JUDGMENT
Usha Mehra, J.
(1) M/S. Nangia Construction (India) Private Limited was awarded the contract for special repairs to Main Runway 10/28 and other operational pavement at Indira Gandhi International Airport, New Delhi with an estimated cost of Rs.2,87,71,916.96 The stipulated time for carrying out the work was twelve months. In the acceptance letter it was provided that the petitioner will be paid mobilisation advance against the bank guarantee of a Nationalised Bank. The formal agreement was executed between the parties on 11th July, 1990 and the work was to commence from 15th July, 1990. According to the petitioner, the work could not commence even up to 10th March, 1991 due to non availability of the run way. This fact was brought to the notice of the Executive Engineer by the petitioner vide his letter dated 24th September, 1990. The requisite connection for the installation of the Hot Mix Plant was also not made available by the respondent with the result the installation of the Hot Mix plant was also held up. It was informed that the run way would be made available only after 3rd October, 1990. The availability of run way for levelling and surface work was to be expedited as only after the levels on complete runway was taken, it could be possible for the Department to finalise and fix L-Sections and X- Sections for the work which was required to be done and this process was to take considerable time. A request was made by the petitioner to hand over the run way as well as laying of cable for electric connections. It was also brought to the notice of the respondent that on account of non availability of run way and laying of cables, the equipment, plant and labour of the petitioner was sitting idle and that the petitioner was suffering heavy losses. Inspite of repeated reminders by the petitioner, the respondent continued to commit breach of contracts by not providing the same. The petitioner brought up these lapses on the part of the respondents vide letter dated 16th February, 1991. The fact that the respondent themselves felt guilty of breach of the contract was admitted by the Chief Engineer vide his noting dated 23rd October, 1991. The petitioner though started the work on 11th March, 1991 but the runway was never made available for 8 hours with the result there was slow progress of the work. On account of these delays on the part of the respondent the cost was further increased by the idleness of labour and equipment. Inspite of these delays on the part of the respondent, the petitioner has executed a substantial work in short span of time. Between middle of March and up to middle of August, 1991, there were strikes in the Mathura Refinery, Indian Oil Corporation which also created hinderance in the progress of work. Thereafter, the monsoon started with effect from 23rd August, 1991 and the execution of work stopper during the rains. The work was re-started with effect from 16th October, 1991. Before starting the work on 16th October, 1991, the petitioner gave the detailed work programme to the respondents vide petitioner’s letter dated 15th October, 1991 wherein it was stated that the work will be completed by September, 1992. The execution of the work continued till 17th December, 1991 and during this period the petitioner executed the work of approximately Rs.40 lacs. Weekly progress reports were also submitted by the petitioner to the respondents. The site was never made available to the petitioner for eight hours either on account of bad weather and non visibility or for some other reason better known to the respondents.
(2) A meeting was organized which was attended by the representative of the petitioner. Respondent with ulterior motive and with malafide intention levelled allegations against the petitioner. In fact, petitioner’s other tender was ignored. To enforce his right, petitioner filed a writ petition against the respondent. Respondent did not like the same hence gave frivolous directions and levelled allegations in the said letter without any basis.
(3) Per terms of the contract, the petitioner was paid mobilisation advance amounting to Rs.28,77,191.00 against the bank guarantee, furnished by the petitioner bearing No.NP/G/20/100 dated 10th July, 1990 drawn on the Bank of India at Nehru Place Branch, New Delhi. The recovery of mobilisation advance was to take effect from the 3rd Running Account Bill. Hence, up to the 9th Running Account Bill the respondents recovered an amount of Rs.22,64,439.00 against the mobilisation advance of Rs.28,77,191.00 thereby leaving a balance of Rs.6,12,752.00 . This fact is admitted by the respondent vide their letter dated 31st December, 1991.
(4) The petitioner beside the above also furnished three other bank guarantees bearing No. (i) NP/G/21/46 for Rs.2,00,000.00 which was valid up to 3rd April, 1992. (ii) NP/G/21/157 for Rs.1,00,000.00 valid up to 31st August, 1992 and (iii) NP/G/21/256 for Rs.2,00,000.00 valid up to 31st May, 1992 on account of security under Clause 10 of the Agreement.
