L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr.

Decided On : Mar-07-2005

Court : Gujarat

Notice (8): Undefined index: topics [APP/View/Case/meta.ctp, line 36]
Code Context


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$viewFile = '/home/legalcrystal/app/View/Case/meta.ctp'
$dataForView = array(
	'title_for_layout' => 'L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr. Semantic Analysis',
	'shops' => array(
		'LAW' => array(
			(int) 0 => 'Exhibits 5',
			(int) 1 => 'Order 39 Rule 1',
			(int) 2 => 'Order 39 Rule 1',
			(int) 3 => 'the Indian Arbitration Act'
		),
		'PERSON' => array(
			(int) 0 => 'K.S. Jhaveri',
			(int) 1 => 'J.1',
			(int) 2 => 'Vadodara',
			(int) 3 => 'MPML',
			(int) 4 => 'Vadodara',
			(int) 5 => 'Performance Guarantee',
			(int) 6 => 'MPML',
			(int) 7 => 'MPML',
			(int) 8 => 'hereinabove.4',
			(int) 9 => 'Mihir Joshi',
			(int) 10 => 'Joshi',
			(int) 11 => 'Joshi',
			(int) 12 => 'Joshi',
			(int) 13 => 'Joshi',
			(int) 14 => 'Joshi',
			(int) 15 => 'Joshi',
			(int) 16 => 'Supplier',
			(int) 17 => 'Supplier',
			(int) 18 => 'Supplier',
			(int) 19 => 'herein:(a',
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			(int) 21 => 'Joshi',
			(int) 22 => 'Joshi',
			(int) 23 => 'Joshi',
			(int) 24 => 'Joshi',
			(int) 25 => 'Anr',
			(int) 26 => 'Paragraphs 16',
			(int) 27 => 'Mukherji',
			(int) 28 => 'Shetty',
			(int) 29 => 'Mukherji',
			(int) 30 => 'Shetty',
			(int) 31 => 'J.',
			(int) 32 => 'J.',
			(int) 33 => 'Mukherji',
			(int) 34 => 'Joshi',
			(int) 35 => 'K.M. Patel',
			(int) 36 => 'K.M. Patel',
			(int) 37 => 'Patel',
			(int) 38 => 'Patel',
			(int) 39 => 'Patel',
			(int) 40 => 'Handels Banken',
			(int) 41 => 'V. GS Atwal',
			(int) 42 => 'V. Prem Heavy Engineering Works Pvt',
			(int) 43 => 'Patel',
			(int) 44 => 'Patel',
			(int) 45 => 'Patel',
			(int) 46 => 'Patel',
			(int) 47 => 'Patel',
			(int) 48 => 'Handels Banken',
			(int) 49 => 'Prem Heavy Engg',
			(int) 50 => 'Patel',
			(int) 51 => 'facie',
			(int) 52 => 'Handels Banken',
			(int) 53 => 'Patel',
			(int) 54 => 'Patel',
			(int) 55 => 'Prem Heavy Engg',
			(int) 56 => 'Bartlam',
			(int) 57 => 'Wright',
			(int) 58 => 'Gardner',
			(int) 59 => 'Jay',
			(int) 60 => 'Bowen L.J.',
			(int) 61 => 'Pothan Joseph',
			(int) 62 => 'Laxmikant V. Patel',
			(int) 63 => 'Chetanbhai Shah',
			(int) 64 => 'Scale 350).12',
			(int) 65 => 'Devang Nanavati'
		),
		'ORG' => array(
			(int) 0 => 'Order',
			(int) 1 => 'Civil Suit',
			(int) 2 => 'Vadodara whereby Application Exh.5',
			(int) 3 => 'M/s L & T Niro Limited',
			(int) 4 => 'L & TNL',
			(int) 5 => 'The Mysore Paper Mills Ltd',
			(int) 6 => 'IDBI Bank Ltd.',
			(int) 7 => 'Bank',
			(int) 8 => 'Bank Guarantees',
			(int) 9 => 'Application Exh.5',
			(int) 10 => 'Bank Guarantees',
			(int) 11 => 'Bank Guarantees',
			(int) 12 => 'MPML',
			(int) 13 => 'Bank Guarantee No',
			(int) 14 => 'Application Exh.5 and Application Exh.23',
			(int) 15 => 'para-45(A) & (B',
			(int) 16 => 'Exh.5',
			(int) 17 => 'MPML',
			(int) 18 => 'MPML',
			(int) 19 => 'the Turnkey Project of Erection and Commissioning of Free',
			(int) 20 => 'the World Bank',
			(int) 21 => 'Indian Renewable Energy Development Agency Ltd',
			(int) 22 => 'IREDA',
			(int) 23 => 'MPML',
			(int) 24 => 'MPML',
			(int) 25 => 'Xerox',
			(int) 26 => 'Bank',
			(int) 27 => 'Bank',
			(int) 28 => 'Bank',
			(int) 29 => 'MPML',
			(int) 30 => 'MPML',
			(int) 31 => 'World Bank',
			(int) 32 => 'MPML',
			(int) 33 => 'MPML',
			(int) 34 => 'Court',
			(int) 35 => 'Court',
			(int) 36 => 'Nanavati Associates',
			(int) 37 => 'Agreement',
			(int) 38 => 'Purchaser',
			(int) 39 => 'Purchaser',
			(int) 40 => 'Contract',
			(int) 41 => 'Arbitration',
			(int) 42 => 'Contract',
			(int) 43 => 'and(b',
			(int) 44 => 'the Civil Court',
			(int) 45 => 'Xerox',
			(int) 46 => 'Hindustan Cosntruction Co. Ltd.',
			(int) 47 => 'the Supreme Court',
			(int) 48 => 'Hindustan Steelworks Construction Ltd.',
			(int) 49 => 'Tarapore & Co.',
			(int) 50 => 'Court',
			(int) 51 => 'R.D. Harbottle (Mercantile) Ltd.',
			(int) 52 => 'National Westminster Bank Ltd.',
			(int) 53 => 'SC',
			(int) 54 => 'J.',
			(int) 55 => 'Court',
			(int) 56 => 'U.P. Coop',
			(int) 57 => 'Federation Ltd.',
			(int) 58 => 'the Apex Court',
			(int) 59 => 'Hindustan Construction Co. Ltd.',
			(int) 60 => 'State of Bihar and Ors',
			(int) 61 => 'HCCL',
			(int) 62 => 'HCCL',
			(int) 63 => 'Arbitration.7.1',
			(int) 64 => 'the Bank Guarantee',
			(int) 65 => 'Court',
			(int) 66 => 'National Highway Authority of',
			(int) 67 => 'Ganga Enterprise',
			(int) 68 => 'AIR 2003',
			(int) 69 => 'SC',
			(int) 70 => 'Maharashtra v. National Construction Corporation',
			(int) 71 => 'Hindustan Steel Works Construction Ltd.',
			(int) 72 => 'V. Tarapore & Co.',
			(int) 73 => 'the Bank Guarantee',
			(int) 74 => 'Bank',
			(int) 75 => 'Bank',
			(int) 76 => 'Bank',
			(int) 77 => 'Bank',
			(int) 78 => 'NTPC Limited',
			(int) 79 => 'Flowmore Private Limited',
			(int) 80 => 'NTPC Limited',
			(int) 81 => 'Flowmore Pvt. Ltd.',
			(int) 82 => 'ONGC Ltd v.',
			(int) 83 => 'SBI',
			(int) 84 => 'Sumac International Ltd.',
			(int) 85 => 'L & T Ltd.',
			(int) 86 => 'Maharashtra State Electricity Board',
			(int) 87 => 'Hindustan Steel Workers Construction Ltd',
			(int) 88 => 'G.S. Atwal & Co.',
			(int) 89 => 'Federal Bank Ltd',
			(int) 90 => 'AIR 2000',
			(int) 91 => 'Hindustan Steel Workers Construction Ltd v. Taropore & Company',
			(int) 92 => 'Court',
			(int) 93 => 'ONGC',
			(int) 94 => '2)Hindustan Construction Co. Ltd',
			(int) 95 => 'ITC Ltd',
			(int) 96 => 'Debt Recovery Appellate Tribunal',
			(int) 97 => 'Hindustan Steel Workers Construction Ltd.',
			(int) 98 => 'Dwarikesh Sugar Industries Ltd.',
			(int) 99 => 'Bank',
			(int) 100 => 'Federal Bank Limited',
			(int) 101 => 'M. Jog Engineering Ltd.',
			(int) 102 => 'AIR 2000',
			(int) 103 => 'India Ltd.',
			(int) 104 => 'Vinmar Impex Inc.',
			(int) 105 => 'Debt Recovery Appellate Tribunal',
			(int) 106 => 'ONGC Ltd v.',
			(int) 107 => 'SBI',
			(int) 108 => 'Hindustan Steel Workers Construction Ltd.',
			(int) 109 => 'V. Taropore & Co.',
			(int) 110 => 'Irretrievable',
			(int) 111 => 'Itech Corporation's',
			(int) 112 => 'ONGC Ltd v.',
			(int) 113 => 'SBI',
			(int) 114 => 'Dwarikesh Sugar Ind. Ltd',
			(int) 115 => 'Works Ltd',
			(int) 116 => 'Bank Guarantee',
			(int) 117 => 'Bank',
			(int) 118 => 'Bank',
			(int) 119 => 'Centex India Ltd.',
			(int) 120 => 'Vinmar Impex Inc.',
			(int) 121 => 'Dwarikesh Sugar Ind. Ltd.',
			(int) 122 => 'Works Ltd.',
			(int) 123 => 'Federal Bank Ltd',
			(int) 124 => 'AIR 2000',
			(int) 125 => 'Hindustan Steels Workers',
			(int) 126 => 'Taropore and Co.',
			(int) 127 => 'Hindustan Zink Limited',
			(int) 128 => 'Vijaybhai Amarbhai & Co.',
			(int) 129 => 'Bank Guarantee',
			(int) 130 => 'Bank Guarantee',
			(int) 131 => 'Bank',
			(int) 132 => 'Bank Guarantee',
			(int) 133 => 'Bank',
			(int) 134 => 'the Civil Court',
			(int) 135 => 'the Arbitral Tribunal',
			(int) 136 => 'Bank Guarantee',
			(int) 137 => 'Bank Guarantee',
			(int) 138 => 'the Apex Court',
			(int) 139 => 'Hindustan Steelworks Construction Ltd.',
			(int) 140 => 'Oil & Natural Gas Corporation Ltd.',
			(int) 141 => 'SBI',
			(int) 142 => 'Overseas Branch',
			(int) 143 => 'the Apex Court',
			(int) 144 => 'the Supreme Court',
			(int) 145 => 'the Apex Court',
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			(int) 147 => 'House',
			(int) 148 => 'the Court of Appeal',
			(int) 149 => 'the Court of Appeal',
			(int) 150 => 'the Court of Appeal',
			(int) 151 => 'the Apex Court',
			(int) 152 => 'U.P. Cooperative Federation Ltd.',
			(int) 153 => 'Sunder Bros',
			(int) 154 => 'AIR 1967 SC 249 (=1966',
			(int) 155 => 'Court',
			(int) 156 => 'the Apex Court',
			(int) 157 => 'AIR 1960 SC',
			(int) 158 => 'Wander Ltd.',
			(int) 159 => 'Antox India P. Ltd',
			(int) 160 => 'Supp',
			(int) 161 => 'AIR 2002 SC 275 (=2002(3',
			(int) 162 => 'JT 285',
			(int) 163 => 'Karnataka Government',
			(int) 164 => 'Court'
		),
		'DATE' => array(
			(int) 0 => '29th December 2004',
			(int) 1 => '16th January 2004',
			(int) 2 => '16th January, 2004',
			(int) 3 => '16th January, 2004',
			(int) 4 => '29th December 2004',
			(int) 5 => '200402',
			(int) 6 => '16/01/2004',
			(int) 7 => '200421',
			(int) 8 => '16/01/2004',
			(int) 9 => '16/01/2004',
			(int) 10 => '17.1.2004',
			(int) 11 => '60 days',
			(int) 12 => 'one year',
			(int) 13 => 'one month's',
			(int) 14 => 'the expiry of',
			(int) 15 => '30 days' period',
			(int) 16 => 'October 2003',
			(int) 17 => 'October 2003',
			(int) 18 => 'February 2004',
			(int) 19 => 'October 2003',
			(int) 20 => '17th July 2004',
			(int) 21 => '30 days',
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			(int) 23 => 'the year 2003',
			(int) 24 => '16th January 2004',
			(int) 25 => '14th February 2004',
			(int) 26 => 'October 2003',
			(int) 27 => '34',
			(int) 28 => '17',
			(int) 29 => '34',
			(int) 30 => '21',
			(int) 31 => '' 18',
			(int) 32 => '1996',
			(int) 33 => '1996',
			(int) 34 => '1995',
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			(int) 36 => '2000',
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			(int) 38 => '1995',
			(int) 39 => '1995',
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			(int) 41 => '3166',
			(int) 42 => '1996',
			(int) 43 => '1994',
			(int) 44 => '2000',
			(int) 45 => '1999',
			(int) 46 => '1998',
			(int) 47 => '70',
			(int) 48 => '1995',
			(int) 49 => '76',
			(int) 50 => '1997',
			(int) 51 => '1986',
			(int) 52 => '1998',
			(int) 53 => '2000',
			(int) 54 => '1996',
			(int) 55 => '2000',
			(int) 56 => '1994',
			(int) 57 => '1997',
			(int) 58 => '1994',
			(int) 59 => '1967',
			(int) 60 => '3166',
			(int) 61 => '1996',
			(int) 62 => '34',
			(int) 63 => '1994',
			(int) 64 => '16/1/2004',
			(int) 65 => '30 days',
			(int) 66 => 'The 30 days',
			(int) 67 => '30 days',
			(int) 68 => 'the 30 days',
			(int) 69 => '14.2.2004',
			(int) 70 => '20/1/2004',
			(int) 71 => '30 days',
			(int) 72 => 'The 30 days',
			(int) 73 => '1942',
			(int) 74 => '1990'
		),
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			(int) 25 => '17.2.2004',
			(int) 26 => '2.3.2004',
			(int) 27 => '25.5.2004',
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			(int) 29 => '15.7.2004',
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			(int) 31 => '23.8.2004',
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			(int) 39 => '1',
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			(int) 96 => '2',
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			(int) 98 => '3',
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			(int) 100 => '1',
			(int) 101 => '502.7.10',
			(int) 102 => '1',
			(int) 103 => '1986)4',
			(int) 104 => '136',
			(int) 105 => '2',
			(int) 106 => '6',
			(int) 107 => '3',
			(int) 108 => '4',
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			(int) 111 => '1',
			(int) 112 => '161.8',
			(int) 113 => '26',
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			(int) 115 => '18.5',
			(int) 116 => 'three',
			(int) 117 => '1',
			(int) 118 => '17.2.2004',
			(int) 119 => '3.1.2004',
			(int) 120 => '1',
			(int) 121 => '1',
			(int) 122 => '20.1.2004',
			(int) 123 => '20.2.2004',
			(int) 124 => '1',
			(int) 125 => '2.3.2004',
			(int) 126 => '1',
			(int) 127 => '9.2',
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			(int) 129 => '1.',
			(int) 130 => '1',
			(int) 131 => '1',
			(int) 132 => '25.6.2004',
			(int) 133 => '1',
			(int) 134 => '18',
			(int) 135 => '18.2',
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			(int) 137 => '1',
			(int) 138 => '20/2/2004.9.5',
			(int) 139 => '14/2/2004',
			(int) 140 => '1',
			(int) 141 => '1',
			(int) 142 => '25.6.2004',
			(int) 143 => '1',
			(int) 144 => '10.1',
			(int) 145 => '1',
			(int) 146 => '11',
			(int) 147 => '130',
			(int) 148 => '138',
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			(int) 150 => '3',
			(int) 151 => '215',
			(int) 152 => '8',
			(int) 153 => '65',
			(int) 154 => '2001(8',
			(int) 155 => '1',
			(int) 156 => '1',
			(int) 157 => '1'
		),
		'ORDINAL' => array(
			(int) 0 => '4th',
			(int) 1 => '1st',
			(int) 2 => '4th',
			(int) 3 => 'first',
			(int) 4 => 'first',
			(int) 5 => 'third'
		),
		'GPE' => array(
			(int) 0 => 'S.D.',
			(int) 1 => 'D.G.',
			(int) 2 => 'L&TNL',
			(int) 3 => 'Nanavati',
			(int) 4 => 'Svenska',
			(int) 5 => 'Bihar',
			(int) 6 => 'Svenska',
			(int) 7 => 'Svenska',
			(int) 8 => 'Bombay',
			(int) 9 => 'Svenska',
			(int) 10 => 'Evans',
			(int) 11 => 'Delhi'
		),
		'NORP' => array(
			(int) 0 => 'Tender',
			(int) 1 => 'Purchaser',
			(int) 2 => 'Goods',
			(int) 3 => 'Purchaser',
			(int) 4 => 'Indian',
			(int) 5 => 'Indian',
			(int) 6 => 'Indian',
			(int) 7 => 'Indian'
		),
		'PRODUCT' => array(
			(int) 0 => 'Bidder',
			(int) 1 => 'Agreement'
		),
		'LOC' => array(
			(int) 0 => 'Purchaser'
		),
		'PERCENT' => array(
			(int) 0 => 'thirty (30) days',
			(int) 1 => '18%'
		),
		'WORK_OF_ART' => array(
			(int) 0 => 'Arbitrator.9.4',
			(int) 1 => 'The Printers (Mysore) Private Ltd v.'
		),
		'QUANTITY' => array(
			(int) 0 => '1994)1 SCC 502'
		)
	),
	'desc' => array(
		'Judgement' => array(
			'id' => '736345',
			'acts' => 'Indian Arbitration Act - Sections 34',
			'appealno' => 'Appeal From Order No. 7 of 2005 with Civil Application No. 41 of 2005',
			'appellant' => 'L and T Niro Limited',
			'authreffered' => '',
			'casename' => 'L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr.',
			'casenote' => ' -  -  7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract. 28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period. Moreover, the said observations cannot be read like a text of a statute or out of context. 184, para 17) Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed. (8) It is well established that where the discretion vested in the Court under S.',
			'caseanalysis' => null,
			'casesref' => ' and Laxmikant V. Patel v. Chetanbhai Shah;',
			'citingcases' => '',
			'counselplain' => ' Mihir H. Joshi, Sr. Counsel and; Devang Nanavati, Adv. for Nanavati & Nanavati',
			'counseldef' => ' K.M. Patel,; Arvind Kumar and; Varun K. Patel, Advs.',
			'court' => 'Gujarat',
			'court_type' => 'HC',
			'decidedon' => '2005-03-07',
			'deposition' => '',
			'favorof' => null,
			'findings' => null,
			'judge' => ' K.S. Jhaveri, J.',
			'judgement' => '<p style="text-align: justify;">K.S. Jhaveri, J.</p><p style="text-align: justify;">1. The present Appeal from Order has been preferred against the order dated 29th December 2004 passed below Exhibits 5 and 23 in Civil Suit No. 459/2004 by learned 4th Joint Civil Judge (Senior Division), Vadodara whereby Application Exh.5 was partly rejected and injunction was refused against encashment of performance of security guarantee and Application Exh.23 was partly allowed.</p><p style="text-align: justify;">2. The present appellant M/s L & T Niro Limited (hereinafter referred to as L & TNL or appellant or plaintiff) filed Special Civil Suit No. 459/2004 in the court of Civil Judge (Senior Division), Vadodara, against The Mysore Paper Mills Ltd (hereinafter referred to as MPML or the respondent No. 1 or Defendant No. 1) and IDBI Bank Ltd. (hereinafter referred to as the Bank or respondent No. 2 or defendant No. 2) praying as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1, its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.1 Appellant L&TNL; also filed Application Exh.5 praying for interim injunction which reads as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1,its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2;</p><p style="text-align: justify;">(b) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 2,its officers and agents, from in any manner whatsoever, making any payment under the said two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.2 The MPML filed Application Exh.23 in the aforesaid suit praying for the following prayers:</p><p style="text-align: justify;">(a) vacate the interim order of temporary injunction dated 16.9.2004 granted on application at Exh-5 and allow this application filed by this defendant;</p><p style="text-align: justify;">(b) pending hearing and final disposal of this application, this Hon'ble Court be pleased to direct the 1st defendant to renew the Bank Guarantee No. 2001021 IBGF 001 dated 16-1-2004 for Rs.1,29,60,027 which is due to expire on 31.1.2005.'</p><p style="text-align: justify;">2.3 The learned 4th Joint Civil Judge (S.D.), Vadodara heard both the aforesaid Applications Exhibits 5 and 23 and by order dated 29th December 2004 partly rejected Application Exh.5 and Application Exh.23 was partly allowed. The operative part of the order reads as under:</p><p style="text-align: justify;">'Application Exh.5 about prayer of guarantee to realise advances is hereby allowed.</p><p style="text-align: justify;">In application Exh.5 prayer towards performance security Guarantee No. 200402/IBGP dated 16/01/2004 for Rs.1,35,00027 expired on 31/03/2006 is hereby rejected.</p><p style="text-align: justify;">Application Exh.23 is hereby partly allowed.</p><p style="text-align: justify;">Ad-interim injunction in respect of plaint para-45(A) & (B) towards performance security (D.G.) No. 200421 IBGP 0001 dated 16/01/2004 for Rs.1,35,00027 expired 31/01/2006 granted earlier is hereby stands vacated. The prayer of guarantee realisation advance dated 16/01/2004 is hereby granted till payment of realisation amount paid by defendant No. 1 to the plaintiff.</p><p style="text-align: justify;">Thus, Exh.5 and Exh.23 are hereby partly allowed.' </p><p style="text-align: justify;">3. The facts as emerging from the record are as under:</p><p style="text-align: justify;">3.1 In pursuance of the Tender for its project by MPML, a contract was signed between L&TNL; and MPML in the Turnkey Project of Erection and Commissioning of Free flow Falling Film Tubelor Evaporator Plant of 100 TPH Water Evaporation Capacity for Rs.13,50,00,267. The said project was aided by the World Bank and the funds were routed through Indian Renewable Energy Development Agency Ltd (IREDA). L&TNL; sent performance bank guarantees and mobilization advance guarantee to MPML on 17.1.2004 which was received by MPML on 20.1.2004. However, the said Performance Guarantee was returned for necessary amendment in view of contradictory dates shown in the bank guarantee. As per clause 3 of the contract, the bank guarantee was required to be valid upto 60 days after the date of completion of performance of work which was one year from the date of release of advance. Thereafter on 30.1.2004 L&TNL; forwarded the rectified performance bank guarantee.</p><p style="text-align: justify;">3.2 MPML sought one month's extension for release of advance payment with clarification that the effective date of contract shall be from the date of release of advance. Before the expiry of 30 days' period for release of mobilization advance from the date of original bank guarantee L&TNL; sought escalation from October 2003 i.e. for the period prior to the date of contract. By letter dated 17.2.2004 MPML replied that demand for escalation was premature for consideration. Again L&TNL; reiterated their demand for escalation by letter dated 2.3.2004. Thereafter correspondences were exchanged and negotiations were held in respect of the claim of escalation.</p><p style="text-align: justify;">3.3 By letter dated 25.5.2004 L&TNL; informed that there was price increase between October 2003 and February 2004 and it was not possible for it to execute contract unless price rise was agreed. MPML replied that the contract having been signed with firm price, it was not possible to consider escalation retrospectively and that L&TNL; may indicate escalation in relation to the period of extension of time for payment of mobilisation advance. It appears that L&TNL; insisted for escalation from October 2003. MPML along with letter dated 25.6.2004 sent a Xerox copy of cheque for Rs.1,29,60,027/- towards mobilization advance and requested L&TNL; to depute responsible officer to collect the cheque. However, by letter dated 17th July 2004 L&TNL; rescinded the contract and requested the Bank not to make payment of bank guarantee in case it is invoked. In turn the Bank by their communication dated 15.7.2004 informed L&TNL; that it was bound to make the payment on invocation and that it was not possible for the Bank to accede to the request of L&TNL.; </p><p style="text-align: justify;">3.4 MPML wrote letter dated 23.8.2004 to L&NTL; stating that the cheque towards mobilization advance has not been collected and the work has not been commenced which amounts to violation of the contract. MPML also indicated that any dispute or claim between the parties has to be sorted out in accordance with the terms agreed upon (arbitration). It was further pointed out that it was a World Bank aided project and if L&TNL; did not comply with the request of MPML within 30 days from the date of the said letter, it will be deemed that L&TNL; was not inclined to execute the contract and the same shall stand rescinded and further informed that MPML has suffered to the extent of Rs.6.18 crores on account of refusal to execute the contract.</p><p style="text-align: justify;">3.5 In view of the above facts, L&TNL; filed the abovementioned suit and interim injunction application and the trial court has passed the impugned order as stated hereinabove.</p><p style="text-align: justify;">4. At this stage it is required to be noted that this Court has very limited scope in dealing with interim orders of the trial court and any observations which may be made by this Court will prejudice either side while proceeding with the main suit. In view of this, I am of the opinion that the present appeal is required to be decided only in the context of the basic principle whether the plaintiff has prima facie case, whether balance of convenience is in favour of the plaintiff and whether irreparable loss would be caused to the plaintiff by refusal of interim injunction.</p><p style="text-align: justify;">5. Heard the learned counsel for the respective parties and perused the relevant documents.</p><p style="text-align: justify;">6. Mr. Mihir Joshi, Senior Counsel for M/s Nanavati and Nanavati Associates for the appellant submitted that the bank guarantee given by the present appellant is required to be considered on facts. Mr. Joshi further submitted that in view of the correspondence exchanged between the parties and the term of the contract it is clear that since the contract has not started as per the agreement, the question of encashment of bank guarantee would not arise and therefore the respondents are required to be restrained from encashing the bank guarantee.</p><p style="text-align: justify;">6.1 Mr. Joshi for the appellant submitted that since the appellants have not received the amount in question, the bank guarantee is conditional. According to him even if the bank guarantee is treated as unconditional the encashment is not in terms of the contract because performance of obligations under the contract has not started in absence of receipt of mobilisation advance and there being no default, encashment of bank guarantee cannot be permitted. He submitted that the respondent No. 1 has in fact engineered a default at the hands of the appellant by delaying the payment of the mobilization advance and therefore the encashment is fraudulent and the invocation ought to be stayed.</p><p style="text-align: justify;">6.2 Mr. Joshi submitted that on account of the aforesaid facts, more particularly about engineering of default and non-payment of mobilization advance, being the breach committed by the respondent itself, special equities are in favour of the appellant for grant of injunction. According to him, the contractual terms were not concluded since the respondent had sought an amendment in terms of payment of the mobilization advance. The term is, therefore, not concluded between the parties and in fact thereafter rescinded. Mr. Joshi contended that the suit when filed was maintainable since no notice for arbitration as contemplated under clause (28) of the Agreement had been issued at that time. Mr. Joshi further submitted that in any case the impugned order does not at all consider the aforesaid contentions and in fact the other side has committed breach of the contract obligations.</p><p style="text-align: justify;">6.3 Mr. Joshi has relied upon clauses 7.1, 7.2 and 28 of the contract which read as under:</p><p style="text-align: justify;">'7.1 Within thirty (30) days of receipt of the notification of contract award, the successful Bidder shall furnish to the Purchaser the performance security in the amount specified in SCC.</p><p style="text-align: justify;">7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract.'</p><p style="text-align: justify;">*** *** ***</p><p style="text-align: justify;">28. Settlement of Disputes:</p><p style="text-align: justify;">28.1 If any dispute or difference of any kind whatsoever shall arise between the Purchaser and the Supplier in connection with or arising out of the Contract, the parties shall make every effort to resolve amicably such dispute or difference by mutual consultation.</p><p style="text-align: justify;">28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given.</p><p style="text-align: justify;">28.2.1 Any dispute or difference in respect of which a notice of intention to commence arbitration has been given in accordance with this Clause shall be finally settled by arbitration. Arbitration may be commenced prior to or after delivery of the Goods under the Contract.</p><p style="text-align: justify;">28.2.2 Arbitration proceedings shall be conducted in accordance with the rules of procedure specified in the SCC.</p><p style="text-align: justify;">28.3 Notwithstanding any reference to arbitration herein:</p><p style="text-align: justify;">(a) the parties shall continue to perform their respective obligations under the Contract unless they otherwise agree; and</p><p style="text-align: justify;">(b) the Purchaser shall pay the supplier any money due to the supplier.'</p><p style="text-align: justify;">6.4 Mr. Joshi submitted that the trial court has misconstrued the clause relating to the settlement of disputes and has overlooked the fact that no notice of arbitration had been given and no ouster of jurisdiction of the Civil Court was contemplated in the contract. According to him the respondent No. 1 has sought to fraudulently encash the performance security on the purported default of the appellant in spite of its own breach in performing its obligations under the contract. According to Mr. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period.</p><p style="text-align: justify;">6.5 Mr. Joshi submitted that since the project, though entrusted by publishing advertisement in the year 2003, was finalised only on 16th January 2004. When the payment was delayed on 14th February 2004 the appellant has sought for escalation of the price from October 2003 in view of the price escalation in the market and admittedly delay was on the part of the defendant No. 1 and not at the instance of the plaintiff. He submitted that since the defendant No. 1 has not agreed for escalation price the appellant could not start the work on account of non-payment of initial amount which was one of the terms and conditions of the Contract.</p><p style="text-align: justify;">6.6 Mr. Joshi further submitted that if at all any fraud is committed by the appellant, then the respondent No. 1 could have lodged complaint against the plaintiff. He submitted that merely by sending a Xerox copy of the demand draft will not fullfil the conditions of the contract. He, therefore, submitted that fraud is committed by defendant No. 1 and in view of the judgement in the case of Hindustan Cosntruction Co. Ltd. (supra), the trial court ought to have granted injunction.</p><p style="text-align: justify;">6.7 Mr. Joshi, in support of his contentions, relied upon a decision of the Supreme Court in the case of Hindustan Steelworks Construction Ltd. v. Tarapore & Co. and Anr., reported in (1996)5 SCC 34. Paragraphs 16, 17 and 18 of the said decision read as under:</p><p style="text-align: justify;">'16. On the basis of these observations the learned counsel submitted that the law laid down by this Court is that except in case of fraud and that too when it creates special equities in the form of irretrievable injustice, the courts should not interfere by restraining the beneficiary from encashing the bank guarantee. We have carefully gone through the judgements delivered by Mukherji and Shetty, JJ. and in our opinion that is not the ratio of the judgement. In that case the court was not called upon to decide whether apart from fraud there can by any other valid ground for interference. Moreover, the said observations cannot be read like a text of a statute or out of context. Observations made by Mukherji, J. in other parts of his judgement (see paras 24 and 34) and his opinion stated in para 21, with which Shetty, J. also agreed,do not support that submission. Mukherji, J. in the paragraph has stated his opinion as under: (SCC p.186, para 21)</p><p style="text-align: justify;">'21. ... An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with except in case of fraud or in case of question of apprehension of irretrievable injustice has been made out'.</p><p style="text-align: justify;">17. Mukherji, j. referred to the following paragraph from the judgement in R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. and then stated that in his view the said view represents the correct state of law: (SC p.184, para 17)</p><p style="text-align: justify;">'Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. In the case of a confirmed performance guarantee, just as in the case of a confirmed letter of credit, the bank was only concerned to ensure that the terms of its mandate and confirmation had been complied with and was in no way concerned with any contractual disputes which might have arisen between the buyers and sellers. Accordingly, since demands for payment had been made by the buyers under the guarantees and the plaintiffs had not established that the demands were fraudulent or other special circumstances there were no grounds for continuing the injunctions....' </p><p style="text-align: justify;">18. What Mukherji, J. has stated in para 34 of his judgement,namely, that: 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U.P. Coop. Federation Ltd. Therefore, fraud cannot be said to be the only exception. In a case where the party approaching the court is able to establish that in view of special equities in his favour if injunction as requested is not granted then he would suffer irretrievable injustice, the court can and would interfere. It may be pointed out that fraud which is recognised as an exception is the fraud by one of the parties to the underlying contract and which has the effect of vitiating the entire underlying transaction. A demand by the beneficiary under the bank guarantee may become fraudulent not because of any fraud committed by the beneficiary while executing the underlying contract but it may become so because of subsequent events or circumstances. