Madras High Court · 2025
Case Details
Acts & Sections
Cited in this judgment
OA Nos. 666 to 669 of 2024 COMMON ORDERThese Original Applications have been taken out under Section 9 of the Arbitration and Conciliation Act, 1996 to restrain the first respondent or its men or agents or servants or through anyone claiming through or under them from invoking and encashing the Bank Guarantees issued by the second respondent, until disposal of the arbitration proceedings.2.I have heard Mr.P.V.Balasubramanian, learned Senior Counsel for Mrs.K.Niranjana Devi, learned counsel appearing for the applicant and Ms.N.Umayaparvathi, learned counsel for the first respondent in all the Original Applications.3.Mr.P.V.Balasubramanian, learned Senior Counsel appearing for the applicant would primarily contend that the applicant, being engaged in the business of setting up infrastructure in various sectors, including Civil Engineering, Water and Irrigation, Power and Mining sectors, in the course of business secured a contract pursuant to the tender floated by the first respondent for Construction of Training Centre, Dining Block, Part Plug and Play Area, DART Centre, Production cum Admin Building, Staff 2/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 Accommodation cum Girl's Hostel Building, Utility – 2, Water Treatment Plant and Swerage Treatment Plant, Environmental Social, Health and Safety (ESHS) etc., for construction of New Technology Centre at Sriperumbudur, Tamilnadu and the total value of the contract was Rs.27,20,02,648.33/- and the period of completion of work was 14 months from the date of issuance of the Letter of Intent; Providing and Supply of Ready Mix Concrete (RMC) through dedicated Batching Plant for Construction of New Technology Centre at Sriperumbudur, Tamilnadu and the total value of the contract was Rs.9,49,32,586/- and period of completion of work was 16 months from the date of issuance of Letter of Intent; Construction of Boys Hostel, GM Bungalow, Compound Wall, Utility – I, Meter Kiosk, External Development Works, Roads, Land Scaping, Environmental, Social Health and Safety etc., for construction of New Technology and the value of the contract wasRs.19,21,44,707/ and the period of completion of work was 16 months from the date of issue of Letter of Intent and Civil and Architectural work for India Rare Earth Permanent Magnet Plant on lump sum turnkey by basis at Vishakapatnam – Package III and the total value of the contract was Rs.7,67,00,000/- and the period of completion of the work was 5 months from the seventh day of issuance of 3/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 the Letter of Intent.4.The learned Senior Counsel would further contend that the Bank Guarantees were necessitated in terms of the Letter of Intent towards Security Deposit cum Performance Guarantee, being 5% of the total contract value. The learned Senior Counsel would also contend that the Bank Guarantees were periodically extended and the applicant Company had started execution of the work. He would however submit that in view of the intervening Covid-19 pandemic, the work was affected and the matters turned worse with the cyclonic rains affecting the site area. The crush owners going on strike also did not help and ultimately, the applicant suffered some hindrance or the other and lost significant amount of time and the delay was not because of the applicant but only due to reasons beyond the control of the applicant. 5.Further, according to the learned Senior Counsel, the delay also resulted in price escalation, especially cost of labour and material increasing by close to 100%. This therefore necessitated the applicant to seek extension of time. The learned Senior Counsel would also bring to my notice that the 4/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 first respondent had granted the extensions as sought for by the applicant only because the first respondent was fully aware that the delay was justified and not as a result of the applicant. 6.The learned Senior Counsel for the applicant would further state that despite granting extensions, the first respondent threatened the applicant with stringent action. The applicant apprehends that the respondents would encash the performance Bank Guarantees. The learned Senior Counsel would further submit that the applicant has successfully completed the scope of work and the same was also brought to the notice of the first respondent in writing with a request to return the Bank Guarantees. According to the learned Senior Counsel, if the Bank Guarantees are encashed it would result in serious consequences, including financial instability to the applicant. The learned Senior Counsel would therefore pray for an interim injunction restraining the first respondent from invoking and encashing the Bank Guarantees.7.Per contra, Ms.Umayaparvathi, learned counsel appearing for the 5/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 first respondent would refute the arguments of the learned Senior Counsel and primarily contend that the applications are premature, especially when the first respondent has not even invoked the Bank Guarantees and taking me through the affidavit filed in support of the Judges Summons, she would point out that even according to the applicant, they only apprehend encashment of the Bank Guarantees. Therefore, she would contend that interim injunction as prayed for, cannot be granted since there is no prima facie case made out or irreparable hardship caused to the applicant as a result of such mere apprehension. She would further contend that the balance of convenience is also strongly in favour of the first respondent alone and not in favour of the applicant. 