Madhya Pradesh High Court
M/S Jyoti Infratech Company vs Director (Ndb Projects) O/O ... on 4 July, 2023
Author: Sushrut Arvind Dharmadhikari
1
IN THE HIGH COURT OF MADHYA PRADESH
AT INDORE
BEFORE
HON'BLE SHRI JUSTICE SUSHRUT ARVIND DHARMADHIKARI
&
HON'BLE SHRI JUSTICE HIRDESH
ON THE 4 th OF JULY, 2023
WRIT PETITION No. 14053 of 2023
BETWEEN:-
M/S JYOTI INFRATECH COMPANY THROUGH ITS
PARTNER MR. RUTUL ARVINDBHAI PRAJAPATI:
REGISTERED OFFICE MANGALDAS ESTATE,
SATYANARAYAN NAGAR, AMRAIWADI, AHMEDABAD
(GUJARAT)
.....PETITIONER
(SHRI JAWAHAR PUROHIT, LEARNED COUNSEL FOR THE PETITIONER .
)
AND
1. DIRECTOR (NDB PROJECTS) O/O ENGINEER IN
CHIEF NIRMAN BHAWAN, ARERA HILLS, BHOPAL
(MADHYA PRADESH)
2. EXECUTIVE ENGINEER MP PWD BRIDGE
DEVELOPMENT DEPARTMENT SHED NO. 8 12
DAFTAR JAWAHAR CHOWK DISTRICT BHOPAL
(MADHYA PRADESH)
3. TEAM LEADER L.N. MALVIYA INFRA PROJECT
PVT LTD. HAVING REGISTERED ADD. AT HC 24
ABHIRUCHI COLONY SUBHASH NAGAR,
DISTRICT BHOPAL (MADHYA PRADESH)
4. BRANCH MANAGER, KOTAK MAHINDRA BANK
LIMITED GROUND FLOOR, PRIME PLAZA OPP.
RAVJIBHAI TOWER MAINGAR AHMEDABAD,
380008 GUJARAT (GUJARAT)
5. THE STATE OF MADHYA PRADESH,THROUGH ITS
PRINCIPAL SECRETARY PWD, NIRMAN BHAVAN,
ARERA HILLS, (MADHYA PRADESH)
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 7/6/2023
5:18:58 PM
2
.....RESPONDENTS
( SHRI ANIKET NAIK APPEARING, LEARNED GOVT. ADVOCATE FOR
THE RESPONDENTS/STATE)
This petition coming on for admission this day, JUSTICE SUSHRUT
ARVIND DHARMADHIKARI passed the following:
ORDER
Heard on the question of admission and interim relief.
The petitioner has filed the present petition under Article 226 of the
Constitution of India praying for the following reliefs:
"(i) That, the Respondent No.1 and 2 may please be
restrained from invoking bank guarantee and forfeiting security
deposits.
(ii) It is therefore most humbly prayed that the Hon'ble Court
may be pleased to direct the Respondent No.1 to form the Dispute
Resolution Board in accordance with the agreed terms of the
contract to settle the disputes between the parties and
(i) Any other relief(s), this Hon'ble Court may deem fit and
proper;
(iv) That, the termination letter dated 06.06.2023 be set
aside."
2. Brief facts of the case are that the petitioner is a registered
partnership firm duly constituted under the provisions of the Partnership Act,
1932 having its registered office at Ahmedabad. A Tender notification was
published by respondent no. 1 for construction of bridges on on the State
Highway and major district roads in Ujjain Distt. (Madhya Pradesh). The
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 7/6/2023
5:18:58 PM
petitioner firm participated in the tender process and was awarded a contract
for construction of aforesaid bridges. In pursuance thereof, the petitioner firm
executed agreement with respondent no.1. All the necessary formalities were
completed including submission of bank guarantee in favour of respondent
no.1. A dispute arose between the parties, as a result of which, the contract has
been terminated by respondent no.3 on 28.04.2023 and process to encash the
bank guarantee and to forfeit the security deposit has been undertaken by the
respondents. Accordingly, the present petition has been filed.
3. Learned counsel for the petitioner submitted that he has no other
alternative remedy seeking redressal of grievance than to approach this Court.
Since as per Clause 20.2 of the Contract, there is a provision for appointment
of a Dispute Resolution Board which has to be constituted within first three
months of the award of construction contract. However, the same has not been
done by the respondents. On these grounds, respondents be restrained from
encashing the bank guarantee.
4. Per contra, Shri Aniket Naik, learned Addnl. Advocate General
vehemently opposed the prayer and submitted that this being a works contract,
the remedy lies before the Madhya Pradesh Madhyastham Adhikaran, in case
the Dispute Resolution Board has not been constituted.
