{"id":9576,"date":"2011-03-11T00:00:00","date_gmt":"2011-03-10T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/helm-dungemittel-gmbh-vs-the-state-trading-corportion-of-on-11-march-2011"},"modified":"2015-12-10T01:00:01","modified_gmt":"2015-12-09T19:30:01","slug":"helm-dungemittel-gmbh-vs-the-state-trading-corportion-of-on-11-march-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/helm-dungemittel-gmbh-vs-the-state-trading-corportion-of-on-11-march-2011","title":{"rendered":"Helm Dungemittel Gmbh vs The State Trading Corportion Of … on 11 March, 2011"},"content":{"rendered":"
Delhi High Court<\/div>\n
Helm Dungemittel Gmbh vs The State Trading Corportion Of … on 11 March, 2011<\/div>\n
Author: V.K.Shali<\/div>\n
*             IN THE HIGH COURT OF DELHI AT NEW DELHI\n\n+      IA Nos. 2206\/2009 & 6701\/2009 IN CS(OS) NO.313\/2009\n\n                                      Date of Decision : 11.03.2011\n\nHELM DUNGEMITTEL GMBH                           ......Plaintiff\n                    Through:             Mr.     A.S.     Chandhiok,\n                                         Additional Solicitor General\n                                         with Mr. Rahul P.Dave,\n                                         Mr.Bhaskar     Tiwari   and\n                                         Mr.Sumit Chopra, Advs.\n\n                              Versus\n\nTHE STATE TRADING CORPORTION OF INDIA LTD. & ORS.\n                                      ...... Defendants\n                     Through: Ms.Ananya Datta, Adv. for\n                              defendant no.1.\n                              Mr.Pradeep Dewan, Sr.Adv.\n                              with Mr.Rajiv Samiyar, Adv.\n                              for defendant no.2.\n\n\nCORAM :\nHON'BLE MR. JUSTICE V.K. SHALI\n\n1.     Whether Reporters of local papers may be\n       allowed to see the judgment?                 YES\n2.     To be referred to the Reporter or not ?      YES\n3.     Whether the judgment should be reported\n       in the Digest ?                              YES\n\nV.K. SHALI, J.\n<\/pre>\n
1.     The question to be decided by the present order is as to<\/p>\n
       whether the defendant no. 2 can be permitted to invoke the<\/p>\n
       counter guarantee on the basis of which the defendant no. 2<\/p>\n
       had furnished the performance guarantee in favour of<\/p>\n
       defendant no. 1\/beneficiary.    It may be pertinent here to<\/p>\n
       mention that counter guarantee by defendant no. 3 was<\/p>\n
       furnished at the instance of the plaintiff as a part of<\/p>\n
CS(OS) No. 313\/2009                                 Page 1 of 23<\/span>
\n        performance guarantee being furnished in terms of the<\/p>\n
       contractual      obligation    between    the   plaintiff   and   the<\/p>\n
       defendant no. 1.\n<\/p>\n<\/p>\n
2.     In order to make the factual matrix clear, the plaintiff<\/p>\n
       hereinafter is referred as \u2015German Party\u2016, the defendant no. 1<\/p>\n
       as \u2015STC\u2016, defendant no. 2 as \u2015Canara Bank\u2016 and the<\/p>\n
       defendant no. 3 as \u2015German Bank\u2016.\n<\/p>\n<\/p>\n
3.     The facts of the case are that the German Party entered into a<\/p>\n
       contract with STC on 01.10.2008 for supply of 3 lac + 10%<\/p>\n
       metric tons of urea @ US Dollar 685.5 per metric ton.             The<\/p>\n
       shipment of the last cargo of the urea was to be dispatched<\/p>\n
       latest by 15.10.2008. This was stated to be the essence of the<\/p>\n
       contract. The case of the German Party is that it had shipped<\/p>\n
       and delivered 3,20,563 metric tons of urea which was within<\/p>\n
       the tolerance limit of + 10% and that this shipment was made<\/p>\n
       within the stipulated time. It was received and accepted by<\/p>\n
       the STC.       The delivery was against letters of credit issued by<\/p>\n
       the STC and on the shipment having been received, the<\/p>\n
       letters of credit were encashed and thus, the entire payment<\/p>\n
       of the goods supplied by the German Party stood paid to it by<\/p>\n
       the STC and the contract stood discharged by performance.<\/p>\n
4.     It is not in dispute that according to Clause 13 of the contract<\/p>\n
       between the German Party and the STC, the German Party<\/p>\n
       was required to furnish a performance guarantee in favour of<\/p>\n
CS(OS) No. 313\/2009                                       Page 2 of 23<\/span>
\n        STC to the extent of 10% of the value of the goods.                  The<\/p>\n
       relevant portion of the performance bank guarantee, the<\/p>\n
       format of which, as well as that of counter guarantee, was<\/p>\n
       furnished by the STC, reads as under :-\n<\/p>\n<\/p>\n
              \u2015…HEREBY        UNCONDITIONALLY      AND
\n              IRREVOCABLY GUARANTEE AND UNDERTAKE
\n              TO PAY TO THE BUYERS IMMEDIATELY ON
\n              FIRST DEMAND WITHOUT PROTEST OR DEMUR
\n              OR REFERENCE TO THE SELLERS IF THE
\n              SELLERS FAIL TO PERFORM ALL OR ANY OF
\n              THEIR    OBLIGATIONS  UNDER    THE   SAID
