Or.39, rule 1 C.P.C.- civil contracts - Injunction suit not to invoke Bank Guarantees given by plaintiff - in the absence of privity of contract between the Beneficiary/second defendant and the plaintiff and when the Bank Guarantees only for and on behalf of first defendant as third party bank Guarantee - in the absence prima facie proof of fraud & misrepresentation - plaintiff is not entitled for any interim injunction - Since the second defendant/beneficiary said that second work was not allotted by him - the beneficiary is not entitled to invoke the bank guarantee given by plaintiff on behalf of first defendant for second work -2 = Lower court dismissed the injunction petition - High court partly allowed the injunction petition in respect of work 2 = M/s. Superbuild India Private Limited, Hyderabad....APPELLANT M/s. Niraj Cement Structural Limited, Mumbai and others....RESPONDENTS = published in http://judis.nic.in/judis_andhra/qrydisp.aspx?filename=10579

Or.39, rule 1 C.P.C.- civil contracts - Injunction suit not to invoke Bank Guarantees given by plaintiff - in the absence of privity of contract between the Beneficiary/second defendant and the plaintiff and when the Bank Guarantees only for and on behalf of first defendant as third party bank Guarantee - in the absence prima facie proof of  fraud & misrepresentation - plaintiff is not entitled for any interim injunction - Since the second defendant/beneficiary said that second work was not allotted by him - the beneficiary is not entitled to invoke the bank guarantee given by plaintiff on behalf of first defendant for second work -2 = Lower court dismissed the injunction petition - High court partly allowed the injunction petition in respect of work 2 =
"Whether the plaintiff has, prima facie, established that defendants 1 and 2
have played any fraud or exercised misrepresentation against the plaintiff in
procuring the bank guarantees from the plaintiff and whether invocation of the
bank guarantees is required to be restrained?" =

since there is no material to hold privity of
contract between the plaintiff and the second defendant,
the plaintiff cannot seek to restrain the second defendant from invoking the
bank guarantees.  The order of the trial Court, therefore, requires no
interference but for the reasons mentions above, insofar as the invocation of
the bank guarantees relating to work-I is concerned.
        Question, as framed above, is answered accordingly so far as bank
guarantees given for work-I is concerned.

20.     So far as work-II is concerned, it is necessary to point out that the
plaintiff alleges to have been given sub-contract relating to the said work-II
also in his favour, which is relating to widening of two lanes from Chintalnar
to Maigudam road from KM 0.00 to KM 65.00 under LWE project. 
As per the plaint allegations,
the performance bank guarantees, as mentioned in schedule III of the plaint
covering Rs.3,56,86,677/-, are said to have been furnished by the plaintiff on
behalf of the first defendant in favour of the second defendant.

21.     During the hearing, learned counsel for the second defendant has
categorically stated that the bank guarantees, which are subject matter of work-
I, which was awarded to the first defendant by the second defendant, are as
shown under schedule I, III and IV of the plaint.
 It is categorically stated by
the learned counsel for the second defendant that the second defendant is no way
concerned with work-II for which the performance bank guarantees, as noted under schedule III, were said to have been furnished by the plaintiff.
It is also stated by the learned counsel for the second defendant that no such work-II was allotted since the second defendant is not concerned with the said work. The performance bank guarantee, allegedly, furnished by the plaintiff, as
shown under schedule III of the plaint, therefore, obviously, cannot be invoked by the second defendant. 
It is also not the case pleaded by the second defendant
either in the written statement or in the counter affidavit that they are any
way concerned with the said work-II and the schedule III bank guarantees. 
 In
view of that, therefore, since the second defendant is no way concerned with
work-II nor with the bank guarantees under schedule III of the plaint, the
invocation and encashment of those bank guarantees is clearly not warranted. The
authority, which has, allegedly, allotted the said work-II to the first
defendant, which has since been sub-contracted, allegedly, to the plaintiff, is
not impleaded in the suit nor any other details of the said work, are on record.
Hence, in my view, to the extent of bank guarantees under schedule III,
the appellant/plaintiff is entitled for injunction, as against the second
defendant.