(5) There were two modes of furnishing security for the maintenance period i.e. either by bank guarantee or by deduction from the running account bills as stipulated in the notice inviting tenders. The total amount of security could only be Rs.3,39,438.00 . The petitioner in lieu of the security, furnished a total bank guarantee of Rs.5,00,000.00 and those were for maintenance period. Besides the above bank guarantes, there is another bank guarantee No.NP/G/20/144 for Rs.1,00,000.00 valid up to 7th March, 1992 furnished in terms of Clause 10 of the Agreement. This security was only for the land on which the labour huts had been constructed by the petitioner. These huts had to be remove on completion of the project and the land was to be handed over to the respondent. This security was furnished to ensure the return of land to the respondent with vacant possession.
(6) The respondent has falsely alleged breach of contract on the part of the petitioner. Pursuant to these false allegations, respondent wrote letter to the Bank invoking for the encashment of the bank guarantees. Petitioner has suffered losses and damages because of the delay and negligence on the part of the respondent. Petitioner demanded payment because of idleness of labour and equipment and other losses suffered. Since these were refuted by respondent hence dispute arose for which purpose petitioner has filed the petition under Section 20 of the Arbitration Act. Aggrieved by the invocation of bank guarantees, petitioner has also filed interim application seeking injunction against the respondent from encashing the bank guarantes. Summons in the petition and the notice on the application were issued which were duly accepted on behalf of the respondent by its counsel Mr. Y.K. Kapur. Mr. Kapur did not choose to file any reply but pleaded that he would address the arguments orally. Mr. Kapur appearing for the respondent took up the plea that the invocation of the bank guarantees by the bank cannot be interdicted by this Court. The law on this point is well settled in the case of General Electric Technical Services Company Inc. Vs. M/s. Punj Sons (P) Ltd. In the similar circumstances the Supreme Court had observed that the adjustment of mobilisation advance by deduction from the remaining bills by the beneficiary is of no consequences. The right to recover the amount under the running bills has no relevance to the liability of the bank under the guarantee. The liability of the bank remained intact irrespective of the recovery of mobilisation advance or the non pay ment under the running bills. It was further contended that there is no fraud whatsoever pleaded or committed by the beneficiary pursuance to which the injunction could be granted. In Tact the invocation of the bank guarantee against the mobilization advance is as per the terms of the guarantee. Therefore, there is no reason why the Court should grant the injunction.
(7) From the contentions raised at the bar and in order to appreciate the same, we have to understand what were the terms of the bank guarantee given against the mobilisation advance. What were the terms of the advance and what were the terms of the bank guarantees furnished by the petitioner against security. The bank guarantee against the mobilisation advance was furnished on 10th July, 1990. It was to expire on 6th July, 1991 plus three months. The term of the bank guarantee against the mobilisation advance reads as under: “In consideration of the Chairman, International Airports Authority of India (hereinafter called ‘the Authority’ which expression shall unless repugnant to the subject or context includes his successors and assigns) having agreed under the terms and conditions Agreement/Acceptance letter No.AAD/TFD/1020/90/334 dated 6.7.90 made between M/s. Nangia Constructions (India) Ltd. 204, Sahyog, 58, Nehru place. New Delhi-110019 (hereinafter called the Contractor’) and the Authority in connection with the work relating to the ‘Special Repairs to Main Runway 10/28 and other Operational Pavements at Igi Airport, New Delhi (hereinafter called ‘the work’) to make at the request of the Contractor an advance of Rs.28,77,191.00 for utilising for the purpose of the work on his furnishing a Bank Guarantee acceptable to the Authority, we Bank of India, Nehru Place, New Delhi-110019 (hereinafter called ‘the Bank’) do hereby guarantee the due recovery by the Authority of the said advance from the bills of the contractor proportionately as the work proceeds. If the said Contractor fails to utilise the said advance for the purpose of the work and for the said advance as aforesaid is not fully recovered/adjusted by the Authority, we, the said Bank hereby unconditionally and irrevocably undertake to pay to the Authority on demand and without demur to the extent of the said sum of Rs.28,77,l91.00 any claim made by the authority on us for the loss or damage caused to or suffered by the Authority by reason of the Authority not being able to recover in full the said sum of Rs.28,77,l91.00 as aforesaid.
(8) We, Bank of India, Nehru Place, New Delhi further agree that the Authority shall be the sole judge of and as to whether the said contractor has not utilised the said advance or any part thereof for the purpose of the work and the extent of the loss or damage caused to or suffered by the Authority on account of the said advance not being recovered in full and the decision of the Authority that the said Contractor has not utilised the said advance or any part thereof for the purpose of the work and as to the amount or amounts or loss or damage caused to or suffered by the Authority shall be final and binding on us.