8.The learned counsel for the first respondent would further contend that though the applicant claims to have completed the project as early as in March 2024, she would refer to the statement in paragraph No.12 of one of the affidavits filed in support of the injunction applications where the applicant has clearly stated that even after 31.03.2024, the applicant continues to execute the work at site, despite the respondent not expressly extending the time for executing the works. She would therefore submit that 6/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 the applicant has not approached this Court with clean hands. 9.The next and most significant argument in my opinion, is that the Bank Guarantees are unconditional and independent contracts between the Bank and the beneficiaries i.e., the respondents and therefore, the applicant cannot seek for interim injunctions as prayed for.10.The learned counsel for the respondents would place reliance on the following decisions in support of her contention:1.Ansal Engineering Projects Ltd., Vs. Tehri Hydro Development Corporation Ltd., and Another ((1996) 5 SCC 450).2.Dwarikesh Sugar Industries Ltd., Prem Heavy Engineering Works (P) Ltd., and Others ((1997) 6 SCC 450).3.Standard Chartered Bank Vs. Heavy Engineering Corporation Ltd., and Others ((2020) 13 SCC 574).The learned counsel for the first respondent would therefore pray for dismissal of the injunction applications.11.I have carefully considered the submissions advanced by the learned counsel on either side.7/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 12.The preliminary objection taken by the first respondent is that the Bank Guarantees being independent contracts between the bank and the beneficiaries and therefore, the applicant, under no circumstances, especially Bank Guarantees being unconditional, can seek restraint as sought for.13.The Hon'ble Supreme Court, in Ansal Engineering Projects Limited's case, has held that an absolute and unconditional bank guarantee obligates the bank to encash the guarantee on demand and the beneficiary cannot be restrained by the Court or Arbitrator from encashing the same, unless fraud or special equity is prima facie made out as a triable issue by specific pleading or strong evidence so as to prevent irreparable injustice to the parties. The Hon'ble Supreme Court further held that the bank is not concerned with the dispute between the beneficiary and the person at whose instance the guarantee was furnished in the first place.14.In Dwarikesh Sugar Industries Limited's case, the Hon'ble Supreme Court held that injunction in such cases can be granted only in 8/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 exceptional cases where there is fraud or irretrievable injury making it impossible for the guarantor to reimburse himself in the event of ultimately succeeding in the matter. 15.In Standard Chartered Bank's case, the Hon'ble Supreme Court held that it was not open to the bank to determine whether invocation of bank guarantee was justified as long as invocation was in terms of the bank guarantee and that the only exceptions to the rule where cases of fraud, irretrievable injustice and special equities.16.In view of the settled legal position as enunciated by the Hon'ble Supreme Court, ordinarily Courts should be slow in granting injunction restraining invocation or encashment of bank guarantees. The only exceptions that are carved out are when the applicant alleges fraud or shows special equities or irretrievable hardship.17.Testing the facts of the present case in the light of the ratio laid down by the Hon'ble Supreme Court in the above cases, the applicant does not plead fraud. However, the applicant pleaded irreparable injury in the 9/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 event of the Bank Guarantees being encashed. However, I neither find the averments in support of such claims of irreparable injury being strong enough nor backed by even prima facie evidence that would satisfy the conscience of this Court to invoke any of the exceptions and grant an interim injunction. 