STATE OF BIHAR Vs. HINDUSTAN CONSTRUCTION COMPANY LIMITED

JUDGEMENT

(1.) THIS appeal is filed by the original defendant Nos. 4, 5 and 6 in Suit No. 3295 of 1992, challenging the order dated 9th February 1996 passed by the learned Single Judge in Notice of Motion No. 2475 of 1992. By the impugned order the learned Single Judge has restrained the defendant Nos. 1 to 3 viz. , the State Bank of India, State Bank of Patiala and Indian Bank from making the payment, under the bank guarantees and the defendant Nos. 4 to 6 viz. , State of Bihar, Superintending Engineer and Executive Engineer, are restrained from invoking the bank guarantees.

(2.) ON 25th April 1989, the plaintiffs were awarded a contract for construction of Icha dam across river Khadkai at village Kuju, Bihar for an amount of Rs. 39,71,31,019. The duration of the contract was for a period of 42 months, i. e. upto 24th April 1992. Clause 5 of the said contract provides for obligation on the part of the plaintiffs to furnish bank guarantee for 10% of the contract price as performance guarantee. Clause 9 of the contract casts obligation upon the plaintiffs to furnish bank guarantees against mobilisation advance given by the defendant Nos. 4 to 6. As per the plaintiffs the bank guarantee as performance guarantee was duly executed by them so also the bank guarantees were executed to the tune of Rs. 596 lakhs from time to time against receipt of mobilisation advance. On 21st October 1992, the present suit has been filed by the plaintiffs seeking reliefs for permanent injunction against the defendant Nos. 1 to 3 from making payment against the bank guarantees so also permanent injunction against the defendant Nos. 4 to 6 from invoking bank guarantees. As per the plaintiffs, the defendant No. 4 cannot invoke the bank guarantee furnished as performance of guarantee as the decision was taken by the defendant Nos. 4 to 6, themselves to stop the construction work on account of non availability of funds for the said project. As far as the bank guarantee issued against the mobilisation advances received by the plaintiffs, it is contended that the plaintiffs have purchased machinery after receipt of the said advances and that the plaintiffs have spent the amount on the work, the plaintiffs are not at fault, and as the decision was taken to stop the work by the defendant Nos. 4 to 6 themselves, the plaintiffs could not execute/complete the work, consequently, the defendant Nos. 4 to 6 cannot invoke bank guarantees.

(3.) ON 22nd October 1992, the plaintiffs took out a Notice of Motion No. 2475 of 1992 for the reliefs as stated above. On the same date the learned Single Judge granted ad-interim orders in terms of prayer Clause (a) (ii) of the Notice of Motion. On 5th February 1992, the ad-interim order was continued till the disposal of the Notice of Motion. It appears that the defendant Nos. 4 to 6 did not remain present on both these dates. On behalf of the defendant Nos. 4 to 6 Shri Gorakhnath Singh, Executive Engineer, Khadkai Dam Icha Chalian District Singhbnum, Bihar has filed an affidavit in reply opposing the Notice of Motion. The case of the defendant Nos. 4 to 6 is that the plaintiffs cannot pray for injunction against them for invoking the bank guarantees issued under the caption of performance security and mobilisation advances. As per these defendants, the plaintiffs did not adhere to the schedule of work and have abandoned the work after receipt of the mobilisation advance of Rs. 532 lakhs. These defendants have contended that inspite of receiving mobilisation advances, the plaintiffs were not in a position to proceed with or complete the construction work and fulfill its contractual obligations. These defendants have further alleged that slight delay in making payment of the mobilisation advance was due to the act of the plaintiffs themselves, therefore, the plaintiffs are not entitled for reliefs sought for. These defendants have further stated that the performance of the plaintiffs was poor and unsatisfactory and during the span of 24 months, the plaintiffs could complete only 3 to 4% of the work which resulted in creating sufficient doubts in the minds of these defendants about the capability of the plaintiffs in executing the work. Thus, these defendants stated that their act of invoking the bank guarantees is legal and proper.