UPPAL ENGINEERING CO Vs. I O C

JUDGEMENT

(1.) This is plaintiff's application under Order 39rules 1 and 2 read with Section 151 of the Code of Civil Procedure seeking adirection restraining the second defendant i.e. Syndicate Bank from paying tothe first defendant any amount under Bank Guarantees No. 24/87 and No.25/87 dated 1/07/1987.

(2.) It is an admitted case of both the parties that the plaintiff wasawarded contract for "Construction of Additional Shed for L.P.G. BottlingPlant at Tikrikalan" by defendant No. 1. The total value of the contract wasRs. 49,10,043.00, Under Clause 2.1.0.0 of the General Conditions of theContract, the plaintiff was required to furnish security deposit in the amountequivalent to 10% of the total value of the contract for the due performanceof its obligations under the contract. Again according to Clause 18 of thetender documents, the plaintiff was also required to furnish a bank guaranteefor securing mobilization advance to the tune of Rs. 4,91,004.00. It seemsthat the plaintiff and defendant No. 1 came to a further arrangement wherebythe latter agreed to accept a composite bank guarantee both for the mobilization advance as well as for the security deposit. Accordingly the plaintifffurnished a bank guarantee bearing No. 24 of 1987, issued by the defendantNo. 2, to the defendant No. 1 covering both mobilization advance and securitydeposit. This bank guarantee was for a sum of Rs. 4,91,004.00. That apartthe plaintiff also furnished another bank guarantee being Guarantee No. 25/87,on 1/07/1987 for an amount of Rs. 1,22,751.00 in lieu of unpaid balanceof initial security deposit which was required to be paid under clause 2.12.0of the General Conditions of the contract. It may be relevant to point outthat the contract in question was terminated on 20/11/1988 when thebank guarantees in question were also invoked by the defendant No. 1.

(3.) Learned Counsel appearing for the plaintiff submits that thedefendant No. 1 was not justified in invoking the bank guarantee No. 24/1987to the full extent when admittedly a sum of Rs. 2,46,304.00 had already beenrecovered by it from the running bills of his client and adjusted towards themobilization advance. Learned Counsel for the plaintiff farther urges that byinvoking the bank guarantee the defendant No. 1 has practised fraud on theplaintiff which vitiates the underlying contract. According to the learnedCounsel the defendant No. 1 could have invoked the bank guarantee onlyfor the balance amount of the mobilization advance which remained due afterthe adjustment of the said amount of Rs. 2,46,300.00.