HINDUSTAN CONSTRUCTION COMPANY LIMITED Vs. STATE OF BIHAR

JUDGEMENT

(1.) Leave granted in both the special leave petitions.

(2.) Hindustan Construction Company Limited (for short, 'HCCL') was awarded a contract for the construction of Icha Ram across the river Kharkai in village Kuju by the State of Bihar (for short, 'the defendants'). The contract was awarded in the sum of Rs. 39,71,31,019/- on 25-4-1989. The period of contract was 42 months and the work was to be completed by 24th of October, 1992. In terms of the agreement, HCCL was required to furnish and it did furnish, a Bank Guarantee for 10 per cent of the contract price as "Performance Guarantee" in the sum of Rupees Three Crores Ninety Seven Lakhs Thirteen Thousand One Hundred and Two only. Another Bank Guarantee which was required to be furnished by HCCL, and which it did furnish, was the Guarantee against "Mobilisation Advance" which was to be provided by the defendants from time to time to the HCCL during the course of the contract. HCCL has already furnished fifty "Mobilisation Advance" Bank Guarantees aggregating in all to Rs. 532 lacs. In addition to those Bank Guarantees, HCCL and also furnished another "Mobilisation Advance" Bank Guarantee dated 2-7-1991 for Rs. 40 lacs, for which no advance has been paid by the State of Bihar. This Bank Guarantee is, however, not in question in these proceedings.

(3.) Both the Bank Guarantees were invoked by the defendants and it was, at this stage, that HCCL filed a suit on 21-10-1992 in the Bombay High Court against State Bank of India, State Bank of Patiala and Indian Bank (defendants 1 to 3) and the State of Bihar and its officers (defendants 4 to 6) for various reliefs, including principal relief that defendants 1 to 3 may be restrained from making payment of the amount covered by the aforesaid Bank Guarantees to defendants 4 to 8. An interim order was passed by the single Judge in the suit on 27-10-1992 and under this interim order, the defendants were restrained from invoking the Bank Guarantees and the Banks were restrained from making payment of the amount covered by the Bank Guarantees to the defendants. The interim order was confirmed on 9-2-1996.