\n              CONTRACT OR SUPPLY MATERIAL – SHORT
\n              THAN    THE   CONTRACTED    QUANTITY   AS
\n              REVEALED BY THE JOINT DRAFT SURVEY AT
\n              THE DISCHARGE PORT OR IF PENALTIES ARE
\n              LEVIED    DUE   TO   QUALITY  DEVIATIONS
\n              (NUTRIENTS\/MOISTURE\/PARTICLE SIZE) FROM
\n              CONTRACTUAL SPECIFICATIONS AS REVEALED
\n              BY DISCHARGE PORT ANALYSIS REPORT OR
\n              LIABILITY TOWARDS DEAD FREIGHT AND
\n              DISPATCH\/DEMURRAGE NOT SETTLED….\u2016<\/p>\n
5.     The case of the plaintiff is that since the contract itself stood<\/p>\n
       discharged, therefore, the invocation of the performance<\/p>\n
       guarantee by the STC was bad in law, which necessitated the<\/p>\n
       filing of the present suit for injunction.<\/p>\n
6.     On having invoked the jurisdiction of this Court by way of the<\/p>\n
       present suit, the German Party on 13.02.2009 was able to<\/p>\n
       persuade this Court to pass an ex parte ad interim order<\/p>\n
       restraining the release of any amount of performance<\/p>\n
       guarantee in question by the Canara Bank or the German<\/p>\n
       Bank     in    pursuance   of   the   letter   of   invocation      dated<\/p>\n
       10.02.2009 by the STC. It may be pertinent here to mention<\/p>\n
CS(OS) No. 313\/2009                                         Page 3 of 23<\/span>
\n        that by the time this order came to be passed on 13.02.2009,<\/p>\n
       the Canara Bank had already on 12.02.2009 credited the<\/p>\n
       guarantee amount to the account of the STC\/the beneficiary<\/p>\n
       whereas it was not able to retrieve the said amount by<\/p>\n
       invoking the counter guarantee from the German Bank on<\/p>\n
       10.02.2009.     This order has continued till date and it is this<\/p>\n
       order which is being considered by the Court in order to<\/p>\n
       decide the question whether it should be confirmed or<\/p>\n
       vacated.\n<\/p>\n<\/p>\n
7.     The grounds on which the German Party has prayed for<\/p>\n
       confirmation of this ex parte order are as follows :-<\/p>\n
       (i)    That the contract having been performed by the German
\n              Party to the satisfaction of the STC and the money
\n              having been realized, therefore, the contract of supply
\n              and purchase of urea stood discharged by performance
\n              on both the sides and consequently, invocation of
\n              performance guarantee by the STC was bad in law.
\n              Reliance is placed on the case titled Chatturbhuj
\n              Vithaldas Jasani Vs. Moreshwar Parashram & Ors.
\n              AIR 1954 SC 236.\n<\/p>\n
       (ii)   The STC had invoked the performance bank guarantee
\n              on extraneous considerations. This is contended on the
\n              ground that the STC in its communication dated
\n              06.11.2008 had requested the German Party for
\n              reduction of the price of urea as the only outstanding
\n              issue. It is not denied by the German Party that its
\n              Indian representative M\/s. Everest Fertilizers had
\n              offered to reduce the price vide communication dated
\n              24.10.2008 but before this communication could be
\n              accepted by the STC, the said offer was revoked by the
\n              Indian party at the instance of the German Party on
\n              27.10.2008.\n<\/p>\n
              This argument is raised as a ground to urge that the
\n              invocation of performance guarantee by the defendants
\n              is actuated by ulterior considerations.\n<\/p>\n
CS(OS) No. 313\/2009                                    Page 4 of 23<\/span>
\n                Reliance is placed on M\/s. Radhey Shyam Bansal Vs.
\n               M\/s. Indian Farmers Fertilisers Cooperative Ltd. –
\n               85 (2000) DLT 484 at page 489 para 17 to 19;\n<\/p>\n
               Larsen & Toubro Vs. Maharashtra State Electricity
\n               Board & Ors., (1995) 6 SCC 68 at page 74 at para 9]\n<\/p>\n
       (iii)   The invocation of the performance bank guarantee or
\n               the counter guarantee by defendant no. 2 was not in
\n               accordance with the performance bank guarantee and,
\n               therefore, the Canara Bank was not obliged to make the
\n               payment to the STC in pursuance to the performance
\n               bank guarantee and if it has done so, it has been done
\n               by the Canara Bank at its own peril. Reliance in this
\n               regard was placed on\n<\/p>\n
               (a) M\/s. Harprashad & Co. Ltd. Vs.         Sudarshan Stee
\n                   Mills & Ors. AIR 1980 Del 174;\n<\/p>\n
               (b) Basic Tele Services Ltd. Vs. Union          of    India &
\n                   Anr., AIR 2000 Delhi 1<\/p>\n
               (c) Puri International (P) Ltd. Vs. National Building
\n                   Construction Company Ltd. 66 (1997) DLT 698<\/p>\n
               (d) Bhushan Industrial Co. Pvt. Ltd. Vs. Cimmco
