* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ IA Nos. 2206/2009 & 6701/2009 IN CS(OS) NO.313/2009
Date of Decision : 11.03.2011
HELM DUNGEMITTEL GMBH ......Plaintiff
Through: Mr. A.S. Chandhiok,
Additional Solicitor General
with Mr. Rahul P.Dave,
Mr.Bhaskar Tiwari and
Mr.Sumit Chopra, Advs.
Versus
THE STATE TRADING CORPORTION OF INDIA LTD. & ORS.
...... Defendants
Through: Ms.Ananya Datta, Adv. for
defendant no.1.
Mr.Pradeep Dewan, Sr.Adv.
with Mr.Rajiv Samiyar, Adv.
for defendant no.2.
CORAM :
HON'BLE MR. JUSTICE V.K. SHALI
1. Whether Reporters of local papers may be
allowed to see the judgment? YES
2. To be referred to the Reporter or not ? YES
3. Whether the judgment should be reported
in the Digest ? YES
V.K. SHALI, J.
1. The question to be decided by the present order is as to
whether the defendant no. 2 can be permitted to invoke the
counter guarantee on the basis of which the defendant no. 2
had furnished the performance guarantee in favour of
defendant no. 1/beneficiary. It may be pertinent here to
mention that counter guarantee by defendant no. 3 was
furnished at the instance of the plaintiff as a part of
CS(OS) No. 313/2009 Page 1 of 23
performance guarantee being furnished in terms of the
contractual obligation between the plaintiff and the
defendant no. 1.
2. In order to make the factual matrix clear, the plaintiff
hereinafter is referred as ―German Party‖, the defendant no. 1
as ―STC‖, defendant no. 2 as ―Canara Bank‖ and the
defendant no. 3 as ―German Bank‖.
3. The facts of the case are that the German Party entered into a
contract with STC on 01.10.2008 for supply of 3 lac + 10%
metric tons of urea @ US Dollar 685.5 per metric ton. The
shipment of the last cargo of the urea was to be dispatched
latest by 15.10.2008. This was stated to be the essence of the
contract. The case of the German Party is that it had shipped
and delivered 3,20,563 metric tons of urea which was within
the tolerance limit of + 10% and that this shipment was made
within the stipulated time. It was received and accepted by
the STC. The delivery was against letters of credit issued by
the STC and on the shipment having been received, the
letters of credit were encashed and thus, the entire payment
of the goods supplied by the German Party stood paid to it by
the STC and the contract stood discharged by performance.
4. It is not in dispute that according to Clause 13 of the contract
between the German Party and the STC, the German Party
was required to furnish a performance guarantee in favour of
CS(OS) No. 313/2009 Page 2 of 23
STC to the extent of 10% of the value of the goods. The
relevant portion of the performance bank guarantee, the
format of which, as well as that of counter guarantee, was
furnished by the STC, reads as under :-
―…HEREBY UNCONDITIONALLY AND
IRREVOCABLY GUARANTEE AND UNDERTAKE
TO PAY TO THE BUYERS IMMEDIATELY ON
FIRST DEMAND WITHOUT PROTEST OR DEMUR
OR REFERENCE TO THE SELLERS IF THE
SELLERS FAIL TO PERFORM ALL OR ANY OF
THEIR OBLIGATIONS UNDER THE SAID
CONTRACT OR SUPPLY MATERIAL – SHORT
THAN THE CONTRACTED QUANTITY AS
REVEALED BY THE JOINT DRAFT SURVEY AT
THE DISCHARGE PORT OR IF PENALTIES ARE
LEVIED DUE TO QUALITY DEVIATIONS
(NUTRIENTS/MOISTURE/PARTICLE SIZE) FROM
CONTRACTUAL SPECIFICATIONS AS REVEALED
BY DISCHARGE PORT ANALYSIS REPORT OR
LIABILITY TOWARDS DEAD FREIGHT AND
DISPATCH/DEMURRAGE NOT SETTLED….‖
5. The case of the plaintiff is that since the contract itself stood
discharged, therefore, the invocation of the performance
guarantee by the STC was bad in law, which necessitated the
filing of the present suit for injunction.
