PATEL ENERGY LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS intra-court appeal impugns the order dated 19th October, 2012 of the learned Single Judge (in W.P.(C) No.5666/2012 preferred by the appellant) of dismissal of CM No.11610/2012 filed by the appellant for interim relief. The appellant seeks interim relief of - Stay of operation of ­ A. Letter dated 30th July, 2012. (i). Letter dated 10th September, 2012. (ii). Stay of encashment of Bank Guarantees dated ­ B. 28th May, 2010. (i). 27th May, 2011. (ii). (iii). 21st September, 2011. Considering the nature of the relief claimed, the appeal was finally heard on 31st October, 2012 when it first came up for consideration, with the consent of the learned ASG appearing on behalf of the respondent no.1 and the counsel for the respondent no.2 South Eastern Coal Fields Limited, who appeared on advance notice and the judgment reserved. The learned Single Judge had earlier, vide order dated 19th September, 2012, granted ad interim relief. Though on dismissal of application of interim relief, the ad interim relief earlier granted stood vacated but the learned Single Judge, to enable the appellant to avail its remedy of appeal, had suspended the impugned order till 30th October, 2012. Accordingly, while reserving judgment, the said order of suspension was continued till the disposal of the appeal.

(2.) THE three bank guarantees of Axis Bank Ltd. (not a party to the proceedings) in favour of Coal India Limited (also not a party to the LPA No.718/2012 Page 2 of 12 proceedings) and South Eastern Coal Fields Ltd., stay of encashment whereof is sought, are identical in language and the portion thereof relevant for the present purposes, may be reproduced as under:-

(3.) BANK Guarantees are instruments of trade and commerce. The courts have adopted the policy of restraining themselves from interfering therewith for the reason of the same interfering in the trade and commerce. It has been held that where the parties have agreed that the payment under the bank guarantee issued at the instance of one in favour of the other shall be made unconditionally, without any demur and simply on demand being made and the parties have acted on the said premise, the courts ought not to come in the way. The only ground for interference by the court in encashment of bank guarantee is, a fraud of egregious nature so as to vitiate the underlying transaction and the very issuance of bank guarantee. The said fraud is not to be in the encashment of the bank guarantee, but has to be in obtaining the bank guarantee. Reference in this regard can be made to Himadri Chemicals Industries Ltd. Vs. Coal Tar Refining Company AIR 2007 SC 2798 and UP Co-operative Federation Limited Vs. Singh Consultants & Engineers (P) Limited, 1988 (1) SCC 174 and UP State Sugar Corporation Vs. Sumac International Ltd (1997) 1 SCC 568.