\n                   International and Anr. 54 (1983) Comp. Cas. 157<\/p>\n
       (iv)    That no one can be allowed to take advantage of his own
\n               fraud even if the fraud is detected at a later stage.<\/p>\n
8.     The Canara Bank, having paid the amount of performance<\/p>\n
       bank guarantee to the STC, has contested the matter<\/p>\n
       vehemently.       The   case   of   the   Canara    Bank      is   that<\/p>\n
       performance bank guarantee is an independent contract and<\/p>\n
       the same was unconditional and             irrevocable envisaging<\/p>\n
       payment of all the amount to the beneficiary on the first<\/p>\n
       written demand without any protest and demur and without<\/p>\n
       reference to the seller namely German Party, if it has failed to<\/p>\n
       perform any of its obligations under the contract.<\/p>\n
CS(OS) No. 313\/2009                                       Page 5 of 23<\/span>\n<\/p>\n
 9.     It is the case of the Canara Bank that this performance<\/p>\n
       guarantee was furnished by the Canara Bank to the STC for a<\/p>\n
       sum of $ 67,86,450 on the counter guarantee having been<\/p>\n
       furnished to it by the German Bank, at the instance of the<\/p>\n
       German Party. It is also the case of the Canara Bank that<\/p>\n
       once the performance bank guarantee was invoked on<\/p>\n
       10.02.2009 by STC, the entire amount of bank guarantee was<\/p>\n
       credited       to   the   international   account   of   the   STC   on<\/p>\n
       12.02.2009, which is also prima facie corroborated not only<\/p>\n
       from the documentary evidence placed on record but also by<\/p>\n
       the affidavit of Mr. S.K. Jain, an official of the Canara Bank.<\/p>\n
       It was contended that it was well within its right to have the<\/p>\n
       money retrieved by invoking the counter guarantee furnished<\/p>\n
       by defendant no. 3.\n<\/p>\n<\/p>\n
10.    The case of the Canara Bank is that on 10.02.2009 on receipt<\/p>\n
       of demand by the STC vide its swift message, it invoked the<\/p>\n
       counter guarantee the same day, i.e., on 10.02.2009 and the<\/p>\n
       German Bank instead of honouring the invocation of counter<\/p>\n
       guarantee referred to the Principal, namely, the German Party<\/p>\n
       and intimated to the Canara Bank that it is investigating into<\/p>\n
       the matter. It is alleged that after taking instructions from<\/p>\n
       the German Party, it wrote back to Canara Bank that the<\/p>\n
       invocation of the counter guarantee by Canara Bank was not<\/p>\n
       in accordance with the terms and conditions of the counter<\/p>\n
       guarantee as it was not stated in the invocation letter whether<\/p>\n
CS(OS) No. 313\/2009                                         Page 6 of 23<\/span>
\n        they were called upon to make the payment by the<\/p>\n
       beneficiary.   This was immediately rectified by the Canara<\/p>\n
       Bank and the German Bank was intimated that it has been<\/p>\n
       called upon to make the payment. It is alleged by the Canara<\/p>\n
       Bank that after having parted with nearly 33 crores of rupees,<\/p>\n
       being a Public Sector Bank, it was deprived of a sizeable<\/p>\n
       amount of money out of circulation, by not honouring of<\/p>\n
       counter guarantee by the German Bank, at the instance of<\/p>\n
       the German Party only with a view to gain time and, in the<\/p>\n
       meantime, it obtained the restraint order from the High Court<\/p>\n
       on 13.02.2009 by not disclosing the full and correct facts.<\/p>\n
11.    The Canara Bank has alleged that the German Party and the<\/p>\n
       German Bank are in collusion with each other. Firstly, the<\/p>\n
       German Bank approached a Court at Hamburg in Germany<\/p>\n
       and obtained a restraint order that German Bank should not<\/p>\n
       make payment to Canara Bank which was vacated with the<\/p>\n
       direction that the guarantee be honoured subject to the<\/p>\n
       decision passed by the High Court of Delhi and thereafter the<\/p>\n
       present petition was filed in which the correct facts were not<\/p>\n
       presented before the Court inasmuch as by the time the order<\/p>\n
       was passed on 13.02.2009, the Canara Bank had already<\/p>\n
       released the amount in favour of the STC and, therefore, what<\/p>\n
       survived on 13.08.2009 was only the realization of the<\/p>\n
       amount by the Canara Bank in pursuance of the counter<\/p>\n
CS(OS) No. 313\/2009                                  Page 7 of 23<\/span>
\n        guarantee whereas the counter guarantee itself was not even<\/p>\n
       on record.\n<\/p>\n<\/p>\n
12.    So far as the allegation of the fraud with respect to the<\/p>\n
       invocation of the counter guarantee is concerned, it is the<\/p>\n
       case of the Canara Bank that there is absolutely no allegation<\/p>\n
       much less a prima facie proof with regard to the fraud having<\/p>\n
       been played by the STC or by the Canara Bank in obtaining<\/p>\n