6. On having invoked the jurisdiction of this Court by way of the
present suit, the German Party on 13.02.2009 was able to
persuade this Court to pass an ex parte ad interim order
restraining the release of any amount of performance
guarantee in question by the Canara Bank or the German
Bank in pursuance of the letter of invocation dated
10.02.2009 by the STC. It may be pertinent here to mention
CS(OS) No. 313/2009 Page 3 of 23
that by the time this order came to be passed on 13.02.2009,
the Canara Bank had already on 12.02.2009 credited the
guarantee amount to the account of the STC/the beneficiary
whereas it was not able to retrieve the said amount by
invoking the counter guarantee from the German Bank on
10.02.2009. This order has continued till date and it is this
order which is being considered by the Court in order to
decide the question whether it should be confirmed or
vacated.
7. The grounds on which the German Party has prayed for
confirmation of this ex parte order are as follows :-
(i) That the contract having been performed by the German
Party to the satisfaction of the STC and the money
having been realized, therefore, the contract of supply
and purchase of urea stood discharged by performance
on both the sides and consequently, invocation of
performance guarantee by the STC was bad in law.
Reliance is placed on the case titled Chatturbhuj
Vithaldas Jasani Vs. Moreshwar Parashram & Ors.
AIR 1954 SC 236.
(ii) The STC had invoked the performance bank guarantee
on extraneous considerations. This is contended on the
ground that the STC in its communication dated
06.11.2008 had requested the German Party for
reduction of the price of urea as the only outstanding
issue. It is not denied by the German Party that its
Indian representative M/s. Everest Fertilizers had
offered to reduce the price vide communication dated
24.10.2008 but before this communication could be
accepted by the STC, the said offer was revoked by the
Indian party at the instance of the German Party on
27.10.2008.
This argument is raised as a ground to urge that the
invocation of performance guarantee by the defendants
is actuated by ulterior considerations.
CS(OS) No. 313/2009 Page 4 of 23
Reliance is placed on M/s. Radhey Shyam Bansal Vs.
M/s. Indian Farmers Fertilisers Cooperative Ltd. –
85 (2000) DLT 484 at page 489 para 17 to 19;
Larsen & Toubro Vs. Maharashtra State Electricity
Board & Ors., (1995) 6 SCC 68 at page 74 at para 9]
(iii) The invocation of the performance bank guarantee or
the counter guarantee by defendant no. 2 was not in
accordance with the performance bank guarantee and,
therefore, the Canara Bank was not obliged to make the
payment to the STC in pursuance to the performance
bank guarantee and if it has done so, it has been done
by the Canara Bank at its own peril. Reliance in this
regard was placed on
(a) M/s. Harprashad & Co. Ltd. Vs. Sudarshan Stee
Mills & Ors. AIR 1980 Del 174;
(b) Basic Tele Services Ltd. Vs. Union of India &
Anr., AIR 2000 Delhi 1
(c) Puri International (P) Ltd. Vs. National Building
Construction Company Ltd. 66 (1997) DLT 698
(d) Bhushan Industrial Co. Pvt. Ltd. Vs. Cimmco
International and Anr. 54 (1983) Comp. Cas. 157
(iv) That no one can be allowed to take advantage of his own
fraud even if the fraud is detected at a later stage.
8. The Canara Bank, having paid the amount of performance
bank guarantee to the STC, has contested the matter
vehemently. The case of the Canara Bank is that
performance bank guarantee is an independent contract and
the same was unconditional and irrevocable envisaging
payment of all the amount to the beneficiary on the first
written demand without any protest and demur and without
reference to the seller namely German Party, if it has failed to
perform any of its obligations under the contract.
CS(OS) No. 313/2009 Page 5 of 23
9. It is the case of the Canara Bank that this performance
guarantee was furnished by the Canara Bank to the STC for a
sum of $ 67,86,450 on the counter guarantee having been
furnished to it by the German Bank, at the instance of the
German Party. It is also the case of the Canara Bank that
once the performance bank guarantee was invoked on
10.02.2009 by STC, the entire amount of bank guarantee was
credited to the international account of the STC on
12.02.2009, which is also prima facie corroborated not only
from the documentary evidence placed on record but also by
the affidavit of Mr. S.K. Jain, an official of the Canara Bank.
It was contended that it was well within its right to have the
money retrieved by invoking the counter guarantee furnished
by defendant no. 3.