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee.' </p><p style="text-align: justify;">6.8 Mr. Joshi has also relied upon a decision of the Apex Court in the case of Hindustan Construction Co. Ltd. v. State of Bihar and Ors., reported in (1998)8 SCC 436. Paragraph 22 of the said decision reads as under:</p><p style="text-align: justify;">'22. We have scrutinised the facts pleaded by the parties in respect of both the bank guarantees as also the documents filed before us and we are, prima facie, of the opinion that the lapse was on the part of the defendants who were not possessed of sufficient funds for completion of the work. The allegation of the defendant that HCCL itself had abandoned the work does not, prima facie, appear to be correct and it is for this reason that we are of the positive view that the 'special equities' are wholly in favour of HCCL.' </p><p style="text-align: justify;">7. Mr. K.M. Patel, learned Advocate appearing for the respondent No. 1 has supported the order passed by the trial court. He submitted that except alleged fraud and there being no concluded contract, no other contentions were advanced before the trial court. Therefore it is not open for the appellant to raise those contentions for the first time in these proceedings. According to him it is a case of unequivocal and conditional bank guarantee. He submitted that the bank has undertaken to pay without demur and without the respondent No. 1 requires to justify anything, and therefore no injunction against invocation of such an unconditional bank guarantee can be granted. Any dispute regarding breach of conract or variation in terms of contract of difference of payment could have been raised before Arbitration.</p><p style="text-align: justify;">7.1 Mr. K.M. Patel appearing for the respondent No. 1 submitted that the Bank Guarantee is a complete and separate contract by itself and it is distinct and independent from the underlying contract and Court cannot restrain invocation of 'a demand guarantee' by looking at the terms of underlying contract. To support this contention he relied upon the decisions in the cases of (1) National Highway Authority of India v. Ganga Enterprise, AIR 2003 SC 3823 para 9, (2) State of Maharashtra v. National Construction Corporation, (1996) 1 SCC 735 and (3) Hindustan Steel Works Construction Ltd. V. Tarapore & Co., (1996) 5 SCC 34.</p><p style="text-align: justify;">7.2 Mr. Patel submitted that the Bank Guarantee being an independent and distinct contract which is payable on demand implies that the Bank is liable to pay as and when demand is made upon the Bank by the beneficiary. The Bank is not concerned with any inter-se disputes between the beneficiary and the persons at whose instance the Bank has issued guarantee. According to him this principle has been reiterated in the case of (1) NTPC Limited v. Flowmore Private Limited, (1995) 4 SCC 515.</p><p style="text-align: justify;">7.3 According to Mr. Patel, encashment of bank guarantee cannot be prevented on the ground of dispute between the parties or pendency of proceedings before Arbitrator, etc. This principle has been enunciated in the cases of (1) NTPC Limited v. Flowmore Pvt. Ltd. (1995) 4 SCC 515 (2) ONGC Ltd v. SBI, (2000) 6 SCC 385, (3) UP Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568, (4) L & T Ltd., v. Maharashtra State Electricity Board, (1995) 6 SCC 68, (5) Hindustan Steel Workers Construction Ltd v. G.S. Atwal & Co., (1995) 5 SCC 76 (6) Federal Bank Ltd v. M. Jog Engineering Limited, AIR 2000 SC 3166, and (7) Hindustan Steel Workers Construction Ltd v. Taropore & Company, (1996) 5 SCC 34.</p><p style="text-align: justify;">7.4 Mr. Patel submitted that encashment of demand bank guarantee can be restrained by the Court only on the ground of (i) fraud and (ii) special equities in the form of irretrievable injustice. He further submitted that the fraud has to be an established fraud and cannot be based on suspicion or conjecture. In this context he has relied upon the decisions in the cases of (1) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, ( which is also referred in ONGC case (2000) 6 SCC 385), (2)Hindustan Construction Co. Ltd v. State of Bihar, (1999) 8 SCC 436, (3) ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70, (3) Hindustan Steel Workers Construction Ltd. V. GS Atwal, (1995) 6 SCC 76, and (4) Dwarikesh Sugar Industries Ltd. V. Prem Heavy Engineering Works Pvt. Ltd. (1997) 6 SCC 450.</p><p style="text-align: justify;">7.5 In support of his contention that the Bank must have knowledge of fraud Mr. Patel has relied upon the decision in the cases of (1) Federal Bank Limited v. M. Jog Engineering Ltd., AIR 2000 SC 3166, (2)Centex India Ltd. V. Vinmar Impex Inc. (1986) 4 SCC 136.</p><p style="text-align: justify;">7.6 Mr. Patel further submitted that even a dishonest and suspicious action cannot constitute fraud and he has drawn support from the ratio laid down in the cases of (1)ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70.</p><p style="text-align: justify;">7.7 According to Mr. Patel, the special equities has to be in the form of irretrievable injustice and it cannot be any other equities as is laid down in the cases of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385, Hindustan Steel Workers Construction Ltd. V. Taropore & Co. (1996) 5 SCC 34.</p><p style="text-align: justify;">7.8 Mr. Patel further submitted that the Irretrievable injustice has to be in terms of Itech Corporation's case i.e. the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. In this regard Mr. Patel has cited the decisions in the case of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385; (2) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, and (3) Dwarikesh Sugar Ind. Ltd v. Prem Heavy Engg. Works Ltd, (1997) 6 SCC 450.</p><p style="text-align: justify;">7.9 Mr. Patel submitted that the general principles for grant of injunction of prima facie case, balance of convenience, etc. applicable while dealing application under Order 39 Rule 1 and 2, do not apply in cases of Bank Guarantee. This principle is laid down in the case of Svenska Handels Banken v. Indian Charge Chrome (1994) 1 SCC 502.</p><p style="text-align: justify;">7.10 Mr. Patel submitted that in cases of unconditional bank guarantee, there is no equity and prima facie case for injunction and injunction under Order 39 Rule 1 cannot be granted to nullify terms of undertaking which is lawfully enforceable. He further submitted that principles of undue enrichment cannot apply in cases of Bank guarantee and the Bank guarantee is in the form of security and it is life blood of international trade and commerce. In the above context Mr. Patel has relied upon the decisions in the case of (1) Centex India Ltd. v. Vinmar Impex Inc. reported in (1986)4 SCC 136 (2) Dwarikesh Sugar Ind. Ltd. v. Prem Heavy Engg. Works Ltd., reported in (1967) 6 SCC 450, (3) Federal Bank Ltd v. M. Jog Engineering Ltd, AIR 2000 SC 3166, (4) Hindustan Steels Workers v. Taropore and Co. (1996) 5 SCC 34, and (5) Hindustan Zink Limited v. Vijaybhai Amarbhai & Co. (1994) 1 GLR 161.</p><p style="text-align: justify;">8. It is required to be noted that from the record it is clear that except the contention with regard to 'fraud' and 'not concluded contract' no arguments were raised before the trial court. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. General allegations, if not accompanied by particulars, are insufficient to constitute an averment of fraud and no court of law can take cognizance thereof.</p><p style="text-align: justify;">9. From the record of the case the trial court has found that as per pleading of the appellant made in para 26 of the plaint, all the formalities were completed between the parties and the parties have signed the contract on 16/1/2004. It was further recorded that looking to the agreement produced by both the parties, the parties have signed under the contract on each and every page. Thus all the formalities of the contract were fulfilled by both the parties. Therefore the trial court was prima facie of the opinion that the contract is in existence and concluded. Moreover, on the facts of the case the trial court found that there is no conditional bank guarantee. </p><p style="text-align: justify;">9.1 In clause 18.5 of the Contract agreement, three ingredients which are important for purposes of advance payments are: (i) 30 days from signing of the contract, (ii) submission of claim; and (iii) submission of Bank Guarantee of equivalent amount. The first bank guarantee was forwarded to the respondent No. 1 vide letter dated 17.2.2004. In the performance guarantee submitted by the plaintiff, there was a mistake with regard to date and this fact had been communicated to the appellant vide letter dated 3.1.2004 and requested the appellant to submit the correct Bank Guarantee. This fact was not disputed by the appellant. The appellant had resubmitted the Bank guarantee by incorporating necessary corrections and forwarded the same to the respondent No. 1 vide letter dated 30.1.2004. The 30 days prescribed period in terms of payment stipulates that the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The bank guarantee was received on 20.1.2004. Therefore the 30 days period was to expire on 20.2.2004. However, the plaintiff demanded price escalation vide letter dated 14.2.2004 which was not within the terms of the contract. The respondent No. 1 replied that the said claim is too premature for being considered. In view of the corrected Bank guarantee, upto 2.3.2004 the respondent No. 1 had right to give advance amount to the appellant. </p><p style="text-align: justify;">9.2 From the record it appears that when the respondent No. 1 was contemplating to make the payment the appellant sought price escalation which was categorically rejected by the respondent No. 1. Therefore, the trial court found that there was no question of paying the mobilization advance by the respondent No. 1 to the appellant at that point of time. However, the respondent No. 1 had written a letter dated 25.6.2004 enclosing therewith a copy of the cheque which was ready for dispatch and requesting the appellant to depute their officer to collect the same. In view of this I do not find any substance in the argument of the appellant that the contract in question could not be performed without mobilization advance and that there is fraud on the part of the respondent No. 1. It is required to be noted that the plaintiff could have started work and thereafter interest could have been claimed for delayed payment.</p><p style="text-align: justify;">9.3 The trial court was also prima facie of the opinion that clause 18 of the contract stipulates to refer the dispute for arbitration. In view of this the Civil Court cannot exercise its jurisdiction and whether there is a breach or not is the subject matter which was required to be decided by the Arbitral Tribunal as agreed between the parties under clause 18.2 of the contract Agreement. The said proceedings are initiated by both the sides and it is at the stage of appointment of third Arbitrator.</p><p style="text-align: justify;">9.4 After considering all the documents and the pleadings of the parties the trial court was of the prima facie opinion that fraud was not established by the appellant. As stated hereinabove, the respondent No. 1 had received the resubmitted Bank Guarantee on 20/1/2004. Therefore the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The 30 days period was to expire on 20/2/2004.</p><p style="text-align: justify;">9.5 Before the expiry of the said period the appellant demanded price escalation vide their letter dated 14/2/2004. This was not stipulated in the contract. In case of delay in payment of any amount by the defendant No. 1 it was agreed between the parties that interest at 18% will become applicable. Apart from that the respondent No. 1 wrote a letter on 25.6.2004 enclosing therewith a copy of cheque requesting the appellant to depute their officer to collect the cheque. There is no dispute about these facts. In view of these facts I am of the opinion that the trial court has rightly formed a prima facie opinion that fraud is not established by the plaintiff.</p><p style="text-align: justify;">9.6 As regards special equity is concerned, as laid down in various judgements of the Apex Court, unless there is established fraud or special circumstances the beneficiary cannot be restrained from encashing the bank guarantee, even if there are disputes between the beneficiary and the person at whose instance the bank guarantee was given by the bank. In absence of fraud or special equities, injunction has to be refused restraining the beneficiary from encashing the bank guarantee. This principle has been enunciated in the case of Hindustan Steelworks Construction Ltd. (supra). In the case of Oil & Natural Gas Corporation Ltd. v. SBI, Overseas Branch, Bombay, reported in (2000)6 SCC 385 the Apex Court quoted the law declared by the Supreme Court in the case of Svenska Handelbanken v. Indian Charge Chrome (reported in (1994)1 SCC 502 as under:</p><p style="text-align: justify;">'... in a case of confirmed bank guarantee/irrevocable letters of credit it cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud. There should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Mere irretrievable injustice without prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee. Only in the event of fraud or irretrievable injustice the court would be entitled to interfere in a transaction involving a bank guarantee and under no other circumstances.'</p><p style="text-align: justify;">9.7 In any case, the allegation that the defendant No. 1 has committed fraud is premature at this stage and therefore the said contention cannot be accepted at this stage.</p><p style="text-align: justify;">10. In view of the above facts and the rulings of the Apex Court, the position in law is very clear that encashment of bank guarantee can be restrained by the Court only on the ground of fraud and special equities in the form of irretrievable injustice. Special equities has to be in the form of irretrievable injustice and it cannot be any other equities. Further, there will be irretrievable injustice only if the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. It is also settled law that in case of unconditional bank guarantee, there cannot be any equity and prima facie case for injunction. Lastly the fraud has to be an established fraud and cannot be based on suspicion or conjecture and even a dishonest and suspicious action cannot constitute fraud. </p><p style="text-align: justify;">10.1 In the present case prima facie the trial court found that there was no fraud. Moreover, the appellant could not show any special equities in the form of any irretrievable injustice so that the court would be entitled to interfere in the matter. It is also the finding that there is no concluded contract between the parties. After considering all the facts and circumstances of the case the trial court has come to a definite conclusion that the applicant has no prima facie case, the balance of convenience lies in favour of respondent No. 1 rather than the appellant and no irreparable loss would be caused to the appellant if the injunction as prayed for is not granted. Therefore I am of the opinion that the trial court has rightly come to the conclusion that the appellant has not established any prima facie case and the balance of convenience is not in favour of the appellant as a consequence of which the interim injunction requires to be dismissed. </p><p style="text-align: justify;">11. Even otherwise it is required to be noted that the jurisdiction of the appellate court is very limited. This principle has been asserted in the decision reported in 1942 Appeal Cases page 130. At page 138 of the said decision it is stated as under:</p><p style="text-align: justify;">'... The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge.In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified. This matter was elaborately discussed in the decision of this House in Evans v. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): 'It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. But the court is not entitled simply to say that if the judge had jurisdiction and had all the facts before him, the Court of Appeal cannot review his order unless he is shown to have applied a wrong principle. The court must if necessary examine a new the relevant facts and circumstances in order to exercise a discretion by way of review which may reverse or vary the order. Otherwise in interlocutory matters the judge might be regarded as independent of supervision.Yet an interlocutory order of the judge may often be of decisive importance on the final issue of the case, and one which requires a careful examination by the Court of Appeal. Thus in Gardner v. Jay (I), Bowen L.J. in discussing the discretion of the judge as regards mode of trial says: 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed.'</p><p style="text-align: justify;">11.1 The above view has been followed by the Apex Court in the case of U.P. Cooperative Federation Ltd. v. Sunder Bros, Delhi, reported in AIR 1967 SC 249 (=1966 Supp SCR 215). Paragraph 8 of the said decision is relevant which reads as under:</p><p style="text-align: justify;">'(8) It is well established that where the discretion vested in the Court under S. 34 of the Indian Arbitration Act has been exercised by the lower court the appellate court should be slow to interfere with the exercise of that discretion. In dealing with the matter raised before it at the appellate stage the appellate court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it may have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. As is often said, it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts then it would certainly be open to the appellate court to interfere with the trial court's exercise of jurisdiction.'</p><p style="text-align: justify;">11.2 Similar view has been reiterated by the Apex Court in cases of The Printers (Mysore) Private Ltd v. Pothan Joseph, reported in AIR 1960 SC 1156, Wander Ltd. v. Antox India P. Ltd, reported in 1990 (Supp) SCC 727 and Laxmikant V. Patel v. Chetanbhai Shah, AIR 2002 SC 275 (=2002(3) SCC 65 = 2001(10) JT 285 = 2001(8) Scale 350).</p><p style="text-align: justify;">12. From the facts and law discussed hereinabove it is found that the trial court has not wrongfully exercised its discretion and sufficient weight has been given to relevant considerations to the materials placed before the trial court. The trial court has exercised the jurisdiction reasonably and in a judicial manner and therefore I do not find any reason to interfere in the order of the trial court. Inthepremises aforesaid, I do not find any merits in the appeal and the same is hereby dismissed. No order as to costs.</p><p style="text-align: justify;">12.1 Since the main appeal has been dismissed, civil application for stay would not survive and is accordingly disposed of. Rule is discharged with no orders as to costs. Ad interim relief stands vacated. However, Respondent No. 1 is directed to keep the amount in question in a suspense account till the dispute between the parties is finally resolved.</p><p style="text-align: justify;">13. At this stage Mr. Devang Nanavati for the appellant seeks extension of stay in order to approach the higher forum. Respondent No. 1 is Karnataka Government undertaking which cannot run away from a decree if passed by the competent Court. The respondent No. 1 will always be able to refund the amount if necessary. Under the circumstances I am not inclined to grant the request made on behalf of the appellant. Hence the request is rejected.<p style="text-align: justify;"></p><p style="text-align: justify;">',
			'observations' => null,
			'overruledby' => null,
			'prhistory' => '',
			'pubs' => 'AIR2005Guj355; I(2006)BC321',
			'ratiodecidendi' => '',
			'respondent' => 'Mysore Paper Mills Ltd. and anr.',
			'sub' => 'Contract;Civil',
			'link' => null,
			'circuit' => null
		)
	),
	'args' => array(
		(int) 0 => '736345'
	)
)
$title_for_layout = 'L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr. Semantic Analysis'
$shops = array(
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		(int) 1 => 'Order 39 Rule 1',
		(int) 2 => 'Order 39 Rule 1',
		(int) 3 => 'the Indian Arbitration Act'
	),
	'PERSON' => array(
		(int) 0 => 'K.S. Jhaveri',
		(int) 1 => 'J.1',
		(int) 2 => 'Vadodara',
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		(int) 4 => 'Vadodara',
		(int) 5 => 'Performance Guarantee',
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		(int) 8 => 'hereinabove.4',
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		(int) 12 => 'Joshi',
		(int) 13 => 'Joshi',
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		(int) 23 => 'Joshi',
		(int) 24 => 'Joshi',
		(int) 25 => 'Anr',
		(int) 26 => 'Paragraphs 16',
		(int) 27 => 'Mukherji',
		(int) 28 => 'Shetty',
		(int) 29 => 'Mukherji',
		(int) 30 => 'Shetty',
		(int) 31 => 'J.',
		(int) 32 => 'J.',
		(int) 33 => 'Mukherji',
		(int) 34 => 'Joshi',
		(int) 35 => 'K.M. Patel',
		(int) 36 => 'K.M. Patel',
		(int) 37 => 'Patel',
		(int) 38 => 'Patel',
		(int) 39 => 'Patel',
		(int) 40 => 'Handels Banken',
		(int) 41 => 'V. GS Atwal',
		(int) 42 => 'V. Prem Heavy Engineering Works Pvt',
		(int) 43 => 'Patel',
		(int) 44 => 'Patel',
		(int) 45 => 'Patel',
		(int) 46 => 'Patel',
		(int) 47 => 'Patel',
		(int) 48 => 'Handels Banken',
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		(int) 54 => 'Patel',
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		(int) 57 => 'Wright',
		(int) 58 => 'Gardner',
		(int) 59 => 'Jay',
		(int) 60 => 'Bowen L.J.',
		(int) 61 => 'Pothan Joseph',
		(int) 62 => 'Laxmikant V. Patel',
		(int) 63 => 'Chetanbhai Shah',
		(int) 64 => 'Scale 350).12',
		(int) 65 => 'Devang Nanavati'
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		(int) 3 => 'M/s L & T Niro Limited',
		(int) 4 => 'L & TNL',
		(int) 5 => 'The Mysore Paper Mills Ltd',
		(int) 6 => 'IDBI Bank Ltd.',
		(int) 7 => 'Bank',
		(int) 8 => 'Bank Guarantees',
		(int) 9 => 'Application Exh.5',
		(int) 10 => 'Bank Guarantees',
		(int) 11 => 'Bank Guarantees',
		(int) 12 => 'MPML',
		(int) 13 => 'Bank Guarantee No',
		(int) 14 => 'Application Exh.5 and Application Exh.23',
		(int) 15 => 'para-45(A) & (B',
		(int) 16 => 'Exh.5',
		(int) 17 => 'MPML',
		(int) 18 => 'MPML',
		(int) 19 => 'the Turnkey Project of Erection and Commissioning of Free',
		(int) 20 => 'the World Bank',
		(int) 21 => 'Indian Renewable Energy Development Agency Ltd',
		(int) 22 => 'IREDA',
		(int) 23 => 'MPML',
		(int) 24 => 'MPML',
		(int) 25 => 'Xerox',
		(int) 26 => 'Bank',
		(int) 27 => 'Bank',
		(int) 28 => 'Bank',
		(int) 29 => 'MPML',
		(int) 30 => 'MPML',
		(int) 31 => 'World Bank',
		(int) 32 => 'MPML',
		(int) 33 => 'MPML',
		(int) 34 => 'Court',
		(int) 35 => 'Court',
		(int) 36 => 'Nanavati Associates',
		(int) 37 => 'Agreement',
		(int) 38 => 'Purchaser',
		(int) 39 => 'Purchaser',
		(int) 40 => 'Contract',
		(int) 41 => 'Arbitration',
		(int) 42 => 'Contract',
		(int) 43 => 'and(b',
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		(int) 45 => 'Xerox',
		(int) 46 => 'Hindustan Cosntruction Co. Ltd.',
		(int) 47 => 'the Supreme Court',
		(int) 48 => 'Hindustan Steelworks Construction Ltd.',
		(int) 49 => 'Tarapore & Co.',
		(int) 50 => 'Court',
		(int) 51 => 'R.D. Harbottle (Mercantile) Ltd.',
		(int) 52 => 'National Westminster Bank Ltd.',
		(int) 53 => 'SC',
		(int) 54 => 'J.',
		(int) 55 => 'Court',
		(int) 56 => 'U.P. Coop',
		(int) 57 => 'Federation Ltd.',
		(int) 58 => 'the Apex Court',
		(int) 59 => 'Hindustan Construction Co. Ltd.',
		(int) 60 => 'State of Bihar and Ors',
		(int) 61 => 'HCCL',
		(int) 62 => 'HCCL',
		(int) 63 => 'Arbitration.7.1',
		(int) 64 => 'the Bank Guarantee',
		(int) 65 => 'Court',
		(int) 66 => 'National Highway Authority of',
		(int) 67 => 'Ganga Enterprise',
		(int) 68 => 'AIR 2003',
		(int) 69 => 'SC',
		(int) 70 => 'Maharashtra v. National Construction Corporation',
		(int) 71 => 'Hindustan Steel Works Construction Ltd.',
		(int) 72 => 'V. Tarapore & Co.',
		(int) 73 => 'the Bank Guarantee',
		(int) 74 => 'Bank',
		(int) 75 => 'Bank',
		(int) 76 => 'Bank',
		(int) 77 => 'Bank',
		(int) 78 => 'NTPC Limited',
		(int) 79 => 'Flowmore Private Limited',
		(int) 80 => 'NTPC Limited',
		(int) 81 => 'Flowmore Pvt. Ltd.',
		(int) 82 => 'ONGC Ltd v.',
		(int) 83 => 'SBI',
		(int) 84 => 'Sumac International Ltd.',
		(int) 85 => 'L & T Ltd.',
		(int) 86 => 'Maharashtra State Electricity Board',
		(int) 87 => 'Hindustan Steel Workers Construction Ltd',
		(int) 88 => 'G.S. Atwal & Co.',
		(int) 89 => 'Federal Bank Ltd',
		(int) 90 => 'AIR 2000',
		(int) 91 => 'Hindustan Steel Workers Construction Ltd v. Taropore & Company',
		(int) 92 => 'Court',
		(int) 93 => 'ONGC',
		(int) 94 => '2)Hindustan Construction Co. Ltd',
		(int) 95 => 'ITC Ltd',
		(int) 96 => 'Debt Recovery Appellate Tribunal',
		(int) 97 => 'Hindustan Steel Workers Construction Ltd.',
		(int) 98 => 'Dwarikesh Sugar Industries Ltd.',
		(int) 99 => 'Bank',
		(int) 100 => 'Federal Bank Limited',
		(int) 101 => 'M. Jog Engineering Ltd.',
		(int) 102 => 'AIR 2000',
		(int) 103 => 'India Ltd.',
		(int) 104 => 'Vinmar Impex Inc.',
		(int) 105 => 'Debt Recovery Appellate Tribunal',
		(int) 106 => 'ONGC Ltd v.',
		(int) 107 => 'SBI',
		(int) 108 => 'Hindustan Steel Workers Construction Ltd.',
		(int) 109 => 'V. Taropore & Co.',
		(int) 110 => 'Irretrievable',
		(int) 111 => 'Itech Corporation's',
		(int) 112 => 'ONGC Ltd v.',
		(int) 113 => 'SBI',
		(int) 114 => 'Dwarikesh Sugar Ind. Ltd',
		(int) 115 => 'Works Ltd',
		(int) 116 => 'Bank Guarantee',
		(int) 117 => 'Bank',
		(int) 118 => 'Bank',
		(int) 119 => 'Centex India Ltd.',
		(int) 120 => 'Vinmar Impex Inc.',
		(int) 121 => 'Dwarikesh Sugar Ind. Ltd.',
		(int) 122 => 'Works Ltd.',
		(int) 123 => 'Federal Bank Ltd',
		(int) 124 => 'AIR 2000',
		(int) 125 => 'Hindustan Steels Workers',
		(int) 126 => 'Taropore and Co.',
		(int) 127 => 'Hindustan Zink Limited',
		(int) 128 => 'Vijaybhai Amarbhai & Co.',
		(int) 129 => 'Bank Guarantee',
		(int) 130 => 'Bank Guarantee',
		(int) 131 => 'Bank',
		(int) 132 => 'Bank Guarantee',
		(int) 133 => 'Bank',
		(int) 134 => 'the Civil Court',
		(int) 135 => 'the Arbitral Tribunal',
		(int) 136 => 'Bank Guarantee',
		(int) 137 => 'Bank Guarantee',
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		(int) 139 => 'Hindustan Steelworks Construction Ltd.',
		(int) 140 => 'Oil & Natural Gas Corporation Ltd.',
		(int) 141 => 'SBI',
		(int) 142 => 'Overseas Branch',
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		(int) 152 => 'U.P. Cooperative Federation Ltd.',
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		(int) 160 => 'Supp',
		(int) 161 => 'AIR 2002 SC 275 (=2002(3',
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		(int) 8 => '16/01/2004',
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		(int) 10 => '17.1.2004',
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		(int) 12 => 'one year',
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		(int) 17 => 'October 2003',
		(int) 18 => 'February 2004',
		(int) 19 => 'October 2003',
		(int) 20 => '17th July 2004',
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		(int) 25 => '14th February 2004',
		(int) 26 => 'October 2003',
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		(int) 28 => '17',
		(int) 29 => '34',
		(int) 30 => '21',
		(int) 31 => '' 18',
		(int) 32 => '1996',
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		(int) 34 => '1995',
		(int) 35 => '1995',
		(int) 36 => '2000',
		(int) 37 => '1997',
		(int) 38 => '1995',
		(int) 39 => '1995',
		(int) 40 => '76',
		(int) 41 => '3166',
		(int) 42 => '1996',
		(int) 43 => '1994',
		(int) 44 => '2000',
		(int) 45 => '1999',
		(int) 46 => '1998',
		(int) 47 => '70',
		(int) 48 => '1995',
		(int) 49 => '76',
		(int) 50 => '1997',
		(int) 51 => '1986',
		(int) 52 => '1998',
		(int) 53 => '2000',
		(int) 54 => '1996',
		(int) 55 => '2000',
		(int) 56 => '1994',
		(int) 57 => '1997',
		(int) 58 => '1994',
		(int) 59 => '1967',
		(int) 60 => '3166',
		(int) 61 => '1996',
		(int) 62 => '34',
		(int) 63 => '1994',
		(int) 64 => '16/1/2004',
		(int) 65 => '30 days',
		(int) 66 => 'The 30 days',
		(int) 67 => '30 days',
		(int) 68 => 'the 30 days',
		(int) 69 => '14.2.2004',
		(int) 70 => '20/1/2004',
		(int) 71 => '30 days',
		(int) 72 => 'The 30 days',
		(int) 73 => '1942',
		(int) 74 => '1990'
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		(int) 6 => '2',
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		(int) 10 => '1,its',
		(int) 11 => 'two',
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		(int) 14 => 'two',
		(int) 15 => '16.9.2004',
		(int) 16 => '001',
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		(int) 20 => '1',
		(int) 21 => '3',
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		(int) 23 => '20.1.2004',
		(int) 24 => '3',
		(int) 25 => '17.2.2004',
		(int) 26 => '2.3.2004',
		(int) 27 => '25.5.2004',
		(int) 28 => '25.6.2004',
		(int) 29 => '15.7.2004',
		(int) 30 => '3.4',
		(int) 31 => '23.8.2004',
		(int) 32 => '1',
		(int) 33 => '28',
		(int) 34 => '7.1',
		(int) 35 => '7.2',
		(int) 36 => '28',
		(int) 37 => '28',
		(int) 38 => '1',
		(int) 39 => '1',
		(int) 40 => '1',
		(int) 41 => '18',
		(int) 42 => '24',
		(int) 43 => '21)'21',
		(int) 44 => '34',
		(int) 45 => 'one',
		(int) 46 => '6.8',
		(int) 47 => '436',
		(int) 48 => '22',
		(int) 49 => '7',
		(int) 50 => '1',
		(int) 51 => '1',
		(int) 52 => '1',
		(int) 53 => '1',
		(int) 54 => '9',
		(int) 55 => '2',
		(int) 56 => '1',
		(int) 57 => '3',
		(int) 58 => '5',
		(int) 59 => '34.7.2',
		(int) 60 => '1',
		(int) 61 => '4',
		(int) 62 => '1',
		(int) 63 => '4',
		(int) 64 => '2',
		(int) 65 => '6',
		(int) 66 => '3',