22.     In view of that, the impugned order of the trial Court dismissing
I.A.No.1596 of 2011 in O.S.No.367 of 2011 is confirmed and injunction
restraining invocation of bank guarantees with respect to bank guarantees
covered under schedule I, II and IV of the plaint is dismissed.

        The appeal is, accordingly, allowed in part to the extent of granting
injunction against the second defendant with regard to the bank guarantees under
schedule III of the plaint alone. As a sequel, the miscellaneous applications,
if any, shall stand closed.
In the circumstances, there shall be no order as to costs.

THE HON'BLE SRI JUSTICE VILAS V.AFZULPURKAR        

CIVIL MISCELLANEOUS APPEAL No.534 of 2012      

29-11-2013

M/s. Superbuild India Private Limited, Hyderabad....APPELLANT

M/s. Niraj Cement Structural Limited, Mumbai and others....RESPONDENTS  

Counsel for the Appellant: MR.S.RAVI
                          for MR. D. SESHASAYANA REDDY

Counsel for the Respondents: MR. NAGESHWAR RAO PAPPU-R1        
                              MR. SRINIVAS MANTHA - R2
                              MR. A. RAVI BABU - R3
<GIST:

>HEAD NOTE :

?Cases referred :
1. (2007) 8 SCC 110
2. (1995) 4 SCC 515
3. (1997) 1 SCC 568
4. (2006) 13 SCC 599
5. (1994) 6 SCC 597


THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR        

CIVIL MISCELLANEOUS APPEAL No.534 of 2012      


The Court made the following order:

JUDGMENT:


        This is an appeal arising out of an injunction petition filed by the
plaintiff in O.S.No.367 of 2011 pending before the III Additional Chief Judge,
City Civil Court, Hyderabad.

2.      The suit was filed seeking relief of injunction against the defendants 1
and 2 from invoking or making any claim against the schedule mentioned bank
guarantees aggregating to an amount of Rs.18,91,09,097/- and consequently,
restraining the third defendant from honouring or making payment under the
aforesaid bank guarantees to defendants 1 and 2.  In the said suit, an
application, being I.A.No.1596 of 2011 was also filed seeking similar relief.
By the impugned order of the trial Court dated 19.06.2012, the said I.A.No.1596
of 2011 was dismissed, on merits, after hearing both sides. Aggrieved thereby,
the present appeal is preferred by the plaintiff.

3.      Respondents 1 to 3 in the aforesaid I.A.No.1596 of 2011 are defendants 1
to 3 in the suit and are also similarly arrayed in this appeal. For the sake of
convenience, they are referred to herein with reference to their array in the
suit.

4.      The case of the plaintiff, in brief, is as follows:

(a) It is stated that the plaintiff is a company engaged in the business of
infrastructure, construction and undertakes major projects throughout India such
as laying of roads and bridges, national highways, engineering procurement and
contracts including Build, Operate and Transfer (BOT) projects etc.  It is
alleged that in March 2010 the second defendant proposed work for providing two
lanes of concrete pavement and widening of culvert including construction of new
slab culvert from KM 107.00 to KM 184.80 i.e. a stretch of 77.80 KM on NH-221
i.e. from Jagdalpur to Konta Road, Chhattisgarh State (hereinafter referred to
as work-I). The first defendant emerged as the successful bidder for a contract
price of Rs.136,84,48,390/-. The first defendant, therefore, was awarded the
said work with a stipulation under the contract to complete the work within 30
months. 
An agreement, accordingly, was entered into by the first defendant and the
second defendant - Government of Chhattisgarh.