(9) We, the said Bank further agree that the guarantee herein contained shall remain in full force and effect during the period that would be taken for the performance of the said work including extension if any and till the said advance has been fully recovered and its claims satisfied or discharged and till the authority certifies that the said advance has been fully recovered/adjusted from the said contractor and accordingly discharge’s this guarantee subject, however, that the authority shall have no claim under this guarantee after three months from the date of actual completion of the said work, as the case may be, unless a notice of the claim under this guarantee has been served on the bank before the expiry of the said period of three months in which case the same shall be enforceable against the bank and notwithstanding the fact that the same is enforced after the expiry of the said period of three months. Provided further that this guarantee shall remain in full force and effect up to 6.7.91 or the extended time granted from time to time by the authority. After the expiry of this date the right of the authority unless extended as above, shall be forfeited and the bank shall be released and discharged from all liabilities/obligations hereunder. The authority shall be at the fullest liberty without effecting in any way the liability of the bank under this guarantee of Indemnity, from time to time to vary any of the terms and conditions of the said work or the advance or to extend time or performance by the said contractor or to postpone for any time and from time to time any of the powers exerciseable by it against the said contractor and either to enforce or forbear from enforcing any of the terms and conditions governing the said agreement or the advance or securities available to the authority and the said bank shall not be released from its liability under these presents by any exercise by the authority of the liberty with reference to the matters aforesaid or by reasons of time being given to the said contractor or any other forbearance, act or commission on the part of the authority or any indulgence by the authority to the said contractor or any other matter or thing whatsoever which under the law relating to sureties would but for this provision have the effect of so releasing the bank from its liability. It shall not be necessary for the authority
(10) We, the said bank also undertake not to revoke this guarantee during its currency except with the previous consent of the Authority in writing and agree that any change in the constitution of the said contractor or the said bank shall not discharge our liability hereunder.
(11) This guarantee shall hold good even in case there is a dispute connected with the said work on account of the recovery of advance for which dispute either the matter is referred to arbitration or there exists a stay order of the Court.
(13) However, it is also understood by the bank that the authority on being asked by the bank will advise the bank the amount for the bills submitted to it by the said contractor from time to time in connection with the guarantee obligations and for the outstanding balance thereof. However, any failure to do so by the authority shall not constitute to be the reason for refusing any payment under this guarantee by the bank nor shall it be open to the bank to question the propriety or otherwise of the demand or the quantum thereof made by the authority or the Executive Engineer in charge of the work.”
(14) This bank guarantee was thereafter extended vide addendum 10th July, 1990 and it was to expire on 31.10.91 plus three months. The said Addendum is reproduced as under: “AT the request of M/s. Nangia Constructions (India) Pvt. Ltd. The captioned guarantee is amended as under: 1. The amount of original guarantee is Rs.28,77,191.00 which has been reduced to Rs.l7,98,244.00 vide EE(C), Ted, Iaai, letter No.AAD/TED/1020/91/345 dated 27.8.91. 2. The validity of guarantee is extended up to 31.10.1991. All other terms and conditions remain unchanged. Notwithstanding anything contained herein before our liability under this guarantee is restricted to Rs.l7,98,244.00 and it will remain in force up to 31.10.91. Unless a suit to enforce any claim under the guarantee is filed against us on or before 31.1.1992 all your rights under the said guarantee shall be forfeited and we shall be relieved and discharged from all liabilities there under.”
(15) Learned counsel for the petitioner contended that the bank guarantee could be invoked in two cases: One When the amount of advance had not been utilised fully or partly for the purpose of the work and secondly when that advance is not fully recovered/adjusted by the Authority. In this case, it is not the case of respondent that advance has not been utilised for the purpose of this work. Nor it is the case of the respondent that an amount of Rs.22 lacs has not been recovered. Hence respondent could not have invoked the bank guarantee for the full amount of advance. As per the terms of the guarantee respondent was under obligation to indicate in the letter of invocation that so much is only left to be recovered against the petitioner because balance had already been recovered from the running Account Bills.
