1. The above Suit is filed by the plaintiff inter alia seeking a declaration that the Joint Bidding Agreement (“JBA”), the Counter Guarantee, and its invocation by defendant No. 1, vide its letter dated 21st September, 2012 (Exhibit-J to the Plaint), is illegal, wrongful and vitiated by fraud and is therefore, null and void, non est and of no effect whatsoever.
2. The facts as narrated by the plaintiff are briefly set out hereunder:
3. On 2nd March, 2009, defendant No. 4 issued a Global Invitation of Request for Qualification vide Tender No. PPD/M1/4th CT/T60/2009 (“RFQ”) inviting applications for the development of 4th Container Terminal Project on Design, Build, Finance, Operate and Transfer (“DBFOT”) basis (“the said Project”).
4. By and under the JBA dated 21st August, 2009, entered into between the plaintiff and defendant No. 2 (“Consortium”) for the purpose of bidding for the Project, defendant No. 2 was to be the Lead Member, Technical Member, Financial Member of the Consortium while the plaintiff was to be the Other Member in the Consortium. Admittedly, the plaintiff has a 26 per cent share and the defendant No. 2 has the balance 74 per cent share in the Consortium.
5. The plaintiff executed a Power of Attorney dated 21st July, 2009 in favour of defendant No. 1, irrevocably designating, nominating, constituting, appointing and authorizing defendant No. 1 as the Lead Member and the true and lawful Attorney of the Consortium, for the purposes of the said Project.
6. The Consortium submitted their RFQ dated 31st August, 2009 to defendant No. 4. Based on the RFQ, the Consortium was pre-qualified for the said Project and issued the Request for Proposal (“RFP”).
7. On 15th October, 2010, the Consortium submitted its RFP bid for the said Project. On 28th June, 2011, the RFP bids were opened and the Consortium was declared the successful bidder for the said Project. On 26th September, 2011, defendant No. 4 issued the Letter of Award (LOA) vide letter No. PPD/CM/BOT/4th CT/2011 dated 26th September, 2011 to defendant No. 2, a copy of which was returned duly signed and accepted by defendant No. 2 to defendant No. 4 vide letter dated 29th September, 2011.
8. Under the RFP, a Bid Bond of Rs. 67 crores was required to be furnished by the Consortium. Defendant No. 2 provided a Bank Guarantee (“Bid Bond”) dated 15th October, 2010, issued by Standard Chartered Bank for Rs. 67 crores, in favour of defendant No. 4 as bid security for the said Project. The said Bid Bond was extended from time to time and the last extension was upto 30th September, 2012. Defendant No. 1, of which defendant No. 2 is a 100% subsidiary furnished a Counter Indemnity to Standard Chartered Bank, securing its obligation under the Bid Bond.
9. The plaintiff provided a Bank Guarantee being Bank Guarantee No. 29101GPER018310 dated 13th October, 2010 issued by defendant No. 3 for a sum of Rs. 17,42,00,000/- in favour of defendant No. 1 (“Counter Guarantee”). The Counter Guarantee has been extended by the plaintiff from time to time and presently has been extended till 30th September, 2012.
10. The Concession Agreement was required to be signed by and between the successful bidder i.e Consortium and defendant No. 4 within 30 days of issuance of the LOA. However, according to the plaintiff, defendant No. 2 has consistently sought extensions for signing the Concession Agreement on some pretext or the other. However, vide its letter dated 3rd January, 2012, defendant No. 2 agreed to sign the Concession Agreement on 11th January, 2012. However, due to further delays no action has been taken towards signing the Concession Agreement even until 26th March, 2012.
11. The plaintiff vide its letter dated 31st March, 2012, communicated to defendant Nos. 1 and 2 that it was agreeable to withdrawing from the Consortium, subject to the approval of defendant No. 4, if the same would help resolve issues between PSA and defendant No. 4 with respect to the said Project.
12. Defendant No. 2 addressed a letter dated 2nd April, 2012 to defendant No. 4, reiterating that defendant No. 2 had assumed all the defined roles in the Consortium and seeking defendant No. 4's consent for allowing the plaintiff to withdraw from the Consortium. Vide its letter dated 30th August, 2012 addressed to defendant No. 2, defendant No. 4 refused permission for any change in the Consortium and requested defendant No. 2 to sign the Concession Agreement within 10 days.