(b) It is alleged that the first defendant was on the look out for sub-
contracting the said work on competitive price on back-to-back basis. The
plaintiff and the first defendant, accordingly, finalized the sub-contract and
the first defendant placed a letter of intent dated 17.05.2010 on the plaintiff.
As per the terms of the said letter of intent, the plaintiff had to arrange the
performance bank guarantees for Rs.6,84,22,420/- being 5% of the value of the
work and the said bank guarantees were to be issued in favour of the second
defendant.  Accordingly, the plaintiff is alleged to have arranged the bank
guarantees through the third defendant bank for the said entire amount of
Rs.6,84,22,420/-. Plaintiff also alleged that it had also provided bank
guarantees for drawing mobilization advance of
Rs.9.5 crores on behalf of the first defendant in favour of the second
defendant. Consequently, the first defendant is said to have executed the
general power of attorney in favour of the nominees of the plaintiff.
(c) The plaintiff further alleged that apart from the aforesaid work another
work regarding widening of two lanes from Chintalnar to Maigudam from KM 0.00 to
KM 65.00 under Left Wing Elimination (LWE) project (hereinafter referred to as
Work-II) was also allotted to the first defendant for which also the sub-
contract was awarded by the first defendant to the plaintiff. In terms of the
said work-II also the plaintiff was required to furnish performance bank
guarantees  to the second defendant for Rs.3,56,86,677/-. The plaintiff and the
first defendant agreed to abide by the sub-contract agreement relating to work-
I, referred to above, so far as execution of work-II also. It is also alleged
that the first defendant furnished the bank guarantees procured by plaintiff to
the second defendant with respect to both the said works. The plaintiff alleged
that he commenced work-I on site from 01.10.2010 by investing in men and
machinery and while the said work was being proceed with in full force, the
first defendant, allegedly, committed breach of terms of sub-contract agreement
by appropriating the entire mobilization advance of Rs.9.5 crores given by the
second defendant to the first defendant. It is stated that as per the sub-
contract agreement, the first defendant ought to have paid the said mobilization
advance to the plaintiff and after long correspondence between the parties and
after delay of more than 78 days, the first defendant paid to the plaintiff 60%
of the mobilization advance i.e. Rs.5.78 crores. Plaintiff, therefore, states
that on account of delay, the progress in the work was slowed down. So far as
the work-II is concerned, plaintiff states that in spite of numerous
correspondence, the first defendant did not respond to the plaintiff and did not
sign the sub-contract. Hence, ultimately, the plaintiff was not interested in
the said work and demanded the first defendant for return of the performance
bank guarantees furnished by it earlier for the work-II for Rs.3,56,86,677/-.

(d) The plaintiff alleged that due to continuous disturbance and bandhs called
by the Extremists and Maoists in the work place, the progress of the work was
considerably slowed down, which was within the knowledge of the first and second
defendants and the problem at site was further compounded by heavy rains during
November - December 2010. It is also alleged that as per the sub-contract
agreement, the first defendant and the plaintiff was to open an ESCROW account
wherein the receivables from the running bills were to be deposited. However,
the first defendant is said to have committed breach of that obligation and also
committed default in not providing the plaintiff with requisite drawings, survey
data, cross sections and structure designs, which also resulted in halting the
work for no fault of the plaintiff. The plaintiff, therefore, alleged fraud,
misrepresentation and deceit to the acts and omissions of the first defendant,
as, briefly, stated above.  It was also stated that the first defendant
misrepresented that the works are World Bank funded but they were only State
Government work under LWE project.  
The plaintiff also alleged that it subsequently came to know that the first
defendant allotted a work to the fourth defendant as a
sub-contractor and thereby, serious fraud on plaintiff is pleaded.
The plaintiff, therefore, alleged that including huge bank guarantees furnished by it, it has incurred huge expenditure of more than Rs.50 crores and has mobilized men and machinery at huge cost. 
The plaintiff also alleged that the first defendant acted in collusion and
connivance with the second defendant and at this stage, the plaintiff came to
know that the second defendant has invoked bank guarantees worth Rs.1 crore in
respect of work-I under letter of invocation of bank guarantee dated 01.06.2011
without notice to the plaintiff. Hence, the plaintiff filed the present suit for
reliefs, as stated above.

