S. No.,Bank Guarantee No.,Issue Date,Amount (Rs.),Expiry Date
1.,007GM07161890017,07.07.2016,"1,20,00,000/-",30.04.2018
2.,007GM07161890018,07.07.2016,"4,80,00,000/-",30.04.2018
14. At the outset, it is relevant to note that the prayers made by PSEPL are limited to seeking injunction against SECI from invoking or making any",,,,
demands under the bank guarantees in question.,,,,
15. In view of the statement made by Mr Sangal that the bank guarantees have been invoked and encashed, it is apparent that the said prayers are",,,,
infructuous and do not survive.,,,,
16. Notwithstanding the above, this Court is of the view that no interference with the invocation of the bank guarantees was warranted in this case.",,,,
The law relating to the bank guarantee is now well settled. In Svenska Handelsbanken v. M/s. Indian Charge Chrome and Others: (1994) 1 SCC 502,",,,,
the Supreme Court had held as under:-,,,,
“...in case of confirmed bank guarantees/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...,,,,
…irretrievable injustice which was made the basis for grant of injunction really was on the ground that the guarantee was not encashable on its,,,,
terms…,,,,
...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.â€,,,,
17. The aforesaid view was reiterated by the Supreme Court in Larsen & Toubro Limited v. Maharashtra State Electricity Board and Others: (1995),,,,
6 SCC 68.,,,,
18. In view of the above settled position, a bank guarantee can be invoked only in exceptional cases where a case of egregious fraud is established.",,,,
19. In the present petition, PSEPL had pleaded that that the invocation of the bank guarantees in question is fraudulent; however, it is apparent from",,,,
the above that the disputes are contractual disputes and this is not a case of an established fraud that vitiates the underlying transaction.,,,,
20. It is also well settled that the invocation and encashment of the bank guarantee cannot be interdicted pending resolution of the contractual disputes,,,,
between the parties. In Hindustan Construction Co. Ltd. v. State of Bihar & Ors: (1999) 8 SCC 436, the Supreme Court observed as under:-",,,,
“8. Now, a Bank Guarantee is the common mode, of securing payment of money in commercial dealings as the beneficiary, under the Guarantee,",,,,
is entitled to realise the whole of the amount under that Guarantee in terms thereof irrespective of any pending dispute between the person on whose,,,,
behalf the Guarantee was given and the beneficiary. In contracts awarded to private individuals by the Government, which involve huge expenditure,",,,,
as, for example, construction contracts, Bank Guarantees are usually required to be furnished in favour of the Government to secure payments made",,,,
to the contractor as ""Advance"" from time to time during the course of the contract as also to secure performance of the work entrusted under the",,,,
contract. Such Guarantees are encashable in terms thereof on the lapse of the contractor either in the performance of the work or in paying back to,,,,
the Government “Advanceâ€, the Guarantee is invoked and the amount is recovered from the Bank.â€",,,,
21. In U.P State Sugar Corporation v Sumac International Limited: AIR 1997 SC 1644, the Supreme Court had held that:",,,,
“12. The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional,,,,
bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes.",,,,
The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving,,,,
such a bank guarantee would otherwise be defeated.â€,,,,
22. In the present case, the disputes essentially revolve around whether the extension in the scheduled commissioning date ought to be granted on the",,,,
ground of what is claimed to be a force majeure event. The expression “force majeure†has been defined under Section 11.3.1 of the Agreement,",,,,
which reads as under:-,,,,
“11.3.1. A “Force Majeure†means any event or circumstances or combination of those stated below that wholly or partly prevents or,,,,
unavoidably delay an Affected Party in the performance of its obligations under this Agreement, but only if and to the extent that such events or",,,,
circumstances are not within the reasonable control, directly or indirectly, of the Affected Party and could not have been avoided if the Affected Party",,,,
had taken reasonable care Of complied with Prudent Utility Practices:,,,,
a) Act of God, including, but not limited to lightning, drought, fire and explosion (to the extent originating from a source external to the site),",,,,
earthquake, volcanic eruption, landslide, flood, cyclone, typhoon or tornado if and only if it is declared/notified by the competent state/central",,,,
authority/agency (as applicable);,,,,
b) any act of war (whether declared Or undeclared), invasion, armed conflict or act of foreign enemy, blockade, embargo, revolution, riot) insurrection,",,,,
terrorist or military action if and only if it is declared/notified by the competent state/central authority/agency (as applicable); or,,,,
c) radioactive contamination or ionising radiation originating from a source in India or resulting from another Force Majeure Event mentioned above,,,,
excluding circumstances where the source or cause of contamination or radiation is brought or has been brought into or near the Power Project by tile,,,,
Affected Party or those employed or engaged by the Affected Party.,,,,
d) An event of Force Majeure identified under SECI-Buying Utility PSA, thereby delivery of power from SPD to Buying Utility.â€",,,,
23. On a plain reading of the aforesaid Clause, this Court cannot readily accept that the delay caused was on account of a force majeure event as",,,,
contemplated under the Agreement. SECI has also not accepted the delay in commissioning of the project on account of the force majeure event. It is,,,,
also noted that the order calling upon PSEPL to stop the work was issued two days prior to the scheduled commissioning date. The said order was,",,,,
concededly, withdrawn on 22.12.2012; yet, it has taken PSEPL more than two months to commission the plant. In the circumstances, it is extremely",,,,
doubtful whether PSEPL would have been in a position to commission the plant on the Scheduled Commissioning Date, that is, on or before",,,,
16.08.2017. Mr Sangal, the learned counsel appearing for SECI also contended that the order dated 14.08.2017 was procured by PSEPL.",,,,
24. Before concluding, it would also be relevant to mention that the bank guarantees in question are unconditional bank guarantees. The language of",,,,
the bank guarantees make it explicitly clear that SECI would not be required to adduce any proof other than its written demand to invoke the bank,,,,
guarantees. The relevant extract of the said bank guarantees reads as under:-,,,,
“The Guarantor Bank hereby expressly agrees that it shall not require any proof in addition to the written demand by SECI, made in any format",,,,
raised at the above mentioned address of the Guarantor Bank, in order to make the said payment to SECI.â€",,,,
25. In view of the above, it is clear that the invocation of the bank guarantees could not have been interdicted on account of the disputes relating to the",,,,
Agreement. Considering PSEPL has insisted on pressing its present petition despite the statement that the bank guarantees had already been invoked,,,,
and the bank drafts have also been collected by SECI. This Court is also of the view that that the present petition ought to be dismissed with costs.,,,,
The petition is, accordingly, dismissed with costs quantified at `50,000/-. The pending applications also stand disposed.",,,,