       the counter guarantee from German Bank. On the contrary,<\/p>\n
       if at all, there is any prima facie evidence of fraud having been<\/p>\n
       played, it is by the German Party with the help of the German<\/p>\n
       Bank because the latter has notably remained absent and<\/p>\n
       silent by not filing even the written statement and remaining<\/p>\n
       absent during the course of entire proceedings.<\/p>\n
13.    I have heard Mr. A.S. Chandhiok, learned Additional Solicitor<\/p>\n
       General on behalf of the plaintiff, namely, the German Party,<\/p>\n
       Mr. A.B. Dial, learned senior counsel for STC and Dr. A.M.<\/p>\n
       Singhvi and Mr. Pradeep Dewan, learned counsel for Canara<\/p>\n
       Bank.\n<\/p>\n<\/p>\n
14.    At the outset, it is pertinent to mention that after the<\/p>\n
       conclusion     of   the   arguments,   Mr.   Chandhiok,         learned<\/p>\n
       Additional Solicitor General, on behalf of the plaintiff, namely,<\/p>\n
       the German Party, had given a suggestion that he is prepared<\/p>\n
       to go for arbitration to resolve the entire dispute between the<\/p>\n
       German Party and the STC, provided the STC refunds the<\/p>\n
CS(OS) No. 313\/2009                                     Page 8 of 23<\/span>
\n        entire amount of the performance guarantee to the Canara<\/p>\n
       Bank and so far as the interest of the STC is concerned, it will<\/p>\n
       be sufficiently protected by the plaintiff by either furnishing a<\/p>\n
       bank guarantee in the name of Registrar General or by<\/p>\n
       depositing the requisite amount with the Registrar General as<\/p>\n
       the pre-condition for reference of the dispute to the Arbitral<\/p>\n
       Tribunal for adjudication.\n<\/p>\n<\/p>\n
15.    Mr. A.B. Dial, learned senior counsel for STC, at the outset,<\/p>\n
       on instructions rejected this offer. Consequently, the matter<\/p>\n
       has to be considered on its merits as to whether the interim<\/p>\n
       order dated 13.02.2009 staying the invocation of the counter<\/p>\n
       guarantee can be permitted to continue in favour of the<\/p>\n
       plaintiff and to the detriment of the Canara Bank.<\/p>\n
16.    The law regarding bank guarantee has been the subject<\/p>\n
       matter of intense litigation not only in High Courts but also<\/p>\n
       before the Apex Court and repeatedly the courts have voiced<\/p>\n
       concern that the invocation of bank guarantee can be stayed<\/p>\n
       only in two circumstances, firstly, in case there is a fraud of<\/p>\n
       egregious nature     or secondly if there is an irretrievable<\/p>\n
       injustice caused to the party on account of the invocation of<\/p>\n
       the bank guarantee. The Court has also observed that it is<\/p>\n
       very essential to impart the credibility to the commercial<\/p>\n
       transactions whether national or international between the<\/p>\n
       contracting parties, namely, the Bank and the beneficiary. It<\/p>\n
CS(OS) No. 313\/2009                                   Page 9 of 23<\/span>
\n        has also been observed that the disputes which may arise<\/p>\n
       with    regard      to     the    performance    or    the   alleged      non-<\/p>\n
       performance of the principal contract in pursuance to which<\/p>\n
       the guarantee is furnished or its interpretation cannot be<\/p>\n
       permitted to be used as a bone of contention for avoiding the<\/p>\n
       liability under the bank guarantee. It will be worthwhile to<\/p>\n
       reproduce a couple of passages from one of the reported<\/p>\n
       judgments      of    the         Apex   Court   in    Dwarikeksh         Sugar<\/p>\n
       Industries Limited Vs. Prem Heavy Engineering Works (P)<\/p>\n
       Ltd. (1997) 6 SCC 450:-\n<\/p>\n<\/p>\n
              “21. Numerous decisions of this Court rendered over a span
\n              of nearly two decades have laid down and reiterated the
\n              principles which the courts must apply while considering the
\n              question whether to grant an injunction which has the effect
\n              of restraining the encashment of a bank guarantee. We do
\n              not think it necessary to burden this judgment by referring
\n              to all of them. Some of the more recent pronouncements on
\n              this point where the earlier decisions have been considered
\n              and reiterated are Svenska Handelsbanken v. Indian Charge
\n              Chrome, Larsen & Toubro Ltd.<\/a> v. Maharashtra SEB,
\n              Hindustan Steel Workers Construction Ltd. v. G.S.Atwal &
\n              Co. (Engineers) (P) Ltd. and U.P.State Sugar Corpn. V.
\n              Sumac International Ltd. The<\/a> general principle which has
\n              been laid down by this Court has been summarized in the
\n              case of U.P. State Sugar Corpn. as follows: (SCC p. 574, para<\/p>\n
              12)<\/p>\n
                                \u2015The law relating to invocation of such
\n                                bank guarantees is by now well settled.