(e)     An injunction application, being I.A.No.1596 of 2011 was filed by the
plaintiff on the self-same pleadings to which the first defendant had filed a
counter stating that it had become the successful contractor for bid price and
work was allotted to it by the second defendant vide letter dated 24.06.2010.
The first defendant, however, totally denied the pleadings of the plaintiff and
the relief sought for as concocted and speculative based on fabricated facts and
figures. It was pointed out that Chattisgarh Government is not made a party and
the suit is bad for non-joinder.

(f) The second defendant filed a detailed counter to the injunction application
accepting that it invited tenders and the first defendant was awarded the
contract for work-I and that bank guarantees were furnished by the first
defendant in terms of the contract and in addition, the first defendant was also
paid mobilization advance of Rs.9.5 crores against the bank guarantees covering
mobilization advance. The second defendant, however, states that neither the
first defendant has sought nor the second defendant has granted any permission
to sub-let or sub-contract work-I in favour of any person including the
plaintiff. It was, therefore, stated by the second defendant that it had no
knowledge of the plaintiff, being the sub-contractor, nor the plaintiff was
authorized by the second defendant.  It is also stated that after invocation of
bank guarantee of Rs.1 crore, under the letter of the third defendant bank dated
20.06.2011, for the first time, the second defendant was informed that bank
guarantees, furnished by the first defendant, were, in fact, third party's bank
guarantees.  The second defendant, therefore, states that it had never given any
approval to the first defendant for acceptance of third party bank guarantees
nor authorized the first defendant to sub-contract or sub-let the work. The second defendant also denied having issued any letter to the sub-contractor and any such document produced by the plaintiff is forged and fabricated.  It is, further, stated that the plaintiff filed a
writ petition on 02.06.2011 before the High Court at Bilaspur where notices were
issued on the interim and main relief but suppressing the same, the plaintiff
filed the present suit on 14.06.2011 and obtained ex parte order of status quo.
The second defendant sought vacation of the said order of status quo by placing
reliance upon a decision of the Supreme Court in HIMADRI CHEMICALS INDUSTRIES      
LTD. v. COAL TAR REFINING CO. [(2007) 8 SCC 110].    

(g) The third defendant bank also filed a counter giving the list of bank
guarantees furnished by it and it accepted that the plaintiff is its customer,
who has availed the credit limits for arrangement of bank guarantees in the name
of the first defendant in favour of the second defendant.

4.      On the basis of the aforesaid affidavit and counter affidavits, the trial
Court considered the injunction application and after examining the terms of the
sub-contract agreement, Ex.P6, marked in the said IA, the trial Court found that
the plaintiff has furnished the bank guarantees on behalf of the main
contractor. On examining the correspondence marked in the IA, as Exs.P9 to P86
and the correspondence produced by the second defendant, marked as Exs.R1 to
R38, came to the conclusion that the dispute primarily arises between the
plaintiff and the first defendant and the second defendant is not any way
concerned with the said dispute. The trial Court, thereafter, followed the ratio
of the decision of the Supreme Court in HIMADRI CHEMICALS INDUSTRIES LTD. v.     
COAL TAR REFINING CO. [AIR 2007 SC 2798 = (2007) 8 SCC 110] and came to the       
conclusion that the plaintiff has failed to establish any fraud vis--vis the
second defendant. The trial Court found that there is no privity of contract
between the plaintiff and the second defendant and consequently, held that the
plaintiff has failed to establish prima facie case and balance of convenience in
it's favour. Thus, as there was no fraud or misrepresentation on the part of the
second defendant, as the second defendant had neither consented to nor agreed
for sub-contract in favour of the plaintiff, the plaintiff was held not entitled
to any relief and his remedy is only to proceed against the first defendant.
Consequently, the application for injunction moved by the plaintiff was
dismissed. It is that order, which is subject matter of challenge in this
appeal.

