S.N. Bhargava, J. - (1.) THIS is an appeal under Order 43 Rule 1(r). CPC read with Section 104, CPC against the order of the Distt. Judge, Jaipur City, Jaipur, dismissing the application filed by the plaintiff appellant, under Section 41 of the Arbitration Act, 1940 read with Order 9 Rules 1 and 2 CPC and Section 151 C.P.C. whereby the petitioner -plaintiff had prayed for stay of encashment of the bank guarantee.
(2.) RAJASTHAN State Electricity Board, respondent No. 1 (hereinafter referred to as the 'Board') accepted an offer of the appellant company for supply of 10 of ACSR Zebra Conductor, on the terms and conditions contained in the purchase order. A formal contract agreement was executed in writing between the parties on 22.10.1979. The said contract contained an arbitration clause mentioned in Section 26 thereof. As per the term No. 16 of the contract, the appellant was to furnish security deposit for the due fulfilment of the contract equivalent to 5% of the contract value in the form of a composite bank guarantee within fifteen days of the receipt of order and if the supplier, failed on neglected to observe or perform any of its obligations under the contract, it will be lawful for the defendant to operate either in whole or in part, the composite bank guarantee as furnished by the supplier. In pursuance of the said contract, the appellant furnished a bank guarantee No. 1750 dated 3.3.1979 issued by the respondent No. 2 in favour of respondent No. 1 for a sum of Rs. 1,43,500/ - equivalent to 5% of the value of the contract. The material terms of the said bank guarantee are as under: 1. The Bank hereby guarantees to the Chief Engineer, Rajasthan State Electricity Board, the fulfilment by the contractors of the various obligations imposed on them under the aforesaid contract including the obligation of the contractors to supply materials of the good quality and workmanship and the bank further guarantees to the Rajasthan State Electricity Board that the contractor shall substitute and supply free of cost any material, that may be required due to defects arising from faulty material, design and workmanship and the Bank undertakes to indemnify and keep the Chief Engineer, Rajasthan State Electricity Board, indemnified to the extent of Rs. 1,43,5001 - (Rupees one lac forty three thousand and five hundred only) against any loss or damage that may be caused to or suffered by the Rajasthan State Electricity Board, by reason of any failure by the contractors to supply materials of good quality, design and workmanship as aforesaid and further under -take, to pay to the Chief Engineer, Rajasthan State Electricity Board, on demand a sum of not exceeding Rs. 1,43,500l - (Rupees one lac forty three thousand and five hundred only) in the event of the contractor failing or neglecting to perform and discharge the aforesaid duties and obligations on their part to be observed and performed under the said contract. 2. The Bank on demand by the Chief Engineer shall make payment of the amount without question to the purchaser. In the case in which the contractor, on receipt of the order and for after the acceptance of his tender has been communicated to him by the purchaser, makes default in entering into an agreement or having entered into such agreement or otherwise the contractor makes default in carrying out the contract thereof. As to whether the occasion or ground has arisen for such demand and decision of the Chief Engineer, shall be final. The decision of the Chief Engineer including Additional Chief Engineer & any other officer exercising the powers of Chief Engineer Rajasthan State Electricity Board, as to whether the contractor have failed or neglected to perform or discharge their duties and obligations as aforesaid and as to the amount payable to the Chief Engineer, Rajasthan State Electricity Board by the Bank herein shall be final and binding on the Bank. 3. The aforesaid bank guarantee had been extended, from time to time and at present is valid upto 30.9.1991. The appellant's case is that it supplied the entire quantity of the material under the contract, to the respondent No. 1 and received full payment against it. It has further been submitted that there was a joint inspection in regard to certain quantities of the alleged defective Conductors and it was agreed that the quantity of 50.2 Kg Conductors jointly inspected shall be accepted and utilised on the transmission lines and that the appellant was to pay the cost for repairs, replacement as mentioned in the inspection report but the respondent Board has utilised the said quantity of Conductors but did not mention the cost, if any, incurred by it for getting the same repaired. However, the Board wrote to the respondent No. 2 vide letter dated 23.11.1983 to remit the amount of Rs. 1,43,500/ - to it immediately. The appellant came to know about this on 26.11.1983. According to the plaintiff appellant the respondent No. 1 Board is in the habit of making such unfounded claims and trying to encash the bank guarantee. In respect of one such unfounded claim, the appellant had to take legal proceedings in the court of Additional Distt. Judge, Delhi, being Suit No. 111/1983 against the respondents. In such proceedings an injunction was granted restraining respondent Board from enforcing or operating the bank guarantee. According to the appellant, respondent No. 1 is not entitled to receive any amount under the said bank guarantee as the appellant has not failed nor neglected to perform its part of the contract, including the obligation to supply material of good quality and workmanship. Moreover, there is no decision of the Chief Engineer as such, till now that the appellant has committed any breach of the terms of the contract or it his failed to perform its part of the contract. Since there is a dispute and some differences have arisen between the parties, concerning or arising out of the contract, the same should be referred to arbitration and the respondent Board cannot encash the bank guarantee unless the matter is decided by the Arbitrators. Therefore, the present application Under Section 20, Arbitration Act for getting a reference of the disputes and differences between the parties to the Arbitrator, has been filed.
(3.) ALONG with the said application, the plaintiff (also filed an application the) appellant had also filed an application on 29.11.1983, under Section 41 of the Arbitration Act read with Order 39 Rules 1 and 2 CPC r/w Section 151 CPC, for stay and praying that the respondent No. 1 may be restrained from recovering or realising any amount under the bank guarantee No. 1750 dated 3.3.79 until further orders of the Court. It was also prayed that the respondent No 2 may be restrained from making any payment under the said bank guarantee to the respondent No. 1. By an exparte order, the trial court was pleased to issue temporary injunction as prayed. After service of the notices, the respondents filed reply to the said application. Trial court, after hearing the counsels for the parties, dismissed the said application and it is against this order that the present appeal has been filed by the appellant.;