\n                                When in the course of commercial
\n                                dealings an unconditional bank guarantee
\n                                is given or accepted, the beneficiary is
\n                                entitled to realize such a bank guarantee
\n                                in terms thereof irrespective of any
\n                                pending disputes. The bank giving such a
\n                                guarantee is bound to honour it as per its
\n                                terms irrespective of any dispute raised by
\n                                its customer. The very purpose of giving
\n                                such a bank guarantee would otherwise
\n                                be defeated. The courts should, therefore,
\n                                be slow in granting an injunction to
\n                                restrain the realization of such a bank<\/p>\n
CS(OS) No. 313\/2009                                             Page 10 of 23<\/span>
\n                          guarantee. The courts have carved out
\n                         only two exceptions.         A fraud in
\n                         connection with such a bank guarantee
\n                         would vitiate the very foundation of such a
\n                         bank guarantee. Hence, if there is such a
\n                         fraud of which the beneficiary seeks to
\n                         take the advantage, he can be restrained
\n                         from doing so.      The second exception
\n                         relates to cases where allowing the
\n                         encashement of an unconditional bank
\n                         guarantee would result in irretrievable
\n                         harm or injustice to one of the parties
\n                         concerned. Since in most cases payment
\n                         of money under such a bank guarantee
\n                         would adversely affect the bank and its
\n                         customer at whose instance the guarantee
\n                         is   given,    the   harm    or    injustice
\n                         contemplated under this head must be of
\n                         such an exceptional and irretrievable
\n                         nature as would override the terms of the
\n                         guarantee and the adverse effect of such
\n                         an injunction on commercial dealings in
\n                         the country.\u2016<\/p>\n
                     Dealing with the question of fraud it has been
\n              held that fraud has to be an established fraud. The
\n              following observations of Sir John Donaldson, M.R. in
\n              Bolivinter Oil SA v. Chase Manhattan Bank are
\n              apposite:\n<\/p><\/blockquote>\n
                         “….The wholly exceptional case where an
\n                         injunction may be granted is where it is
\n                         proved that the bank knows that any
\n                         demand for payment already made or
\n                         which may thereafter be made will clearly
\n                         be fraudulent. But the evidence must be
\n                         clear, both as to the fact of fraud and as
\n                         to the bank’s knowledge.          It would
\n                         certainly not normally be sufficient that
\n                         this   rests    on   the    uncorroborated
\n                         statement of the customer, for irreparable
\n                         damage can be done to a bank’s credit in
\n                         the relatively brief time which must
\n                         elapse between the granting of such an
\n                         injunction and an application by the bank
\n                         to have it discharged.”\n<\/p><\/blockquote>\n
17.    In the light of the aforesaid legal position, I have considered<\/p>\n
       carefully the submissions made by the learned counsel for<\/p>\n
       German Party. The main contention of the learned counsel<\/p>\n
       in order to confirm the ad interim order against the invocation<\/p>\n
CS(OS) No. 313\/2009                                      Page 11 of 23<\/span>
\n        of the performance guarantee has been that the contract<\/p>\n
       regarding supply of urea which was executed between the<\/p>\n
       German Party and the STC having been performed, inasmuch<\/p>\n
       as the goods having been supplied and the price having been<\/p>\n
       realized,      it   stood   discharged    by   performance         and<\/p>\n
       consequently the performance bank guarantee which was<\/p>\n
       furnished by the German Party through the chain of German<\/p>\n
       Bank furnishing counter guarantee to Canara Bank and<\/p>\n
       Canara Bank furnishing performance guarantee to the<\/p>\n
       beneficiary, namely, STC, came to an end and neither of the<\/p>\n
       two guarantees — performance or the counter guarantee<\/p>\n
       could have been invoked.         The learned senior counsel had<\/p>\n
       placed      reliance   on   Chatturbhuj    Vithaldas    Jasani     Vs.<\/p>\n
       Moreshwar Parashram & Ors. AIR 1954 SC 236, where it<\/p>\n
       has been observed as under :-\n<\/p><\/blockquote>\n
                      \u2015The question then is, does a contract
\n                      for the supply of goods terminate when
\n                      the goods are supplied or does it
\n                      continue in being till payment is made
\n                      and the contract is fully discharged by
\n                      performance on both sides? We are of
\n                      opinion that it continues in being till it
\n                      is fully discharged by performance on
\n                      both sides.\u2016<\/p>\n<\/blockquote>\n<\/blockquote>\n
18.    No doubt, in Chatturbhuj’s Case, it has been held that a<\/p>\n
       contract stands fully discharged by performance on both<\/p>\n
       sides but the observations passed in that case were not in the<\/p>\n
       context of invocation of a bank guarantee.           That case was<\/p>\n
CS(OS) No. 313\/2009                                       Page 12 of 23<\/span>
