but
improbable, the trial Judge may impose conditions as to time or
mode of trial, as well as payment into court, or furnishing
security. As such a defence does not raise triable issues,
conditions as to deposit or security or both can extend to the
entire principal sum together with such interest as the court feels
the justice of the case requires.
17.5. If the defendant has no substantial defence and/or raises no
genuine triable issues, and the court finds such defence to be
frivolous or vexatious, then leave to defend the suit shall be
refused, and the plaintiff is entitled to judgment forthwith.
17.6. If any part of the amount claimed by the plaintiff is
admitted by the defendant to be due from him, leave to defend the
suit, (even if triable issues or a substantial defence is raised),
shall not be granted unless the amount so admitted to be due is
deposited by the defendant in court.
5. As noted above two stands have been taken by the defendant bank,
firstly, that though the four bank guarantees were issued but they were not
by the duly authorised and competent officer and were issued in connivance
and collusion with the plaintiff and contractor and secondly, that the four
bank guarantees were forged and fabricated for the reason no corresponding
records of the four bank guarantees were available with the bank.
6. Plaintiff has placed on record not only the four bank guarantees but
also letter dated 13th February, 2009 sent by the Chairman of the defendant
bank noting that the four bank guarantees in question were issued by their
Vaivakawn Branch, jointly by the Branch Manager and the second officer,
however, they were not vested with the power to issue bank guarantees.
7. Considering the material placed on record, it is a fit case where leave
to defend is required to be granted in view of the law laid down by the
Supreme Court in IDBI Trusteeship Services (supra). However, the fact
remains that the plaintiff proceeded with the work based on the four bank
guarantees and hence it is a case for grant of conditional leave to defend to
the defendant bank in view of its two contrary stands. The defendant bank is
thus granted leave to defendant subject to its depositing a sum of
₹1,18,37,396/- the amount due on the date of filing of the suit with the
Registrar General of this Court within eight weeks from today. The amount
so deposited would be kept in a fixed deposit.
8. Application is disposed of.
CS(OS) 2038/2009
1. Since the dispute in the present suit is a commercial dispute, Registry
will re-number the suit as a Commercial Suit.
2. Written statement be filed within 30 days.
3. Replication be filed within three weeks thereafter.
4. Admission/denial of documents has already been concluded.
5. List the suit for settling the issues on 8th December, 2017.
6. Order dasti.
(MUKTA GUPTA)
JUDGE
OCTOBER 10, 2017
'vn'
