Indian Oil Corporation Ltd. vs Uppal Engineering Pvt.Ltd.and anr.

I.S. Tiwana, J.

The petitionerCorporation is before me under Section 115 of the Code of Civil Procedure, to impugn the ad interim injunction consistently granted by the two courts below restraining it from invoking or encashing the Bankguarantee issued by the respondentBank in favour of the respondent company. The material facts are as follows :

In response to an advertisement issued by the petitioner for inviting tenders for the construction of certain residential quarters at Gurgaon, an award latter dated 9th December, 1986 was issued in favour of the respondentcompany (plaintiff). Thereafter, on 4th February, 1987 the two sides entered into a contract, one of the material clauses of which was that the construction had to be completed by the respondentcompany by 3rd February, 1988. Thereafter, as certain differences arose between the parties and the petitionerCorporation tried to invoke or encash the Bank Guarantee furnished by the respondent bank in its favour, the respondentcompany filed the present suit seeking injunction to restrain the petitioner from invoking or mobilising the bank guarantee in question as well as restraining the respondentbank from making any payment to the petitioner. As pointed out earlier, the lower Courts have granted this injunction as an interim measure during the pendency of the suit. The petitioner impugns the said orders.

Having heard the learned counsel, I however find no merit in this petition.

The principle of law that the payment under a letter of credit or payment under bank guarantee should not normally be restrained by Courts excepting under special circumstances like when the fraud is committed or special equity exists in favour of the principaldebtor, appears to be well settled. In the instant case, the two courts have found as a fact that special equities do exist in favour of the respondent (plaintiff) company. The details of these conclusions are well reflected in para 12 of the Appellate Court order, which reads as follows :

"In the present case, the foremost question to be taken into consideration is whether any special equity lies in favour of the plaintiff for granting interim injunction or not. According to the contract, the plaintiff was required to complete its work within twelve months of its commencement, and for the commencement of the work the plaintiff required that the site was free from all encumbrances. The plaintiff was to be supplied with other facilities like water, electricity and the site plan and drawings were to be approved by the Haryana Urban Development Authority in time. In the present case, prima facie from the pleadings of the parties, it appears that the site in question was not available to the plaintiff to start its work of construction. It is further even admitted by the appellantCorporation that permission from Haryana Urban Development Authority was obtained only in the month of September, 1987 which means a delay of seven months out of the prescribed period of 12 months had been caused due to the fault of the appellant itself and, therefore, it was impossible for the plaintiff to execute the contract upto 3rd February, 1988. The plaintiff has been able to prima facie show that he drawings were not approved by the authorities nor proper supply of other building materials was made to the plaintiffcompany in time. The possession of the site admittedly was also handed over to the plaintiff after a considerable delay and, therefore, the completion of work could not be carried out in the specified period of 12 months. The plaintiff has been able to show through various letters, as referred to above that proper amenities were not provided to the plaintiff, nor the site was made available to him in time, the drawings were also supplied later which were also not according to the drawings approved by the Haryana Urban Development Authority. The facts narrated above clearly show that fault for noncompletion of work entirely lies at the shoulders of the appellantCorporation itself."

Nothing has been urged or brought to my notice to dislodge these findings. Further it cannot be done in exercise of jurisdiction under Section 115 of the Code of Civil Procedure. It has been observed by the Supreme Court in Sher Singh (dead) through LRs v. Joint Director of Consolidation and others, AIR 1978 SC 134, "If a subordinate Court is found to possess the jurisdiction to decide a matter, it cannot be said to exercise it illegally or with material irregularity even if it decides the matter wrongly. In other words, it is not open to the High Court while exercising its jurisdiction under Section 115 of the Code of Civil Procedure to correct errors of fact howsoever gross or even errors of law unless the errors have relation to the jurisdiction of the Court to try the dispute itself. Therefore, this petition fails and is dismissed, but with no order as to costs.