- (1.) This special leave petition arises from the order of the learned Single Judge of the Delhi High court dated 17/1/1996 made in Suit No. 990 of 1995. The petitioner had sought for injunction under Section 41 read with Schedule II of the Arbitration Act, 1940 (for short, 'the Act') to restrain the respondent from invoking the bank guarantee No. 33 of 1991 dated 13/2/1991 to encash Rs. 57,57,970. 00 pursuant to the letter of invocation dated 5/4/1995. The facts mentioned therein are that the petitioner had entered into contract on 30/3/1991 pursuant to a tender submitted by him to construct 108 residential quarters at Katharia, Bhagirath Puram, Tehri. The construction was to be completed within the stipulated period but was not completed. In terms of the contract, the first respondent had terminated it. The petitioner availed of the remedy under Section 20 of the Act for appointment of an arbitrator for reference of the dispute in terms of the contract. Pending consideration thereof, he filed an application to restrain the respondent from encashing the bank guarantee. The respondent after termination of the contract had issued a letter of invocation dated 5/4/1995 calling upon the UCO Bank to pay the aforesaid amount in terms of the bank guarantee. It was contended in the High court that the amount due and payable by the petitioner should be determined in the suit. The bank guarantee could not be invoked till then and the payment thereof could not be made. The respondent had played fraud on the petitioner in entering into the contract and seeking extension of the time. There are exceptional circumstances which necessitated the petitioner to seek relief of injunction pending determination of the amount due and payable by the petitioner. The High court rejected the contentions and dismissed the petition. Thus, this special leave petition.
(2.) Admittedly, the bank guarantee given by the UCO Bank on behalf of the petitioner reads as under: "On production of a bank guarantee for the above principal amount and interest due thereon, we, UCO Bank, 5, Parliament Street, New Delhi, (hereinafter referred to as 'the Bank') at the request of Ansal Engineering Projects Limited Contractor (s) do hereby undertake to pay to the Corporation an amount not exceeding Rs. 57,57,970. 00 plus interest as aforesaid against any loss or damage caused to be suffered or would be caused to or suffered by the Corporation by reason of any breach by the said Contractor (s) of any of the terms or conditions contained in the said agreement. We, UCO Bank, 5, Parliament Street, New Delhi do hereby undertake to pay the amount due and payable under this guarantee without any demur, merely on a demand from the Corporation staling that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the Corporation by reason of breach by the said Contractor (s) of any of the terms or conditions contained in the said agreement or by reason of the Contractor (s) failure to perform the said agreement. Any such demand made on the bank shall be conclusive as regards the amount due and payable by the bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 57,57,970. 00 plus interest due on the outstanding balance of mobilisation advance @ 18% p. a. We undertake to pay to the Corporation money so demanded notwithstanding any dispute or disputes raised by the Contractor (s) /supplier (s) in any suit or proceeding pending before any court or tribunal relating thereto. Our liability under this present being absolute and unequivocal. "
(3.) The letter of invocation of the respondent is thus: "We hereby invoke subject bank guarantee and demand the amount detailed hereinafter as the amount claimed is due by way of loss and damage caused to or would be caused to or suffered by THDC/ourselves by reason of breach by your customer of the terms and conditions contained in the said agreement and also by reason of your customer's failure to perform the said agreement. Thdc/we are limiting our claim against you to the extent of the principal amount of mobilisation advance lying outstanding against your customer plus interest due on the outstanding balance of mobilisation advance @ 18% per annum. You are as such, requested to pay the following amount: (A) Outstanding amount of mobilisation advance due and payable by M/s Ansal Engineering Project Limited, in terms of the bank guarantee in question, Rs. 51,02,658. 00. (B) Balance interest @ 18% per annum calculated on the outstanding mobilisation advance up to 30/10/1994, Rs. 13,89,625. 00. (C) Interest @ 18% per annum on the outstanding mobilisation advance of Rs. 51,02,658. 00 w. e. f. 31/10/1994 till the date of payment by you. This notice of demand may be treated as a fresh demand to pay the abovenoted amounts in terms of order dated 1/9/1994 passed by the Hon'ble High court of Delhi at New Delhi in OMP No. 39 of 1994 titled as M/s Ansal Engineering Projects Ltd. versus Tehri Hydro Development Corporation Ltd. and yourself. Photocopy of the said order is enclosed herewith for ready reference. ";