5. Learned counsel for the respondent further contended that so far as
the prayer for stay upon invocation of bank guarantee is concerned, the same
cannot be acceded to in the light of the judgment of Apex Court in the case of
Standard Chartered Bank Vs. Heavy Engineering Corporation Limited
And Another reported in (2020) 13 SCC 574. Relevant paragraphs of the said
judgments are as follows:
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Signed by: SEHAR HASEEN
Signing time: 7/6/2023
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" 19. The law relating to invocation of bank guarantees with the
consistent line of precedents of this Court is well settled and a three‐
Judge Bench of this Court in Ansal Engineering Projects Ltd. Vs. Tehri
Hydro Development Corporation Ltd. and Another3 held thus: "4. It is
settled law that bank guarantee is an independent and distinct contract
between the bank and the beneficiary and is not qualified by the
underlying transaction and the validity of the primary contract between
the person at whose instance the bank guarantee was given and the
beneficiary. Unless fraud or special equity exists, is pleaded and prima
facie established by strong evidence as a triable issue, the beneficiary
cannot be restrained from encashing the bank guarantee even if dispute
between the beneficiary and the person at whose instance the bank
guarantee was given by the bank, had arisen in performance of the
contract or execution of the works undertaken in furtherance thereof.
The bank unconditionally and irrevocably promised to pay, on demand,
the amount of liability undertaken in the guarantee without any demur
or dispute in terms of the bank guarantee. The object behind is to
inculcate respect for free flow of commerce and trade and faith in the
commercial banking transactions unhedged by pending disputes
between the beneficiary and the contractor.
5. .....The court exercising its power cannot interfere with enforcement of
bank guarantee/letters of credit except only in cases where fraud or
special equity is prima facie made out in the case as triable issue by
strong evidence so as to prevent irretrievable injustice to the parties."
(emphasis supplied) 3 1996(5) SCC 450
20. A bank guarantee constitutes an independent contract. In Hindustan
Construction Co. Ltd. Vs. State of Bihar and Others(supra), a two Judge
Bench of this Court formulated the condition upon which the invocation
of the bank guarantee depends in the following terms: "9. What is
important, therefore, is that the bank guarantee should be in
unequivocal terms, unconditional and recite that the amount would be
paid without demur or objection and irrespective of any dispute that
might have cropped up or might have been pending between the
beneficiary under the bank guarantee or the person on whose behalf the
guarantee was furnished. The terms of the bank guarantee are,
therefore, extremely material. Since the bank guarantee represents an
independent contract between the bank and the beneficiary, both the
parties would be bound by the terms thereof. The invocation, therefore,
will have to be in accordance with the terms of the bank guarantee, or
else, the invocation itself would be bad."
21. The same principle was followed in State Bank of India and Another
Vs. Mula Sahakari Sakhar Karkhana Ltd.4 wherein a twoJudge Bench
held thus: 4 2006(6) SCC 293 "33. It is beyond any cavil that a bank
guarantee must be construed on its own terms. It is considered to be a
separate transaction.
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Signed by: SEHAR HASEEN
Signing time: 7/6/2023
5:18:58 PM
34. If a construction, as was suggested by Mr Naphade, is to be accepted,
it would also be open to a banker to put forward a case that absolute
and unequivocal bank guarantee should be read as a conditional one
having regard to circumstances attending thereto. It is, to our mind,
impermissible in law. "
6. It is further submitted by learned counsel for the respondent that on
a bare perusal of the impugned order, it is seen that disputed questions of facts
are involved which cannot be gone into by this Court in this petition under
Article 226 of the Constitution of India. Therefore this petition is not
maintainable and deserves to be dismissed.
7. We have heard learned counsel for the parties and perused the
record.
8. This Court has gone through Particular Conditions of Contract
annexed with the petition wherein Clause 20.6(a)(i) provides thus:
"Contract with Domestic Contractors:
Arbitration shall be conducted in accordance with the "Madhya
Pradesh Madhyastham Adhikaran Adhiniyam , 1983 or any statutory
amendment thereof. For purpose of this Sub Clause, the term 'Domestic
Contractor' means a Contractor who is registered in India and is a
judicial person created under Indian law."
7. In view of the agreement for works contract and according to Clause
20.6(a)(i), this Court is not inclined to entertain the writ petition. However,
petitioner shall be at liberty to approach Madhya Pradesh Madhyastham
Adhikaran, seeking redressal of his grievance, if so advised.
8. With the aforesaid liberty, petition stands dismissed.
(S. A. DHARMADHIKARI) (HIRDESH)
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 7/6/2023
5:18:58 PM
JUDGE JUDGE
sh
Signature Not Verified
Signed by: SEHAR HASEEN
Signing time: 7/6/2023
5:18:58 PM