\n        dealing with the question of execution of a contract between<\/p>\n
       the Central Government and a private party where the<\/p>\n
       question of discharge of contract had arisen as to whether it<\/p>\n
       could be said that the contract had been discharged merely<\/p>\n
       on the supply of goods or only when the payment for the said<\/p>\n
       supply is received and it was in this context that the<\/p>\n
       observations were passed by the Apex Court. The Supreme<\/p>\n
       Court in Haryana Financial Corpn. Vs. Jagdamba Oil Mills,<\/p>\n
       (2002) 3 SCC 496, has observed that the law enunciated by<\/p>\n
       judgment is not like a theorem which is to be applied blindly<\/p>\n
       without reference to the facts of the case in the light of which<\/p>\n
       that pronouncement has been made. The facts of the case in<\/p>\n
       which the judgment has been given should correlate with the<\/p>\n
       facts of the case in hand and only then it has to be seen as to<\/p>\n
       whether the ratio laid down in the said judgment can be<\/p>\n
       applied to the facts of the present case.\n<\/p><\/blockquote>\n
19.    Going by this parameter, the ratio laid down by the Apex<\/p>\n
       Court in Chatturbhuj’s Case, which the learned senior<\/p>\n
       counsel for the German Party has observed to be a locus<\/p>\n
       classics, cannot be said to be applicable to the facts of the<\/p>\n
       present case.\n<\/p>\n<\/p>\n
20.    The judgment in M\/s. Radhey Shyam’s Case, where a<\/p>\n
       similar proposition has been laid down by the learned single<\/p>\n
       Judge is also distinguishable from the facts of the case. In<\/p>\n
CS(OS) No. 313\/2009                                   Page 13 of 23<\/span>
\n        that case also, the invocation of the bank guarantee was<\/p>\n
       stayed on the ground that the contract having been<\/p>\n
       performed the performance guarantee stood discharged.<\/p>\n
       But in that case, the invocation letter was not placed on<\/p>\n
       record by the party concerned which prompted the Court to<\/p>\n
       pass a restraint order whereas in the present case, the said<\/p>\n
       documents have been placed on record by the defendants,<\/p>\n
       i.e., STC and the Canara Bank. Therefore, the facts of this<\/p>\n
       case are distinguishable. Similar would be the position with<\/p>\n
       regard to Larsen and Toubro’s Case where the invocation of<\/p>\n
       the bank guarantee which was conditional was stayed<\/p>\n
       because of irretrievable injustice.\n<\/p>\n<\/p>\n
21.    One thing I must observe that there is a growing tendency on<\/p>\n
       the part of the counsel to cite plethora of judgments so that<\/p>\n
       the Court gets lost in the maze of papers and judgments and<\/p>\n
       the main issue gets sidetracked and secondly, that merely<\/p>\n
       because a restraint order has been issued in a particular case<\/p>\n
       on the Court being      satisfied about the existence of facts,<\/p>\n
       warranting the grant of such a stay in the said case does not<\/p>\n
       necessarily mean that as a matter of course, the stay must<\/p>\n
       follow in the facts of the case which is in hand.<\/p>\n
22.    In addition to this, it has not been admitted by the Canara<\/p>\n
       Bank in the plaint or during the course of arguments that the<\/p>\n
       contract stood discharged on account of performance. On the<\/p>\n
CS(OS) No. 313\/2009                                   Page 14 of 23<\/span>
\n        contrary, it has taken the plea in the written statement that<\/p>\n
       the performance guarantee has been invoked by STC, which<\/p>\n
       was unconditional and therefore, they invoked the counter<\/p>\n
       guarantee.      It is also not open to the plaintiff namely the<\/p>\n
       German Party to contend that there was no dispute regarding<\/p>\n
       the quantity, quality, demurrage, dispatch or terms of<\/p>\n
       performance, and, therefore, the guarantee could not be<\/p>\n
       invoked. The invocation letter dated 10.02.2009 raised by the<\/p>\n
       STC, the beneficiary, against the Canara Bank\/defendant no.<\/p>\n
       2 and the consequent invocation of counter guarantee by the<\/p>\n
       Canara Bank intimating that they have been called upon to<\/p>\n
       make the payment, was a complete answer to this contention<\/p>\n
       of the learned counsel for the plaintiff. Therefore, in the light<\/p>\n
       of above facts, I do not agree with this contention of the<\/p>\n
       learned counsel for the plaintiff that the contract stood<\/p>\n
       discharged by performance.\n<\/p>\n<\/p>\n
23.    I also do not agree with the contention of the learned counsel<\/p>\n
       for the plaintiff that the invocation of the performance<\/p>\n
       guarantee      by   the   STC   was   on   account   of    ulterior<\/p>\n
       considerations.     The plaintiff has referred to the ulterior<\/p>\n
       considerations by drawing the attention of the Court to the<\/p>\n
       correspondence exchanged between the Indian representative<\/p>\n
       of the German Party and the STC regarding its offer to reduce<\/p>\n
       the price of the urea and the said offer having been<\/p>\n
       withdrawn as well as the letter purported to have been<\/p>\n
CS(OS) No. 313\/2009                                   Page 15 of 23<\/span>
\n        written by STC, after withdrawal of the letter by its Indian<\/p>\n
       representative, the only outstanding issue is with regard to<\/p>\n
       reduction of the price of urea.\n<\/p>\n<\/p>\n
24.    If one sees the contents of these three letters in a sequential<\/p>\n
       order, the letter where the STC has made reference to an<\/p>\n
       outstanding issue regarding the reduction of price is a<\/p>\n
       subsequent letter written by them to German Party after<\/p>\n
       having     not   only   received   the   offer   from   its       Indian<\/p>\n
       representative regarding reduction of price of the urea<\/p>\n
       voluntarily but also unilaterally withdrawing the said offer<\/p>\n
       without any rhyme or reason and this cannot be permitted to<\/p>\n
       be used as a ground or a shield for honouring the<\/p>\n
       performance guarantee which has been invoked by the<\/p>\n