13. Defendant No. 4 vide its letter dated 12th September, 2012 informed defendant No. 2 of its failure to sign the Concession Agreement and called upon defendant No. 2 to show cause before 5.00 p.m on 15th September, 2012, as to why the Award of the Project to the Consortium should not be terminated and why other remedial measures as per provisions of Tender Conditions and LOA, should not be taken. Defendant No. 2 vide its letter dated 15th September, 2012 replied to the aforesaid show cause notice. The plaintiff received a letter dated 21st September, 2012 from defendant No. 3, informing the plaintiff that defendant No. 1 has invoked the Counter Guarantee. The plaintiff vide its letter dated 24th September, 2012 addressed to defendant No. 3 has alleged that defendant No. 1 has perpetrated a fraud on the plaintiff and requested defendant No. 3 not to make any payment to defendant No. 2. The plaintiff has therefore filed the above suit inter alia seeking the reliefs set out hereinabove.
14. The above Notice of Motion is taken out in the said Suit seeking urgent reliefs restraining defendant Nos. 1 and 2 from invoking the said Bank Guarantee. The urgent application was first moved on 24th September, 2012 at 5.00 p.m, when this Court directed that the Bank Guarantee shall not be encashed by defendant No. 1 and placed the said Application for hearing on 25th September, 2012. By Consent of the parties, the Notice of Motion was taken up for final hearing on 25th September, 2012. In view thereof, the defendants were allowed to proceed on the basis of denials.
15. Mr. Virag Tulzapurkar, the learned Senior Advocate appearing for the plaintiff, submitted that the Counter Guarantee dated 13th October, 2010 issued by defendant No. 3 Bank for a sum of Rs. 17,42,00,000/- (Rupees Seventeen Crores Forty two lakhs only) in favour of defendant No. 1 is not the kind of guarantee which is usually given in the course of commercial transactions, inasmuch as the guarantee has been given in favour of defendant No. 1, which is the holding Company of the plaintiff's Consortium Member, defendant No. 2. Therefore, the limitations and constraints normally involved in restraining payment under the Bank Guarantee, which are well settled, are not attracted in the present case. Mr. Tulzapurkar next submitted that the invocation of the Counter Guarantee is vitiated by fraud perpetrated by defendant Nos. 1 and 2 (PSA), as set out in clause 8 of the Plaint. He submitted that PSA's action of leading the plaintiff to believe that it was interested in implementing the said Project, which it knew well that it had no such intention, is an act of fraud which vitiates JBA and all contractual arrangements entered into between the plaintiff and PSA including the Counter Guarantee. He submitted that PSA being the Lead Member of the Consortium and being responsible for all roles under the said Project was solely and exclusively empowered and responsible for signing the Concession Agreement with defendant No. 4. It is submitted that the plaintiff admittedly did not assume any defined role in relation to the Project and PSA has submitted in writing that it has assumed all the defined roles. It is therefore safe to conclude that PSA was and is solely and exclusively empowered and responsible for fulfilling and complying with the terms and conditions of the bidding document and for signing of the Concession Agreement. He submitted that this is also established from the letters addressed by defendant No. 2 to the defendant No. 4 being Exhibits E and H to the Plaint. He submitted that there are special equities in the plaintiff's favour. The sole ground alleged by defendant No. 4 against the Consortium is the failure to sign the Concession Agreement. This had to be done by PSA alone and the plaintiff had no role to play in this. The default is therefore of PSA alone. If defendant No. 4's invocation of the Standard Chartered Bank Bid Bond is solely due to PSA's failure to execute the Concession Agreement, then defendant No. 1 is not entitled to pass or that burden to the plaintiff and claim any benefit under the said Guarantee. Allowing defendant No. 1 to do so would be clearly fraudulent. The fraud is of the beneficiary (defendant No. 1) who cannot be allowed to take any benefit thereof. In support of his submission, Mr. Tulzapurkar has relied on the decision of the Hon'ble Supreme Court in the case of U.P Co-operative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd., (1988) 1 SCC 174 and an unreported decision of the Division Bench of the Delhi High Court in Yog Systems India Ltd.… v. Su-Kam Power Systems Ltd.…. in FAO (OS) No. 649 of 2006 dated 12th October, 2007.