10. The case of the Canara Bank is that on 10.02.2009 on receipt
of demand by the STC vide its swift message, it invoked the
counter guarantee the same day, i.e., on 10.02.2009 and the
German Bank instead of honouring the invocation of counter
guarantee referred to the Principal, namely, the German Party
and intimated to the Canara Bank that it is investigating into
the matter. It is alleged that after taking instructions from
the German Party, it wrote back to Canara Bank that the
invocation of the counter guarantee by Canara Bank was not
in accordance with the terms and conditions of the counter
guarantee as it was not stated in the invocation letter whether
CS(OS) No. 313/2009 Page 6 of 23
they were called upon to make the payment by the
beneficiary. This was immediately rectified by the Canara
Bank and the German Bank was intimated that it has been
called upon to make the payment. It is alleged by the Canara
Bank that after having parted with nearly 33 crores of rupees,
being a Public Sector Bank, it was deprived of a sizeable
amount of money out of circulation, by not honouring of
counter guarantee by the German Bank, at the instance of
the German Party only with a view to gain time and, in the
meantime, it obtained the restraint order from the High Court
on 13.02.2009 by not disclosing the full and correct facts.
11. The Canara Bank has alleged that the German Party and the
German Bank are in collusion with each other. Firstly, the
German Bank approached a Court at Hamburg in Germany
and obtained a restraint order that German Bank should not
make payment to Canara Bank which was vacated with the
direction that the guarantee be honoured subject to the
decision passed by the High Court of Delhi and thereafter the
present petition was filed in which the correct facts were not
presented before the Court inasmuch as by the time the order
was passed on 13.02.2009, the Canara Bank had already
released the amount in favour of the STC and, therefore, what
survived on 13.08.2009 was only the realization of the
amount by the Canara Bank in pursuance of the counter
CS(OS) No. 313/2009 Page 7 of 23
guarantee whereas the counter guarantee itself was not even
on record.
12. So far as the allegation of the fraud with respect to the
invocation of the counter guarantee is concerned, it is the
case of the Canara Bank that there is absolutely no allegation
much less a prima facie proof with regard to the fraud having
been played by the STC or by the Canara Bank in obtaining
the counter guarantee from German Bank. On the contrary,
if at all, there is any prima facie evidence of fraud having been
played, it is by the German Party with the help of the German
Bank because the latter has notably remained absent and
silent by not filing even the written statement and remaining
absent during the course of entire proceedings.
13. I have heard Mr. A.S. Chandhiok, learned Additional Solicitor
General on behalf of the plaintiff, namely, the German Party,
Mr. A.B. Dial, learned senior counsel for STC and Dr. A.M.
Singhvi and Mr. Pradeep Dewan, learned counsel for Canara
Bank.
14. At the outset, it is pertinent to mention that after the
conclusion of the arguments, Mr. Chandhiok, learned
Additional Solicitor General, on behalf of the plaintiff, namely,
the German Party, had given a suggestion that he is prepared
to go for arbitration to resolve the entire dispute between the
German Party and the STC, provided the STC refunds the
CS(OS) No. 313/2009 Page 8 of 23
entire amount of the performance guarantee to the Canara
Bank and so far as the interest of the STC is concerned, it will
be sufficiently protected by the plaintiff by either furnishing a
bank guarantee in the name of Registrar General or by
depositing the requisite amount with the Registrar General as
the pre-condition for reference of the dispute to the Arbitral
Tribunal for adjudication.
15. Mr. A.B. Dial, learned senior counsel for STC, at the outset,
on instructions rejected this offer. Consequently, the matter
has to be considered on its merits as to whether the interim
order dated 13.02.2009 staying the invocation of the counter
guarantee can be permitted to continue in favour of the
plaintiff and to the detriment of the Canara Bank.