5.      Mr. S. Ravi, learned senior counsel for the appellant/plaintiff, contended
that the trial Court has failed to appreciate the connivance between the first
defendant and second defendant in invocation of bank guarantees. Learned senior
counsel placed strong reliance on Ex.A6 letter dated 02.07.2010 under which the
first defendant placed letter of intent on the plaintiff as a sub-contractor.
Learned senior counsel also relied upon and pointed out that having awarded
sub-contract to the plaintiff, the first defendant also executed agreement
awarding work in favour of the fourth defendant on the same day i.e. 02.07.2010,
which also establishes fraud played on the plaintiff.  Similarly, the fifth
respondent is another sub-contractor, who was awarded sub-contract on
15.02.2011. Learned senior counsel also pointed out that the plaintiff has
already filed a criminal complaint, which is under investigation by the police
against the first defendant and the Government of India has already black listed
the first defendant and all the said documents are already produced and marked
before the trial Court.

6.      According to the learned senior counsel, therefore, fraud is evident from
the fact that there is a deliberate misrepresentation to the plaintiff that the
project is a World Bank aided project whereas much later it turned out that it
is LWE project. Learned senior counsel, therefore, submits that the format
prescribed by the second defendant was adopted for furnishing bank guarantees,
which also represented that it is a World Bank funded project. Learned senior
counsel also placed reliance upon the rejoinder filed by the plaintiff before
the trial Court wherein the plaintiff had stated that the second defendant was
aware of the plaintiff, being awarded sub-contract and that it is the plaintiff,
who has furnished all the bank guarantees. Learned senior counsel also pointed
out the averment that the representatives of the second defendant visited
Hyderabad and verified with the banker, third defendant, and on being satisfied of the credentials of the plaintiff and the bank guarantees, have accepted the same. 
Learned senior counsel, therefore, submits that it is, therefore,
not open either for the first defendant or the second defendant to disown the
plaintiff, as if there is no privity of contract and the aforesaid acts of the
first and the second defendant, clearly established fraud, misrepresentation and
connivance, which has resulted in the plaintiff parting with huge amount in the
shape of bank guarantees, which are now sought to be invoked.

7.      Learned senior counsel placed strong reliance upon the decisions of the
Supreme Court in HIMADRI CHEMICALS INDUSTRIES LTD. v. COAL TAR REFINING CO.1;          
NATIONAL THERMAL POWER CORPORAITON LTD. v. FLOWMORE PVT. LTD2 and U.P. STATE                
SUGAR CORPORATION v. SUMAC INTERNATIONAL LTD.3 in support of his contention that      
the trial Court has failed to appreciate that the plaintiff had established
fraud, misrepresentation and connivance, between the first and the second
defendant and consequently, it ought to have restrained the invocation of bank
guarantees.

8.      Learned counsel for the first respondent/first defendant while denying all
the adverse allegations pointed out that the appellant was fully aware that it
was not a World Bank project and in fact, it's original letter of intent placed
on the plaintiff was forged.
Learned counsel relies upon part of the plaint allegations to show that the
plaintiff himself is a recipient of mobilization advance to the extent of grant
of Rs.5.78 crores. Learned counsel also denied that the first defendant was
black listed, as alleged.

9. Learned counsel for the second respondent, on the other hand, submits that
the work was allotted on competitive tender basis to the first defendant, who
has furnished bank guarantees. Learned counsel has also submitted details of
bank guarantees covering guarantees against mobilization advance and the
guarantees submitted towards performance guarantees. The said bank guarantees
also form part of the plaint schedule where the performance guarantees are
listed under schedule I. The guarantees covering the mobilization advance are
listed in schedule Ii and IV of the plaintiff and there is no controversy with
regard to the same.  It is also not in dispute that from out of the bank
guarantees under schedule II of the plaint, two bank guarantees of Rs.50 lakhs
each aggregating to Rs.1 crore were already invoked and encashed by the second
defendant. Learned counsel, therefore, submitted that the plaint allegations did
not contain any specific allegation of fraud or misrepresentation as against the
second defendant and almost all the allegations are directed against the first
defendant.