16. Mr. Tulzapurkar next submitted that the Suit guarantee is conditional and the conditions stipulated therein have not been met. After reading the sentence in paragraph 4 of the Bank Guarantee “we, Bank of Baroda (“Guarantor”) hereby irrevocably and unconditionally undertake to pay to PSA International Pte Ltd. (“Beneficiary”), on its first demand an amount upto Rs. 17,42,00,000/- (Rupees Seventeen Crores and Forty two lakhs only), as payment obligation to the beneficiary pursuant to the Bid Bond, without any demur, reservation, recourse, contest or protest” Mr. Tulzapurkar has laid great stress on the words “as payment obligation to the beneficiary pursuant to the Bid Bond”, and has submitted that the said words are of great significance and cannot be ignored. He submitted that therefore the obligation of defendant No. 3 Bank to pay defendant No. 1 viz. the beneficiary under the Suit guarantee is conditional upon defendant No. 1's entitlement to receive payment. He submitted that this means that unless there is an obligation to make payment on the part of the plaintiff to defendant No. 1 and the said obligation fastens, the Suit guarantee cannot be invoked and defendant No. 3 Bank is not obliged to make payment. He submitted that defendant No. 1 who is not a party to the JBA is not entitled to receive any sum under the JBA. Hence defendant No. 1's entitlement to receive payment has to be traced to the Counter Indemnity, which defendant No 1 has given to Standard Chartered Bank. It would follow that defendant No. 1 would be entitled to make a claim under the Counter Guarantee only in case it establishes that the plaintiff is obligated to make payment to defendant No. 1 due to the loss it has suffered under the Counter Indemnity, which can be attributed to the plaintiff. In short, the obligation under the Counter Guarantee is that of an Indemnity whereby Bank of Baroda has guaranteed the plaintiff's indemnity obligation to defendant No. 1. It is submitted that it is an admitted position that invocation of the Bid Bond by JNPT and the consequent claim under the Counter Guarantee is not attributable to the plaintiff and the plaintiff is in no way responsible for the invocation of the Standard Chartered Bank Guarantee by defendant No. 4, and for any alleged loss caused, defendant No. 1 is not entitled to make any claim under the Counter Guarantee. In support of his contention that the Counter Guarantee is conditional and conditions stipulated therein have not been met and therefore defendant No. 1 cannot be allowed to invoke/encash the Bank Guarantee, Mr. Tulzapurkar further submitted that there is no declaration in defendant No. 1's letter dated 21st September, 2012 seeking to invoke the Suit guarantee to the effect that payment obligation has fastened on the plaintiff pursuant to the Bid Bond, which is a pre-condition under paragraph 4 of the Suit guarantee. It is therefore submitted that the said invocation is not in terms of the Suit guarantee and is bad in law, non est and of no legal consequence whatsoever. In support of his contention that invocation of a Guarantee has to be in terms of the Bank Guarantee, Mr. Tulzapurkar relied on the judgment of the Apex Court in Hindustan Construction Company Ltd. v. State of Bihar, (1999) 8 SCC 436.
17. Mr. Tulzapurkar submitted that if appropriate orders restraining encashment of the Counter Guarantee are not passed, irretrievable injustice would be caused to the plaintiff. He submitted that defendant No. 2 is a Shell Company and has no assets either in India or in Singapore and thereby any order that the plaintiff may obtain against defendant No. 1 will be a mere paper decree. Mr. Tulzapurkar further submitted that the Notice of Motion be allowed in terms of prayer clauses (a) to (d).
