ALLAHABAD BANK Vs. TAMILNADU ELECTRICITY BOARD

JUDGEMENT

(1.) THIS appeal challenges a judgment of the learned Single Judge made in C. S. No. 628 of 1992 whereby the second defendant was directed to pay interest to the first defendant on the bank guarantee from 18. 11. 1987 as per the Reserve Bank of India rates.

(2.) THE case of the plaintiff is as follows: pursuant to the tender and supplementary tender invited for the design and construction of chimney as well as a passenger lift, the plaintiff quoted Rs. 1,95,93,360/ -. The first defendant accepted the same, and the plaintiff paid Rs. 1 lakh towards earnest money deposit, and as regards the balance of Rs. 21,29,976/-, the plaintiff was permitted to give bank guarantee. Accordingly, it was furnished for Rs. 21,30,000/ -. It was to remain in force till 30. 4. 1990, and later on, it was extended till 30. 4. 1992. In spite of due completion of the work by the plaintiff, the first defendant unilaterally and wrongfully invoked the bank guarantee on the ground of breach of contract for non-employment of four expatriate staff (Tileman experts ). The contract did not provide for any right to the first defendant to specify the number of experts to be deployed from time to time. In the absence of any such agreement, it is not open to the first defendant to unilaterally specify the number of persons to be deployed. The first defendant has no right to invoke the bank guarantee and compel the second defendant to remit the sum of Rs. 21,30,000/- since the first defendant had not suffered any damage or injury in the performance of the contract, and there is no clause in the contract. Hence, the suit for declaration and consequential permanent injunction.

(3.) THE first defendant filed a written statement alleging that by letter dated 8. 6. 1987, the plaintiff confirmed that during execution of the work at various phases, experts from Tileman, U. K. , will be available; that on that assurance, the price bids were ordered to be opened by the Board; that as per the contract, the company should have completed the work by 2. 11. 1989; that the entire delay is attributed to the plaintiff; that the company completed the work on 27. 1. 1992; that a fine of Rs. 20,000/- was imposed on the plaintiff for slow progress; that the delay is due to the plaintiff and also due to the non-deployment of foreign experts; that the first defendant has not wrongfully invoked the bank guarantee; that had the plaintiff not furnished the names of the experts and the collaborator's undertaking at the time of finalisation of the tender, the plaintiff's offer would have been straightaway rejected; that an amount of Rs. 18,96,810/- is the minimal amount recommended by the Committee constituted by the first defendant to go into the issue of recovery for non-deployment of foreign experts, towards recovery for the lapses by the plaintiff; that the plaintiff had categorically admitted that in the event of decision taken against them, they agreed to pay the entire penalty of Rs. 18,96,810/- with interest to the Board; that the plaintiff was given two months' time to remit the same; that according to the terms of the contract, liquidated damages of Rs. 5,55,075/- has been levied on the plaintiff; that the amount covered under the bank guarantee may not be sufficient for the entire dues from the plaintiff; that there is no merit in the suit, and the same was to be dismissed.