10. Learned counsel pointed out that the second defendant never agreed to nor
permitted the first defendant to sub-contract the work either to plaintiff or
defendants 4 and 5. In terms of the contract between defendants 1 and 2, the
successful tenderer i.e. the first defendant was to furnish the performance bank
guarantees as well as the bank guarantees against mobilization advance.
Admittedly, the said guarantees were furnished in the name of the first
defendant in favour of the second defendant by the third defendant bank without
ever disclosing to the second defendant that the said guarantees are third party
bank guarantees. While substantiating the stand of the second defendant in its
written statement with reference to the correspondence referred to above, the
learned counsel placed strong reliance upon the said correspondence to
substantiate that the second defendant only dealt with the first defendant and
had no option but to invoke the bank guarantee on finding that the terms and
conditions of the contract were not being met by the first defendant,
though mobilization advance of Rs.9.5 crores was paid to the first defendant.
Learned counsel placed strong reliance upon the letter of invocation to the
extent of Rs.1 crore of the bank guarantees dated 01.06.2011 and that 20 days
after encashment, under the letter of the bank dated 20.06.2011, for the first
time, the bank voluntarily informed the second defendant that the bank
guarantees are third party bank guarantees to which the second defendant
protested immediately.

11.  Learned counsel for the second defendant strongly refuted the letter
produced by the plaintiff, Ex.P20, dated 04.08.2010 wherein the plaintiff is
said to have furnished the bank guarantees, which were acknowledged by the
Executive Engineer of the second defendant.  The authenticity of such
endorsement is very strongly disputed by the second defendant. It is, further,
pointed out that the contract has since been terminated and the bank guarantees
were rightly invoked and the first defendant had never questioned the said
termination.
Learned counsel, therefore, submits that in the absence of any specific
pleadings to substantiate fraud or misrepresentation against the second
defendant, the plaintiff is not entitled to any relief.
Learned counsel also submitted that in the absence of any prayer for declaration
mere injunctive relief sought for in the plaint is not sustainable. Learned
counsel placed reliance upon the decision of the Supreme Court in RELIANCE SALT
LTD. v. COSMOS ENTERPRISES AND ANOTHER4 and STATE TRADING CORPORATION OF INDIA                  
LTD. v. JAINSONS CLOTHING CORPORATION5 in support of his contentions and submits    
that no interference in this appeal is warranted.

12. In the light of these rival contentions, in order to find prima facie case
and balance of convenience, it is necessary to first ascertain as to
whether the
appellant/plaintiff has been able to establish any fraud, misrepresentation or
connivance vis--vis the second defendant.
Therefore, the following question arises for consideration:

"Whether the plaintiff has, prima facie, established that defendants 1 and 2
have played any fraud or exercised misrepresentation against the plaintiff in
procuring the bank guarantees from the plaintiff and whether invocation of the
bank guarantees is required to be restrained?"

13. A look at the plaint allegations point out that the primary allegations of
misrepresentation and fraud are against the first defendant. So far as the
second defendant is concerned, it cannot be disputed that the State cannot be
said to have practiced fraud on the plaintiff, particularly, when the second
defendant asserts that it had never agreed to nor consented for sub-letting or
sub-contracting of the work awarded to the first defendant.  Plaintiff has not
been able to produce any documents, prima facie, to substantiate that a
sub-contract, in his favour, was authorized and approved by the second
defendant. A sheet anchor of the case of the plaintiff is Ex.P20 covering letter
under which the plaintiff, allegedly, furnished the bank guarantees towards
mobilization advance covering Rs.3.5 crores.
A rubber stamp and signature of the Executive Engineer of the second defendant
on the said letter is strongly disputed by the second defendant on the ground
that the said signature and endorsement, allegedly, of the Executive Engineer is
forged and fabricated.
In support of that, reliance is placed upon the letters of the first defendant
dated 15.07.2010, 04.08.2010 and 01.09.2010 under which the bank guarantees
toward performance bank guarantee as well as mobilization advance were furnished
by the first defendant to the Superintending Engineer, National Highways
(Circle) of the second defendant. It is pointed out that the letter of the first
defendant dated 04.08.2010 refers to mobilization advance of Rs.3.5 crores,
which has the same reference as Ex.P20, plaintiff's letter dated 04.08.2010. The
trial Court has marked this correspondence on behalf of the second defendant, as
Exs.R8 and R9 but other details of the said exhibits are not mentioned in the
appendix. It is evident from the aforesaid documents that all the bank
guarantees are furnished by the first defendant in favour of the second
defendant.