(16) The petitioner had executed the work to the tune of Rs.80 lacs and as per the term of the contract, Rs.3.5 lacs was debited from each of the seven running bills (out of nine) totalling Rs.22 lacs approximately. Thus only a sum ofRs.6,12,752.00 remained outstanding as on 31.12.91. This fact Find support from a letter issued by Mr. Ashok Kumar, Accounts Manager of the respondent bearing No.FA/DP/91/127 dated 31st December, 1991. The said letter reads’ as under: “TO The Project Manager, M/s. Nangia Const(India) Pvt. Ltd. 204, Sahyog, 58 Nehru Place, New Delhi-110019 Dear Sir, With reference to your letter No.Nil dated 30.12.91, it is to state that a sum of Rs.6,12,752.00 is outstanding as on 31.12.91 against the Mobilization Advance of Rs.28,77,191.00 paid for the work special repair to Main Runway 10/28 and other operational payment at Igi Airport being executed by your firm under the agreement No.3/TFD/90-91. Thanking you, Yours faithfully, sd/- (Ashok Kumar) Accounts Manager.
(17) This letter is a clear admission to the fact that after adjusting the mobilisation advance from the Running Account Bill, only a sum of Rs.6,12,752.00 remained outstanding. Therefore, it was not justified on the part of the respondent Authority to invoke the bank guarantee to the full extent ofRs.l7,98,244.00 . Hence, the invocation is not as per the term of the bank guarantee. The bank guarantee stipulates that the advance had to be recovered/adjusted from the bills of the contractor proportionately as the work proceeds. It was only when the authority failed to recover or adjust fully the advance then the authority could invoke the bank guarantee to the extent of the amount of the guarantee. This find support from the language of the bank guarantee where it is specifically mentioned that the claim made by the authority on the bank will be for the loss or damage caused to or suffered by reason of the authority not having been able to recover in full. Beside this view can be supported from the fact that original bank guarantee was for a sum of Rs.28,77,191.00 which was furnished on 10th July, 1990. To it own addendum, was issued on 28.8.1991 extending the bank guarantee up to 31st January, 1992 but amount of guarantee was reduced to the extent of Rs. 17,98,244.00. This was because by them from the running account bills an amount of Rs. 11 lacs approximately had been recovered. Hence it is apparent that the respondent could only invoke that much guarantee which had not been adjusted or recovered so far from the running account bills.
(18) In view of these submissions made at the bar, the question for consideration is whether having already recovered/adjusted a substantial amount of the advance from the running bills of the petitioner, could the authority invoke the guarantee to the fullest extent? The guarantee in law is in fact given by the parties for an object and purpose namely, that the beneficiary may recover the amount easily from the guarantor without undergoing the botheration. But the guarantee is not a mean to be used. for enrichment. When the purpose of the guarantee is fulfillled the beneficiary cannot invoke the guarantee. Take for example, if instead of Rs.22 lacks, the total amount of Rs.28 lacs had been recovered from the running bills, could the authority still invoke the bank guarantee after having already recovered the advance as stipulated in the guarantee? The answer would naturally be in the negative. The liability of the petitioner under the guarantee is to the maximum extent of the amount mentioned therein, but that does not mean that the authority can invoke to the fullest extent the amount of the bank guarantee and also recover the amount from the running bills. This would tentamount to taking double benefit which is not permissible under law.