		(int) 67 => '1',
		(int) 68 => '4',
		(int) 69 => '6',
		(int) 70 => '5',
		(int) 71 => '5',
		(int) 72 => '6',
		(int) 73 => '7',
		(int) 74 => '5',
		(int) 75 => '1',
		(int) 76 => '1',
		(int) 77 => '6',
		(int) 78 => '8',
		(int) 79 => '3',
		(int) 80 => '2',
		(int) 81 => '3',
		(int) 82 => '6',
		(int) 83 => '4',
		(int) 84 => '6',
		(int) 85 => '1',
		(int) 86 => '2)Centex',
		(int) 87 => '4',
		(int) 88 => '136.7.6',
		(int) 89 => '2',
		(int) 90 => '1',
		(int) 91 => '6',
		(int) 92 => '5',
		(int) 93 => '34.7.8',
		(int) 94 => '1',
		(int) 95 => '6',
		(int) 96 => '2',
		(int) 97 => '1',
		(int) 98 => '3',
		(int) 99 => '6',
		(int) 100 => '1',
		(int) 101 => '502.7.10',
		(int) 102 => '1',
		(int) 103 => '1986)4',
		(int) 104 => '136',
		(int) 105 => '2',
		(int) 106 => '6',
		(int) 107 => '3',
		(int) 108 => '4',
		(int) 109 => '5',
		(int) 110 => '5',
		(int) 111 => '1',
		(int) 112 => '161.8',
		(int) 113 => '26',
		(int) 114 => '9.1',
		(int) 115 => '18.5',
		(int) 116 => 'three',
		(int) 117 => '1',
		(int) 118 => '17.2.2004',
		(int) 119 => '3.1.2004',
		(int) 120 => '1',
		(int) 121 => '1',
		(int) 122 => '20.1.2004',
		(int) 123 => '20.2.2004',
		(int) 124 => '1',
		(int) 125 => '2.3.2004',
		(int) 126 => '1',
		(int) 127 => '9.2',
		(int) 128 => '1',
		(int) 129 => '1.',
		(int) 130 => '1',
		(int) 131 => '1',
		(int) 132 => '25.6.2004',
		(int) 133 => '1',
		(int) 134 => '18',
		(int) 135 => '18.2',
		(int) 136 => '1',
		(int) 137 => '1',
		(int) 138 => '20/2/2004.9.5',
		(int) 139 => '14/2/2004',
		(int) 140 => '1',
		(int) 141 => '1',
		(int) 142 => '25.6.2004',
		(int) 143 => '1',
		(int) 144 => '10.1',
		(int) 145 => '1',
		(int) 146 => '11',
		(int) 147 => '130',
		(int) 148 => '138',
		(int) 149 => '2',
		(int) 150 => '3',
		(int) 151 => '215',
		(int) 152 => '8',
		(int) 153 => '65',
		(int) 154 => '2001(8',
		(int) 155 => '1',
		(int) 156 => '1',
		(int) 157 => '1'
	),
	'ORDINAL' => array(
		(int) 0 => '4th',
		(int) 1 => '1st',
		(int) 2 => '4th',
		(int) 3 => 'first',
		(int) 4 => 'first',
		(int) 5 => 'third'
	),
	'GPE' => array(
		(int) 0 => 'S.D.',
		(int) 1 => 'D.G.',
		(int) 2 => 'L&TNL',
		(int) 3 => 'Nanavati',
		(int) 4 => 'Svenska',
		(int) 5 => 'Bihar',
		(int) 6 => 'Svenska',
		(int) 7 => 'Svenska',
		(int) 8 => 'Bombay',
		(int) 9 => 'Svenska',
		(int) 10 => 'Evans',
		(int) 11 => 'Delhi'
	),
	'NORP' => array(
		(int) 0 => 'Tender',
		(int) 1 => 'Purchaser',
		(int) 2 => 'Goods',
		(int) 3 => 'Purchaser',
		(int) 4 => 'Indian',
		(int) 5 => 'Indian',
		(int) 6 => 'Indian',
		(int) 7 => 'Indian'
	),
	'PRODUCT' => array(
		(int) 0 => 'Bidder',
		(int) 1 => 'Agreement'
	),
	'LOC' => array(
		(int) 0 => 'Purchaser'
	),
	'PERCENT' => array(
		(int) 0 => 'thirty (30) days',
		(int) 1 => '18%'
	),
	'WORK_OF_ART' => array(
		(int) 0 => 'Arbitrator.9.4',
		(int) 1 => 'The Printers (Mysore) Private Ltd v.'
	),
	'QUANTITY' => array(
		(int) 0 => '1994)1 SCC 502'
	)
)
$desc = array(
	'Judgement' => array(
		'id' => '736345',
		'acts' => 'Indian Arbitration Act - Sections 34',
		'appealno' => 'Appeal From Order No. 7 of 2005 with Civil Application No. 41 of 2005',
		'appellant' => 'L and T Niro Limited',
		'authreffered' => '',
		'casename' => 'L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr.',
		'casenote' => ' -  -  7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract. 28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period. Moreover, the said observations cannot be read like a text of a statute or out of context. 184, para 17) Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed. (8) It is well established that where the discretion vested in the Court under S.',
		'caseanalysis' => null,
		'casesref' => ' and Laxmikant V. Patel v. Chetanbhai Shah;',
		'citingcases' => '',
		'counselplain' => ' Mihir H. Joshi, Sr. Counsel and; Devang Nanavati, Adv. for Nanavati &amp; Nanavati',
		'counseldef' => ' K.M. Patel,; Arvind Kumar and; Varun K. Patel, Advs.',
		'court' => 'Gujarat',
		'court_type' => 'HC',
		'decidedon' => '2005-03-07',
		'deposition' => '',
		'favorof' => null,
		'findings' => null,
		'judge' => ' K.S. Jhaveri, J.',
		'judgement' => '<p style="text-align: justify;">K.S. Jhaveri, J.</p><p style="text-align: justify;">1. The present Appeal from Order has been preferred against the order dated 29th December 2004 passed below Exhibits 5 and 23 in Civil Suit No. 459/2004 by learned 4th Joint Civil Judge (Senior Division), Vadodara whereby Application Exh.5 was partly rejected and injunction was refused against encashment of performance of security guarantee and Application Exh.23 was partly allowed.</p><p style="text-align: justify;">2. The present appellant M/s L & T Niro Limited (hereinafter referred to as L & TNL or appellant or plaintiff) filed Special Civil Suit No. 459/2004 in the court of Civil Judge (Senior Division), Vadodara, against The Mysore Paper Mills Ltd (hereinafter referred to as MPML or the respondent No. 1 or Defendant No. 1) and IDBI Bank Ltd. (hereinafter referred to as the Bank or respondent No. 2 or defendant No. 2) praying as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1, its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.1 Appellant L&TNL; also filed Application Exh.5 praying for interim injunction which reads as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1,its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2;</p><p style="text-align: justify;">(b) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 2,its officers and agents, from in any manner whatsoever, making any payment under the said two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.2 The MPML filed Application Exh.23 in the aforesaid suit praying for the following prayers:</p><p style="text-align: justify;">(a) vacate the interim order of temporary injunction dated 16.9.2004 granted on application at Exh-5 and allow this application filed by this defendant;</p><p style="text-align: justify;">(b) pending hearing and final disposal of this application, this Hon'ble Court be pleased to direct the 1st defendant to renew the Bank Guarantee No. 2001021 IBGF 001 dated 16-1-2004 for Rs.1,29,60,027 which is due to expire on 31.1.2005.'</p><p style="text-align: justify;">2.3 The learned 4th Joint Civil Judge (S.D.), Vadodara heard both the aforesaid Applications Exhibits 5 and 23 and by order dated 29th December 2004 partly rejected Application Exh.5 and Application Exh.23 was partly allowed. The operative part of the order reads as under:</p><p style="text-align: justify;">'Application Exh.5 about prayer of guarantee to realise advances is hereby allowed.</p><p style="text-align: justify;">In application Exh.5 prayer towards performance security Guarantee No. 200402/IBGP dated 16/01/2004 for Rs.1,35,00027 expired on 31/03/2006 is hereby rejected.</p><p style="text-align: justify;">Application Exh.23 is hereby partly allowed.</p><p style="text-align: justify;">Ad-interim injunction in respect of plaint para-45(A) & (B) towards performance security (D.G.) No. 200421 IBGP 0001 dated 16/01/2004 for Rs.1,35,00027 expired 31/01/2006 granted earlier is hereby stands vacated. The prayer of guarantee realisation advance dated 16/01/2004 is hereby granted till payment of realisation amount paid by defendant No. 1 to the plaintiff.</p><p style="text-align: justify;">Thus, Exh.5 and Exh.23 are hereby partly allowed.' </p><p style="text-align: justify;">3. The facts as emerging from the record are as under:</p><p style="text-align: justify;">3.1 In pursuance of the Tender for its project by MPML, a contract was signed between L&TNL; and MPML in the Turnkey Project of Erection and Commissioning of Free flow Falling Film Tubelor Evaporator Plant of 100 TPH Water Evaporation Capacity for Rs.13,50,00,267. The said project was aided by the World Bank and the funds were routed through Indian Renewable Energy Development Agency Ltd (IREDA). L&TNL; sent performance bank guarantees and mobilization advance guarantee to MPML on 17.1.2004 which was received by MPML on 20.1.2004. However, the said Performance Guarantee was returned for necessary amendment in view of contradictory dates shown in the bank guarantee. As per clause 3 of the contract, the bank guarantee was required to be valid upto 60 days after the date of completion of performance of work which was one year from the date of release of advance. Thereafter on 30.1.2004 L&TNL; forwarded the rectified performance bank guarantee.</p><p style="text-align: justify;">3.2 MPML sought one month's extension for release of advance payment with clarification that the effective date of contract shall be from the date of release of advance. Before the expiry of 30 days' period for release of mobilization advance from the date of original bank guarantee L&TNL; sought escalation from October 2003 i.e. for the period prior to the date of contract. By letter dated 17.2.2004 MPML replied that demand for escalation was premature for consideration. Again L&TNL; reiterated their demand for escalation by letter dated 2.3.2004. Thereafter correspondences were exchanged and negotiations were held in respect of the claim of escalation.</p><p style="text-align: justify;">3.3 By letter dated 25.5.2004 L&TNL; informed that there was price increase between October 2003 and February 2004 and it was not possible for it to execute contract unless price rise was agreed. MPML replied that the contract having been signed with firm price, it was not possible to consider escalation retrospectively and that L&TNL; may indicate escalation in relation to the period of extension of time for payment of mobilisation advance. It appears that L&TNL; insisted for escalation from October 2003. MPML along with letter dated 25.6.2004 sent a Xerox copy of cheque for Rs.1,29,60,027/- towards mobilization advance and requested L&TNL; to depute responsible officer to collect the cheque. However, by letter dated 17th July 2004 L&TNL; rescinded the contract and requested the Bank not to make payment of bank guarantee in case it is invoked. In turn the Bank by their communication dated 15.7.2004 informed L&TNL; that it was bound to make the payment on invocation and that it was not possible for the Bank to accede to the request of L&TNL.; </p><p style="text-align: justify;">3.4 MPML wrote letter dated 23.8.2004 to L&NTL; stating that the cheque towards mobilization advance has not been collected and the work has not been commenced which amounts to violation of the contract. MPML also indicated that any dispute or claim between the parties has to be sorted out in accordance with the terms agreed upon (arbitration). It was further pointed out that it was a World Bank aided project and if L&TNL; did not comply with the request of MPML within 30 days from the date of the said letter, it will be deemed that L&TNL; was not inclined to execute the contract and the same shall stand rescinded and further informed that MPML has suffered to the extent of Rs.6.18 crores on account of refusal to execute the contract.</p><p style="text-align: justify;">3.5 In view of the above facts, L&TNL; filed the abovementioned suit and interim injunction application and the trial court has passed the impugned order as stated hereinabove.</p><p style="text-align: justify;">4. At this stage it is required to be noted that this Court has very limited scope in dealing with interim orders of the trial court and any observations which may be made by this Court will prejudice either side while proceeding with the main suit. In view of this, I am of the opinion that the present appeal is required to be decided only in the context of the basic principle whether the plaintiff has prima facie case, whether balance of convenience is in favour of the plaintiff and whether irreparable loss would be caused to the plaintiff by refusal of interim injunction.</p><p style="text-align: justify;">5. Heard the learned counsel for the respective parties and perused the relevant documents.</p><p style="text-align: justify;">6. Mr. Mihir Joshi, Senior Counsel for M/s Nanavati and Nanavati Associates for the appellant submitted that the bank guarantee given by the present appellant is required to be considered on facts. Mr. Joshi further submitted that in view of the correspondence exchanged between the parties and the term of the contract it is clear that since the contract has not started as per the agreement, the question of encashment of bank guarantee would not arise and therefore the respondents are required to be restrained from encashing the bank guarantee.</p><p style="text-align: justify;">6.1 Mr. Joshi for the appellant submitted that since the appellants have not received the amount in question, the bank guarantee is conditional. According to him even if the bank guarantee is treated as unconditional the encashment is not in terms of the contract because performance of obligations under the contract has not started in absence of receipt of mobilisation advance and there being no default, encashment of bank guarantee cannot be permitted. He submitted that the respondent No. 1 has in fact engineered a default at the hands of the appellant by delaying the payment of the mobilization advance and therefore the encashment is fraudulent and the invocation ought to be stayed.</p><p style="text-align: justify;">6.2 Mr. Joshi submitted that on account of the aforesaid facts, more particularly about engineering of default and non-payment of mobilization advance, being the breach committed by the respondent itself, special equities are in favour of the appellant for grant of injunction. According to him, the contractual terms were not concluded since the respondent had sought an amendment in terms of payment of the mobilization advance. The term is, therefore, not concluded between the parties and in fact thereafter rescinded. Mr. Joshi contended that the suit when filed was maintainable since no notice for arbitration as contemplated under clause (28) of the Agreement had been issued at that time. Mr. Joshi further submitted that in any case the impugned order does not at all consider the aforesaid contentions and in fact the other side has committed breach of the contract obligations.</p><p style="text-align: justify;">6.3 Mr. Joshi has relied upon clauses 7.1, 7.2 and 28 of the contract which read as under:</p><p style="text-align: justify;">'7.1 Within thirty (30) days of receipt of the notification of contract award, the successful Bidder shall furnish to the Purchaser the performance security in the amount specified in SCC.</p><p style="text-align: justify;">7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract.'</p><p style="text-align: justify;">*** *** ***</p><p style="text-align: justify;">28. Settlement of Disputes:</p><p style="text-align: justify;">28.1 If any dispute or difference of any kind whatsoever shall arise between the Purchaser and the Supplier in connection with or arising out of the Contract, the parties shall make every effort to resolve amicably such dispute or difference by mutual consultation.</p><p style="text-align: justify;">28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given.</p><p style="text-align: justify;">28.2.1 Any dispute or difference in respect of which a notice of intention to commence arbitration has been given in accordance with this Clause shall be finally settled by arbitration. Arbitration may be commenced prior to or after delivery of the Goods under the Contract.</p><p style="text-align: justify;">28.2.2 Arbitration proceedings shall be conducted in accordance with the rules of procedure specified in the SCC.</p><p style="text-align: justify;">28.3 Notwithstanding any reference to arbitration herein:</p><p style="text-align: justify;">(a) the parties shall continue to perform their respective obligations under the Contract unless they otherwise agree; and</p><p style="text-align: justify;">(b) the Purchaser shall pay the supplier any money due to the supplier.'</p><p style="text-align: justify;">6.4 Mr. Joshi submitted that the trial court has misconstrued the clause relating to the settlement of disputes and has overlooked the fact that no notice of arbitration had been given and no ouster of jurisdiction of the Civil Court was contemplated in the contract. According to him the respondent No. 1 has sought to fraudulently encash the performance security on the purported default of the appellant in spite of its own breach in performing its obligations under the contract. According to Mr. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period.</p><p style="text-align: justify;">6.5 Mr. Joshi submitted that since the project, though entrusted by publishing advertisement in the year 2003, was finalised only on 16th January 2004. When the payment was delayed on 14th February 2004 the appellant has sought for escalation of the price from October 2003 in view of the price escalation in the market and admittedly delay was on the part of the defendant No. 1 and not at the instance of the plaintiff. He submitted that since the defendant No. 1 has not agreed for escalation price the appellant could not start the work on account of non-payment of initial amount which was one of the terms and conditions of the Contract.</p><p style="text-align: justify;">6.6 Mr. Joshi further submitted that if at all any fraud is committed by the appellant, then the respondent No. 1 could have lodged complaint against the plaintiff. He submitted that merely by sending a Xerox copy of the demand draft will not fullfil the conditions of the contract. He, therefore, submitted that fraud is committed by defendant No. 1 and in view of the judgement in the case of Hindustan Cosntruction Co. Ltd. (supra), the trial court ought to have granted injunction.</p><p style="text-align: justify;">6.7 Mr. Joshi, in support of his contentions, relied upon a decision of the Supreme Court in the case of Hindustan Steelworks Construction Ltd. v. Tarapore & Co. and Anr., reported in (1996)5 SCC 34. Paragraphs 16, 17 and 18 of the said decision read as under:</p><p style="text-align: justify;">'16. On the basis of these observations the learned counsel submitted that the law laid down by this Court is that except in case of fraud and that too when it creates special equities in the form of irretrievable injustice, the courts should not interfere by restraining the beneficiary from encashing the bank guarantee. We have carefully gone through the judgements delivered by Mukherji and Shetty, JJ. and in our opinion that is not the ratio of the judgement. In that case the court was not called upon to decide whether apart from fraud there can by any other valid ground for interference. Moreover, the said observations cannot be read like a text of a statute or out of context. Observations made by Mukherji, J. in other parts of his judgement (see paras 24 and 34) and his opinion stated in para 21, with which Shetty, J. also agreed,do not support that submission. Mukherji, J. in the paragraph has stated his opinion as under: (SCC p.186, para 21)</p><p style="text-align: justify;">'21. ... An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with except in case of fraud or in case of question of apprehension of irretrievable injustice has been made out'.</p><p style="text-align: justify;">17. Mukherji, j. referred to the following paragraph from the judgement in R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. and then stated that in his view the said view represents the correct state of law: (SC p.184, para 17)</p><p style="text-align: justify;">'Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. In the case of a confirmed performance guarantee, just as in the case of a confirmed letter of credit, the bank was only concerned to ensure that the terms of its mandate and confirmation had been complied with and was in no way concerned with any contractual disputes which might have arisen between the buyers and sellers. Accordingly, since demands for payment had been made by the buyers under the guarantees and the plaintiffs had not established that the demands were fraudulent or other special circumstances there were no grounds for continuing the injunctions....' </p><p style="text-align: justify;">18. What Mukherji, J. has stated in para 34 of his judgement,namely, that: 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U.P. Coop. Federation Ltd. Therefore, fraud cannot be said to be the only exception. In a case where the party approaching the court is able to establish that in view of special equities in his favour if injunction as requested is not granted then he would suffer irretrievable injustice, the court can and would interfere. It may be pointed out that fraud which is recognised as an exception is the fraud by one of the parties to the underlying contract and which has the effect of vitiating the entire underlying transaction. A demand by the beneficiary under the bank guarantee may become fraudulent not because of any fraud committed by the beneficiary while executing the underlying contract but it may become so because of subsequent events or circumstances. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee.' </p><p style="text-align: justify;">6.8 Mr. Joshi has also relied upon a decision of the Apex Court in the case of Hindustan Construction Co. Ltd. v. State of Bihar and Ors., reported in (1998)8 SCC 436. Paragraph 22 of the said decision reads as under:</p><p style="text-align: justify;">'22. We have scrutinised the facts pleaded by the parties in respect of both the bank guarantees as also the documents filed before us and we are, prima facie, of the opinion that the lapse was on the part of the defendants who were not possessed of sufficient funds for completion of the work. The allegation of the defendant that HCCL itself had abandoned the work does not, prima facie, appear to be correct and it is for this reason that we are of the positive view that the 'special equities' are wholly in favour of HCCL.' </p><p style="text-align: justify;">7. Mr. K.M. Patel, learned Advocate appearing for the respondent No. 1 has supported the order passed by the trial court. He submitted that except alleged fraud and there being no concluded contract, no other contentions were advanced before the trial court. Therefore it is not open for the appellant to raise those contentions for the first time in these proceedings. According to him it is a case of unequivocal and conditional bank guarantee. He submitted that the bank has undertaken to pay without demur and without the respondent No. 1 requires to justify anything, and therefore no injunction against invocation of such an unconditional bank guarantee can be granted. Any dispute regarding breach of conract or variation in terms of contract of difference of payment could have been raised before Arbitration.</p><p style="text-align: justify;">7.1 Mr. K.M. Patel appearing for the respondent No. 1 submitted that the Bank Guarantee is a complete and separate contract by itself and it is distinct and independent from the underlying contract and Court cannot restrain invocation of 'a demand guarantee' by looking at the terms of underlying contract. To support this contention he relied upon the decisions in the cases of (1) National Highway Authority of India v. Ganga Enterprise, AIR 2003 SC 3823 para 9, (2) State of Maharashtra v. National Construction Corporation, (1996) 1 SCC 735 and (3) Hindustan Steel Works Construction Ltd. V. Tarapore & Co., (1996) 5 SCC 34.</p><p style="text-align: justify;">7.2 Mr. Patel submitted that the Bank Guarantee being an independent and distinct contract which is payable on demand implies that the Bank is liable to pay as and when demand is made upon the Bank by the beneficiary. The Bank is not concerned with any inter-se disputes between the beneficiary and the persons at whose instance the Bank has issued guarantee. According to him this principle has been reiterated in the case of (1) NTPC Limited v. Flowmore Private Limited, (1995) 4 SCC 515.</p><p style="text-align: justify;">7.3 According to Mr. Patel, encashment of bank guarantee cannot be prevented on the ground of dispute between the parties or pendency of proceedings before Arbitrator, etc. This principle has been enunciated in the cases of (1) NTPC Limited v. Flowmore Pvt. Ltd. (1995) 4 SCC 515 (2) ONGC Ltd v. SBI, (2000) 6 SCC 385, (3) UP Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568, (4) L & T Ltd., v. Maharashtra State Electricity Board, (1995) 6 SCC 68, (5) Hindustan Steel Workers Construction Ltd v. G.S. Atwal & Co., (1995) 5 SCC 76 (6) Federal Bank Ltd v. M. Jog Engineering Limited, AIR 2000 SC 3166, and (7) Hindustan Steel Workers Construction Ltd v. Taropore & Company, (1996) 5 SCC 34.</p><p style="text-align: justify;">7.4 Mr. Patel submitted that encashment of demand bank guarantee can be restrained by the Court only on the ground of (i) fraud and (ii) special equities in the form of irretrievable injustice. He further submitted that the fraud has to be an established fraud and cannot be based on suspicion or conjecture. In this context he has relied upon the decisions in the cases of (1) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, ( which is also referred in ONGC case (2000) 6 SCC 385), (2)Hindustan Construction Co. Ltd v. State of Bihar, (1999) 8 SCC 436, (3) ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70, (3) Hindustan Steel Workers Construction Ltd. V. GS Atwal, (1995) 6 SCC 76, and (4) Dwarikesh Sugar Industries Ltd. V. Prem Heavy Engineering Works Pvt. Ltd. (1997) 6 SCC 450.</p><p style="text-align: justify;">7.5 In support of his contention that the Bank must have knowledge of fraud Mr. Patel has relied upon the decision in the cases of (1) Federal Bank Limited v. M. Jog Engineering Ltd., AIR 2000 SC 3166, (2)Centex India Ltd. V. Vinmar Impex Inc. (1986) 4 SCC 136.</p><p style="text-align: justify;">7.6 Mr. Patel further submitted that even a dishonest and suspicious action cannot constitute fraud and he has drawn support from the ratio laid down in the cases of (1)ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70.</p><p style="text-align: justify;">7.7 According to Mr. Patel, the special equities has to be in the form of irretrievable injustice and it cannot be any other equities as is laid down in the cases of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385, Hindustan Steel Workers Construction Ltd. V. Taropore & Co. (1996) 5 SCC 34.</p><p style="text-align: justify;">7.8 Mr. Patel further submitted that the Irretrievable injustice has to be in terms of Itech Corporation's case i.e. the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. In this regard Mr. Patel has cited the decisions in the case of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385; (2) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, and (3) Dwarikesh Sugar Ind. Ltd v. Prem Heavy Engg. Works Ltd, (1997) 6 SCC 450.</p><p style="text-align: justify;">7.9 Mr. Patel submitted that the general principles for grant of injunction of prima facie case, balance of convenience, etc. applicable while dealing application under Order 39 Rule 1 and 2, do not apply in cases of Bank Guarantee. This principle is laid down in the case of Svenska Handels Banken v. Indian Charge Chrome (1994) 1 SCC 502.</p><p style="text-align: justify;">7.10 Mr. Patel submitted that in cases of unconditional bank guarantee, there is no equity and prima facie case for injunction and injunction under Order 39 Rule 1 cannot be granted to nullify terms of undertaking which is lawfully enforceable. He further submitted that principles of undue enrichment cannot apply in cases of Bank guarantee and the Bank guarantee is in the form of security and it is life blood of international trade and commerce. In the above context Mr. Patel has relied upon the decisions in the case of (1) Centex India Ltd. v. Vinmar Impex Inc. reported in (1986)4 SCC 136 (2) Dwarikesh Sugar Ind. Ltd. v. Prem Heavy Engg. Works Ltd., reported in (1967) 6 SCC 450, (3) Federal Bank Ltd v. M. Jog Engineering Ltd, AIR 2000 SC 3166, (4) Hindustan Steels Workers v. Taropore and Co. (1996) 5 SCC 34, and (5) Hindustan Zink Limited v. Vijaybhai Amarbhai & Co. (1994) 1 GLR 161.</p><p style="text-align: justify;">8. It is required to be noted that from the record it is clear that except the contention with regard to 'fraud' and 'not concluded contract' no arguments were raised before the trial court. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. General allegations, if not accompanied by particulars, are insufficient to constitute an averment of fraud and no court of law can take cognizance thereof.</p><p style="text-align: justify;">9. From the record of the case the trial court has found that as per pleading of the appellant made in para 26 of the plaint, all the formalities were completed between the parties and the parties have signed the contract on 16/1/2004. It was further recorded that looking to the agreement produced by both the parties, the parties have signed under the contract on each and every page. Thus all the formalities of the contract were fulfilled by both the parties. Therefore the trial court was prima facie of the opinion that the contract is in existence and concluded. Moreover, on the facts of the case the trial court found that there is no conditional bank guarantee. </p><p style="text-align: justify;">9.1 In clause 18.5 of the Contract agreement, three ingredients which are important for purposes of advance payments are: (i) 30 days from signing of the contract, (ii) submission of claim; and (iii) submission of Bank Guarantee of equivalent amount. The first bank guarantee was forwarded to the respondent No. 1 vide letter dated 17.2.2004. In the performance guarantee submitted by the plaintiff, there was a mistake with regard to date and this fact had been communicated to the appellant vide letter dated 3.1.2004 and requested the appellant to submit the correct Bank Guarantee. This fact was not disputed by the appellant. The appellant had resubmitted the Bank guarantee by incorporating necessary corrections and forwarded the same to the respondent No. 1 vide letter dated 30.1.2004. The 30 days prescribed period in terms of payment stipulates that the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The bank guarantee was received on 20.1.2004. Therefore the 30 days period was to expire on 20.2.2004. However, the plaintiff demanded price escalation vide letter dated 14.2.2004 which was not within the terms of the contract. The respondent No. 1 replied that the said claim is too premature for being considered. In view of the corrected Bank guarantee, upto 2.3.2004 the respondent No. 1 had right to give advance amount to the appellant. </p><p style="text-align: justify;">9.2 From the record it appears that when the respondent No. 1 was contemplating to make the payment the appellant sought price escalation which was categorically rejected by the respondent No. 1. Therefore, the trial court found that there was no question of paying the mobilization advance by the respondent No. 1 to the appellant at that point of time. However, the respondent No. 1 had written a letter dated 25.6.2004 enclosing therewith a copy of the cheque which was ready for dispatch and requesting the appellant to depute their officer to collect the same. In view of this I do not find any substance in the argument of the appellant that the contract in question could not be performed without mobilization advance and that there is fraud on the part of the respondent No. 1. It is required to be noted that the plaintiff could have started work and thereafter interest could have been claimed for delayed payment.