NATIONAL CAPITAL POWER STATION Vs. BANK OF BARODA

JUDGEMENT

(1.) By means of the present writ petition, the petitioners seek a writ, order or direction in the nature of mandamus or otherwise commanding the respondents-Bank of Baroda, Abid Circle Branch, Hyderabad to honour the thirteen Bank Guarantees along with interest at the rate of 18% per annum from the date of invocation, specified at Annexure-1 to the writ petition as invoked by the petitioners by means of letter dated 8-10-1997 and 7-11-1998 (Annexures 6 and 12 to the writ petition).

(2.) Briefly stated the facts giving rise to the present writ petition are as follows : The petitioner No. 1 is a unit of National Thermal Power Corporation Ltd. (Petitioner No. 2), which is Government of India Undertaking. They entered into a contract with one M/s. Aluminium Industries Ltd. situated at Ceramic Factor Road, Kundra, Kerala, respondent No. 4, for the purposes of supply of equipments and spares, erection and civil and Structural contract works. A contract was awarded vide letter dated 2-12-1988 for value of Rs. 18.98 crores approximately. The respondent No. 4 submitted Bank Guarantees as security towards initial/interim advances, free of cost material issued by the petitioners, guarantee for faithful performance of the contract, guarantee in respect of financial assistance provided by the petitioners. The total value of the bank guarantees submitted by the respondent No. 4 was to the tune of Rs. 493.86 lacs approximately covering 13 bank guarantee issued by the Bank of Baroda, respondent No. 1. It appears that the work order was issued by the petitioners to the respondent No. 4 and a sum of Rs. 2.35 crores was given as advance also. According to the petitioners, the respondent No. 4 performed about 80% of the work and thereafter the work was abandoned by it in the year 1996. A sum of Rs. 5.45 crores remained due to the petitioners on account of abandonment of work by the respondent No. 4. A tripartite meeting was held between the petitioners, Bank of Baroda and the respondent on 27-9-1995, in which certain decisions were taken to resolve the dispute. Thereafter, on 8-10-1997 the petitioners invoked all the 13 bank guarantees for sum of Rs. 493.86 lacs issued by the Bank of Baroda in favour of the petitioners which was followed by another reminder dated 14-5-1998 and 7-11-1998. It appears that Bank of Baroda, vide letter dated 8-11-1997, declined to honour the Bank Guarantees on the ground that there was an agreement entered into on 27-9-1997 in which the petitioners had agreed to reduce the Bank guarantees of initial advance and interim advance to the tune of 75% of the value of supply made and on that basis it had released Rs. 75 lacs to the respondent No. 4 to meet the cost of balance work. It was followed by another letter dated 28-9-1998 requesting the petitioner to send detailed reconciliation for reduction in guarantee/obligation furnished by them. In the said letter, the respondent bank had specifically mentioned that in the joint meeting held on 7-1-1997, it was agreed that the guarantee amount would be reduced maintaining the value of the guarantee for advance as 25% of the supplies made and 100% of the balance supply to be made.

(3.) The petitioner vide letter dated 7-11-1998 reduced the amount of bank guarantee by Rs. 83.19 lacs and, therefore invoked the remaining amount of bank guarantee to the tune of Rs. 410.68 lacks.