       beneficiary from Canara Bank. The question of reduction or<\/p>\n
       non-reduction of the price of the urea as alleged by the<\/p>\n
       German Party even if assumed to be correct, pertains to a<\/p>\n
       dispute sought to be raised between the two contracting<\/p>\n
       parties, namely, the German Party and the STC, but it has<\/p>\n
       nothing to do with the performance guarantee which is a<\/p>\n
       contract between the beneficiary, i.e., STC and the guarantor,<\/p>\n
       i.e., the Canara Bank. Permitting the stoppage of payment on<\/p>\n
       the plea of the German Party raised herein before will not only<\/p>\n
       be adding a condition to the counter guarantee but it would<\/p>\n
       be also against the settled legal position of law laid down by<\/p>\n
       the Supreme Court in a catena of authorities that the<\/p>\n
CS(OS) No. 313\/2009                                      Page 16 of 23<\/span>
\n        guarantee is an independent contract where the scope of<\/p>\n
       stoppage is very limited by the Court and is available only in<\/p>\n
       the eventuality of fraud or irretrievable injustice being cause<\/p>\n
       to the party.\n<\/p>\n<\/p>\n
25.    The reference to the various authorities such as M\/s. Radhey<\/p>\n
       Shyam Bansal’s Case and Larsen & Toubro’s Case is also<\/p>\n
       inappropriate keeping in view the pronouncement of Apex<\/p>\n
       Court in Haryana Financial Corpn.’s Case.<\/p>\n
26.    So far as the judgment in Hindustan Steel Works Vs.<\/p>\n
       Tarapore and Co. & Anr.,              (1996) 5 SCC 34 and U.P.<\/p>\n
       Cooperative Federation Ltd. Vs. Singh Consultants and<\/p>\n
       Engineers (P) Ltd., (1988) 1 SCC 174, which have been<\/p>\n
       relied upon by the plaintiff is concerned, I am of the<\/p>\n
       considered opinion that the same instead of supporting the<\/p>\n
       submissions of the plaintiff, namely, the German Party,<\/p>\n
       support the contention of the respondent that the bank<\/p>\n
       guarantee is an independent contract and its invocation<\/p>\n
       cannot         be   stayed   except     in   two    aforementioned<\/p>\n
       circumstances.\n<\/p>\n<\/p>\n
27.    Admittedly, so far as the plaintiff is concerned, it is not his<\/p>\n
       case that any irretrievable injustice will be caused to the<\/p>\n
       German Party on account of the invocation of the bank<\/p>\n
       guarantee. However, fraud has been taken as a ground by<\/p>\n
       the German Party for stopping the invocation of the bank<\/p>\n
CS(OS) No. 313\/2009                                       Page 17 of 23<\/span>
\n        guarantee. Simply by making an averment, it cannot be said<\/p>\n
       that fraud has been played in invocation of the bank<\/p>\n
       guarantee, there must be prima facie evidence to show that<\/p>\n
       fraud has been committed in obtaining the guarantee. The<\/p>\n
       learned counsel has referred to the observations passed by<\/p>\n
       the Apex Court wherein it has been observed that fraud may<\/p>\n
       not be played initially and it may be revealed by the<\/p>\n
       subsequent facts on the record, even if this preposition of the<\/p>\n
       German Party is accepted to be correct, there is no denial of<\/p>\n
       the fact that fraud prima facie must be established. In the<\/p>\n
       instant case, it is my opinion that the German Party has<\/p>\n
       failed to establish by any prima facie evidence that fraud has<\/p>\n
       been played in either obtaining the performance guarantee or<\/p>\n
       the counter guarantee.     As a matter of fact, there is no<\/p>\n
       allegation qua the counter guarantee given by the German<\/p>\n
       Bank to the Canara Bank which is the only surviving point.<\/p>\n
       Further, the only allegation which the plaintiff namely the<\/p>\n
       German Party is making in order to urge its point of fraud is<\/p>\n
       that the contract stood discharged by the performance and,<\/p>\n
       therefore, the bank guarantee was invoked by the STC only<\/p>\n
       for the purpose of reduction of the price. These points have<\/p>\n
       already been dealt hereinabove and could hardly be said to be<\/p>\n
       a ground for staying restraining the invocation of the counter<\/p>\n
       guarantee.\n<\/p>\n
CS(OS) No. 313\/2009                                  Page 18 of 23<\/span>\n<\/p>\n
 28.    On the contrary, if at all, there was any prima facie evidence<\/p>\n
       of fraud, it was a fraud which was sought to be played not<\/p>\n
       only by the plaintiff but also perpetrated by the German Party<\/p>\n
       on the Canara Bank.        This has been felt by the Court on<\/p>\n
       account of the fact that admittedly in the instant case, the<\/p>\n
       restraint order has been passed on 13.02.2009 when the<\/p>\n
       amount of      `33 crores or so in terms of performance bank<\/p>\n
       guarantee having been invoked on 10.02.2009, had been<\/p>\n
       credited to the international account of the STC by the<\/p>\n
       Canara Bank and this fact was well within the knowledge of<\/p>\n
       the German Bank.            So, obviously, it must have been<\/p>\n
       conveyed to its Principal, namely, the German Party. Apart<\/p>\n
       from this, the Indian representative of the German Party i.e.<\/p>\n
       Everest Fertilizers was aware about this fact or even if not<\/p>\n
       aware is deemed to be aware because of the correspondence<\/p>\n
       which was being exchanged between the parties.                  The<\/p>\n
       German Party cannot take the plea of being ignorant of the<\/p>\n
       fact that on 13.02.2009 when the restraint order was passed,<\/p>\n
       they knew that the amount had already been paid to the<\/p>\n
       beneficiary but still they did not point out to the Court that<\/p>\n
       the money having been paid by the Canara Bank to the<\/p>\n
       beneficiary in pursuance of the performance guarantee the<\/p>\n
       only stay which was required to be passed was against the<\/p>\n
       invocation     of   the   counter   guarantee   on   11.02.2009.<\/p>\n
       Moreover, in the entire plaint, the German Party is making<\/p>\n
CS(OS) No. 313\/2009                                    Page 19 of 23<\/span>