</p><p style="text-align: justify;">9.3 The trial court was also prima facie of the opinion that clause 18 of the contract stipulates to refer the dispute for arbitration. In view of this the Civil Court cannot exercise its jurisdiction and whether there is a breach or not is the subject matter which was required to be decided by the Arbitral Tribunal as agreed between the parties under clause 18.2 of the contract Agreement. The said proceedings are initiated by both the sides and it is at the stage of appointment of third Arbitrator.</p><p style="text-align: justify;">9.4 After considering all the documents and the pleadings of the parties the trial court was of the prima facie opinion that fraud was not established by the appellant. As stated hereinabove, the respondent No. 1 had received the resubmitted Bank Guarantee on 20/1/2004. Therefore the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The 30 days period was to expire on 20/2/2004.</p><p style="text-align: justify;">9.5 Before the expiry of the said period the appellant demanded price escalation vide their letter dated 14/2/2004. This was not stipulated in the contract. In case of delay in payment of any amount by the defendant No. 1 it was agreed between the parties that interest at 18% will become applicable. Apart from that the respondent No. 1 wrote a letter on 25.6.2004 enclosing therewith a copy of cheque requesting the appellant to depute their officer to collect the cheque. There is no dispute about these facts. In view of these facts I am of the opinion that the trial court has rightly formed a prima facie opinion that fraud is not established by the plaintiff.</p><p style="text-align: justify;">9.6 As regards special equity is concerned, as laid down in various judgements of the Apex Court, unless there is established fraud or special circumstances the beneficiary cannot be restrained from encashing the bank guarantee, even if there are disputes between the beneficiary and the person at whose instance the bank guarantee was given by the bank. In absence of fraud or special equities, injunction has to be refused restraining the beneficiary from encashing the bank guarantee. This principle has been enunciated in the case of Hindustan Steelworks Construction Ltd. (supra). In the case of Oil & Natural Gas Corporation Ltd. v. SBI, Overseas Branch, Bombay, reported in (2000)6 SCC 385 the Apex Court quoted the law declared by the Supreme Court in the case of Svenska Handelbanken v. Indian Charge Chrome (reported in (1994)1 SCC 502 as under:</p><p style="text-align: justify;">'... in a case of confirmed bank guarantee/irrevocable letters of credit it cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud. There should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Mere irretrievable injustice without prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee. Only in the event of fraud or irretrievable injustice the court would be entitled to interfere in a transaction involving a bank guarantee and under no other circumstances.'</p><p style="text-align: justify;">9.7 In any case, the allegation that the defendant No. 1 has committed fraud is premature at this stage and therefore the said contention cannot be accepted at this stage.</p><p style="text-align: justify;">10. In view of the above facts and the rulings of the Apex Court, the position in law is very clear that encashment of bank guarantee can be restrained by the Court only on the ground of fraud and special equities in the form of irretrievable injustice. Special equities has to be in the form of irretrievable injustice and it cannot be any other equities. Further, there will be irretrievable injustice only if the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. It is also settled law that in case of unconditional bank guarantee, there cannot be any equity and prima facie case for injunction. Lastly the fraud has to be an established fraud and cannot be based on suspicion or conjecture and even a dishonest and suspicious action cannot constitute fraud. </p><p style="text-align: justify;">10.1 In the present case prima facie the trial court found that there was no fraud. Moreover, the appellant could not show any special equities in the form of any irretrievable injustice so that the court would be entitled to interfere in the matter. It is also the finding that there is no concluded contract between the parties. After considering all the facts and circumstances of the case the trial court has come to a definite conclusion that the applicant has no prima facie case, the balance of convenience lies in favour of respondent No. 1 rather than the appellant and no irreparable loss would be caused to the appellant if the injunction as prayed for is not granted. Therefore I am of the opinion that the trial court has rightly come to the conclusion that the appellant has not established any prima facie case and the balance of convenience is not in favour of the appellant as a consequence of which the interim injunction requires to be dismissed. </p><p style="text-align: justify;">11. Even otherwise it is required to be noted that the jurisdiction of the appellate court is very limited. This principle has been asserted in the decision reported in 1942 Appeal Cases page 130. At page 138 of the said decision it is stated as under:</p><p style="text-align: justify;">'... The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge.In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified. This matter was elaborately discussed in the decision of this House in Evans v. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): 'It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. But the court is not entitled simply to say that if the judge had jurisdiction and had all the facts before him, the Court of Appeal cannot review his order unless he is shown to have applied a wrong principle. The court must if necessary examine a new the relevant facts and circumstances in order to exercise a discretion by way of review which may reverse or vary the order. Otherwise in interlocutory matters the judge might be regarded as independent of supervision.Yet an interlocutory order of the judge may often be of decisive importance on the final issue of the case, and one which requires a careful examination by the Court of Appeal. Thus in Gardner v. Jay (I), Bowen L.J. in discussing the discretion of the judge as regards mode of trial says: 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed.'</p><p style="text-align: justify;">11.1 The above view has been followed by the Apex Court in the case of U.P. Cooperative Federation Ltd. v. Sunder Bros, Delhi, reported in AIR 1967 SC 249 (=1966 Supp SCR 215). Paragraph 8 of the said decision is relevant which reads as under:</p><p style="text-align: justify;">'(8) It is well established that where the discretion vested in the Court under S. 34 of the Indian Arbitration Act has been exercised by the lower court the appellate court should be slow to interfere with the exercise of that discretion. In dealing with the matter raised before it at the appellate stage the appellate court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it may have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. As is often said, it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts then it would certainly be open to the appellate court to interfere with the trial court's exercise of jurisdiction.'</p><p style="text-align: justify;">11.2 Similar view has been reiterated by the Apex Court in cases of The Printers (Mysore) Private Ltd v. Pothan Joseph, reported in AIR 1960 SC 1156, Wander Ltd. v. Antox India P. Ltd, reported in 1990 (Supp) SCC 727 and Laxmikant V. Patel v. Chetanbhai Shah, AIR 2002 SC 275 (=2002(3) SCC 65 = 2001(10) JT 285 = 2001(8) Scale 350).</p><p style="text-align: justify;">12. From the facts and law discussed hereinabove it is found that the trial court has not wrongfully exercised its discretion and sufficient weight has been given to relevant considerations to the materials placed before the trial court. The trial court has exercised the jurisdiction reasonably and in a judicial manner and therefore I do not find any reason to interfere in the order of the trial court. Inthepremises aforesaid, I do not find any merits in the appeal and the same is hereby dismissed. No order as to costs.</p><p style="text-align: justify;">12.1 Since the main appeal has been dismissed, civil application for stay would not survive and is accordingly disposed of. Rule is discharged with no orders as to costs. Ad interim relief stands vacated. However, Respondent No. 1 is directed to keep the amount in question in a suspense account till the dispute between the parties is finally resolved.</p><p style="text-align: justify;">13. At this stage Mr. Devang Nanavati for the appellant seeks extension of stay in order to approach the higher forum. Respondent No. 1 is Karnataka Government undertaking which cannot run away from a decree if passed by the competent Court. The respondent No. 1 will always be able to refund the amount if necessary. Under the circumstances I am not inclined to grant the request made on behalf of the appellant. Hence the request is rejected.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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Warning (2): Invalid argument supplied for foreach() [APP/View/Case/meta.ctp, line 39]
Code Context
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			(int) 87 => 'Hindustan Steel Workers Construction Ltd',
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			(int) 62 => '34',
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			(int) 68 => 'the 30 days',
			(int) 69 => '14.2.2004',
			(int) 70 => '20/1/2004',
			(int) 71 => '30 days',
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			(int) 11 => 'two',
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			(int) 3 => 'first',
			(int) 4 => 'first',
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		),
		'GPE' => array(
			(int) 0 => 'S.D.',
			(int) 1 => 'D.G.',
			(int) 2 => 'L&TNL',
			(int) 3 => 'Nanavati',
			(int) 4 => 'Svenska',
			(int) 5 => 'Bihar',
			(int) 6 => 'Svenska',
			(int) 7 => 'Svenska',
			(int) 8 => 'Bombay',
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			(int) 10 => 'Evans',
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		'NORP' => array(
			(int) 0 => 'Tender',
			(int) 1 => 'Purchaser',
			(int) 2 => 'Goods',
			(int) 3 => 'Purchaser',
			(int) 4 => 'Indian',
			(int) 5 => 'Indian',
			(int) 6 => 'Indian',
			(int) 7 => 'Indian'
		),
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			(int) 0 => 'Bidder',
			(int) 1 => 'Agreement'
		),
		'LOC' => array(
			(int) 0 => 'Purchaser'
		),
		'PERCENT' => array(
			(int) 0 => 'thirty (30) days',
			(int) 1 => '18%'
		),
		'WORK_OF_ART' => array(
			(int) 0 => 'Arbitrator.9.4',
			(int) 1 => 'The Printers (Mysore) Private Ltd v.'
		),
		'QUANTITY' => array(
			(int) 0 => '1994)1 SCC 502'
		)
	),
	'desc' => array(
		'Judgement' => array(
			'id' => '736345',
			'acts' => 'Indian Arbitration Act - Sections 34',
			'appealno' => 'Appeal From Order No. 7 of 2005 with Civil Application No. 41 of 2005',
			'appellant' => 'L and T Niro Limited',
			'authreffered' => '',
			'casename' => 'L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr.',
			'casenote' => ' -  -  7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract. 28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period. Moreover, the said observations cannot be read like a text of a statute or out of context. 184, para 17) Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed. (8) It is well established that where the discretion vested in the Court under S.',
			'caseanalysis' => null,
			'casesref' => ' and Laxmikant V. Patel v. Chetanbhai Shah;',
			'citingcases' => '',
			'counselplain' => ' Mihir H. Joshi, Sr. Counsel and; Devang Nanavati, Adv. for Nanavati & Nanavati',
			'counseldef' => ' K.M. Patel,; Arvind Kumar and; Varun K. Patel, Advs.',
			'court' => 'Gujarat',
			'court_type' => 'HC',
			'decidedon' => '2005-03-07',
			'deposition' => '',
			'favorof' => null,
			'findings' => null,
			'judge' => ' K.S. Jhaveri, J.',
			'judgement' => '<p style="text-align: justify;">K.S. Jhaveri, J.</p><p style="text-align: justify;">1. The present Appeal from Order has been preferred against the order dated 29th December 2004 passed below Exhibits 5 and 23 in Civil Suit No. 459/2004 by learned 4th Joint Civil Judge (Senior Division), Vadodara whereby Application Exh.5 was partly rejected and injunction was refused against encashment of performance of security guarantee and Application Exh.23 was partly allowed.</p><p style="text-align: justify;">2. The present appellant M/s L & T Niro Limited (hereinafter referred to as L & TNL or appellant or plaintiff) filed Special Civil Suit No. 459/2004 in the court of Civil Judge (Senior Division), Vadodara, against The Mysore Paper Mills Ltd (hereinafter referred to as MPML or the respondent No. 1 or Defendant No. 1) and IDBI Bank Ltd. (hereinafter referred to as the Bank or respondent No. 2 or defendant No. 2) praying as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1, its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.1 Appellant L&TNL; also filed Application Exh.5 praying for interim injunction which reads as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1,its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2;</p><p style="text-align: justify;">(b) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 2,its officers and agents, from in any manner whatsoever, making any payment under the said two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.2 The MPML filed Application Exh.23 in the aforesaid suit praying for the following prayers:</p><p style="text-align: justify;">(a) vacate the interim order of temporary injunction dated 16.9.2004 granted on application at Exh-5 and allow this application filed by this defendant;</p><p style="text-align: justify;">(b) pending hearing and final disposal of this application, this Hon'ble Court be pleased to direct the 1st defendant to renew the Bank Guarantee No. 2001021 IBGF 001 dated 16-1-2004 for Rs.1,29,60,027 which is due to expire on 31.1.2005.'</p><p style="text-align: justify;">2.3 The learned 4th Joint Civil Judge (S.D.), Vadodara heard both the aforesaid Applications Exhibits 5 and 23 and by order dated 29th December 2004 partly rejected Application Exh.5 and Application Exh.23 was partly allowed. The operative part of the order reads as under:</p><p style="text-align: justify;">'Application Exh.5 about prayer of guarantee to realise advances is hereby allowed.</p><p style="text-align: justify;">In application Exh.5 prayer towards performance security Guarantee No. 200402/IBGP dated 16/01/2004 for Rs.1,35,00027 expired on 31/03/2006 is hereby rejected.</p><p style="text-align: justify;">Application Exh.23 is hereby partly allowed.</p><p style="text-align: justify;">Ad-interim injunction in respect of plaint para-45(A) & (B) towards performance security (D.G.) No. 200421 IBGP 0001 dated 16/01/2004 for Rs.1,35,00027 expired 31/01/2006 granted earlier is hereby stands vacated. The prayer of guarantee realisation advance dated 16/01/2004 is hereby granted till payment of realisation amount paid by defendant No. 1 to the plaintiff.</p><p style="text-align: justify;">Thus, Exh.5 and Exh.23 are hereby partly allowed.' </p><p style="text-align: justify;">3. The facts as emerging from the record are as under:</p><p style="text-align: justify;">3.1 In pursuance of the Tender for its project by MPML, a contract was signed between L&TNL; and MPML in the Turnkey Project of Erection and Commissioning of Free flow Falling Film Tubelor Evaporator Plant of 100 TPH Water Evaporation Capacity for Rs.13,50,00,267. The said project was aided by the World Bank and the funds were routed through Indian Renewable Energy Development Agency Ltd (IREDA). L&TNL; sent performance bank guarantees and mobilization advance guarantee to MPML on 17.1.2004 which was received by MPML on 20.1.2004. However, the said Performance Guarantee was returned for necessary amendment in view of contradictory dates shown in the bank guarantee. As per clause 3 of the contract, the bank guarantee was required to be valid upto 60 days after the date of completion of performance of work which was one year from the date of release of advance. Thereafter on 30.1.2004 L&TNL; forwarded the rectified performance bank guarantee.</p><p style="text-align: justify;">3.2 MPML sought one month's extension for release of advance payment with clarification that the effective date of contract shall be from the date of release of advance. Before the expiry of 30 days' period for release of mobilization advance from the date of original bank guarantee L&TNL; sought escalation from October 2003 i.e. for the period prior to the date of contract. By letter dated 17.2.2004 MPML replied that demand for escalation was premature for consideration. Again L&TNL; reiterated their demand for escalation by letter dated 2.3.2004. Thereafter correspondences were exchanged and negotiations were held in respect of the claim of escalation.</p><p style="text-align: justify;">3.3 By letter dated 25.5.2004 L&TNL; informed that there was price increase between October 2003 and February 2004 and it was not possible for it to execute contract unless price rise was agreed. MPML replied that the contract having been signed with firm price, it was not possible to consider escalation retrospectively and that L&TNL; may indicate escalation in relation to the period of extension of time for payment of mobilisation advance. It appears that L&TNL; insisted for escalation from October 2003. MPML along with letter dated 25.6.2004 sent a Xerox copy of cheque for Rs.1,29,60,027/- towards mobilization advance and requested L&TNL; to depute responsible officer to collect the cheque. However, by letter dated 17th July 2004 L&TNL; rescinded the contract and requested the Bank not to make payment of bank guarantee in case it is invoked. In turn the Bank by their communication dated 15.7.2004 informed L&TNL; that it was bound to make the payment on invocation and that it was not possible for the Bank to accede to the request of L&TNL.; </p><p style="text-align: justify;">3.4 MPML wrote letter dated 23.8.2004 to L&NTL; stating that the cheque towards mobilization advance has not been collected and the work has not been commenced which amounts to violation of the contract. MPML also indicated that any dispute or claim between the parties has to be sorted out in accordance with the terms agreed upon (arbitration). It was further pointed out that it was a World Bank aided project and if L&TNL; did not comply with the request of MPML within 30 days from the date of the said letter, it will be deemed that L&TNL; was not inclined to execute the contract and the same shall stand rescinded and further informed that MPML has suffered to the extent of Rs.6.18 crores on account of refusal to execute the contract.</p><p style="text-align: justify;">3.5 In view of the above facts, L&TNL; filed the abovementioned suit and interim injunction application and the trial court has passed the impugned order as stated hereinabove.</p><p style="text-align: justify;">4. At this stage it is required to be noted that this Court has very limited scope in dealing with interim orders of the trial court and any observations which may be made by this Court will prejudice either side while proceeding with the main suit. In view of this, I am of the opinion that the present appeal is required to be decided only in the context of the basic principle whether the plaintiff has prima facie case, whether balance of convenience is in favour of the plaintiff and whether irreparable loss would be caused to the plaintiff by refusal of interim injunction.</p><p style="text-align: justify;">5. Heard the learned counsel for the respective parties and perused the relevant documents.</p><p style="text-align: justify;">6. Mr. Mihir Joshi, Senior Counsel for M/s Nanavati and Nanavati Associates for the appellant submitted that the bank guarantee given by the present appellant is required to be considered on facts. Mr. Joshi further submitted that in view of the correspondence exchanged between the parties and the term of the contract it is clear that since the contract has not started as per the agreement, the question of encashment of bank guarantee would not arise and therefore the respondents are required to be restrained from encashing the bank guarantee.</p><p style="text-align: justify;">6.1 Mr. Joshi for the appellant submitted that since the appellants have not received the amount in question, the bank guarantee is conditional. According to him even if the bank guarantee is treated as unconditional the encashment is not in terms of the contract because performance of obligations under the contract has not started in absence of receipt of mobilisation advance and there being no default, encashment of bank guarantee cannot be permitted. He submitted that the respondent No. 1 has in fact engineered a default at the hands of the appellant by delaying the payment of the mobilization advance and therefore the encashment is fraudulent and the invocation ought to be stayed.</p><p style="text-align: justify;">6.2 Mr. Joshi submitted that on account of the aforesaid facts, more particularly about engineering of default and non-payment of mobilization advance, being the breach committed by the respondent itself, special equities are in favour of the appellant for grant of injunction. According to him, the contractual terms were not concluded since the respondent had sought an amendment in terms of payment of the mobilization advance. The term is, therefore, not concluded between the parties and in fact thereafter rescinded. Mr. Joshi contended that the suit when filed was maintainable since no notice for arbitration as contemplated under clause (28) of the Agreement had been issued at that time. Mr. Joshi further submitted that in any case the impugned order does not at all consider the aforesaid contentions and in fact the other side has committed breach of the contract obligations.</p><p style="text-align: justify;">6.3 Mr. Joshi has relied upon clauses 7.1, 7.2 and 28 of the contract which read as under:</p><p style="text-align: justify;">'7.1 Within thirty (30) days of receipt of the notification of contract award, the successful Bidder shall furnish to the Purchaser the performance security in the amount specified in SCC.</p><p style="text-align: justify;">7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract.'</p><p style="text-align: justify;">*** *** ***</p><p style="text-align: justify;">28. Settlement of Disputes:</p><p style="text-align: justify;">28.1 If any dispute or difference of any kind whatsoever shall arise between the Purchaser and the Supplier in connection with or arising out of the Contract, the parties shall make every effort to resolve amicably such dispute or difference by mutual consultation.</p><p style="text-align: justify;">28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given.</p><p style="text-align: justify;">28.2.1 Any dispute or difference in respect of which a notice of intention to commence arbitration has been given in accordance with this Clause shall be finally settled by arbitration. Arbitration may be commenced prior to or after delivery of the Goods under the Contract.</p><p style="text-align: justify;">28.2.2 Arbitration proceedings shall be conducted in accordance with the rules of procedure specified in the SCC.</p><p style="text-align: justify;">28.3 Notwithstanding any reference to arbitration herein:</p><p style="text-align: justify;">(a) the parties shall continue to perform their respective obligations under the Contract unless they otherwise agree; and</p><p style="text-align: justify;">(b) the Purchaser shall pay the supplier any money due to the supplier.'</p><p style="text-align: justify;">6.4 Mr. Joshi submitted that the trial court has misconstrued the clause relating to the settlement of disputes and has overlooked the fact that no notice of arbitration had been given and no ouster of jurisdiction of the Civil Court was contemplated in the contract. According to him the respondent No. 1 has sought to fraudulently encash the performance security on the purported default of the appellant in spite of its own breach in performing its obligations under the contract. According to Mr. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period.</p><p style="text-align: justify;">6.5 Mr. Joshi submitted that since the project, though entrusted by publishing advertisement in the year 2003, was finalised only on 16th January 2004. When the payment was delayed on 14th February 2004 the appellant has sought for escalation of the price from October 2003 in view of the price escalation in the market and admittedly delay was on the part of the defendant No. 1 and not at the instance of the plaintiff. He submitted that since the defendant No. 1 has not agreed for escalation price the appellant could not start the work on account of non-payment of initial amount which was one of the terms and conditions of the Contract.</p><p style="text-align: justify;">6.6 Mr. Joshi further submitted that if at all any fraud is committed by the appellant, then the respondent No. 1 could have lodged complaint against the plaintiff. He submitted that merely by sending a Xerox copy of the demand draft will not fullfil the conditions of the contract. He, therefore, submitted that fraud is committed by defendant No. 1 and in view of the judgement in the case of Hindustan Cosntruction Co. Ltd. (supra), the trial court ought to have granted injunction.</p><p style="text-align: justify;">6.7 Mr. Joshi, in support of his contentions, relied upon a decision of the Supreme Court in the case of Hindustan Steelworks Construction Ltd. v. Tarapore & Co. and Anr., reported in (1996)5 SCC 34. Paragraphs 16, 17 and 18 of the said decision read as under:</p><p style="text-align: justify;">'16. On the basis of these observations the learned counsel submitted that the law laid down by this Court is that except in case of fraud and that too when it creates special equities in the form of irretrievable injustice, the courts should not interfere by restraining the beneficiary from encashing the bank guarantee. We have carefully gone through the judgements delivered by Mukherji and Shetty, JJ. and in our opinion that is not the ratio of the judgement. In that case the court was not called upon to decide whether apart from fraud there can by any other valid ground for interference. Moreover, the said observations cannot be read like a text of a statute or out of context. Observations made by Mukherji, J. in other parts of his judgement (see paras 24 and 34) and his opinion stated in para 21, with which Shetty, J. also agreed,do not support that submission. Mukherji, J. in the paragraph has stated his opinion as under: (SCC p.186, para 21)</p><p style="text-align: justify;">'21. ... An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with except in case of fraud or in case of question of apprehension of irretrievable injustice has been made out'.</p><p style="text-align: justify;">17. Mukherji, j. referred to the following paragraph from the judgement in R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. and then stated that in his view the said view represents the correct state of law: (SC p.184, para 17)</p><p style="text-align: justify;">'Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. In the case of a confirmed performance guarantee, just as in the case of a confirmed letter of credit, the bank was only concerned to ensure that the terms of its mandate and confirmation had been complied with and was in no way concerned with any contractual disputes which might have arisen between the buyers and sellers. Accordingly, since demands for payment had been made by the buyers under the guarantees and the plaintiffs had not established that the demands were fraudulent or other special circumstances there were no grounds for continuing the injunctions....' </p><p style="text-align: justify;">18. What Mukherji, J. has stated in para 34 of his judgement,namely, that: 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U.P. Coop. Federation Ltd. Therefore, fraud cannot be said to be the only exception. In a case where the party approaching the court is able to establish that in view of special equities in his favour if injunction as requested is not granted then he would suffer irretrievable injustice, the court can and would interfere. It may be pointed out that fraud which is recognised as an exception is the fraud by one of the parties to the underlying contract and which has the effect of vitiating the entire underlying transaction. A demand by the beneficiary under the bank guarantee may become fraudulent not because of any fraud committed by the beneficiary while executing the underlying contract but it may become so because of subsequent events or circumstances. