- (1.) This is an application for injunction restraining the defendant No. 1, Steel Authority of India Ltd. from enforcing or calling up the Bank Guarantee dated 31-8-1982 for Rs. 30,00,000/- given by the defendant No. 2, United Bank of India in favour of the defendant No. 1. The defendant No. 1 gave a contract to the plaintiff for dredging and deepening a reservoir at Durgapur. To enable the plaintiff to bring the machinery and start the work, the defendant No. 1 advanced Rs. 30,00,000/- to the plaintiff. To secure the said advance of Rs, 30,00,000/- paid by the defendant No. 1 to the plaintiff, the plaintiff gave the said Bank Guarantee through the United Bank of India.
(2.) Mr. Biswaroop Gupta, learned Counsel for the plaintiff, submitted the plaintiff was induced to obtain the said contract by the defendant No. 1 by suppression of material facts, that the reservoir which was to be cleaned and deepened could not be deepened inasmuch as the bed of the reservoir which was shown in the plan given to the plaintiff as plain and without any undulations was formed and created by inundating a village with a Railway siding and various other structures and facilities for human habitation. It is not disputed by the defendant No. 1 that part of the reservoir contains portion of Railway rack and a village but the same were not unknown to the plaintiff. Various contentions have been raised by Mr. Gupta but the two main contentions which in my view are of substance at this interlocutory stage are that the conditions of the Bank Guarantee were not complied with by the defendant No. 1 in calling up the amount of the Bank Guarantee and further that the defendant No. 1 being aware of such defects requested for the extensions of the Bank Guarantee for another one year till December 31, 1984 by its letter dated 14/15th December, 1983. On this aspect Mr. Gupta firstly relied on the letter dated September 19, 1983 which is annexed to the affidavit-in-opposition filed on behalf of the defendant No. 1 affirmed by Gourhari Chandra on 9th of November, 1984. By the said letter a demand was made for payment of the entire amount of Rs. 30,00,000/- under the said Bank Guarantee and it was suggested in the said letter that the contractor having committed default in due compliance of the contract in question an amount of Rs. 30,00,000/- has become due and payable to Steel Authority of India Ltd., Account, Durgapur Steel Plant. Accordingly, in terms of the above quoted Bank Guarantee demand was made for payment of the said amount to Steel Authority of India Ltd. within three days from the date of the receipt of the said letter. Interest was also claimed @ 190% per annum. The demand was not met by the Bank. Thereafter by a letter dated 14/15th December, 1983 being Annexure "F" to the petition the defendant No. 1 again wrote to the Bank as follows : "Validities of the above mentioned Bank Guarantees are due to expire on 31-12-83. Contractual obligations of your client are yet to be fulfilled. Please extend the validity of both the Bank Guarantees up to 31-12-84 with grace period up to 30-6-85 for lodgement of claim for the present and send us the letters of extension immediately. In case, however, you are not in a position to extend the validity of the Bank Guarantees as requested please treat this letter as our demand for the full value of the Bank Guarantees amounting to Rs. 32.45 Lakh (Rupees thirty two lakh forty five thousand only) and remit the sum by a crossed cheque drawn in favour of "M/s. Steel Authority of India Ltd., A/C, Durgapur Steel Plant", immediately."
(3.) Mr. Gupta submitted that by this letter the earlier Letter of Demand dated 19-9-1983 was given a go-by and the defendant No. 1 would be satisfied if the validity of the Guarantee had been extended. The concluding portion of the letter was a fresh demand but there was no allegation of default of the defendant No. 1 having suffered any loss or damages. In the earlier letter dated September 19,1983 although default was alleged but there was no claim or allegation that the defendant No. 1 had suffered loss or damages. This is well settled, Mr. Gupta submitted, that to be a valid demand the same should be made in accordance with the terms and conditions of the Guarantee. That not being done the defendant No. 1 was not entitled to demand payment of the amount under the Guarantee.;