HORIZON TRAVELS Vs. PAN AMERICAN W AIRLINE

JUDGEMENT

(1.) Ed. facts : Parties agreed to make plaintiff (pff.) general Sales Agent of Deft. 1 for Phagwara &. Jullundhar in Punjab on 1.4.88, Pff. had given Bank Guarantee of Rs. 15 lakh on 26.8.88 which was extended from time to time. For agreement permission of Reserve Bank of India was necessary. RBI refused to give permission and then agreement was amended and territory of Panipat was added. For latter territory pff. sold tickets of more than 25 lakhs between 16.10 to 17.11.90. Pff. was not paying this and Deft. 1 sought encashment of Guarantee from Deft. 2 (the Bank). Pff. filed a suit for injunction that Deft. I should not encash Guarantee as it had been given in respect of contract of Phagwara and Jullundhar which contract never came into force for lack of permission by R.B.I, and hence Deft. I was not entitled to encash same. Pff. also applied for interim injunction. Deft. I in his W.S. raised the contention that pff. had suppressed the fact in the plaint that it owes more than Rs. 25 lakhs on account of sale of tickets at Panipat. In the replication pff. evaded to answer this and on Deft.'s request pff. was ordered to make admission which he did but added that the pff. suffered loss because of writing by Deft. I to other Airlines not to honour the tickets issued by pff.]

(2.) b. At any rate, there is no prima facie, evidence produced by the pff. to show that any regular tickets issued by the pff. had been not honoured by the carriers mentioned in the tickets of which copies were supplied to deft. 1 during the course of business of the pff. It is also not established, prima facie, by producing any evidence on record that any claims had been made by any passengers against the pff. on the basis of any instructions issued by deft. 1 for not honouring any tickets issued by pff. Principles which should govern regarding the invocation of bank guarantees and letters of credit have been analysed by the Supreme Court in U.P. Coop. Fed. vs. Singh Consultants 1988 (1) SCC. 174 and it was clarified in this judgment that in order to restrain the operation either of irrevocable letter of credit or of confirmed letter of credit or of bank guarantee, there should be serious dispute and there should be good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Otherwise the very purpose of bank guarantees would be negatived and the fabric of trading operation will get jeopardised. In para 34 it was laid down that on the basis of these principles, it is reiterated that commitments of banks must be honoured free from interference by the courts. In the aforesaid case, a contention was raised that there was delay in performance of the agreement, and defective machinery had been supplied and if the bank guarantee is allowed to be enforced the damage would be done. The Supreme Court held that it was not a case where a strong prima facie case of fraud in entering into a transaction was made out and thus, the order of the High Court restraining invocation of bank guarantee was set aside.

(3.) The learned counsel for deft. 1 did not dispute the legal principle that if by invoking the bank guarantee deft. 1 is trying to unjustly enrich itself or is practising any fraud the court is within its powers to grant the temporary injunction but he has vehemently argued that prima facie, it is clear that the pff. without any good reasons is with-holding the trust money of deft. 1 to the tune of Rs. 25,94,372.00 and thus. the court should not exercise its discretion in favour of the pff. I come to the conclusion that prima facie, the plaintiff has failed to show that deft. 1 is practising any fraud by invoking the bank guarantee in question or by invoking the said bank guarantee deft. 1 is trying to unjustly enrich itself ; rather if injunction is granted the pff would be unjustly withholding the huge amount due from the pff. to deft. 1.