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee.' </p><p style="text-align: justify;">6.8 Mr. Joshi has also relied upon a decision of the Apex Court in the case of Hindustan Construction Co. Ltd. v. State of Bihar and Ors., reported in (1998)8 SCC 436. Paragraph 22 of the said decision reads as under:</p><p style="text-align: justify;">'22. We have scrutinised the facts pleaded by the parties in respect of both the bank guarantees as also the documents filed before us and we are, prima facie, of the opinion that the lapse was on the part of the defendants who were not possessed of sufficient funds for completion of the work. The allegation of the defendant that HCCL itself had abandoned the work does not, prima facie, appear to be correct and it is for this reason that we are of the positive view that the 'special equities' are wholly in favour of HCCL.' </p><p style="text-align: justify;">7. Mr. K.M. Patel, learned Advocate appearing for the respondent No. 1 has supported the order passed by the trial court. He submitted that except alleged fraud and there being no concluded contract, no other contentions were advanced before the trial court. Therefore it is not open for the appellant to raise those contentions for the first time in these proceedings. According to him it is a case of unequivocal and conditional bank guarantee. He submitted that the bank has undertaken to pay without demur and without the respondent No. 1 requires to justify anything, and therefore no injunction against invocation of such an unconditional bank guarantee can be granted. Any dispute regarding breach of conract or variation in terms of contract of difference of payment could have been raised before Arbitration.</p><p style="text-align: justify;">7.1 Mr. K.M. Patel appearing for the respondent No. 1 submitted that the Bank Guarantee is a complete and separate contract by itself and it is distinct and independent from the underlying contract and Court cannot restrain invocation of 'a demand guarantee' by looking at the terms of underlying contract. To support this contention he relied upon the decisions in the cases of (1) National Highway Authority of India v. Ganga Enterprise, AIR 2003 SC 3823 para 9, (2) State of Maharashtra v. National Construction Corporation, (1996) 1 SCC 735 and (3) Hindustan Steel Works Construction Ltd. V. Tarapore & Co., (1996) 5 SCC 34.</p><p style="text-align: justify;">7.2 Mr. Patel submitted that the Bank Guarantee being an independent and distinct contract which is payable on demand implies that the Bank is liable to pay as and when demand is made upon the Bank by the beneficiary. The Bank is not concerned with any inter-se disputes between the beneficiary and the persons at whose instance the Bank has issued guarantee. According to him this principle has been reiterated in the case of (1) NTPC Limited v. Flowmore Private Limited, (1995) 4 SCC 515.</p><p style="text-align: justify;">7.3 According to Mr. Patel, encashment of bank guarantee cannot be prevented on the ground of dispute between the parties or pendency of proceedings before Arbitrator, etc. This principle has been enunciated in the cases of (1) NTPC Limited v. Flowmore Pvt. Ltd. (1995) 4 SCC 515 (2) ONGC Ltd v. SBI, (2000) 6 SCC 385, (3) UP Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568, (4) L & T Ltd., v. Maharashtra State Electricity Board, (1995) 6 SCC 68, (5) Hindustan Steel Workers Construction Ltd v. G.S. Atwal & Co., (1995) 5 SCC 76 (6) Federal Bank Ltd v. M. Jog Engineering Limited, AIR 2000 SC 3166, and (7) Hindustan Steel Workers Construction Ltd v. Taropore & Company, (1996) 5 SCC 34.</p><p style="text-align: justify;">7.4 Mr. Patel submitted that encashment of demand bank guarantee can be restrained by the Court only on the ground of (i) fraud and (ii) special equities in the form of irretrievable injustice. He further submitted that the fraud has to be an established fraud and cannot be based on suspicion or conjecture. In this context he has relied upon the decisions in the cases of (1) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, ( which is also referred in ONGC case (2000) 6 SCC 385), (2)Hindustan Construction Co. Ltd v. State of Bihar, (1999) 8 SCC 436, (3) ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70, (3) Hindustan Steel Workers Construction Ltd. V. GS Atwal, (1995) 6 SCC 76, and (4) Dwarikesh Sugar Industries Ltd. V. Prem Heavy Engineering Works Pvt. Ltd. (1997) 6 SCC 450.</p><p style="text-align: justify;">7.5 In support of his contention that the Bank must have knowledge of fraud Mr. Patel has relied upon the decision in the cases of (1) Federal Bank Limited v. M. Jog Engineering Ltd., AIR 2000 SC 3166, (2)Centex India Ltd. V. Vinmar Impex Inc. (1986) 4 SCC 136.</p><p style="text-align: justify;">7.6 Mr. Patel further submitted that even a dishonest and suspicious action cannot constitute fraud and he has drawn support from the ratio laid down in the cases of (1)ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70.</p><p style="text-align: justify;">7.7 According to Mr. Patel, the special equities has to be in the form of irretrievable injustice and it cannot be any other equities as is laid down in the cases of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385, Hindustan Steel Workers Construction Ltd. V. Taropore & Co. (1996) 5 SCC 34.</p><p style="text-align: justify;">7.8 Mr. Patel further submitted that the Irretrievable injustice has to be in terms of Itech Corporation's case i.e. the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. In this regard Mr. Patel has cited the decisions in the case of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385; (2) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, and (3) Dwarikesh Sugar Ind. Ltd v. Prem Heavy Engg. Works Ltd, (1997) 6 SCC 450.</p><p style="text-align: justify;">7.9 Mr. Patel submitted that the general principles for grant of injunction of prima facie case, balance of convenience, etc. applicable while dealing application under Order 39 Rule 1 and 2, do not apply in cases of Bank Guarantee. This principle is laid down in the case of Svenska Handels Banken v. Indian Charge Chrome (1994) 1 SCC 502.</p><p style="text-align: justify;">7.10 Mr. Patel submitted that in cases of unconditional bank guarantee, there is no equity and prima facie case for injunction and injunction under Order 39 Rule 1 cannot be granted to nullify terms of undertaking which is lawfully enforceable. He further submitted that principles of undue enrichment cannot apply in cases of Bank guarantee and the Bank guarantee is in the form of security and it is life blood of international trade and commerce. In the above context Mr. Patel has relied upon the decisions in the case of (1) Centex India Ltd. v. Vinmar Impex Inc. reported in (1986)4 SCC 136 (2) Dwarikesh Sugar Ind. Ltd. v. Prem Heavy Engg. Works Ltd., reported in (1967) 6 SCC 450, (3) Federal Bank Ltd v. M. Jog Engineering Ltd, AIR 2000 SC 3166, (4) Hindustan Steels Workers v. Taropore and Co. (1996) 5 SCC 34, and (5) Hindustan Zink Limited v. Vijaybhai Amarbhai & Co. (1994) 1 GLR 161.</p><p style="text-align: justify;">8. It is required to be noted that from the record it is clear that except the contention with regard to 'fraud' and 'not concluded contract' no arguments were raised before the trial court. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. General allegations, if not accompanied by particulars, are insufficient to constitute an averment of fraud and no court of law can take cognizance thereof.</p><p style="text-align: justify;">9. From the record of the case the trial court has found that as per pleading of the appellant made in para 26 of the plaint, all the formalities were completed between the parties and the parties have signed the contract on 16/1/2004. It was further recorded that looking to the agreement produced by both the parties, the parties have signed under the contract on each and every page. Thus all the formalities of the contract were fulfilled by both the parties. Therefore the trial court was prima facie of the opinion that the contract is in existence and concluded. Moreover, on the facts of the case the trial court found that there is no conditional bank guarantee. </p><p style="text-align: justify;">9.1 In clause 18.5 of the Contract agreement, three ingredients which are important for purposes of advance payments are: (i) 30 days from signing of the contract, (ii) submission of claim; and (iii) submission of Bank Guarantee of equivalent amount. The first bank guarantee was forwarded to the respondent No. 1 vide letter dated 17.2.2004. In the performance guarantee submitted by the plaintiff, there was a mistake with regard to date and this fact had been communicated to the appellant vide letter dated 3.1.2004 and requested the appellant to submit the correct Bank Guarantee. This fact was not disputed by the appellant. The appellant had resubmitted the Bank guarantee by incorporating necessary corrections and forwarded the same to the respondent No. 1 vide letter dated 30.1.2004. The 30 days prescribed period in terms of payment stipulates that the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The bank guarantee was received on 20.1.2004. Therefore the 30 days period was to expire on 20.2.2004. However, the plaintiff demanded price escalation vide letter dated 14.2.2004 which was not within the terms of the contract. The respondent No. 1 replied that the said claim is too premature for being considered. In view of the corrected Bank guarantee, upto 2.3.2004 the respondent No. 1 had right to give advance amount to the appellant. </p><p style="text-align: justify;">9.2 From the record it appears that when the respondent No. 1 was contemplating to make the payment the appellant sought price escalation which was categorically rejected by the respondent No. 1. Therefore, the trial court found that there was no question of paying the mobilization advance by the respondent No. 1 to the appellant at that point of time. However, the respondent No. 1 had written a letter dated 25.6.2004 enclosing therewith a copy of the cheque which was ready for dispatch and requesting the appellant to depute their officer to collect the same. In view of this I do not find any substance in the argument of the appellant that the contract in question could not be performed without mobilization advance and that there is fraud on the part of the respondent No. 1. It is required to be noted that the plaintiff could have started work and thereafter interest could have been claimed for delayed payment.</p><p style="text-align: justify;">9.3 The trial court was also prima facie of the opinion that clause 18 of the contract stipulates to refer the dispute for arbitration. In view of this the Civil Court cannot exercise its jurisdiction and whether there is a breach or not is the subject matter which was required to be decided by the Arbitral Tribunal as agreed between the parties under clause 18.2 of the contract Agreement. The said proceedings are initiated by both the sides and it is at the stage of appointment of third Arbitrator.</p><p style="text-align: justify;">9.4 After considering all the documents and the pleadings of the parties the trial court was of the prima facie opinion that fraud was not established by the appellant. As stated hereinabove, the respondent No. 1 had received the resubmitted Bank Guarantee on 20/1/2004. Therefore the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The 30 days period was to expire on 20/2/2004.</p><p style="text-align: justify;">9.5 Before the expiry of the said period the appellant demanded price escalation vide their letter dated 14/2/2004. This was not stipulated in the contract. In case of delay in payment of any amount by the defendant No. 1 it was agreed between the parties that interest at 18% will become applicable. Apart from that the respondent No. 1 wrote a letter on 25.6.2004 enclosing therewith a copy of cheque requesting the appellant to depute their officer to collect the cheque. There is no dispute about these facts. In view of these facts I am of the opinion that the trial court has rightly formed a prima facie opinion that fraud is not established by the plaintiff.</p><p style="text-align: justify;">9.6 As regards special equity is concerned, as laid down in various judgements of the Apex Court, unless there is established fraud or special circumstances the beneficiary cannot be restrained from encashing the bank guarantee, even if there are disputes between the beneficiary and the person at whose instance the bank guarantee was given by the bank. In absence of fraud or special equities, injunction has to be refused restraining the beneficiary from encashing the bank guarantee. This principle has been enunciated in the case of Hindustan Steelworks Construction Ltd. (supra). In the case of Oil & Natural Gas Corporation Ltd. v. SBI, Overseas Branch, Bombay, reported in (2000)6 SCC 385 the Apex Court quoted the law declared by the Supreme Court in the case of Svenska Handelbanken v. Indian Charge Chrome (reported in (1994)1 SCC 502 as under:</p><p style="text-align: justify;">'... in a case of confirmed bank guarantee/irrevocable letters of credit it cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud. There should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Mere irretrievable injustice without prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee. Only in the event of fraud or irretrievable injustice the court would be entitled to interfere in a transaction involving a bank guarantee and under no other circumstances.'</p><p style="text-align: justify;">9.7 In any case, the allegation that the defendant No. 1 has committed fraud is premature at this stage and therefore the said contention cannot be accepted at this stage.</p><p style="text-align: justify;">10. In view of the above facts and the rulings of the Apex Court, the position in law is very clear that encashment of bank guarantee can be restrained by the Court only on the ground of fraud and special equities in the form of irretrievable injustice. Special equities has to be in the form of irretrievable injustice and it cannot be any other equities. Further, there will be irretrievable injustice only if the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. It is also settled law that in case of unconditional bank guarantee, there cannot be any equity and prima facie case for injunction. Lastly the fraud has to be an established fraud and cannot be based on suspicion or conjecture and even a dishonest and suspicious action cannot constitute fraud. </p><p style="text-align: justify;">10.1 In the present case prima facie the trial court found that there was no fraud. Moreover, the appellant could not show any special equities in the form of any irretrievable injustice so that the court would be entitled to interfere in the matter. It is also the finding that there is no concluded contract between the parties. After considering all the facts and circumstances of the case the trial court has come to a definite conclusion that the applicant has no prima facie case, the balance of convenience lies in favour of respondent No. 1 rather than the appellant and no irreparable loss would be caused to the appellant if the injunction as prayed for is not granted. Therefore I am of the opinion that the trial court has rightly come to the conclusion that the appellant has not established any prima facie case and the balance of convenience is not in favour of the appellant as a consequence of which the interim injunction requires to be dismissed. </p><p style="text-align: justify;">11. Even otherwise it is required to be noted that the jurisdiction of the appellate court is very limited. This principle has been asserted in the decision reported in 1942 Appeal Cases page 130. At page 138 of the said decision it is stated as under:</p><p style="text-align: justify;">'... The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge.In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified. This matter was elaborately discussed in the decision of this House in Evans v. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): 'It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. But the court is not entitled simply to say that if the judge had jurisdiction and had all the facts before him, the Court of Appeal cannot review his order unless he is shown to have applied a wrong principle. The court must if necessary examine a new the relevant facts and circumstances in order to exercise a discretion by way of review which may reverse or vary the order. Otherwise in interlocutory matters the judge might be regarded as independent of supervision.Yet an interlocutory order of the judge may often be of decisive importance on the final issue of the case, and one which requires a careful examination by the Court of Appeal. Thus in Gardner v. Jay (I), Bowen L.J. in discussing the discretion of the judge as regards mode of trial says: 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed.'</p><p style="text-align: justify;">11.1 The above view has been followed by the Apex Court in the case of U.P. Cooperative Federation Ltd. v. Sunder Bros, Delhi, reported in AIR 1967 SC 249 (=1966 Supp SCR 215). Paragraph 8 of the said decision is relevant which reads as under:</p><p style="text-align: justify;">'(8) It is well established that where the discretion vested in the Court under S. 34 of the Indian Arbitration Act has been exercised by the lower court the appellate court should be slow to interfere with the exercise of that discretion. In dealing with the matter raised before it at the appellate stage the appellate court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it may have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. As is often said, it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts then it would certainly be open to the appellate court to interfere with the trial court's exercise of jurisdiction.'</p><p style="text-align: justify;">11.2 Similar view has been reiterated by the Apex Court in cases of The Printers (Mysore) Private Ltd v. Pothan Joseph, reported in AIR 1960 SC 1156, Wander Ltd. v. Antox India P. Ltd, reported in 1990 (Supp) SCC 727 and Laxmikant V. Patel v. Chetanbhai Shah, AIR 2002 SC 275 (=2002(3) SCC 65 = 2001(10) JT 285 = 2001(8) Scale 350).</p><p style="text-align: justify;">12. From the facts and law discussed hereinabove it is found that the trial court has not wrongfully exercised its discretion and sufficient weight has been given to relevant considerations to the materials placed before the trial court. The trial court has exercised the jurisdiction reasonably and in a judicial manner and therefore I do not find any reason to interfere in the order of the trial court. Inthepremises aforesaid, I do not find any merits in the appeal and the same is hereby dismissed. No order as to costs.</p><p style="text-align: justify;">12.1 Since the main appeal has been dismissed, civil application for stay would not survive and is accordingly disposed of. Rule is discharged with no orders as to costs. Ad interim relief stands vacated. However, Respondent No. 1 is directed to keep the amount in question in a suspense account till the dispute between the parties is finally resolved.</p><p style="text-align: justify;">13. At this stage Mr. Devang Nanavati for the appellant seeks extension of stay in order to approach the higher forum. Respondent No. 1 is Karnataka Government undertaking which cannot run away from a decree if passed by the competent Court. The respondent No. 1 will always be able to refund the amount if necessary. Under the circumstances I am not inclined to grant the request made on behalf of the appellant. Hence the request is rejected.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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			'pubs' => 'AIR2005Guj355; I(2006)BC321',
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			'respondent' => 'Mysore Paper Mills Ltd. and anr.',
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		(int) 0 => '4th',
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		(int) 5 => 'third'
	),
	'GPE' => array(
		(int) 0 => 'S.D.',
		(int) 1 => 'D.G.',
		(int) 2 => 'L&TNL',
		(int) 3 => 'Nanavati',
		(int) 4 => 'Svenska',
		(int) 5 => 'Bihar',
		(int) 6 => 'Svenska',
		(int) 7 => 'Svenska',
		(int) 8 => 'Bombay',
		(int) 9 => 'Svenska',
		(int) 10 => 'Evans',
		(int) 11 => 'Delhi'
	),
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		(int) 0 => 'Tender',
		(int) 1 => 'Purchaser',
		(int) 2 => 'Goods',
		(int) 3 => 'Purchaser',
		(int) 4 => 'Indian',
		(int) 5 => 'Indian',
		(int) 6 => 'Indian',
		(int) 7 => 'Indian'
	),
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		(int) 0 => 'Bidder',
		(int) 1 => 'Agreement'
	),
	'LOC' => array(
		(int) 0 => 'Purchaser'
	),
	'PERCENT' => array(
		(int) 0 => 'thirty (30) days',
		(int) 1 => '18%'
	),
	'WORK_OF_ART' => array(
		(int) 0 => 'Arbitrator.9.4',
		(int) 1 => 'The Printers (Mysore) Private Ltd v.'
	),
	'QUANTITY' => array(
		(int) 0 => '1994)1 SCC 502'
	)
)
$desc = array(
	'Judgement' => array(
		'id' => '736345',
		'acts' => 'Indian Arbitration Act - Sections 34',
		'appealno' => 'Appeal From Order No. 7 of 2005 with Civil Application No. 41 of 2005',
		'appellant' => 'L and T Niro Limited',
		'authreffered' => '',
		'casename' => 'L and T Niro Limited Vs. Mysore Paper Mills Ltd. and anr.',
		'casenote' => ' -  -  7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract. 28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period. Moreover, the said observations cannot be read like a text of a statute or out of context. 184, para 17) Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed. (8) It is well established that where the discretion vested in the Court under S.',
		'caseanalysis' => null,
		'casesref' => ' and Laxmikant V. Patel v. Chetanbhai Shah;',
		'citingcases' => '',
		'counselplain' => ' Mihir H. Joshi, Sr. Counsel and; Devang Nanavati, Adv. for Nanavati &amp; Nanavati',
		'counseldef' => ' K.M. Patel,; Arvind Kumar and; Varun K. Patel, Advs.',
		'court' => 'Gujarat',
		'court_type' => 'HC',
		'decidedon' => '2005-03-07',
		'deposition' => '',
		'favorof' => null,
		'findings' => null,
		'judge' => ' K.S. Jhaveri, J.',
		'judgement' => '<p style="text-align: justify;">K.S. Jhaveri, J.</p><p style="text-align: justify;">1. The present Appeal from Order has been preferred against the order dated 29th December 2004 passed below Exhibits 5 and 23 in Civil Suit No. 459/2004 by learned 4th Joint Civil Judge (Senior Division), Vadodara whereby Application Exh.5 was partly rejected and injunction was refused against encashment of performance of security guarantee and Application Exh.23 was partly allowed.</p><p style="text-align: justify;">2. The present appellant M/s L & T Niro Limited (hereinafter referred to as L & TNL or appellant or plaintiff) filed Special Civil Suit No. 459/2004 in the court of Civil Judge (Senior Division), Vadodara, against The Mysore Paper Mills Ltd (hereinafter referred to as MPML or the respondent No. 1 or Defendant No. 1) and IDBI Bank Ltd. (hereinafter referred to as the Bank or respondent No. 2 or defendant No. 2) praying as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1, its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.1 Appellant L&TNL; also filed Application Exh.5 praying for interim injunction which reads as under:</p><p style="text-align: justify;">(a) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 1,its officers and agents, from in any manner whatsoever, invoking and/or encashing the two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2;</p><p style="text-align: justify;">(b) that, pending the hearing and final disposal of this suit, this Hon'ble Court be pleased to issue a temporary injunction restraining Defendant No. 2,its officers and agents, from in any manner whatsoever, making any payment under the said two Bank Guarantees dated 16th January, 2004 for Rs.1,35,00,027/- and Rs.1,29,60,027/- issued by Defendant No. 2.'</p><p style="text-align: justify;">2.2 The MPML filed Application Exh.23 in the aforesaid suit praying for the following prayers:</p><p style="text-align: justify;">(a) vacate the interim order of temporary injunction dated 16.9.2004 granted on application at Exh-5 and allow this application filed by this defendant;</p><p style="text-align: justify;">(b) pending hearing and final disposal of this application, this Hon'ble Court be pleased to direct the 1st defendant to renew the Bank Guarantee No. 2001021 IBGF 001 dated 16-1-2004 for Rs.1,29,60,027 which is due to expire on 31.1.2005.'</p><p style="text-align: justify;">2.3 The learned 4th Joint Civil Judge (S.D.), Vadodara heard both the aforesaid Applications Exhibits 5 and 23 and by order dated 29th December 2004 partly rejected Application Exh.5 and Application Exh.23 was partly allowed. The operative part of the order reads as under:</p><p style="text-align: justify;">'Application Exh.5 about prayer of guarantee to realise advances is hereby allowed.</p><p style="text-align: justify;">In application Exh.5 prayer towards performance security Guarantee No. 200402/IBGP dated 16/01/2004 for Rs.1,35,00027 expired on 31/03/2006 is hereby rejected.</p><p style="text-align: justify;">Application Exh.23 is hereby partly allowed.</p><p style="text-align: justify;">Ad-interim injunction in respect of plaint para-45(A) & (B) towards performance security (D.G.) No. 200421 IBGP 0001 dated 16/01/2004 for Rs.1,35,00027 expired 31/01/2006 granted earlier is hereby stands vacated. The prayer of guarantee realisation advance dated 16/01/2004 is hereby granted till payment of realisation amount paid by defendant No. 1 to the plaintiff.</p><p style="text-align: justify;">Thus, Exh.5 and Exh.23 are hereby partly allowed.' </p><p style="text-align: justify;">3. The facts as emerging from the record are as under:</p><p style="text-align: justify;">3.1 In pursuance of the Tender for its project by MPML, a contract was signed between L&TNL; and MPML in the Turnkey Project of Erection and Commissioning of Free flow Falling Film Tubelor Evaporator Plant of 100 TPH Water Evaporation Capacity for Rs.13,50,00,267. The said project was aided by the World Bank and the funds were routed through Indian Renewable Energy Development Agency Ltd (IREDA). L&TNL; sent performance bank guarantees and mobilization advance guarantee to MPML on 17.1.2004 which was received by MPML on 20.1.2004. However, the said Performance Guarantee was returned for necessary amendment in view of contradictory dates shown in the bank guarantee. As per clause 3 of the contract, the bank guarantee was required to be valid upto 60 days after the date of completion of performance of work which was one year from the date of release of advance. Thereafter on 30.1.2004 L&TNL; forwarded the rectified performance bank guarantee.</p><p style="text-align: justify;">3.2 MPML sought one month's extension for release of advance payment with clarification that the effective date of contract shall be from the date of release of advance. Before the expiry of 30 days' period for release of mobilization advance from the date of original bank guarantee L&TNL; sought escalation from October 2003 i.e. for the period prior to the date of contract. By letter dated 17.2.2004 MPML replied that demand for escalation was premature for consideration. Again L&TNL; reiterated their demand for escalation by letter dated 2.3.2004. Thereafter correspondences were exchanged and negotiations were held in respect of the claim of escalation.</p><p style="text-align: justify;">3.3 By letter dated 25.5.2004 L&TNL; informed that there was price increase between October 2003 and February 2004 and it was not possible for it to execute contract unless price rise was agreed. MPML replied that the contract having been signed with firm price, it was not possible to consider escalation retrospectively and that L&TNL; may indicate escalation in relation to the period of extension of time for payment of mobilisation advance. It appears that L&TNL; insisted for escalation from October 2003. MPML along with letter dated 25.6.2004 sent a Xerox copy of cheque for Rs.1,29,60,027/- towards mobilization advance and requested L&TNL; to depute responsible officer to collect the cheque. However, by letter dated 17th July 2004 L&TNL; rescinded the contract and requested the Bank not to make payment of bank guarantee in case it is invoked. In turn the Bank by their communication dated 15.7.2004 informed L&TNL; that it was bound to make the payment on invocation and that it was not possible for the Bank to accede to the request of L&TNL.; </p><p style="text-align: justify;">3.4 MPML wrote letter dated 23.8.2004 to L&NTL; stating that the cheque towards mobilization advance has not been collected and the work has not been commenced which amounts to violation of the contract. MPML also indicated that any dispute or claim between the parties has to be sorted out in accordance with the terms agreed upon (arbitration). It was further pointed out that it was a World Bank aided project and if L&TNL; did not comply with the request of MPML within 30 days from the date of the said letter, it will be deemed that L&TNL; was not inclined to execute the contract and the same shall stand rescinded and further informed that MPML has suffered to the extent of Rs.6.18 crores on account of refusal to execute the contract.</p><p style="text-align: justify;">3.5 In view of the above facts, L&TNL; filed the abovementioned suit and interim injunction application and the trial court has passed the impugned order as stated hereinabove.</p><p style="text-align: justify;">4. At this stage it is required to be noted that this Court has very limited scope in dealing with interim orders of the trial court and any observations which may be made by this Court will prejudice either side while proceeding with the main suit. In view of this, I am of the opinion that the present appeal is required to be decided only in the context of the basic principle whether the plaintiff has prima facie case, whether balance of convenience is in favour of the plaintiff and whether irreparable loss would be caused to the plaintiff by refusal of interim injunction.</p><p style="text-align: justify;">5. Heard the learned counsel for the respective parties and perused the relevant documents.</p><p style="text-align: justify;">6. Mr. Mihir Joshi, Senior Counsel for M/s Nanavati and Nanavati Associates for the appellant submitted that the bank guarantee given by the present appellant is required to be considered on facts. Mr. Joshi further submitted that in view of the correspondence exchanged between the parties and the term of the contract it is clear that since the contract has not started as per the agreement, the question of encashment of bank guarantee would not arise and therefore the respondents are required to be restrained from encashing the bank guarantee.