18. Mr. Darius Khambata, the learned Senior Advocate appearing for defendant Nos. 1 and 2, has first submitted that the nature of the Bank Guarantee would not change the law applicable to the invocation of Bank Guarantees as alleged by the plaintiff. He has submitted that whether an encashment of a unconditional and irrevocable Bank Guarantee ought to be permitted or not has to be considered without any reference to the underlying or main contract or to the disputes/claims thereunder and the plaintiffs extensive references to the underlying contract especially in absence of established fraud are wrongful and of no consequence. He has submitted that the allegations of fraud made by the plaintiff are completely baseless, unsubstantiated, mala fide and constitute a blatant attempt to stall the legitimate encashment of the Counter Guarantee. He submitted that the plaintiff admittedly has a 26 per cent share in the Consortium and is bound to bear the liability of the Consortium to the extent of its share in the same. He has relied on section 43 of the Indian Contract Act, 1872 which inter alia provides that each of the two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise unless contrary intention appears from the contract. He has submitted that not only there is no contract to the contrary in the JBA but in fact clause 5 of the JBA reaffirms the joint liability of the plaintiff and defendant No. 2 (Partners to the Consortium). He has submitted that though the plaintiff has tried to suggest that clause 4 of the JBA contract is to the contrary, the same is not correct and that clause 4 only is an assignment of functions and responsibilities within the Consortium. Mr. Khambata therefore submitted that the plaintiff is liable in law to contribute to the extent of 26 per cent of the Consortium's losses/liabilities/payment obligations. He submitted that as per the requirement under the RFP, the Consortium furnished a Bid Bond of Rs. 67 crores in favour of the defendant No. 4 as security for executing the Concession Agreement. The Bid Bond was counter indemnified by defendant No. 1. The Bid Bond has been encashed by defendant No. 4 on 21st September, 2012. He submitted that the plaintiff furnished a Counter Guarantee dated 13th October, 2010 issued by defendant No. 3 in favour of defendant No. 1 for a sum of Rs. 17.42 crores which represented the plaintiff's share (26 per cent) of the total amount of Rs. 67 crores covered by the Bid Bond. He submitted that defendant Nos. 1 and 2 could have submitted their share of 74 per cent of the Bid Bond amount and could have required that the plaintiff submit its share of the Bid Bond directly to defendant No. 4 and the effect would have been that defendant No. 4 would have invoked two Bank Guarantees aggregating to Rs. 67 crores. However, defendant No. 4 wanted a single Bank Guarantee and therefore the Counter Guarantee was obtained. Mr. Khambata submitted that as a result, the Counter Guarantee has become payable in favour of defendant No. 1 by defendant No. 3 and the same ought to be paid by defendant No. 3 without any demur or protest and any further inquiry in the matter. Mr. Khambata submitted that therefore the plaintiff's submission that defendant No. 2 was the lead member and as such there is no obligation on the plaintiff, is devoid of merits, against the terms of the JBA and false. Mr. Khambata submitted that the Counter Guarantee is an unconditional and an irrevocable guarantee and contains an unequivocal promise to pay a sum of Rs. 17.42 crores without any demur or protest and the same ought to be encashed. He submitted that in the present case the plaintiff has failed to make out any case of fraud. The averments in this regard made in paras 8–10 of the Plaint, by no stretch of imagination can be said to have been made out a case of such fraud, apart from the fact that the allegations are incredible and totally bereft of particulars. He submitted that the present case does not fall within any of the recognized exceptions laid down by the Hon'ble Supreme Court in a catena of decisions and as such no injunction restraining the encashment of the Counter Guarantee ought to be granted.
19. Mr. Khambata has further submitted that it could never have been the intention of defendant No. 1 to defraud the plaintiff of Rs. 17.42 crores covered by the Counter Guarantee and in the process suffer a loss of Rs. 50 crores in view of the encashment of Bid Bond of Rs. 67 crores and also further lose the valuable right to enter into the Concession Agreement for a period of 30 years. Hence alleging a fraudulent intention on the part of defendant No. 1 in the facts and circumstances of the present case is absurd, to say the least. He submitted that admittedly, defendant Nos. 1 and 2 have made serious attempts with defendant No. 4 to procure its consent in regard to the plaintiff's withdrawal from the Consortium. However, for reasons beyond the control of defendant Nos. 1 and 2, defendant No. 4 has not permitted a change in the Constitution of the Consortium. This conduct on the part of defendant Nos. 1 and 2 itself belies any fraudulent intention on their part. Mr. Khambata has submitted that the correspondence entered into by and between defendant Nos. 1 and 2 and the defendant No. 4 establishes that the defendant Nos. 1 and 2 contested the decision of defendant No. 4 in regard to the signing of the Concession Agreement and it is pertinent to note that the letter of award has not yet been terminated by defendant No. 4. Mr. Khambata has further submitted that existence of fraud merely makes a contract voidable. However, while alleging fraud, the plaintiff has not rescinded the JBA. As such the allegations of fraud made by the plaintiff in the above Notice of Motion are merely bald assertions and do not establish a case of fraud, much less fraud of an egregious nature.
