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Judgment
Sl. No.,Bank Guarantee No.,Amount,Valid upto
1,01/2005 dated 4.1.2005,"Rs.2,24,000.00",31-5-2007
2,1/05 dated 9.3.2005,"Rs.22,40,000.00",31-5-2007
for & on behalf of the President of India,",,,
sd/-,,,
(Director)â€,,,
Relevant Clause of bank guarantee dated 4.1.2005:-,,,
“3. In consideration thereof, we hereby at the request of the contractor, expressly, irrevocably and unconditionally undertake and guarantee to pay",,,
on written demand, without demur and without reference to the contractor, an amount not exceeding Rs.2,24,000/- (Rupees Two lacs twenty four",,,
thousand only) against any loss of damage caused to or suffered or would be caused to you by reason of any breach by the said contractor of any of,,,
the terms and conditions contained in the said contract or by reason of the contractor’s failure to perform the said agreement. Your demand shall,,,
be conclusive evidence to us as regards the amount due and payable by the Bank under this guarantee. However, liability under this guarantee shall be",,,
restricted to an amount not exceeding Rs.2,24,000/- Payment by us to you will be made within thirty (30) days from receipt of your written request",,,
making reference to this guarantee and on demand.â€,,,
Relevant clauses of bank guarantee dated 9.3.2005:-,,,
“3. In consideration thereof, we hereby at the request of the companies expressly, irrevocably and unconditionally undertake and guarantee to",,,
refund to you on demand and without demur and without reference to the contractor the said payment of Rs.22,40,000/- (Twenty Two lakhs Forty",,,
Thousand only) on receipt of your intimation that the contractor has not fulfilled the condition of the contract and is not in a position to supply the said,,,
stores as per the ter ms and conditions contained in the said contract.â€,,,
The law with respect to what should be the cause of action contained in an invocation letter, invoking and seeking encashment of the bank",,,
guarantees, is contained in the judgment of the Supreme Court reported as Hindustan Construction Co. Ltd. v. State of Bihar and Others (1999) 8",,,
SCC 436, and as followed by a judgment passed by this Court in Puri International (P) Ltd. v. National Building Construction Co. Ltd, 66 (1997) DLT",,,
These judgments have been referred to and relied upon by the trial court in para 45 of the impugned judgment. As per these two judgments,,,
unless the invocation letter of the bank guarantees is in accordance with the requirements of the bank guarantees, moneys cannot be paid under the",,,
bank guarantees.,,,
I have already reproduced above the invocation letter as well as the relevant terms of the bank guarantees. The relevant terms of the bank,,,
guarantees require that the invocation letter must state that moneys to be paid by the bank/defendant no. 1/respondent no. 2 is on account of damage,,,
caused or suffered or would be caused to the appellant no.1/defendant no.2 by reason of breach of the contractor/respondent no. 1/plaintiff or the,,,
failure of contractor/respondent no. 1/plaintiff to perform the agreement entered into between the parties. Unfortunately, the invocation letter is",,,
grossly deficient because the invocation letter seeks invocation of bank guarantees not for the reasons as stated as per the bank guarantees, but on the",,,
ground that the bank guarantees are invoked on account of the respondent no. 1/plaintiff being a concern with whom the Government could not deal,,,
as the name of the respondent no. 1/plaintiff is put in the list of prohibited entities with which Government cannot do business.,,,
Unfortunately, the concerned authority which invoked the bank guarantee has proceeded on an elementary lack of knowledge of the requirements",,,
of the law pertaining to invocation of the bank guarantees, and it is for this reason that appellant no. 1/defendant no.2 is unnecessarily suffering. Also,",,,
as stated above, the appellant no.1/defendant no.2 is suffering because no one has bothered to give a legal advice to appellant no. 1/defendant no.2",,,
that appellant no. 1/defendant no.2 should have instituted substantive proceedings in the nature of a suit for recovery of money or arbitration,,,
proceedings to recover the amounts from the respondent no. 1/plaintiff on account of breach of contract, if any, by the respondent no. 1/plaintiff, and",,,
therefore as of today any claim of the appellant no. 1/defendant no.2 against the respondent no. 1/plaintiff/contractor would be grossly barred by,,,
limitation.,,,
In view of the aforesaid discussion, I do not find any merit in the appeal and the same is hereby dismissed.",,,