(19) Mr. Kapur on the other hand contended that this Court has no power to take into consideration these facts because the authority has been empowered to invoke the bank guarantee irrespective of the fact whether the amount has been recovered or not. He, in order to strengthen his arguments, placed reliance on the decision of Supreme Court in the case of General Electrical Technical Services Company Inc. Vs. M/s. Punj Sons (P) Ltd. and another(supra) and in particular the observation of the Supreme Court to the extent that ” when the mobilisation advance was to be recovered from the running bills non disclosure of this fact to the bank by the beneficiary would not make the invocation defective nor it was necessary for the authority to mention to the bank as to how much amount had been recovered from the running bills and what amount remained payable. The bank is not concerned with the outstanding amount payable under the running bills. The right to recover the amount under the running bills has no relevance under the guarantee. The liability of the bank remained intact irrespective of the recovery of the mobilisation advance or the non payment under the running bills”. The Supreme Court had also observed that “the failure on the part of the beneficiary to certify the remaining mobilisation advance in the letter for encashment of bank guarantee is of little consequence to the liability under the guarantee”. The bank has to pay as per the term nor the bank could be injected from paying the same. Therefore, relying on these observations of the Supreme Court, Mr. Kapur contended that this Court cannot go behind the invocation to determine as to how much amount was recovered from the running bill and what amount remains payable by the petitioner. Moroever, the Accounts Manager had no ‘authority to issue that letter. I am afraid these arguments of Mr. Kapur are without force. The facts in General Electric Technical Services Company Inc. Vs. M/s. Punj Sons (P) Ltd. and another are quite distinguishable. In that case, the guarantee was a composite bank guarantee. The facts in that case were like this: “THE General Electric Technical Services Company (GETSCO) had entered into a contract with Indian airlines which included, inter alia, the construction and fabrication of aircraft testing centre/engine repair centre in Delhi. The GETSCO in turn entered into a contract with M/s. Punj Sons (P) Ltd. respondent-1 for getting that work done for Indian Airlines. As per the contract respondent -1 was required to provide performance bond equal to 30 per cent of the total value of contract price which was to be split up into two performance bonds partly to be released on completion of the project, and the balance upon the expiration of the warranty. The respondent-1 was also required to furnish a bank guarantee to secure the mobilisation advance of 25 per cent of the contract value. On 28th October, 1986 respondent-I furnished the bank guarantee to secure the mobilisation advance of Rs.l,86,000.00 . The guarantee was furnished by Hongkong & Shanghai Bank (‘the Bank’) respondent-2. Respondent-1 instead of furnishing the two performance bonds, as agreed upon, suggested alternative proposals vide its letter dated 3.9.87 suggesting composite bank guarantee where amount vacated by mobilisation advance shall be utilised by performance bank guarantee amount. This guarantee shall at any time be valid for equivalent to 30% of the contract value, to cover unrecovered mobilisation advance and performance guarantee amount of the work certified.
(20) GETSCO accepted the revised proposal contained in the aforesaid letter. Consequently, on 25th January, 1988, the bank furnished a composite bank guarantee for Rs.2,12,25,000.00 .
(21) It seems respondent-1 failed to complete the project within the stipulated time as per contractual specifications despite repeated opportunities to rectify defects and deficiency prior to August 1988 and thereafter. GETSCO terminated respondent-1’s right to continue the project and wrote a letter dated 17 April 1989 to the bank seeking encashment of the bank guarantee dated 25th January 1988 for Rs.l,06,12,500.00 . On the same day the bank issued a cashier’s order No-2605 for Rs.l,06,12,500.00 in favor of GETSCO. On 18 April, 1989 the respondent -1 filed a suit for injunction against GETSCO and the bank in the High Court and obtained an exparte injunction. Division Bench allowed the appeal. On Special Leave Petition being filed Supreme Court reversed the order by making an observation that mentioning of amount deducted against mobilisation advance was not essential because invocation was as per the terms of bank guarantee.
(22) The perusal of the facts as discussed by the High Court in the case of Punj Sons, shows that the High Court took into consideration the fact that GETSCO could not encash the bank guarantee on account of the non performance of contract. The High Court was of the view that it is only the amount vacated from the mobilisation advance which GETSCO could adjust towards performance guarantee. On these observations, the Supreme Court opined that the High Court misinterpreted the terms of the bank guarantee. The recovery or adjustment of the mobilisation advance had nothing to do with the performance guarantee. The performance guarantee was distinct and on contractor committing breach of contract the authority was proving its right to invoke the guarantee. In view of breach having been alleged and invocation being of performance guarantee, the deduction or recovery made against mobilisation advance was of no consequences. It was under these circumstances the above observations were made. But that does not mean that if the guarantee is given for securing the mobilisation advance and the amount having already been recovered still the beneficiary will not give benefit of the same while invoking the bank guarantee. Such an invocation, to my mind, would not be as per the terms of the bank guarantee. Therefore, I find force in the submission of Mr. Shiv Dayal, Senior Advocate for the petitioner that the invocation is not as per the terms of the guarantee. The principle of special equities are in favor of the petitioner. Sofaras the mobilisation advance guarantee is concerned, the petitioner never gave any performance guarantee with it. Therefore, it does not lie in the mouth of the respondent to allege that it was not necessary for it to have mentioned as to how much mobilisation advance had been recovered from the running bills. Moroever, respondent now cannot turn round and say that the letter issued by the Accounts Manager was of no consequences. Sofaras the petitioner is concerned, it is an admission of fact by the respondent. There is not an iota of evidence has been placed on record by the respondent to prove that Accounts Manager had no authority to issue this letter or that instead of Rs.6,12,752.00 some other amount is due. Therefore, sofaras mobilisation advance guarantee is concerned, to my mind, the respondent cannot invoke the bank guarantee to the full extent. Authority can invoke the guarantee for the unrecovered amount. The liability of the bank in term of the bank guarantee stood reduced as when the authority recovered or adjusted the mobilisation advance from the running bills.
