JAMNA AUTO INDUSTRIES Vs. UNION OF INDIA

JUDGEMENT

(1.) The facts, in brief, are that the petitioner had been awarded a contract for supply of goods on February 12, 1973 and the petitioner had furnished a bank guarantee of Rs.27,000.00 as security for due performance of the said contract. The respondents invoked the said bank guarantee by issuing-letter dated July 19, 1974 (Annexure P3) and required the Manager of the Central Bank of India to pay the amount of the bank guarantee to the respondents. It was mentioned in this letter that the petitioner had defaulted in the contract inasmuch as period for delivery of the goods was extended upto May 15, 1974 but the petitioner had failed to complete the supplies before that date and thus, the contract had been cancelled at the risk and cost of the petitioner. Simulteneously the respondents had issued letter to the petitioner cancelling the contract as the petitioner had failed to make supplies before the extended date of delivery mentioning that the time was the essence of the contract.

(2.) The contention of the learned Counsel for the petitioner is that the bank guarantee had not been invoked in terms of the bank guarantee bond inasmuch as it was stipulated in the guarantee bond that the bank guarantee could be invoked only if the respondents were to suffer any loss on account of any breach of contract by the petitioner but the respondents have not even alleged in the letter by which the contract was cancelled and the letter by which the bankguarantee was invoked that the respondents had suffered any damages on account of the alleged breach of contract on the part of the petitioner.

(3.) There appears a lot of merit in this contention. The guarantee bond, copy of which is Annexure A (appearing at page 41 of the file) mentions that the Central Bank of India undertook a promise to pay the amount due and payable under the guarantee without anydemur, merely on a demand from the Government stating that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the Government by reason of any breach by the said contractor of any of the terms orconditions contained in the said agreement or by reasons of the contractor's failure to perform the said agreement.