</p><p style="text-align: justify;">6.1 Mr. Joshi for the appellant submitted that since the appellants have not received the amount in question, the bank guarantee is conditional. According to him even if the bank guarantee is treated as unconditional the encashment is not in terms of the contract because performance of obligations under the contract has not started in absence of receipt of mobilisation advance and there being no default, encashment of bank guarantee cannot be permitted. He submitted that the respondent No. 1 has in fact engineered a default at the hands of the appellant by delaying the payment of the mobilization advance and therefore the encashment is fraudulent and the invocation ought to be stayed.</p><p style="text-align: justify;">6.2 Mr. Joshi submitted that on account of the aforesaid facts, more particularly about engineering of default and non-payment of mobilization advance, being the breach committed by the respondent itself, special equities are in favour of the appellant for grant of injunction. According to him, the contractual terms were not concluded since the respondent had sought an amendment in terms of payment of the mobilization advance. The term is, therefore, not concluded between the parties and in fact thereafter rescinded. Mr. Joshi contended that the suit when filed was maintainable since no notice for arbitration as contemplated under clause (28) of the Agreement had been issued at that time. Mr. Joshi further submitted that in any case the impugned order does not at all consider the aforesaid contentions and in fact the other side has committed breach of the contract obligations.</p><p style="text-align: justify;">6.3 Mr. Joshi has relied upon clauses 7.1, 7.2 and 28 of the contract which read as under:</p><p style="text-align: justify;">'7.1 Within thirty (30) days of receipt of the notification of contract award, the successful Bidder shall furnish to the Purchaser the performance security in the amount specified in SCC.</p><p style="text-align: justify;">7.2 The proceeds of the performance security shall be payable to the Purchaser as compensation for any loss resulting from the Supplier's failure to complete its obligations under the Contract.'</p><p style="text-align: justify;">*** *** ***</p><p style="text-align: justify;">28. Settlement of Disputes:</p><p style="text-align: justify;">28.1 If any dispute or difference of any kind whatsoever shall arise between the Purchaser and the Supplier in connection with or arising out of the Contract, the parties shall make every effort to resolve amicably such dispute or difference by mutual consultation.</p><p style="text-align: justify;">28.2 If, after thirty (30) days, the parties have failed to resolve their dispute or difference by such mutual consultation, then either the Purchaser or the Supplier may give notice to the other party of its intention to commence arbitration, as hereinafter provided, as to the matter in dispute, and no arbitration in respect of this matter may be commenced unless such notice is given.</p><p style="text-align: justify;">28.2.1 Any dispute or difference in respect of which a notice of intention to commence arbitration has been given in accordance with this Clause shall be finally settled by arbitration. Arbitration may be commenced prior to or after delivery of the Goods under the Contract.</p><p style="text-align: justify;">28.2.2 Arbitration proceedings shall be conducted in accordance with the rules of procedure specified in the SCC.</p><p style="text-align: justify;">28.3 Notwithstanding any reference to arbitration herein:</p><p style="text-align: justify;">(a) the parties shall continue to perform their respective obligations under the Contract unless they otherwise agree; and</p><p style="text-align: justify;">(b) the Purchaser shall pay the supplier any money due to the supplier.'</p><p style="text-align: justify;">6.4 Mr. Joshi submitted that the trial court has misconstrued the clause relating to the settlement of disputes and has overlooked the fact that no notice of arbitration had been given and no ouster of jurisdiction of the Civil Court was contemplated in the contract. According to him the respondent No. 1 has sought to fraudulently encash the performance security on the purported default of the appellant in spite of its own breach in performing its obligations under the contract. According to Mr. Joshi, the respondent has failed to perform its obligations under the contract of releasing advance payment within the stipulated period.</p><p style="text-align: justify;">6.5 Mr. Joshi submitted that since the project, though entrusted by publishing advertisement in the year 2003, was finalised only on 16th January 2004. When the payment was delayed on 14th February 2004 the appellant has sought for escalation of the price from October 2003 in view of the price escalation in the market and admittedly delay was on the part of the defendant No. 1 and not at the instance of the plaintiff. He submitted that since the defendant No. 1 has not agreed for escalation price the appellant could not start the work on account of non-payment of initial amount which was one of the terms and conditions of the Contract.</p><p style="text-align: justify;">6.6 Mr. Joshi further submitted that if at all any fraud is committed by the appellant, then the respondent No. 1 could have lodged complaint against the plaintiff. He submitted that merely by sending a Xerox copy of the demand draft will not fullfil the conditions of the contract. He, therefore, submitted that fraud is committed by defendant No. 1 and in view of the judgement in the case of Hindustan Cosntruction Co. Ltd. (supra), the trial court ought to have granted injunction.</p><p style="text-align: justify;">6.7 Mr. Joshi, in support of his contentions, relied upon a decision of the Supreme Court in the case of Hindustan Steelworks Construction Ltd. v. Tarapore & Co. and Anr., reported in (1996)5 SCC 34. Paragraphs 16, 17 and 18 of the said decision read as under:</p><p style="text-align: justify;">'16. On the basis of these observations the learned counsel submitted that the law laid down by this Court is that except in case of fraud and that too when it creates special equities in the form of irretrievable injustice, the courts should not interfere by restraining the beneficiary from encashing the bank guarantee. We have carefully gone through the judgements delivered by Mukherji and Shetty, JJ. and in our opinion that is not the ratio of the judgement. In that case the court was not called upon to decide whether apart from fraud there can by any other valid ground for interference. Moreover, the said observations cannot be read like a text of a statute or out of context. Observations made by Mukherji, J. in other parts of his judgement (see paras 24 and 34) and his opinion stated in para 21, with which Shetty, J. also agreed,do not support that submission. Mukherji, J. in the paragraph has stated his opinion as under: (SCC p.186, para 21)</p><p style="text-align: justify;">'21. ... An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with except in case of fraud or in case of question of apprehension of irretrievable injustice has been made out'.</p><p style="text-align: justify;">17. Mukherji, j. referred to the following paragraph from the judgement in R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd. and then stated that in his view the said view represents the correct state of law: (SC p.184, para 17)</p><p style="text-align: justify;">'Only in exceptional cases would the courts interfere with the machinery of irrevocable obligations assumed by banks. In the case of a confirmed performance guarantee, just as in the case of a confirmed letter of credit, the bank was only concerned to ensure that the terms of its mandate and confirmation had been complied with and was in no way concerned with any contractual disputes which might have arisen between the buyers and sellers. Accordingly, since demands for payment had been made by the buyers under the guarantees and the plaintiffs had not established that the demands were fraudulent or other special circumstances there were no grounds for continuing the injunctions....' </p><p style="text-align: justify;">18. What Mukherji, J. has stated in para 34 of his judgement,namely, that: 'It is only in exceptional cases that is to say in case of fraud or in case irretrievable injustice be done, the courts should interfere' is really the ratio of the decision of this Court in U.P. Coop. Federation Ltd. Therefore, fraud cannot be said to be the only exception. In a case where the party approaching the court is able to establish that in view of special equities in his favour if injunction as requested is not granted then he would suffer irretrievable injustice, the court can and would interfere. It may be pointed out that fraud which is recognised as an exception is the fraud by one of the parties to the underlying contract and which has the effect of vitiating the entire underlying transaction. A demand by the beneficiary under the bank guarantee may become fraudulent not because of any fraud committed by the beneficiary while executing the underlying contract but it may become so because of subsequent events or circumstances. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee.' </p><p style="text-align: justify;">6.8 Mr. Joshi has also relied upon a decision of the Apex Court in the case of Hindustan Construction Co. Ltd. v. State of Bihar and Ors., reported in (1998)8 SCC 436. Paragraph 22 of the said decision reads as under:</p><p style="text-align: justify;">'22. We have scrutinised the facts pleaded by the parties in respect of both the bank guarantees as also the documents filed before us and we are, prima facie, of the opinion that the lapse was on the part of the defendants who were not possessed of sufficient funds for completion of the work. The allegation of the defendant that HCCL itself had abandoned the work does not, prima facie, appear to be correct and it is for this reason that we are of the positive view that the 'special equities' are wholly in favour of HCCL.' </p><p style="text-align: justify;">7. Mr. K.M. Patel, learned Advocate appearing for the respondent No. 1 has supported the order passed by the trial court. He submitted that except alleged fraud and there being no concluded contract, no other contentions were advanced before the trial court. Therefore it is not open for the appellant to raise those contentions for the first time in these proceedings. According to him it is a case of unequivocal and conditional bank guarantee. He submitted that the bank has undertaken to pay without demur and without the respondent No. 1 requires to justify anything, and therefore no injunction against invocation of such an unconditional bank guarantee can be granted. Any dispute regarding breach of conract or variation in terms of contract of difference of payment could have been raised before Arbitration.</p><p style="text-align: justify;">7.1 Mr. K.M. Patel appearing for the respondent No. 1 submitted that the Bank Guarantee is a complete and separate contract by itself and it is distinct and independent from the underlying contract and Court cannot restrain invocation of 'a demand guarantee' by looking at the terms of underlying contract. To support this contention he relied upon the decisions in the cases of (1) National Highway Authority of India v. Ganga Enterprise, AIR 2003 SC 3823 para 9, (2) State of Maharashtra v. National Construction Corporation, (1996) 1 SCC 735 and (3) Hindustan Steel Works Construction Ltd. V. Tarapore & Co., (1996) 5 SCC 34.</p><p style="text-align: justify;">7.2 Mr. Patel submitted that the Bank Guarantee being an independent and distinct contract which is payable on demand implies that the Bank is liable to pay as and when demand is made upon the Bank by the beneficiary. The Bank is not concerned with any inter-se disputes between the beneficiary and the persons at whose instance the Bank has issued guarantee. According to him this principle has been reiterated in the case of (1) NTPC Limited v. Flowmore Private Limited, (1995) 4 SCC 515.</p><p style="text-align: justify;">7.3 According to Mr. Patel, encashment of bank guarantee cannot be prevented on the ground of dispute between the parties or pendency of proceedings before Arbitrator, etc. This principle has been enunciated in the cases of (1) NTPC Limited v. Flowmore Pvt. Ltd. (1995) 4 SCC 515 (2) ONGC Ltd v. SBI, (2000) 6 SCC 385, (3) UP Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568, (4) L & T Ltd., v. Maharashtra State Electricity Board, (1995) 6 SCC 68, (5) Hindustan Steel Workers Construction Ltd v. G.S. Atwal & Co., (1995) 5 SCC 76 (6) Federal Bank Ltd v. M. Jog Engineering Limited, AIR 2000 SC 3166, and (7) Hindustan Steel Workers Construction Ltd v. Taropore & Company, (1996) 5 SCC 34.</p><p style="text-align: justify;">7.4 Mr. Patel submitted that encashment of demand bank guarantee can be restrained by the Court only on the ground of (i) fraud and (ii) special equities in the form of irretrievable injustice. He further submitted that the fraud has to be an established fraud and cannot be based on suspicion or conjecture. In this context he has relied upon the decisions in the cases of (1) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, ( which is also referred in ONGC case (2000) 6 SCC 385), (2)Hindustan Construction Co. Ltd v. State of Bihar, (1999) 8 SCC 436, (3) ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70, (3) Hindustan Steel Workers Construction Ltd. V. GS Atwal, (1995) 6 SCC 76, and (4) Dwarikesh Sugar Industries Ltd. V. Prem Heavy Engineering Works Pvt. Ltd. (1997) 6 SCC 450.</p><p style="text-align: justify;">7.5 In support of his contention that the Bank must have knowledge of fraud Mr. Patel has relied upon the decision in the cases of (1) Federal Bank Limited v. M. Jog Engineering Ltd., AIR 2000 SC 3166, (2)Centex India Ltd. V. Vinmar Impex Inc. (1986) 4 SCC 136.</p><p style="text-align: justify;">7.6 Mr. Patel further submitted that even a dishonest and suspicious action cannot constitute fraud and he has drawn support from the ratio laid down in the cases of (1)ITC Ltd v. Debt Recovery Appellate Tribunal, (1998) 2 SCC 70.</p><p style="text-align: justify;">7.7 According to Mr. Patel, the special equities has to be in the form of irretrievable injustice and it cannot be any other equities as is laid down in the cases of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385, Hindustan Steel Workers Construction Ltd. V. Taropore & Co. (1996) 5 SCC 34.</p><p style="text-align: justify;">7.8 Mr. Patel further submitted that the Irretrievable injustice has to be in terms of Itech Corporation's case i.e. the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. In this regard Mr. Patel has cited the decisions in the case of (1) ONGC Ltd v. SBI, (2000) 6 SCC 385; (2) Svenska Handels Banken v. Indian Charge Chrome, (1994) 1 SCC 502, and (3) Dwarikesh Sugar Ind. Ltd v. Prem Heavy Engg. Works Ltd, (1997) 6 SCC 450.</p><p style="text-align: justify;">7.9 Mr. Patel submitted that the general principles for grant of injunction of prima facie case, balance of convenience, etc. applicable while dealing application under Order 39 Rule 1 and 2, do not apply in cases of Bank Guarantee. This principle is laid down in the case of Svenska Handels Banken v. Indian Charge Chrome (1994) 1 SCC 502.</p><p style="text-align: justify;">7.10 Mr. Patel submitted that in cases of unconditional bank guarantee, there is no equity and prima facie case for injunction and injunction under Order 39 Rule 1 cannot be granted to nullify terms of undertaking which is lawfully enforceable. He further submitted that principles of undue enrichment cannot apply in cases of Bank guarantee and the Bank guarantee is in the form of security and it is life blood of international trade and commerce. In the above context Mr. Patel has relied upon the decisions in the case of (1) Centex India Ltd. v. Vinmar Impex Inc. reported in (1986)4 SCC 136 (2) Dwarikesh Sugar Ind. Ltd. v. Prem Heavy Engg. Works Ltd., reported in (1967) 6 SCC 450, (3) Federal Bank Ltd v. M. Jog Engineering Ltd, AIR 2000 SC 3166, (4) Hindustan Steels Workers v. Taropore and Co. (1996) 5 SCC 34, and (5) Hindustan Zink Limited v. Vijaybhai Amarbhai & Co. (1994) 1 GLR 161.</p><p style="text-align: justify;">8. It is required to be noted that from the record it is clear that except the contention with regard to 'fraud' and 'not concluded contract' no arguments were raised before the trial court. It is well established law that in suits filed on the basis of fraud, the allegations of fraud must be clear, definite and specific. General allegations, if not accompanied by particulars, are insufficient to constitute an averment of fraud and no court of law can take cognizance thereof.</p><p style="text-align: justify;">9. From the record of the case the trial court has found that as per pleading of the appellant made in para 26 of the plaint, all the formalities were completed between the parties and the parties have signed the contract on 16/1/2004. It was further recorded that looking to the agreement produced by both the parties, the parties have signed under the contract on each and every page. Thus all the formalities of the contract were fulfilled by both the parties. Therefore the trial court was prima facie of the opinion that the contract is in existence and concluded. Moreover, on the facts of the case the trial court found that there is no conditional bank guarantee. </p><p style="text-align: justify;">9.1 In clause 18.5 of the Contract agreement, three ingredients which are important for purposes of advance payments are: (i) 30 days from signing of the contract, (ii) submission of claim; and (iii) submission of Bank Guarantee of equivalent amount. The first bank guarantee was forwarded to the respondent No. 1 vide letter dated 17.2.2004. In the performance guarantee submitted by the plaintiff, there was a mistake with regard to date and this fact had been communicated to the appellant vide letter dated 3.1.2004 and requested the appellant to submit the correct Bank Guarantee. This fact was not disputed by the appellant. The appellant had resubmitted the Bank guarantee by incorporating necessary corrections and forwarded the same to the respondent No. 1 vide letter dated 30.1.2004. The 30 days prescribed period in terms of payment stipulates that the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The bank guarantee was received on 20.1.2004. Therefore the 30 days period was to expire on 20.2.2004. However, the plaintiff demanded price escalation vide letter dated 14.2.2004 which was not within the terms of the contract. The respondent No. 1 replied that the said claim is too premature for being considered. In view of the corrected Bank guarantee, upto 2.3.2004 the respondent No. 1 had right to give advance amount to the appellant. </p><p style="text-align: justify;">9.2 From the record it appears that when the respondent No. 1 was contemplating to make the payment the appellant sought price escalation which was categorically rejected by the respondent No. 1. Therefore, the trial court found that there was no question of paying the mobilization advance by the respondent No. 1 to the appellant at that point of time. However, the respondent No. 1 had written a letter dated 25.6.2004 enclosing therewith a copy of the cheque which was ready for dispatch and requesting the appellant to depute their officer to collect the same. In view of this I do not find any substance in the argument of the appellant that the contract in question could not be performed without mobilization advance and that there is fraud on the part of the respondent No. 1. It is required to be noted that the plaintiff could have started work and thereafter interest could have been claimed for delayed payment.</p><p style="text-align: justify;">9.3 The trial court was also prima facie of the opinion that clause 18 of the contract stipulates to refer the dispute for arbitration. In view of this the Civil Court cannot exercise its jurisdiction and whether there is a breach or not is the subject matter which was required to be decided by the Arbitral Tribunal as agreed between the parties under clause 18.2 of the contract Agreement. The said proceedings are initiated by both the sides and it is at the stage of appointment of third Arbitrator.</p><p style="text-align: justify;">9.4 After considering all the documents and the pleadings of the parties the trial court was of the prima facie opinion that fraud was not established by the appellant. As stated hereinabove, the respondent No. 1 had received the resubmitted Bank Guarantee on 20/1/2004. Therefore the respondent No. 1 should have made the payment of mobilization advance within 30 days from the date of receipt of Bank Guarantee. The 30 days period was to expire on 20/2/2004.</p><p style="text-align: justify;">9.5 Before the expiry of the said period the appellant demanded price escalation vide their letter dated 14/2/2004. This was not stipulated in the contract. In case of delay in payment of any amount by the defendant No. 1 it was agreed between the parties that interest at 18% will become applicable. Apart from that the respondent No. 1 wrote a letter on 25.6.2004 enclosing therewith a copy of cheque requesting the appellant to depute their officer to collect the cheque. There is no dispute about these facts. In view of these facts I am of the opinion that the trial court has rightly formed a prima facie opinion that fraud is not established by the plaintiff.</p><p style="text-align: justify;">9.6 As regards special equity is concerned, as laid down in various judgements of the Apex Court, unless there is established fraud or special circumstances the beneficiary cannot be restrained from encashing the bank guarantee, even if there are disputes between the beneficiary and the person at whose instance the bank guarantee was given by the bank. In absence of fraud or special equities, injunction has to be refused restraining the beneficiary from encashing the bank guarantee. This principle has been enunciated in the case of Hindustan Steelworks Construction Ltd. (supra). In the case of Oil & Natural Gas Corporation Ltd. v. SBI, Overseas Branch, Bombay, reported in (2000)6 SCC 385 the Apex Court quoted the law declared by the Supreme Court in the case of Svenska Handelbanken v. Indian Charge Chrome (reported in (1994)1 SCC 502 as under:</p><p style="text-align: justify;">'... in a case of confirmed bank guarantee/irrevocable letters of credit it cannot be interfered with unless there is fraud and irretrievable injustice involved in the case and fraud has to be an established fraud. There should be prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Mere irretrievable injustice without prima facie case of established fraud is of no consequence in restraining the encashment of bank guarantee. Only in the event of fraud or irretrievable injustice the court would be entitled to interfere in a transaction involving a bank guarantee and under no other circumstances.'</p><p style="text-align: justify;">9.7 In any case, the allegation that the defendant No. 1 has committed fraud is premature at this stage and therefore the said contention cannot be accepted at this stage.</p><p style="text-align: justify;">10. In view of the above facts and the rulings of the Apex Court, the position in law is very clear that encashment of bank guarantee can be restrained by the Court only on the ground of fraud and special equities in the form of irretrievable injustice. Special equities has to be in the form of irretrievable injustice and it cannot be any other equities. Further, there will be irretrievable injustice only if the party is rendered absolutely remedyless for recovery of the amount in case it ultimately succeeds. It is also settled law that in case of unconditional bank guarantee, there cannot be any equity and prima facie case for injunction. Lastly the fraud has to be an established fraud and cannot be based on suspicion or conjecture and even a dishonest and suspicious action cannot constitute fraud. </p><p style="text-align: justify;">10.1 In the present case prima facie the trial court found that there was no fraud. Moreover, the appellant could not show any special equities in the form of any irretrievable injustice so that the court would be entitled to interfere in the matter. It is also the finding that there is no concluded contract between the parties. After considering all the facts and circumstances of the case the trial court has come to a definite conclusion that the applicant has no prima facie case, the balance of convenience lies in favour of respondent No. 1 rather than the appellant and no irreparable loss would be caused to the appellant if the injunction as prayed for is not granted. Therefore I am of the opinion that the trial court has rightly come to the conclusion that the appellant has not established any prima facie case and the balance of convenience is not in favour of the appellant as a consequence of which the interim injunction requires to be dismissed. </p><p style="text-align: justify;">11. Even otherwise it is required to be noted that the jurisdiction of the appellate court is very limited. This principle has been asserted in the decision reported in 1942 Appeal Cases page 130. At page 138 of the said decision it is stated as under:</p><p style="text-align: justify;">'... The appellate tribunal is not at liberty merely to substitute its own exercise of discretion for the discretion already exercised by the judge.In other words, appellate authorities ought not to reverse the order merely because they would themselves have exercised the original discretion, had it attached to them, in a different way. But if the appellate tribunal reaches the clear conclusion that there has been a wrongful exercise of discretion in that no weight, or no sufficient weight, has been given to relevant considerations such as those urged before us by the appellant, then the reversal of the order on appeal may be justified. This matter was elaborately discussed in the decision of this House in Evans v. Bartlam (2), where the proposition was stated by my noble and learned friend, Lord Wright, as follows (3): 'It is clear that the Court of Appeal should not interfere with the discretion of a judge acting within his jurisdiction unless the court is clearly satisfied that he was wrong. But the court is not entitled simply to say that if the judge had jurisdiction and had all the facts before him, the Court of Appeal cannot review his order unless he is shown to have applied a wrong principle. The court must if necessary examine a new the relevant facts and circumstances in order to exercise a discretion by way of review which may reverse or vary the order. Otherwise in interlocutory matters the judge might be regarded as independent of supervision.Yet an interlocutory order of the judge may often be of decisive importance on the final issue of the case, and one which requires a careful examination by the Court of Appeal. Thus in Gardner v. Jay (I), Bowen L.J. in discussing the discretion of the judge as regards mode of trial says: 'That discretion, like other judicial discretions, must be exercised according to common sense and according to justice, and if there is a miscarriage in the exercise of it, it will be reviewed.'</p><p style="text-align: justify;">11.1 The above view has been followed by the Apex Court in the case of U.P. Cooperative Federation Ltd. v. Sunder Bros, Delhi, reported in AIR 1967 SC 249 (=1966 Supp SCR 215). Paragraph 8 of the said decision is relevant which reads as under:</p><p style="text-align: justify;">'(8) It is well established that where the discretion vested in the Court under S. 34 of the Indian Arbitration Act has been exercised by the lower court the appellate court should be slow to interfere with the exercise of that discretion. In dealing with the matter raised before it at the appellate stage the appellate court would normally not be justified in interfering with the exercise of the discretion under appeal solely on the ground that if it had considered the matter at the trial stage it may have come to a contrary conclusion. If the discretion has been exercised by the trial court reasonably and in a judicial manner the fact that the appellate court would have taken a different view may not justify interference with the trial court's exercise of discretion. As is often said, it is ordinarily not open to the appellate court to substitute its own exercise of discretion for that of the trial judge; but if it appears to the appellate court that in exercising its discretion the trial court has acted unreasonably or capriciously or has ignored relevant facts then it would certainly be open to the appellate court to interfere with the trial court's exercise of jurisdiction.'</p><p style="text-align: justify;">11.2 Similar view has been reiterated by the Apex Court in cases of The Printers (Mysore) Private Ltd v. Pothan Joseph, reported in AIR 1960 SC 1156, Wander Ltd. v. Antox India P. Ltd, reported in 1990 (Supp) SCC 727 and Laxmikant V. Patel v. Chetanbhai Shah, AIR 2002 SC 275 (=2002(3) SCC 65 = 2001(10) JT 285 = 2001(8) Scale 350).</p><p style="text-align: justify;">12. From the facts and law discussed hereinabove it is found that the trial court has not wrongfully exercised its discretion and sufficient weight has been given to relevant considerations to the materials placed before the trial court. The trial court has exercised the jurisdiction reasonably and in a judicial manner and therefore I do not find any reason to interfere in the order of the trial court. Inthepremises aforesaid, I do not find any merits in the appeal and the same is hereby dismissed. No order as to costs.</p><p style="text-align: justify;">12.1 Since the main appeal has been dismissed, civil application for stay would not survive and is accordingly disposed of. Rule is discharged with no orders as to costs. Ad interim relief stands vacated. However, Respondent No. 1 is directed to keep the amount in question in a suspense account till the dispute between the parties is finally resolved.</p><p style="text-align: justify;">13. At this stage Mr. Devang Nanavati for the appellant seeks extension of stay in order to approach the higher forum. Respondent No. 1 is Karnataka Government undertaking which cannot run away from a decree if passed by the competent Court. The respondent No. 1 will always be able to refund the amount if necessary. Under the circumstances I am not inclined to grant the request made on behalf of the appellant. Hence the request is rejected.<p style="text-align: justify;"></p><p style="text-align: justify;">',
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LAW: Exhibits 5, Order 39 Rule 1, Order 39 Rule 1, the Indian Arbitration Act