16. The law regarding bank guarantee has been the subject
matter of intense litigation not only in High Courts but also
before the Apex Court and repeatedly the courts have voiced
concern that the invocation of bank guarantee can be stayed
only in two circumstances, firstly, in case there is a fraud of
egregious nature or secondly if there is an irretrievable
injustice caused to the party on account of the invocation of
the bank guarantee. The Court has also observed that it is
very essential to impart the credibility to the commercial
transactions whether national or international between the
contracting parties, namely, the Bank and the beneficiary. It
CS(OS) No. 313/2009 Page 9 of 23
has also been observed that the disputes which may arise
with regard to the performance or the alleged non-
performance of the principal contract in pursuance to which
the guarantee is furnished or its interpretation cannot be
permitted to be used as a bone of contention for avoiding the
liability under the bank guarantee. It will be worthwhile to
reproduce a couple of passages from one of the reported
judgments of the Apex Court in Dwarikeksh Sugar
Industries Limited Vs. Prem Heavy Engineering Works (P)
Ltd. (1997) 6 SCC 450:-
“21. Numerous decisions of this Court rendered over a span
of nearly two decades have laid down and reiterated the
principles which the courts must apply while considering the
question whether to grant an injunction which has the effect
of restraining the encashment of a bank guarantee. We do
not think it necessary to burden this judgment by referring
to all of them. Some of the more recent pronouncements on
this point where the earlier decisions have been considered
and reiterated are Svenska Handelsbanken v. Indian Charge
Chrome, Larsen & Toubro Ltd. v. Maharashtra SEB,
Hindustan Steel Workers Construction Ltd. v. G.S.Atwal &
Co. (Engineers) (P) Ltd. and U.P.State Sugar Corpn. V.
Sumac International Ltd. The general principle which has
been laid down by this Court has been summarized in the
case of U.P. State Sugar Corpn. as follows: (SCC p. 574, para12)
―The law relating to invocation of such
bank guarantees is by now well settled.
When in the course of commercial
dealings an unconditional bank guarantee
is given or accepted, the beneficiary is
entitled to realize such a bank guarantee
in terms thereof irrespective of any
pending disputes. The bank giving such a
guarantee is bound to honour it as per its
terms irrespective of any dispute raised by
its customer. The very purpose of giving
such a bank guarantee would otherwise
be defeated. The courts should, therefore,
be slow in granting an injunction to
restrain the realization of such a bankCS(OS) No. 313/2009 Page 10 of 23
guarantee. The courts have carved out
only two exceptions. A fraud in
connection with such a bank guarantee
would vitiate the very foundation of such a
bank guarantee. Hence, if there is such a
fraud of which the beneficiary seeks to
take the advantage, he can be restrained
from doing so. The second exception
relates to cases where allowing the
encashement of an unconditional bank
guarantee would result in irretrievable
harm or injustice to one of the parties
concerned. Since in most cases payment
of money under such a bank guarantee
would adversely affect the bank and its
customer at whose instance the guarantee
is given, the harm or injustice
contemplated under this head must be of
such an exceptional and irretrievable
nature as would override the terms of the
guarantee and the adverse effect of such
an injunction on commercial dealings in
the country.‖Dealing with the question of fraud it has been
held that fraud has to be an established fraud. The
following observations of Sir John Donaldson, M.R. in
Bolivinter Oil SA v. Chase Manhattan Bank are
apposite:“….The wholly exceptional case where an
injunction may be granted is where it is
proved that the bank knows that any
demand for payment already made or
which may thereafter be made will clearly
be fraudulent. But the evidence must be
clear, both as to the fact of fraud and as
to the bank’s knowledge. It would
certainly not normally be sufficient that
this rests on the uncorroborated
statement of the customer, for irreparable
damage can be done to a bank’s credit in
the relatively brief time which must
elapse between the granting of such an
injunction and an application by the bank
to have it discharged.”17. In the light of the aforesaid legal position, I have considered
carefully the submissions made by the learned counsel for
German Party. The main contention of the learned counsel
in order to confirm the ad interim order against the invocation
CS(OS) No. 313/2009 Page 11 of 23
of the performance guarantee has been that the contractregarding supply of urea which was executed between the
German Party and the STC having been performed, inasmuch
as the goods having been supplied and the price having been
realized, it stood discharged by performance and
consequently the performance bank guarantee which was
furnished by the German Party through the chain of German
Bank furnishing counter guarantee to Canara Bank and
Canara Bank furnishing performance guarantee to the
beneficiary, namely, STC, came to an end and neither of the
two guarantees — performance or the counter guarantee
could have been invoked. The learned senior counsel had
placed reliance on Chatturbhuj Vithaldas Jasani Vs.