18.In terms of the ratio laid down by the Hon'ble Supreme Court, the applicant has to clearly show by strong evidence that the applicant will not be in a position to recover the amounts in the event of ultimately succeeding of the dispute with the first respondent. I do not find any such pleading or evidence to prima facie establish such irretrievable injury.19.The various consequences that have been narrated by the applicant in support of the injunction application, in my opinion do not fall under any of the exceptions of special equity or irretrievable loss. Therefore, in the facts of the present case, I do not find any exceptional circumstances warranting an interim injunction to be granted as prayed for. Even on facts, as rightly pointed by the learned counsel for the first respondent though the applicant's foundation for seeking injunction is that the applicant has already 10/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 completed the work, it is seen from one affidavit filed in support of the injunction application that even after the alleged date on which the applicant claims to have completed the work, the applicant itself has come on record before this Court stating that the applicant is executing the work even post the said date. 20.Further, even in the tabular column set out in the affidavit filed in support of the Original Application No.660 of 2024 at paragraph No.12 in Serial No.6, the applicant refers to a letter seeking extension of time which is dated 25.03.2024 and has stated that the same is under process and that below the tabular column, the EOT represent the applicant has clearly stated that even after 25.03.2024, the applicant continues to execute the work. This prima facie negates the contention of the learned counsel for the applicant that the applicant has fulfilled all its obligations on time by completing the work.21.Further, as held by the Hon'ble Supreme Court, the bank guarantees are unconditional as in the present case and being an independent contract between the first respondent and the second respondent, the 11/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 applicant cannot ordinarily restrain the encashment of said bank guarantees, unless there is strong material material placed evidencing fraud or special equity. I have already discussed herein above and found that the applicant has not brought this case under any of the exceptional cases. 22.Further, even according to the applicant, there is no allegation showing prima facie case for grant of interim injunction, the word used by the applicant in the affidavit is only apprehension that the first respondent would encash the Bank Guarantee.23.In view of all the above, I do not find the applicant having made out a case for granting an interim injunction as prayed for.24.In fine, all these Original Applications are dismissed. However, there shall be no order as to costs. 24.01.2025ataP.B.BALAJI,J.ata12/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 O.A.Nos.666 to 669 of 202424.01.202513/13
OA Nos. 666 to 669 of 2024 COMMON ORDERThese Original Applications have been taken out under Section 9 of the Arbitration and Conciliation Act, 1996 to restrain the first respondent or its men or agents or servants or through anyone claiming through or under them from invoking and encashing the Bank Guarantees issued by the second respondent, until disposal of the arbitration proceedings.2.I have heard Mr.P.V.Balasubramanian, learned Senior Counsel for Mrs.K.Niranjana Devi, learned counsel appearing for the applicant and Ms.N.Umayaparvathi, learned counsel for the first respondent in all the Original Applications.3.Mr.P.V.Balasubramanian, learned Senior Counsel appearing for the applicant would primarily contend that the applicant, being engaged in the business of setting up infrastructure in various sectors, including Civil Engineering, Water and Irrigation, Power and Mining sectors, in the course of business secured a contract pursuant to the tender floated by the first respondent for Construction of Training Centre, Dining Block, Part Plug and Play Area, DART Centre, Production cum Admin Building, Staff 2/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 Accommodation cum Girl's Hostel Building, Utility – 2, Water Treatment Plant and Swerage Treatment Plant, Environmental Social, Health and Safety (ESHS) etc., for construction of New Technology Centre at Sriperumbudur, Tamilnadu and the total value of the contract was Rs.27,20,02,648.33/- and the period of completion of work was 14 months from the date of issuance of the Letter of Intent; Providing and Supply of Ready Mix Concrete (RMC) through dedicated Batching Plant for Construction of New Technology Centre at Sriperumbudur, Tamilnadu and the total value of the contract was Rs.9,49,32,586/- and period of completion of work was 16 months from the date of issuance of Letter of Intent; Construction of Boys Hostel, GM Bungalow, Compound Wall, Utility – I, Meter Kiosk, External Development Works, Roads, Land Scaping, Environmental, Social Health and Safety etc., for construction of New Technology and the value of the contract wasRs.19,21,44,707/ and the period of completion of work was 16 months from the date of issue of Letter of Intent and Civil and Architectural work for India Rare Earth Permanent Magnet Plant on lump sum turnkey by basis at Vishakapatnam – Package III and the total value of the contract was Rs.7,67,00,000/- and the period of completion of the work was 5 months from the seventh day of issuance of 