20. Dealing with the plaintiffs argument that the Counter Guarantee is a conditional one, Mr. Khambata has submitted that the said argument is totally erroneous. The expression ‘payment obligation’ is merely descriptive of what the Counter Guarantee has been furnished for, and it cannot be contended that the same is a conditional guarantee. It is reiterated that once the Bid Bond for a sum of Rs. 67 crores is encashed, defendant No. 1 is entitled to be reimbursed to the extent of Rs. 17.42 crores, which is the plaintiff's share of the amount covered by the Bid Bond and which has been encashed (albeit wrongfully) by defendant No. 4. The Counter Guarantee provides that the encashment of the Bid Bond is to be established by providing a copy of the defendant No. 4's invocation letter to the defendant No. 3 Bank. This has been done. Mr. Khambata submitted that the plaintiff's contention that defendant No. 1 would be entitled to make a claim under the Counter Guarantee only in case it establishes that the plaintiff is obligated to make payment to defendant No. 1 due to the loss it has suffered under the Counter Indemnity is erroneous in law. He submitted that the present case is one of an unconditional bank guarantee the law regarding which does not change merely because it is given in the context of an obligation to indemnify. It is further submitted that the expression “payment obligation to the beneficiary pursuant to the Bid Bond” has to be read along with clause 5 of the Guarantee. Read as a whole, it is clear that defendant No. 1 can call upon defendant No. 3 to pay under the Counter Guarantee dated October 13, 2010, once there is a letter of invocation of the Bid Bond by defendant No. 4. That letter of invocation by defendant No. 4 (which is produced before the Court) itself fully establishes the right to invoke the Counter Guarantee.
21. Mr. Khambata submitted that the reliance placed by the plaintiff upon the Judgment of the Apex Court in Hindustan Construction Company Ltd. v. State of Bihar (supra) is misplaced, as the language of the Guarantee in that case was materially different from the language of the Counter Guarantee in the present case. Mr. Khambata therefore submitted that the submission made on behalf of the plaintiff that the Suit guarantee is conditional and the conditions stipulated therein have not been met, are untenable and baseless, and that the Guarantee is infact unconditional and irrevocable containing an unequivocal promise to pay a sum of Rs. 17.42 crores without any demur or protest, and the same ought to be encashed.
22. As regards the submission of the plaintiff that irretrievable injustice shall be caused to them in case the Counter Guarantee is encashed, Mr. Khambata has, relying on paragraph 12 of the decision of Hon'ble Supreme Court in U.P State Sugar Corporation v. Sumac International Ltd.., (1997) 1 SCC 568 and paragraph 22 of Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd., (1997) 6 SCC 450 submitted that no substantial pleadings have been made to justify as to how irretrievable injustice shall be caused to the plaintiff in case the Counter Guarantee is encashed. Further, no special equities have been made out by the plaintiff for a grant of an injunction against encashment of the Counter Guarantee. Pleadings in paras 12 and 13 of the Plaint are based on alleged fraud. It is also not contended that defendant No. 1 is a Shell Company. It is therefore submitted by Mr. Khambata that the above Notice of Motion for interim reliefs filed by the plaintiff be dismissed with costs.
23. I have considered the submissions advanced by the learned Senior Advocates appearing for the Parties, and the case law relied upon by them in support of their submissions.
24. Admittedly, a Consortium consisting of the plaintiff and the defendant No. 2, which is a subsidiary of defendant No. 1, submitted a bid for the design and construction of the Fourth Terminal at the Jawaharlal Nehru Port pursuant to RFP floated by defendant No. 4. The plaintiff has a 26 per cent share in the Consortium and the balance share of 74 per cent is that of the defendant No. 2. A Consortium is in the nature of a partnership and the Consortium members must, in law, bear the liabilities of the Consortium to the extent of their share in such Consortium. Such liability of each partner finds confirmation in section 43 of the Indian Contract Act, 1872 which provides as follows:
“43. Any one of joint promisors may be compelled to perform.— When two or more persons make a joint promise, the promisee may, in the absence of express agreement to the contrary, compel any one or more of such joint promisors to perform the whole of the promise.
Each promisor may compel contribution — Each of two or more joint promisors may compel every other joint promisor to contribute equally with himself to the performance of the promise, unless a contrary intention appears from the contract.
Sharing of loss by default in contribution — If any one of two or more joint promisors make default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares.
Explanation.— Nothing in this section shall prevent a surety from recovering, from his principal, payments made by the surety on behalf of the principal, or entitle the principal to recover anything from the surety on account of payment made by the principal.”
(Emphasis supplied)
No contract to the contrary is found in the JBA. In fact, the JBA reaffirms the liability of the parties by providing as follows:
“5. Joint and Several Liability.— The parties do hereby undertake to be jointly and severally responsible for all Obligations and liabilities relating to the Project and in accordance with the terms of the RFQ, RFP and the Concession Agreement, till such time as the Financial Close for the Project is achieved under and in accordance with the Concession Agreement.”