Moreshwar Parashram & Ors. AIR 1954 SC 236, where it
has been observed as under :-
―The question then is, does a contract
for the supply of goods terminate when
the goods are supplied or does it
continue in being till payment is made
and the contract is fully discharged by
performance on both sides? We are of
opinion that it continues in being till it
is fully discharged by performance on
both sides.‖
18. No doubt, in Chatturbhuj’s Case, it has been held that a
contract stands fully discharged by performance on both
sides but the observations passed in that case were not in the
context of invocation of a bank guarantee. That case was
CS(OS) No. 313/2009 Page 12 of 23
dealing with the question of execution of a contract betweenthe Central Government and a private party where the
question of discharge of contract had arisen as to whether it
could be said that the contract had been discharged merely
on the supply of goods or only when the payment for the said
supply is received and it was in this context that the
observations were passed by the Apex Court. The Supreme
Court in Haryana Financial Corpn. Vs. Jagdamba Oil Mills,
(2002) 3 SCC 496, has observed that the law enunciated by
judgment is not like a theorem which is to be applied blindly
without reference to the facts of the case in the light of which
that pronouncement has been made. The facts of the case in
which the judgment has been given should correlate with the
facts of the case in hand and only then it has to be seen as to
whether the ratio laid down in the said judgment can be
applied to the facts of the present case.
19. Going by this parameter, the ratio laid down by the Apex
Court in Chatturbhuj’s Case, which the learned senior
counsel for the German Party has observed to be a locus
classics, cannot be said to be applicable to the facts of the
present case.
20. The judgment in M/s. Radhey Shyam’s Case, where a
similar proposition has been laid down by the learned single
Judge is also distinguishable from the facts of the case. In
CS(OS) No. 313/2009 Page 13 of 23
that case also, the invocation of the bank guarantee was
stayed on the ground that the contract having been
performed the performance guarantee stood discharged.
But in that case, the invocation letter was not placed on
record by the party concerned which prompted the Court to
pass a restraint order whereas in the present case, the said
documents have been placed on record by the defendants,
i.e., STC and the Canara Bank. Therefore, the facts of this
case are distinguishable. Similar would be the position with
regard to Larsen and Toubro’s Case where the invocation of
the bank guarantee which was conditional was stayed
because of irretrievable injustice.
21. One thing I must observe that there is a growing tendency on
the part of the counsel to cite plethora of judgments so that
the Court gets lost in the maze of papers and judgments and
the main issue gets sidetracked and secondly, that merely
because a restraint order has been issued in a particular case
on the Court being satisfied about the existence of facts,
warranting the grant of such a stay in the said case does not
necessarily mean that as a matter of course, the stay must
follow in the facts of the case which is in hand.
22. In addition to this, it has not been admitted by the Canara
Bank in the plaint or during the course of arguments that the
contract stood discharged on account of performance. On the
CS(OS) No. 313/2009 Page 14 of 23
contrary, it has taken the plea in the written statement that
the performance guarantee has been invoked by STC, which
was unconditional and therefore, they invoked the counter
guarantee. It is also not open to the plaintiff namely the
German Party to contend that there was no dispute regarding
the quantity, quality, demurrage, dispatch or terms of
performance, and, therefore, the guarantee could not be
invoked. The invocation letter dated 10.02.2009 raised by the
STC, the beneficiary, against the Canara Bank/defendant no.
2 and the consequent invocation of counter guarantee by the
Canara Bank intimating that they have been called upon to
make the payment, was a complete answer to this contention
of the learned counsel for the plaintiff. Therefore, in the light
of above facts, I do not agree with this contention of the
learned counsel for the plaintiff that the contract stood
discharged by performance.
23. I also do not agree with the contention of the learned counsel
for the plaintiff that the invocation of the performance
guarantee by the STC was on account of ulterior
considerations. The plaintiff has referred to the ulterior
considerations by drawing the attention of the Court to the
correspondence exchanged between the Indian representative
of the German Party and the STC regarding its offer to reduce
the price of the urea and the said offer having been
withdrawn as well as the letter purported to have been
CS(OS) No. 313/2009 Page 15 of 23
written by STC, after withdrawal of the letter by its Indian
representative, the only outstanding issue is with regard to
reduction of the price of urea.