3/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 the Letter of Intent.4.The learned Senior Counsel would further contend that the Bank Guarantees were necessitated in terms of the Letter of Intent towards Security Deposit cum Performance Guarantee, being 5% of the total contract value. The learned Senior Counsel would also contend that the Bank Guarantees were periodically extended and the applicant Company had started execution of the work. He would however submit that in view of the intervening Covid-19 pandemic, the work was affected and the matters turned worse with the cyclonic rains affecting the site area. The crush owners going on strike also did not help and ultimately, the applicant suffered some hindrance or the other and lost significant amount of time and the delay was not because of the applicant but only due to reasons beyond the control of the applicant. 5.Further, according to the learned Senior Counsel, the delay also resulted in price escalation, especially cost of labour and material increasing by close to 100%. This therefore necessitated the applicant to seek extension of time. The learned Senior Counsel would also bring to my notice that the 4/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 first respondent had granted the extensions as sought for by the applicant only because the first respondent was fully aware that the delay was justified and not as a result of the applicant. 6.The learned Senior Counsel for the applicant would further state that despite granting extensions, the first respondent threatened the applicant with stringent action. The applicant apprehends that the respondents would encash the performance Bank Guarantees. The learned Senior Counsel would further submit that the applicant has successfully completed the scope of work and the same was also brought to the notice of the first respondent in writing with a request to return the Bank Guarantees. According to the learned Senior Counsel, if the Bank Guarantees are encashed it would result in serious consequences, including financial instability to the applicant. The learned Senior Counsel would therefore pray for an interim injunction restraining the first respondent from invoking and encashing the Bank Guarantees.7.Per contra, Ms.Umayaparvathi, learned counsel appearing for the 5/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 first respondent would refute the arguments of the learned Senior Counsel and primarily contend that the applications are premature, especially when the first respondent has not even invoked the Bank Guarantees and taking me through the affidavit filed in support of the Judges Summons, she would point out that even according to the applicant, they only apprehend encashment of the Bank Guarantees. Therefore, she would contend that interim injunction as prayed for, cannot be granted since there is no prima facie case made out or irreparable hardship caused to the applicant as a result of such mere apprehension. She would further contend that the balance of convenience is also strongly in favour of the first respondent alone and not in favour of the applicant. 8.The learned counsel for the first respondent would further contend that though the applicant claims to have completed the project as early as in March 2024, she would refer to the statement in paragraph No.12 of one of the affidavits filed in support of the injunction applications where the applicant has clearly stated that even after 31.03.2024, the applicant continues to execute the work at site, despite the respondent not expressly extending the time for executing the works. She would therefore submit that 6/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 the applicant has not approached this Court with clean hands. 9.The next and most significant argument in my opinion, is that the Bank Guarantees are unconditional and independent contracts between the Bank and the beneficiaries i.e., the respondents and therefore, the applicant cannot seek for interim injunctions as prayed for.10.The learned counsel for the respondents would place reliance on the following decisions in support of her contention:1.Ansal Engineering Projects Ltd., Vs. Tehri Hydro Development Corporation Ltd., and Another ((1996) 5 SCC 450).2.Dwarikesh Sugar Industries Ltd., Prem Heavy Engineering Works (P) Ltd., and Others ((1997) 6 SCC 450).3.Standard Chartered Bank Vs. Heavy Engineering Corporation Ltd., and Others ((2020) 13 SCC 574).The learned counsel for the first respondent would therefore pray for dismissal of the injunction applications.11.I have carefully considered the submissions advanced by the learned counsel on either side.7/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 12.The preliminary objection taken by the first respondent is that the Bank Guarantees being independent contracts between the bank and the beneficiaries and therefore, the applicant, under no circumstances, especially Bank Guarantees being unconditional, can seek restraint as sought for.13.The Hon'ble Supreme Court, in Ansal Engineering Projects Limited's case, has held that an absolute and unconditional bank guarantee obligates