\n        averments of fraud only with regard to performance guarantee<\/p>\n
       whereas it is only in the prayer they seek restraint against<\/p>\n
       invocation of the counter guarantee.\n<\/p>\n<\/p>\n
29.    These facts were not pointed out though a relief against<\/p>\n
       invocation of counter guarantee by defendant no. 3 was<\/p>\n
       obtained by the plaintiff and that too without attaching a copy<\/p>\n
       of the counter guarantee along with the plaint. Another fact<\/p>\n
       which shows that there was an active collusion and a fraud<\/p>\n
       perpetrated by the German Party in collusion with the<\/p>\n
       German Bank was that the German Bank did not raise any<\/p>\n
       objection to the letter of invocation dated 10.02.2009 by<\/p>\n
       Canara Bank invoking counter guarantee and stated that it is<\/p>\n
       investigating into the matter though it was none of its<\/p>\n
       business to raise such an objection to the honouring of its<\/p>\n
       obligation.    In the meantime, referred the matter to its<\/p>\n
       Principal, namely, the German Party who instigated it to move<\/p>\n
       the Court in Hamburg in Germany and got a temporary relief<\/p>\n
       by obtaining a restraint order against the realization of the<\/p>\n
       counter guarantee.   Despite this, the German Bank neither<\/p>\n
       appeared nor filed any written statement before this Court<\/p>\n
       and remained notably silent which clearly shows that if at all<\/p>\n
       there was any fraud, it was sought to be played on a public<\/p>\n
       sector bank by the German Party with the help of German<\/p>\n
       Bank. Therefore, I feel that even this ground of fraud is not<\/p>\n
       available to the plaintiff to continue to enjoy the stay of the<\/p>\n
CS(OS) No. 313\/2009                                  Page 20 of 23<\/span>
\n        invocation of bank guarantee by defendant no. 2.           On the<\/p>\n
       contrary, there is fairly good amount of circumstantial<\/p>\n
       evidence to show that the German Party in collusion with the<\/p>\n
       German Bank was trying to take undue advantage to mislead<\/p>\n
       the Court which has the features of playing a fraud.<\/p>\n
30.    The aforesaid reasoning would be equally meeting the point or<\/p>\n
       the submission which has been urged by the plaintiff,<\/p>\n
       namely, the German Party against the defendant no. 2 that<\/p>\n
       no one can be allowed to take advantage of his own fraud.<\/p>\n
31.    So far as the plea of the learned senior counsel for the<\/p>\n
       German Party raising the question of invocation of the bank<\/p>\n
       guarantee to be a formality by reproducing the parrot like<\/p>\n
       language of the guarantee is concerned, I do not feel that it<\/p>\n
       can be said that the invocation of the bank guarantee has<\/p>\n
       been taken as a parrot like reproduction of the words by the<\/p>\n
       STC or the Canara Bank.          But at the same time, the<\/p>\n
       invocation of the bank guarantee or the contents of the said<\/p>\n
       letter are not to be subjected to hair splitting analysis as is<\/p>\n
       being sought to be done by the learned counsel for the<\/p>\n
       plaintiff.\n<\/p>\n<\/p>\n
32.    I have also gone through the various other judgments which<\/p>\n
       have also been cited by the learned senior counsel for the<\/p>\n
       plaintiff which I do not find to be of any help to the plaintiff<\/p>\n
       namely the German Party although there cannot be any<\/p>\n
CS(OS) No. 313\/2009                                   Page 21 of 23<\/span>
\n        dispute about the proposition of law laid down therein which<\/p>\n
       broadly remains the same as has been reproduced in para 21<\/p>\n
       of the Dwarikesh’s Case hereinbefore.\n<\/p>\n<\/p>\n
33.    For the reasons mentioned above, I am of the considered<\/p>\n
       opinion that there is absolutely no fraud and no merit in the<\/p>\n
       application under Order XXXIX Rule 1 & 2, CPC filed by the<\/p>\n
       plaintiff which will warrant staying of the invocation of the<\/p>\n
       counter guarantee by defendant no. 2 namely the Canara<\/p>\n
       Bank against defendant no. 3 which was granted in favour of<\/p>\n
       the plaintiff on 13.02.2009 much less the continuance of the<\/p>\n
       same.\n<\/p>\n<\/p>\n
34.    I, accordingly vacate the stay order and permit defendant<\/p>\n
       no.2 to realize the amount of counter guarantee from German<\/p>\n
       Bank. The IA No. 2206\/2009 is dismissed. So far as the IA<\/p>\n
       No. 6701\/2009 wherein the plaintiff had prayed for a<\/p>\n
       direction to the STC to produce certain records has also<\/p>\n
       become infructuous on account of the fact that an affidavit of<\/p>\n
       Mr. S.K. Jain, a senior employee of the STC has been filed<\/p>\n
       indicating that the amount of performance guarantee was<\/p>\n
       credited to the international account of the STC on 10.02.2009<\/p>\n
       itself.\n<\/p>\n<\/p>\n
35.    It is clarified that the amount, dates, etc. mentioned<\/p>\n
       hereinbefore if they are at variance with the record, the latter<\/p>\n
       should be taken to be correct.     Further expression of any<\/p>\n
CS(OS) No. 313\/2009                                   Page 22 of 23<\/span>
\n        opinion herein may not be treated as an expression on the<\/p>\n
       merits of the case.\n<\/p>\n<\/p>\n
36.    Dasti on payment of usual certified copy charges.<\/p>\n
                                                     V.K. SHALI, J.\n<\/p>\n
MARCH 11, 2011
\nMA<\/p>\n
CS(OS) No. 313\/2009                                 Page 23 of 23<\/span>\n <\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court Helm Dungemittel Gmbh vs The State Trading Corportion Of … on 11 March, 2011 Author: V.K.Shali * 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-9576","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nHelm Dungemittel Gmbh vs The State Trading Corportion Of ... on 11 March, 2011 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/helm-dungemittel-gmbh-vs-the-state-trading-corportion-of-on-11-march-2011\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Helm Dungemittel Gmbh vs The State Trading Corportion Of ... on 11 March, 2011 - 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