Even execution of a Power of Attorney irrevocably designating, nominating, constituting, appointing and authorizing the other member of the Consortium to be its true and lawful attorney for the purposes of the said Project or defendant No. 2 taking upon itself to be the Lead Member and carry out all acts under the Consortium even on behalf of the plaintiff, would in no way absolve the plaintiff of its liability in law to contribute to the extent of 26 per cent of the Consortium's losses/liabilities/payment obligations.
25. Under the RFP, a Bid Bond of Rs. 67 crores was required to be furnished by the Consortium. On the basis of the respective shares of the Partners of the Consortium, the plaintiff would have had to furnish a Bid Bond to the extent of Rs. 17.42 crores (26 per cent) of the total amount of Rs. 67 crores to the defendant No. 4 and the defendant No. 2 would have had to provide a Bid Bond of Rs. 49.58 crores, being 74 per cent of the total amount of Rs. 67 crores to the defendant No. 4. As explained by Mr. Khambata, since defendant No. 4 required one single Bid Bond, defendant No. 2 through Standard Chartered Bank for and on behalf of the Consortium, of which the plaintiff is a Partner furnished a Bid Bond of Rs. 67 crores in favour of defendant No. 4 as security for executing the Concession Agreement. The Bid Bond was counter indemnified by defendant No. 1. It is clear beyond any doubt that in consideration of defendant No. 1 issuing Counter Indemnity in favour of Standard Chartered Bank for issuance of the Bid Bond in favour of defendant No. 4 for Rs. 67 crores, the plaintiff furnished the Counter Guarantee dated October 13, 2010 issued by defendant No. 3 in favour of defendant No. 1 for a sum of Rs. 17.42 crores which represented the plaintiff's share (26 per cent) of the total amount of Rs. 67 crores covered by the Bid Bond. In fact by issuing the said Counter Guarantee, the plaintiff has acknowledged the fact that it is liable to contribute to the extent of 26 per cent of the Consortium's losses/liabilities/payment obligations.
26. According to the plaintiff, the sole ground alleged by defendant No. 4 against the Consortium is the failure to sign the Concession Agreement. It is submitted by the plaintiff that the Concession Agreement was to be signed by defendant No. 2, and the plaintiff had no role to play in this and therefore the default of not signing the Concession Agreement is that of defendant Nos. 1 and 2 alone and the conduct of defendant Nos. 1 and 2 now establishes that the defendant Nos. 1 and 2 were never interested in implementing the said Project and that action of leading the plaintiff to believe that it was interested in implementing the said Project, when it was known that it had no such intention is an act of fraud which vitiates the JBA and all contractual arrangements entered into between the plaintiff and PSA, including the Counter Guarantee. As set out hereinabove, the plaintiff is not absolved of its liability under the Consortium Agreement only because the defendant No. 2 had taken upon itself to be the lead member and carry out all acts under the Consortium even on behalf of the plaintiff including signing of the Concession Agreement. Again, as can be seen from the correspondence annexed to the plaint, a serious issue has arisen with the defendant No. 4 qua the time frame during which the Concession Agreement was required to be signed. The reply of defendant No. 2 to the show cause notice issued by defendant No. 4 establishes that defendant Nos. 1 and 2 are seriously contesting the decisions of defendant No. 4 with regard to the signing of the Concession Agreement and that defendant No. 4 has till date not terminated the letter of award. The plaintiff wants the Court to hold at this stage itself that defendant Nos. 1 and 2 are incorrect qua their stand regarding the time frame during which the Concession Agreement is required to be signed and therefore they never intended to sign the Concession Agreement and have thereby committed a fraud on the plaintiff. This cannot be done and also does not appear to be so. As submitted by Mr. Khambata, it could never have been the intention of defendant No. 1 to defraud the plaintiff of Rs. 17.42 crores covered by the Counter Guarantee and in the process suffer a loss of Rs. 50 crores (in view of the encashment of Bid Bond of Rs. 67 crores) and also further lose the valuable right to enter into a Concession Agreement which was to enure for a period of 30 years. Again the serious attempts on the part of defendant Nos. 1 and 2 to procure the consent of defendant No. 4 with regard to the plaintiff's withdrawal from the Consortium, also belies any fraudulent intent on the part of defendant Nos. 1 and 2.