24. If one sees the contents of these three letters in a sequential
order, the letter where the STC has made reference to an
outstanding issue regarding the reduction of price is a
subsequent letter written by them to German Party after
having not only received the offer from its Indian
representative regarding reduction of price of the urea
voluntarily but also unilaterally withdrawing the said offer
without any rhyme or reason and this cannot be permitted to
be used as a ground or a shield for honouring the
performance guarantee which has been invoked by the
beneficiary from Canara Bank. The question of reduction or
non-reduction of the price of the urea as alleged by the
German Party even if assumed to be correct, pertains to a
dispute sought to be raised between the two contracting
parties, namely, the German Party and the STC, but it has
nothing to do with the performance guarantee which is a
contract between the beneficiary, i.e., STC and the guarantor,
i.e., the Canara Bank. Permitting the stoppage of payment on
the plea of the German Party raised herein before will not only
be adding a condition to the counter guarantee but it would
be also against the settled legal position of law laid down by
the Supreme Court in a catena of authorities that the
CS(OS) No. 313/2009 Page 16 of 23
guarantee is an independent contract where the scope of
stoppage is very limited by the Court and is available only in
the eventuality of fraud or irretrievable injustice being cause
to the party.
25. The reference to the various authorities such as M/s. Radhey
Shyam Bansal’s Case and Larsen & Toubro’s Case is also
inappropriate keeping in view the pronouncement of Apex
Court in Haryana Financial Corpn.’s Case.
26. So far as the judgment in Hindustan Steel Works Vs.
Tarapore and Co. & Anr., (1996) 5 SCC 34 and U.P.
Cooperative Federation Ltd. Vs. Singh Consultants and
Engineers (P) Ltd., (1988) 1 SCC 174, which have been
relied upon by the plaintiff is concerned, I am of the
considered opinion that the same instead of supporting the
submissions of the plaintiff, namely, the German Party,
support the contention of the respondent that the bank
guarantee is an independent contract and its invocation
cannot be stayed except in two aforementioned
circumstances.
27. Admittedly, so far as the plaintiff is concerned, it is not his
case that any irretrievable injustice will be caused to the
German Party on account of the invocation of the bank
guarantee. However, fraud has been taken as a ground by
the German Party for stopping the invocation of the bank
CS(OS) No. 313/2009 Page 17 of 23
guarantee. Simply by making an averment, it cannot be said
that fraud has been played in invocation of the bank
guarantee, there must be prima facie evidence to show that
fraud has been committed in obtaining the guarantee. The
learned counsel has referred to the observations passed by
the Apex Court wherein it has been observed that fraud may
not be played initially and it may be revealed by the
subsequent facts on the record, even if this preposition of the
German Party is accepted to be correct, there is no denial of
the fact that fraud prima facie must be established. In the
instant case, it is my opinion that the German Party has
failed to establish by any prima facie evidence that fraud has
been played in either obtaining the performance guarantee or
the counter guarantee. As a matter of fact, there is no
allegation qua the counter guarantee given by the German
Bank to the Canara Bank which is the only surviving point.
Further, the only allegation which the plaintiff namely the
German Party is making in order to urge its point of fraud is
that the contract stood discharged by the performance and,
therefore, the bank guarantee was invoked by the STC only
for the purpose of reduction of the price. These points have
already been dealt hereinabove and could hardly be said to be
a ground for staying restraining the invocation of the counter
guarantee.
CS(OS) No. 313/2009 Page 18 of 23
28. On the contrary, if at all, there was any prima facie evidence
of fraud, it was a fraud which was sought to be played not
only by the plaintiff but also perpetrated by the German Party
on the Canara Bank. This has been felt by the Court on
account of the fact that admittedly in the instant case, the
restraint order has been passed on 13.02.2009 when the
amount of `33 crores or so in terms of performance bank
guarantee having been invoked on 10.02.2009, had been
credited to the international account of the STC by the
Canara Bank and this fact was well within the knowledge of
the German Bank. So, obviously, it must have been
conveyed to its Principal, namely, the German Party. Apart
from this, the Indian representative of the German Party i.e.