(23) In the case of Punj Sons (supra), the Supreme Court observed that when there is a serious dispute between the parties, the bank guarantee cannot be encashed. Even otherwise, I find that the special equity is also in favor of the petitioner because the respondent/authority cannot be permitted to deduct the amount of mobilisation advance from the running bill and also claim the same amount from the bank by invoking the bank guarantee
(24) Counsel for the petitioner took the plea that the invocation of the bank guarantee No.NP/G/20/100 dated 10th July, 1990 which was subsequently by Addendum extended up to 31st October, 1991 plus three months could not have been invoke-d by the respondents after the expiry of 31st October, 1991. As per respondents own showing the bank guarantee had been invoked vide letter dated 4.1.1992 therefore, the invocation is barred. I am afraid this argument of the petitioner has no force. The perusal of the Addendum shows that the date of expiry of this bank guarantee was 31st October, 1991 plus three months and the concluding portion of the addendum as reproduced earlier clearly shows that the authority could enforce its claim under the guarantee on or before 31st January, 1992. The contention of the petitioner that this could be done only by filing a suit has no force because the bank could not curtail the period of limitation for institution of the suit. The word ‘suit’ used in this addendum to enforce any claim means lodging the claim with the bank which the respondent/authority could do up to 31st January, 1992. Therefore, to my mind, the invocation was within time.
(25) Sofaras the bank, guarantees namely NP/G/21/46 for Rs.2 lakh and NP/G/21/157 for Rs.1,00,000.00 and NP/G/21/256 for Rs.2,00,000.00 are concerned, these were furnished by the. petitioner on account of security under Clause 10 of the Agreement which reads as under: “THE contrctor, whose tender is accepted, will be required to furnish by way of security deposit for the due fulfillment of his contract, such as will amount…. (1)… ..(ii)….(iii). The security deposit will be collected by deductions from the running bill of the contractor at the rates mentioned above and the earnest money deposited at the time of tender, will be treated as part of the security deposit. The security amount will also be accepted in cash or in the shape of guarantee bonds of Nationalised banks and State Bank of India will also be accpted for this purpose provided confirmatory advice is forthcoming from the Reserve Bank of India.”
(26) This shows that these bank guarantees were furnished by the petitioner for the due performance of the contract. As per the affidavit filed by the respondent/authority of one Shri Ashok Messon, Assistant Engineer, the contract of the petitioner stood terminated vide letter dated 3rd January, 1992 posted on 4th January, 1992. Mr. Kapur, therefore, contended that once the contract is terminated, the consequences have to follow as per Clause 3 of the Agreement, which provides inter alia as follows: “THE Engineer-in-Charge may without prejudice to his right against the contractor in any respect of any delay or inferior workmanship or otherwise or to any claim for damage in respect of any breaches of the contract and without prejudice to any rights or remedies under any of the provision of this contract or otherwise and whether the date for completion has or has not elapsed by notice in writing, absolutely determine the contract. When the contractor has made himself liable for action under any of the case aforesaid the Engineer-in-Charge on behalf of the International Airports Authority of India shall have powers: (a) To determine or rescind the contract as aforesaid (of which termination or rescission notice in writing to the contractor under the hand of the Engineer-in-Charge shall be conclusive evidence) . Upon such determination or recession the security deposit of the contractor shall be liable to be forfeited and shall be forfeited and shall be absolutely at the disposal of International Airports Authority of India.”
(27) Mr. Kapur, therefore, contended that having invoked the provision of Clause 3 of the Agreement, the Authority of the Engineer-in- Charge, cannot be challenged before this Court under the present proceedings. The petitioner instead of depositing the security amount in cash as stipulated in the contract had furnished the bank guarantee in lieu thereof. Since, the contract has been terminated and the Engineer-in-Charge, has invoked the provision of Clause 3 of the agreement and also invoked the bank guarantee which was furnished by way of security, this Court cannot go behind the same to find out whether the contract had been rightly terminated or that there was no breach of contract on the part of the contractor.