PERSON: K.S. Jhaveri, J.1, Vadodara, MPML, Vadodara, Performance Guarantee, MPML, MPML, hereinabove.4, Mihir Joshi, Joshi, Joshi, Joshi, Joshi, Joshi, Joshi, Supplier, Supplier, Supplier, herein:(a, Joshi, Joshi, Joshi, Joshi, Joshi, Anr, Paragraphs 16, Mukherji, Shetty, Mukherji, Shetty, J., J., Mukherji, Joshi, K.M. Patel, K.M. Patel, Patel, Patel, Patel, Handels Banken, V. GS Atwal, V. Prem Heavy Engineering Works Pvt, Patel, Patel, Patel, Patel, Patel, Handels Banken, Prem Heavy Engg, Patel, facie, Handels Banken, Patel, Patel, Prem Heavy Engg, Bartlam, Wright, Gardner, Jay, Bowen L.J., Pothan Joseph, Laxmikant V. Patel, Chetanbhai Shah, Scale 350).12, Devang Nanavati

ORG: Order, Civil Suit, Vadodara whereby Application Exh.5, M/s L & T Niro Limited, L & TNL, The Mysore Paper Mills Ltd, IDBI Bank Ltd., Bank, Bank Guarantees, Application Exh.5, Bank Guarantees, Bank Guarantees, MPML, Bank Guarantee No, Application Exh.5 and Application Exh.23, para-45(A) & (B, Exh.5, MPML, MPML, the Turnkey Project of Erection and Commissioning of Free, the World Bank, Indian Renewable Energy Development Agency Ltd, IREDA, MPML, MPML, Xerox, Bank, Bank, Bank, MPML, MPML, World Bank, MPML, MPML, Court, Court, Nanavati Associates, Agreement, Purchaser, Purchaser, Contract, Arbitration, Contract, and(b, the Civil Court, Xerox, Hindustan Cosntruction Co. Ltd., the Supreme Court, Hindustan Steelworks Construction Ltd., Tarapore & Co., Court, R.D. Harbottle (Mercantile) Ltd., National Westminster Bank Ltd., SC, J., Court, U.P. Coop, Federation Ltd., the Apex Court, Hindustan Construction Co. Ltd., State of Bihar and Ors, HCCL, HCCL, Arbitration.7.1, the Bank Guarantee, Court, National Highway Authority of, Ganga Enterprise, AIR 2003, SC, Maharashtra v. National Construction Corporation, Hindustan Steel Works Construction Ltd., V. Tarapore & Co., the Bank Guarantee, Bank, Bank, Bank, Bank, NTPC Limited, Flowmore Private Limited, NTPC Limited, Flowmore Pvt. Ltd., ONGC Ltd v., SBI, Sumac International Ltd., L & T Ltd., Maharashtra State Electricity Board, Hindustan Steel Workers Construction Ltd, G.S. Atwal & Co., Federal Bank Ltd, AIR 2000, Hindustan Steel Workers Construction Ltd v. Taropore & Company, Court, ONGC, 2)Hindustan Construction Co. Ltd, ITC Ltd, Debt Recovery Appellate Tribunal, Hindustan Steel Workers Construction Ltd., Dwarikesh Sugar Industries Ltd., Bank, Federal Bank Limited, M. Jog Engineering Ltd., AIR 2000, India Ltd., Vinmar Impex Inc., Debt Recovery Appellate Tribunal, ONGC Ltd v., SBI, Hindustan Steel Workers Construction Ltd., V. Taropore & Co., Irretrievable, Itech Corporation's, ONGC Ltd v., SBI, Dwarikesh Sugar Ind. Ltd, Works Ltd, Bank Guarantee, Bank, Bank, Centex India Ltd., Vinmar Impex Inc., Dwarikesh Sugar Ind. Ltd., Works Ltd., Federal Bank Ltd, AIR 2000, Hindustan Steels Workers, Taropore and Co., Hindustan Zink Limited, Vijaybhai Amarbhai & Co., Bank Guarantee, Bank Guarantee, Bank, Bank Guarantee, Bank, the Civil Court, the Arbitral Tribunal, Bank Guarantee, Bank Guarantee, the Apex Court, Hindustan Steelworks Construction Ltd., Oil & Natural Gas Corporation Ltd., SBI, Overseas Branch, the Apex Court, the Supreme Court, the Apex Court, Court, House, the Court of Appeal, the Court of Appeal, the Court of Appeal, the Apex Court, U.P. Cooperative Federation Ltd., Sunder Bros, AIR 1967 SC 249 (=1966, Court, the Apex Court, AIR 1960 SC, Wander Ltd., Antox India P. Ltd, Supp, AIR 2002 SC 275 (=2002(3, JT 285, Karnataka Government, Court

