WESTERN COALFIELDS LIMITED Vs. RAJESH

JUDGEMENT

(1.) This appeal challenges the order 5.4.2011 passed by the Third Joint Civil Judge, Senior Division, Nagpur, allowing the application Exh.5 for grant of temporary injunction, restraining the appellants from invoking the Bank Guarantees furnished on 19.2.2008 filed in Special Civil Suit No.236 of 2011 by the respondent no.1/plaintiff. The appellants are the defendant nos.1 and 2, the respondent no.1 is the plaintiff and the respondent no.2 is the Oriental Bank of Commerce and the original defendant no.3.

(2.) The facts not in dispute are stated below-- On 18.5.2007, the appellants/original defendant nos.1 and 2 awarded the contract for the work of diversion of Motaghat Nallah (Phase-II and Phase-III) at Padmapur Open Cast Mine of Chandrapur area, to the respondent no.1/plaintiff. An Agreement No.08/2007-2008 was entered into between the parties. The total cost of contract was of Rs.13.95 Crores. The period of completion of work prescribed under the contract was from 23.7.2007 to 28.10.2008. On 10.10.2007, two Bank Guarantees of M/s.Mahesh Merchant Bank Limited, Chandrapur, said to be a Scheduled Bank, were furnished by way of performance guarantees, by the plaintiff. During the progress of work, the respondent no.1 substituted the aforesaid two Bank Guarantees by two separate Bank Guarantees dated 19.2.2008 of the Nationalized Bank i.e. Oriental Bank of Commerce (the respondent no.2 herein). One Bank Guarantee was for Rs.69,79,000/- whereas other was for Rs.1,54,94,580/-. Thus, it was for total amount of Rs.2,24,73,580/- that the two guarantees were furnished and their validity is upto 19.11.2011. The respondent no.1 completed 40% of work to the tune of Rs.5,95,96,000/- upto 28.10.2008 and the balance 60% work, costing Rs.799.86 Lacs, remained incomplete.

(3.) On 5.3.2009, the appellants issued a show cause notice to the respondent no.1 asking as to why the penal interest should not be recovered on the amount of Rs.2,24,73,580/- for a period of five months during which the contract was continued on the basis of the forged and fake Bank Guarantees of non existent bank i.e. M/s.Mahesh Merchant Bank Limited. The respondent no.1 was called upon to deposit an amount of Rs.16,85,528/- as penal interest @ 18 % per annum, on the said amount for a period of five months. It is not disputed that this amount of penal interest has been recovered from the respondent no.1. By communication dated 16.9.2010, the appellants terminated the contract for the reason of furnishing of fake Bank Guarantees of non existent bank by the respondent no.1. Thereafter, by communication dated 17.2.2011, addressed to the Oriental Bank of Commerce, the appellants invoked two Bank Guarantees of total Rs.2,24,73,580/-.