the bank to encash the guarantee on demand and the beneficiary cannot be restrained by the Court or Arbitrator from encashing the same, unless fraud or special equity is prima facie made out as a triable issue by specific pleading or strong evidence so as to prevent irreparable injustice to the parties. The Hon'ble Supreme Court further held that the bank is not concerned with the dispute between the beneficiary and the person at whose instance the guarantee was furnished in the first place.14.In Dwarikesh Sugar Industries Limited's case, the Hon'ble Supreme Court held that injunction in such cases can be granted only in 8/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 exceptional cases where there is fraud or irretrievable injury making it impossible for the guarantor to reimburse himself in the event of ultimately succeeding in the matter. 15.In Standard Chartered Bank's case, the Hon'ble Supreme Court held that it was not open to the bank to determine whether invocation of bank guarantee was justified as long as invocation was in terms of the bank guarantee and that the only exceptions to the rule where cases of fraud, irretrievable injustice and special equities.16.In view of the settled legal position as enunciated by the Hon'ble Supreme Court, ordinarily Courts should be slow in granting injunction restraining invocation or encashment of bank guarantees. The only exceptions that are carved out are when the applicant alleges fraud or shows special equities or irretrievable hardship.17.Testing the facts of the present case in the light of the ratio laid down by the Hon'ble Supreme Court in the above cases, the applicant does not plead fraud. However, the applicant pleaded irreparable injury in the 9/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 event of the Bank Guarantees being encashed. However, I neither find the averments in support of such claims of irreparable injury being strong enough nor backed by even prima facie evidence that would satisfy the conscience of this Court to invoke any of the exceptions and grant an interim injunction. 18.In terms of the ratio laid down by the Hon'ble Supreme Court, the applicant has to clearly show by strong evidence that the applicant will not be in a position to recover the amounts in the event of ultimately succeeding of the dispute with the first respondent. I do not find any such pleading or evidence to prima facie establish such irretrievable injury.19.The various consequences that have been narrated by the applicant in support of the injunction application, in my opinion do not fall under any of the exceptions of special equity or irretrievable loss. Therefore, in the facts of the present case, I do not find any exceptional circumstances warranting an interim injunction to be granted as prayed for. Even on facts, as rightly pointed by the learned counsel for the first respondent though the applicant's foundation for seeking injunction is that the applicant has already 10/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 completed the work, it is seen from one affidavit filed in support of the injunction application that even after the alleged date on which the applicant claims to have completed the work, the applicant itself has come on record before this Court stating that the applicant is executing the work even post the said date. 20.Further, even in the tabular column set out in the affidavit filed in support of the Original Application No.660 of 2024 at paragraph No.12 in Serial No.6, the applicant refers to a letter seeking extension of time which is dated 25.03.2024 and has stated that the same is under process and that below the tabular column, the EOT represent the applicant has clearly stated that even after 25.03.2024, the applicant continues to execute the work. This prima facie negates the contention of the learned counsel for the applicant that the applicant has fulfilled all its obligations on time by completing the work.21.Further, as held by the Hon'ble Supreme Court, the bank guarantees are unconditional as in the present case and being an independent contract between the first respondent and the second respondent, the 11/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 applicant cannot ordinarily restrain the encashment of said bank guarantees, unless there is strong material material placed evidencing fraud or special equity. I have already discussed herein above and found that the applicant has not brought this case under any of the exceptional cases. 22.Further, even according to the applicant, there is no allegation showing prima facie case for grant of interim injunction, the word used by the applicant in the affidavit is only apprehension that the first respondent would encash the Bank Guarantee.23.In view of all the above, I do not find the applicant having made out a case for granting an interim injunction as prayed for.24.In fine, all these Original Applications are dismissed. However, there shall be no order as to costs. 24.01.2025ataP.B.BALAJI,J.ata12/13 https://www.mhc.tn.gov.in/judis OA Nos. 666 to 669 of 2024 O.A.Nos.666 to 669 of 202424.01.202513/13