Everest Fertilizers was aware about this fact or even if not
aware is deemed to be aware because of the correspondence
which was being exchanged between the parties. The
German Party cannot take the plea of being ignorant of the
fact that on 13.02.2009 when the restraint order was passed,
they knew that the amount had already been paid to the
beneficiary but still they did not point out to the Court that
the money having been paid by the Canara Bank to the
beneficiary in pursuance of the performance guarantee the
only stay which was required to be passed was against the
invocation of the counter guarantee on 11.02.2009.
Moreover, in the entire plaint, the German Party is making
CS(OS) No. 313/2009 Page 19 of 23
averments of fraud only with regard to performance guarantee
whereas it is only in the prayer they seek restraint against
invocation of the counter guarantee.
29. These facts were not pointed out though a relief against
invocation of counter guarantee by defendant no. 3 was
obtained by the plaintiff and that too without attaching a copy
of the counter guarantee along with the plaint. Another fact
which shows that there was an active collusion and a fraud
perpetrated by the German Party in collusion with the
German Bank was that the German Bank did not raise any
objection to the letter of invocation dated 10.02.2009 by
Canara Bank invoking counter guarantee and stated that it is
investigating into the matter though it was none of its
business to raise such an objection to the honouring of its
obligation. In the meantime, referred the matter to its
Principal, namely, the German Party who instigated it to move
the Court in Hamburg in Germany and got a temporary relief
by obtaining a restraint order against the realization of the
counter guarantee. Despite this, the German Bank neither
appeared nor filed any written statement before this Court
and remained notably silent which clearly shows that if at all
there was any fraud, it was sought to be played on a public
sector bank by the German Party with the help of German
Bank. Therefore, I feel that even this ground of fraud is not
available to the plaintiff to continue to enjoy the stay of the
CS(OS) No. 313/2009 Page 20 of 23
invocation of bank guarantee by defendant no. 2. On the
contrary, there is fairly good amount of circumstantial
evidence to show that the German Party in collusion with the
German Bank was trying to take undue advantage to mislead
the Court which has the features of playing a fraud.
30. The aforesaid reasoning would be equally meeting the point or
the submission which has been urged by the plaintiff,
namely, the German Party against the defendant no. 2 that
no one can be allowed to take advantage of his own fraud.
31. So far as the plea of the learned senior counsel for the
German Party raising the question of invocation of the bank
guarantee to be a formality by reproducing the parrot like
language of the guarantee is concerned, I do not feel that it
can be said that the invocation of the bank guarantee has
been taken as a parrot like reproduction of the words by the
STC or the Canara Bank. But at the same time, the
invocation of the bank guarantee or the contents of the said
letter are not to be subjected to hair splitting analysis as is
being sought to be done by the learned counsel for the
plaintiff.
32. I have also gone through the various other judgments which
have also been cited by the learned senior counsel for the
plaintiff which I do not find to be of any help to the plaintiff
namely the German Party although there cannot be any
CS(OS) No. 313/2009 Page 21 of 23
dispute about the proposition of law laid down therein which
broadly remains the same as has been reproduced in para 21
of the Dwarikesh’s Case hereinbefore.
33. For the reasons mentioned above, I am of the considered
opinion that there is absolutely no fraud and no merit in the
application under Order XXXIX Rule 1 & 2, CPC filed by the
plaintiff which will warrant staying of the invocation of the
counter guarantee by defendant no. 2 namely the Canara
Bank against defendant no. 3 which was granted in favour of
the plaintiff on 13.02.2009 much less the continuance of the
same.
34. I, accordingly vacate the stay order and permit defendant
no.2 to realize the amount of counter guarantee from German
Bank. The IA No. 2206/2009 is dismissed. So far as the IA
No. 6701/2009 wherein the plaintiff had prayed for a
direction to the STC to produce certain records has also
become infructuous on account of the fact that an affidavit of
Mr. S.K. Jain, a senior employee of the STC has been filed
indicating that the amount of performance guarantee was
credited to the international account of the STC on 10.02.2009
itself.
35. It is clarified that the amount, dates, etc. mentioned
hereinbefore if they are at variance with the record, the latter
should be taken to be correct. Further expression of any
CS(OS) No. 313/2009 Page 22 of 23
opinion herein may not be treated as an expression on the
merits of the case.
36. Dasti on payment of usual certified copy charges.
V.K. SHALI, J.
MARCH 11, 2011
MA
CS(OS) No. 313/2009 Page 23 of 23