(28) Mr. Dayal, appearing for the petitioner, on the other hand contended that there was a delay on the part of the respondent/authority in making available the run way for a period of approximately 8 months which fact is admitted by the Chief Engineer of the respondent/authority vide its endorsement dated 23.10.91 made on the para wise comments furnished by the Superintending Engineer dt. 22nd October, 1991. The Chief Engineer has made the following endorsement, “UNDER the present circumstances and breach of contract on the part of the Department, to make available runway for a period of approximately 8 months, we have to accept delay in completion of work.”
(29) He, therefofe, contender that since there is no breach on the part of the petitioner, the security could not be forfeited nor the bank guarantee furnished in lieu of the same can be encashed. I am afraid these arguments of the counsel for the petitioner have no force because this Court cannot go into the merits of the case nor can determine as to whose fault it was, which led to the termination of the contract and whether there was delay or not. These are the questions of fact which have to be gone into by or before the arbitrator. In fact, instead of depositing the security amount, the petitioner had furnished the bank guarantee in lieu thereof, and the Superintending Engineer, having already invoked his power, under Clause 3. it is not necessary for the authority to prove before this Court that the contractor has committed a breach of contract or that loss there by is being caused to the beneficiary. The purpose of the bank guarantee furnished in lieu of security is not merely idemnification. The object is to secure the payment of a sum of money guaranteed by the bank as if it is a cash deposit made by the bank in favor of the promisee. Hence the respondent cannot be restrained from encashing the bank guarantees which were furnished in lieu of security mentioned above. These performance guarantees were accepted by the authority instead of asking the petitioner to deposit the security in cash. It is the case of the respondent – authority that petitioner has failed to perform the contract as per the terms and conditions. Whether breach is on the part of petitioner or respondent, these issues are to be determined. These issues do not relate to the obligation of the bank under the guarantee given and the bank is also not a party to the suit. The law as to the contractual obligations under the bank guarantee has been settled in the case of U.P. Cooperative Federation Ltd. Vs. Singh Consultants and Engineers (P) Ltd. . In that case, Supreme Court observed that unless there is a good prima facie case of fraud, special equity and serious dispute, bank cannot be interdicted by the court. The demand in the present case is under the guarantee and as per the terms thereof. No case of fraud or special equity has been made out in this case hence bank cannot be restrained from discharging its obligation under these three bank guarantees.
(30) As regard the guarantee bearing No.NP/G/20/144 for Rs.1,00,000.00 is concerned, that was furnished by the petitioner in lieu of the land provided by the respondent/authority for setting up labour camps. This was also in term of the Clause 10 of the Special Conditions which reads as under: “NO labour camps will be permitted within the Airport limits and the contractor shall make the necessary arrangements, at his own cost with the prior approval of the Engineer-in-Charge in respect of sitting the camps.”
(31) This security of Rs.1,00,000.00 was furnished for the land on which the labour huts had been constructed by the petitioner. It was stipulated that on completion of the project the petitioner was to remove the hutments from there. Mr. Y.K. Kapur, appearing for the respondent admitted that the land has been taken possession of by the respondent/authority. In view of the same, when the land is with the respondent/authority and there is no hinderance by the petitioner, I do not think the bank guarantee can be encashed because the bank could only be made liable if it had been the case of the respondent/authority that the land has not been handed over to the respondent. Since it is stated at the bar that the possession of the land has been taken over by the respondent/authority, the authority cannot be permitted to enrich itself by also encashing the bank guarantee, for which the security was taken. Therefore, taking these factors into consideration I find that special equity is in favor of the petitioner because if the respondent is allowed to encash the bank guarantee it would amount to irretrievable injustice to the petitioner. Therefore, prima facie I am of the view that qua this bank guarantee, the respondent should be restrained from encashing the same.
(32) In view of my above discussion, it is hereby ordered that the respondent authority cannot encash the mobilisation advance guarantee to the full amount, nor can it encash the bank guarantee bearing No.NP/G/20/144 for Rs.l,00,000.00 . As regards the rest of the three performance bank guarantees furnished in lieu of security under Clause 10 of the agreement, the bank cannot be restrained from encashing the same. With these observations, I.A.52/92 stands disposed of.