DATE: 29th December 2004, 16th January 2004, 16th January, 2004, 16th January, 2004, 29th December 2004, 200402, 16/01/2004, 200421, 16/01/2004, 16/01/2004, 17.1.2004, 60 days, one year, one month's, the expiry of, 30 days' period, October 2003, October 2003, February 2004, October 2003, 17th July 2004, 30 days, thirty (30) days, the year 2003, 16th January 2004, 14th February 2004, October 2003, 34, 17, 34, 21, ' 18, 1996, 1996, 1995, 1995, 2000, 1997, 1995, 1995, 76, 3166, 1996, 1994, 2000, 1999, 1998, 70, 1995, 76, 1997, 1986, 1998, 2000, 1996, 2000, 1994, 1997, 1994, 1967, 3166, 1996, 34, 1994, 16/1/2004, 30 days, The 30 days, 30 days, the 30 days, 14.2.2004, 20/1/2004, 30 days, The 30 days, 1942, 1990

CARDINAL: 23, 459/2004, 459/2004, 1, 1, 2, 2, 1, two, 2.'2.1, 1,its, two, 2;(b, 2,its, two, 16.9.2004, 001, 16, 5, 23, 1, 3, 100, 20.1.2004, 3, 17.2.2004, 2.3.2004, 25.5.2004, 25.6.2004, 15.7.2004, 3.4, 23.8.2004, 1, 28, 7.1, 7.2, 28, 28, 1, 1, 1, 18, 24, 21)'21, 34, one, 6.8, 436, 22, 7, 1, 1, 1, 1, 9, 2, 1, 3, 5, 34.7.2, 1, 4, 1, 4, 2, 6, 3, 1, 4, 6, 5, 5, 6, 7, 5, 1, 1, 6, 8, 3, 2, 3, 6, 4, 6, 1, 2)Centex, 4, 136.7.6, 2, 1, 6, 5, 34.7.8, 1, 6, 2, 1, 3, 6, 1, 502.7.10, 1, 1986)4, 136, 2, 6, 3, 4, 5, 5, 1, 161.8, 26, 9.1, 18.5, three, 1, 17.2.2004, 3.1.2004, 1, 1, 20.1.2004, 20.2.2004, 1, 2.3.2004, 1, 9.2, 1, 1., 1, 1, 25.6.2004, 1, 18, 18.2, 1, 1, 20/2/2004.9.5, 14/2/2004, 1, 1, 25.6.2004, 1, 10.1, 1, 11, 130, 138, 2, 3, 215, 8, 65, 2001(8, 1, 1, 1

ORDINAL: 4th, 1st, 4th, first, first, third

GPE: S.D., D.G., L&TNL, Nanavati, Svenska, Bihar, Svenska, Svenska, Bombay, Svenska, Evans, Delhi

NORP: Tender, Purchaser, Goods, Purchaser, Indian, Indian, Indian, Indian

PRODUCT: Bidder, Agreement

LOC: Purchaser

PERCENT: thirty (30) days, 18%

WORK_OF_ART: Arbitrator.9.4, The Printers (Mysore) Private Ltd v.

QUANTITY: 1994)1 SCC 502