27. It is trite law that a Court can restrain encashment of Bank Guarantee in cases of established fraud in issuance of the Bank Guarantee. The fraud has to be absolute and egregious vitiating the very foundation of the Bank Guarantee. In my view, in the present case, the plaintiff has failed to make out any case of fraud. On a reading of the averments made in paragraph 8 of the Suit it is clear that the said averments by no stretch of imagination can be said to have made out a case of fraud. The allegations of fraud made by the plaintiff are merely bald assertions and do not establish a case of fraud much less a fraud of a egregious nature. In view thereof, the decisions cited by the learned Senior Counsel for the plaintiff in the cases of U.P Co-operative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. (supra) and Yog Systems India Ltd.… v. Su-Kam Power Systems Ltd.…. (supra) are of no assistance to the plaintiff. As held hereinafter, the said Counter Guarantee is an unconditional and irrevocable Guarantee. It is settled law that encashment of an unconditional and irrevocable Bank Guarantee ought not to be injuncted by the Courts unless the case falls within the recognized exceptions laid down by the Hon'ble Supreme Court in a catena of decisions in which case an injunction restraining the encashment of a Bank Guarantee can be granted. An unconditional and irrevocable Bank Guarantee is an independent contract and whether encashment of the same ought to be permitted or not has to be considered without any reference to the underlying or main contract or to the disputes/claims thereunder. It is also pertinent to note that though the plaintiff has alleged fraud on the part of defendant Nos. 1 and 2, the plaintiff has till date not rescinded the JBA which speaks volumes about the seriousness of the allegation of fraud made by them against defendant Nos. 1 and 2. The allegation therefore made by the plaintiff that the invocation of the Bank Guarantee is vitiated by fraud cannot be accepted and the said contention is rejected.
28. To deal with the submission advanced on behalf of the plaintiff that the Bank Guarantee is a conditional one, paragraphs 4, 5 and 6 of the Guarantee are relevant and are reproduced hereunder:
“4. In consideration of PSA International Pte Ltd. counter indemnifying Standard Chartered Bank for issue of the Bid Bond of Rs. 67,00,00,000 (Rupees Sixty Seven Crore only) on behalf of the Consortium of PSA Mumbai Investments Pte Ltd and ABG Ports Pvt. Ltd (“Consortium”), we, Bank of Baroda (“Guarantor”), hereby irrevocably and unconditionally undertake to pay to PSA International Pte Ltd. (“Beneficiary”), on its first demand, an amount upto Rs. 17,42,00,000/- (Rupees Seventeen Crores and Forty Two Lakhs only), as payment obligation to the beneficiary pursuant to the Bid Bond, without any demur, reservation, recourse, contest or protest, without notice or reference to ABG Ports Pvt. Ltd. irrespective of whether the Beneficiary's demand is disputed by ABG Ports Pvt. Ltd. or any other person or not, within 3 business days of a written request from the Beneficiary for payment within the Effective Period (as defined hereinafter), supported by the following documents.
(I) A photocopy certified to be true copy of the Beneficiary of the letter from Jawaharlal Nehru Port Trust making claim under the Bid Bond, or, in the absence of such letter from Jawaharlal Nehru Port Trust, a letter from the Standard Chartered Bank stating that Jawaharlal Nehru Port Trust has made a claim under the Bid Bond.
(II) A letter on the letterhead of the Beneficiary that it is invoking this Bank Guarantee as the Bid Bond counter indemnified by it is invoked by Jawaharlal Nehru Port Trust.
5. Any demand or request made in writing duly acknowledged by an Authorized official conforming to paragraph 4 above made by the Beneficiary shall be final, conclusive and binding on the Guarantor and the Guarantor shall make all payments under this Bank Guarantee without requiring or obtaining any additional evidence or proof that the amount claimed or requested by the Beneficiary is due and/or payable to the Beneficiary.
6. Any demand or request made in writing duly acknowledged by an Authorized official conforming to paragraph 4 above made by the Beneficiary should be addressed to the Bank at the address given below and may be sent through post or fax.
7. For avoidance of doubt, the guarantor hereby irrevocably and expressly waives all rights of objection or challenge in respect of or in relation to any payment made pursuant to the Bid Bond or this Bank Guarantee”.