14.     Further, even the sub-contract agreement, Ex.P6, dated 02.07.2010, relied
upon by the plaintiff, is executed by and between the plaintiff and the first
defendant.  In terms of the said sub-contract agreement also, though the second
defendant is not a party thereto, under clause 12, the performance bank
guarantees are required to be furnished by the sub-contractor on behalf of the
main contractor.
I am, therefore, unable to find even prima facie any documentary evidence
showing that there was any privity of contract between the plaintiff and the
second defendant, particularly, in view of the specific stand of the second
defendant that it had never consented to or authorized the sub-letting or sub-
contracting of the contract awarded to the first defendant.

15.     Further, under separate letters of the third defendant bank dated
09.08.2010 and 20.09.2010, the third defendant bank had confirmed to the second
defendant of having furnished all the bank guarantees with the expiry date
mentioned in the last column of the table with respect to each bank guarantee.
No where in the said letters of bank any reference to third party bank
guarantees is mentioned.  Further, the mobilization advance was, admittedly,
paid to the first defendant under RTGS and demand drafts, which is evidenced by
documents produced by the defendants and the entire exhibited correspondence 
relating to the execution of the work is between the second defendant and the
first defendant. It is evident that after the bank disclosed that the bank
guarantees are third party bank guarantees, the second defendant filed a
complaint on 08.07.2011 with the banking Ombudsman, Reserve Bank of India  
against the third defendant bank, which is said to be pending.

16.     All this, therefore, clearly shows that there is no privity of contract
between the second defendant and the plaintiff and consequently, the plaintiff
has failed to establish any fraud and misrepresentation or connivance as against
the second defendant in invocation of the bank guarantees.

17.     At this stage, it is also necessary to notice the legal position as well.
The decision of the Supreme Court in HIMADRI CHEMICALS INDUSTRIES LTD's case (1       
supra) was already relied upon by the trial Court. The Supreme Court in NATIONAL
THERMAL POWER CORPORAITON LTD.'s case (2 supra) has held that even if there is      
an inter se dispute between the party at whose instance the guarantee is issued
and the beneficiary, it is no ground for preventing the beneficiary from
invoking the bank guarantee. 
In the present case, there is no dispute so far as
the plaintiff and the second defendant is concerned, as there is no privity of
contract between them. 
Hence, the second defendant, which is the beneficiary, cannot be restrained from
invoking the bank guarantees furnished by the first defendant in favour of the
second defendant, at the instance of the plaintiff. 
In the decision in U.P.
STATE SUGAR CORPORATION's case (3 supra) it was clearly held by the Supreme    
Court in para 13 as follows:
"13. The same question came up for consideration before this Court in Svenska
Handelsbanken V. Indian Charge Chrome [(1994) 1 SCC 502]. This Court once again  
reiterated that a confirmed bank guarantee/irrevocable letter of credit cannot
be interfered with unless there is established fraud or irretrievable injustice
involved in the case.  Irretrievable injury has ot be one of the nature noticed
in the case of Itek Corpn. v. First National Bank of Boston [566 Fed Supp 1210].
On the question of fraud this Court confirmed the observations made in the case
of U.P. Coop. Federation Ltd [(1998) 1 SCC 174] and stated that the fraud must
be that of the beneficiary, not the fraud of anyone else.
(emphasis supplied)

        Thus, even if there is fraud, it must be of egregious nature so as to
vitiate the entire transaction. It is also necessary that the fraud must be that
of the beneficiary and not the fraud of anyone else.
In the present case, the beneficiary is the second defendant and as already held
above, there is neither any specific allegation nor any material to establish
fraud even prima facie so far as the second defendant is concerned.