29. As set out hereinabove, it is clear that defendant No. 2 initially furnished a Bid Bond of Rs. 67 crores through the Standard Chartered Bank to defendant No. 4 on behalf of the Consortium which included the plaintiff's contribution. Since the plaintiff was required to make its contribution to the extent of 26 per cent of the said Bid Bond i.e to the extent of 17.42 crores and since the defendant No. 1 counter indemnified the said Bid Bond of Rs. 67 crores, the plaintiff furnished a Counter Guarantee dated 13th October, 2010 issued by defendant No. 3 in favour of defendant No. 1 for a sum of Rs. 17.42 crores. The terms of the Counter Guarantee make it clear that the Counter Guarantee is for issue of Bid Bond of Rs. 67 crores by PSA on behalf of the Consortium. The payment under the Counter Guarantee is described as the payment obligation of the plaintiff to the beneficiary pursuant to the Bid Bond. The payment under the Counter Guarantee is without demur, reservation, recourse, contest or protest. The only condition for such payment is that the demand or the payment must be supported by the documents listed in Clause 4 and must be in accordance with Clauses 5 and 6. Admittedly the demand complies with this requirement. Upon such demand being made, the defendant No. 3 Bank, within 3 days upon receipt of a written request from defendant No. 1, is bound to pay an amount upto Rs. 17.42 crores as payment obligation to defendant No. 1 pursuant to the Bid Bond, without any demur, reservation, recourse, contest or protest, without notice or reference to the plaintiff, irrespective of whether the defendant No. 1's demand is disputed or not by the plaintiff or any other person. Mr. Khambata is therefore correct in his submission that the expression “payment obligation” is merely descriptive of what the Counter Guarantee has been furnished for, and it cannot be contended that the same is a conditional guarantee. He is further correct in his contention that once the Bid Bond for a sum of Rs. 67 crores is encashed, defendant No. 1 is entitled to be reimbursed to the extent of Rs. 17.42 crores, which is the plaintiff's share of the amount covered by the Bid Bond and which has been encashed by defendant No. 4. I do not agree with the contention advanced on behalf of the plaintiff that defendant No. 1 would be entitled to make a claim under the Counter Guarantee only in case it establishes that the plaintiff is obligated to make payment to defendant No. 1 due to the loss it has suffered under the Counter Indemnity. I also do not agree with the submission of the plaintiff that the defendant No. 1 in its letter of invocation ought to have declared that payment of obligation has fastened on the plaintiff pursuant to the Bid Bond or that it is a precondition under paragraph 4 of the said Guarantee. The language of the Guarantee in the case of Hindustan Construction Company Ltd. v. State of Bihar (supra) was materially different from the language of the Counter Guarantee in the present case and would therefore lend no assistance to the plaintiff. In my view, the Counter Guarantee is an unconditional and irrevocable Guarantee - the law regarding which does not change merely because it is given in the context of an obligation to indemnify. The submission therefore advanced on behalf of the plaintiff that the Bank Guarantee is a conditional Bank Guarantee or that the invocation is not in terms of the Counter Guarantee and is bad in law, non est and of no legal consequence cannot be accepted and is rejected.
30. As regards the submission on behalf of the plaintiff that irretrievable injustice shall be caused to it in case the Counter Guarantee is encashed, I agree with the submissions advanced on behalf of defendant Nos. 1 and 2 that no substantial pleadings have been made to justify as to how irretrievable injustice shall be caused to the plaintiff in case the Counter Guarantee is encashed and that no special equities have been made out by the plaintiff for the grant of injunction against encashment of the Counter Guarantee. The plaintiff has itself stated in the Plaint that defendant No. 1 is ultimately owned by the Govt. of Singapore and is one of the largest Container Terminal Operators in the World. In the case of U.P State Sugar Corporation v. Sumac International Ltd.. (supra), the Hon'ble Supreme Court has held in paragraph 12 that the irretrievable harm or injustice must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of an injunction on commercial dealings in the country. As correctly submitted on behalf of defendant Nos. 1 and 2, the plaintiff has done nothing more than to merely plead irretrievable injustice, without establishing cogent grounds to establish the same in case the injunction against the Counter Guarantee is not granted. In view thereof, the threshold of irretrievable injustice as required in law is not met by the plaintiff in the facts and circumstances of the case. Again in the case of Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. (supra), the Hon'ble Supreme Court held in para 22 as under:
“22. The second exception to the rule of granting injunction, i.e the resulting of irretrievable injury, has to be such a circumstance which would make it impossible for the guarantor to reimburse himself, if he ultimately succeeds. This will have to be decisively established and it must be proved to the satisfaction of the Court that there would be no possibility whatsoever of the recovery of the amount from the beneficiary, by way of restitution.”
No such circumstance exists in the present case.
31. In the light of the above circumstances, in my view, the plaintiff has not made out any case to restrain the defendant Nos. 1 and 2 from invoking the said Counter Guarantee. The above Notice of Motion is therefore dismissed with costs.
Notice of motion dismissed.
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