18.     In RELIANCE SALT LTD.'s case (4 supra) it was held that subsequent breach
of contract on the part of a party to the contract will not amount to fraud, as
the fraud, which vitiates the contract must have a nexus with the acts of the
party prior to entering into the contract. Obviously, on the facts of the
present case, there are no allegations of any fraud prior to entering into the
contract by the plaintiff with the first defendant much less so far as the
second defendant is concerned. 
In STATE TRADING CORPORATION OF INDIA LTD.'s case         
(5 supra) it was held that in order to seek a temporary injunction on the ground
of fraud or irretrievable injury, the plaintiff must make out a strong prima
facie case or special equities in his favour.

19.     As has been held above, since there is no material to hold privity of
contract between the plaintiff and the second defendant,
the plaintiff cannot seek to restrain the second defendant from invoking the
bank guarantees.  The order of the trial Court, therefore, requires no
interference but for the reasons mentions above, insofar as the invocation of
the bank guarantees relating to work-I is concerned.
        Question, as framed above, is answered accordingly so far as bank
guarantees given for work-I is concerned.

20.     So far as work-II is concerned, it is necessary to point out that the
plaintiff alleges to have been given sub-contract relating to the said work-II
also in his favour, which is relating to widening of two lanes from Chintalnar
to Maigudam road from KM 0.00 to KM 65.00 under LWE project.
As per the plaint allegations,
the performance bank guarantees, as mentioned in schedule III of the plaint
covering Rs.3,56,86,677/-, are said to have been furnished by the plaintiff on
behalf of the first defendant in favour of the second defendant.

21.     During the hearing, learned counsel for the second defendant has
categorically stated that the bank guarantees, which are subject matter of work-
I, which was awarded to the first defendant by the second defendant, are as
shown under schedule I, III and IV of the plaint.
 It is categorically stated by
the learned counsel for the second defendant that the second defendant is no way
concerned with work-II for which the performance bank guarantees, as noted under schedule III, were said to have been furnished by the plaintiff.
It is also stated by the learned counsel for the second defendant that no such work-II was allotted since the second defendant is not concerned with the said work. The performance bank guarantee, allegedly, furnished by the plaintiff, as
shown under schedule III of the plaint, therefore, obviously, cannot be invoked by the second defendant.
It is also not the case pleaded by the second defendant
either in the written statement or in the counter affidavit that they are any
way concerned with the said work-II and the schedule III bank guarantees. 
 In
view of that, therefore, since the second defendant is no way concerned with
work-II nor with the bank guarantees under schedule III of the plaint, the
invocation and encashment of those bank guarantees is clearly not warranted. The
authority, which has, allegedly, allotted the said work-II to the first
defendant, which has since been sub-contracted, allegedly, to the plaintiff, is
not impleaded in the suit nor any other details of the said work, are on record.
Hence, in my view, to the extent of bank guarantees under schedule III,
the appellant/plaintiff is entitled for injunction, as against the second
defendant.

22.     In view of that, the impugned order of the trial Court dismissing
I.A.No.1596 of 2011 in O.S.No.367 of 2011 is confirmed and injunction
restraining invocation of bank guarantees with respect to bank guarantees
covered under schedule I, II and IV of the plaint is dismissed.

        The appeal is, accordingly, allowed in part to the extent of granting
injunction against the second defendant with regard to the bank guarantees under
schedule III of the plaint alone. As a sequel, the miscellaneous applications,
if any, shall stand closed.
In the circumstances, there shall be no order as to costs.

_____________________  
VILAS V. AFZULPURKAR, J  
November 29, 2013

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