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Em and Em Associates Vs. Delhi Developement Authority - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 1391 of 1984
Judge
Reported in1986(2)ARBLR140(Delhi); 30(1986)DLT163
ActsCode of Civil Procedure (CPC), 1908 - Order 39, Rule 1;Arbitration Act, 1940- Sections 41
AppellantEm and Em Associates
RespondentDelhi Developement Authority
Advocates: D.K. Syal and; M.L. Jain, Advs
Excerpt:
.....order 39 rules 1 and 2 of the arbitration act, 1940, against the respondent from encashing the bank guarantee - it was observed that the bank already had paid a certain amount of guarantee to the respondent without any demur on demand, for the purpose loss or damages that could be caused to the respondent due to the breach of contract on the part of the contractor - it was also observed that nothing was mentioned in the letter about the amount that was due on account of any loss or damages - it was further found that the bank guarantee arose out of the contract between the petitioner and the respondent and the amount of bank guarantee would remain a liability of the petitioner- hence, it was held that under section 41 of the act, the respondent should be restrained from encashing the..........authority (to be referred to as dda), their officers, agents and servants from encashing the bank guarantee/guarantee bond no. 44/82 for rs. 46,300.00 . (2) this application is resisted by the respondent/dpa. (3) the perusal of the bank guarantee shows that the syndicate bank (hereinafter to be referred to as the bank) undertook to pay the amount due and payable under this guarantee without any demur on demand from the dda staling that the amount claimed is due by way of loss or damages caused to or would be caused to or suffered by the dda by reason of any breach on the part of the petitioner-contractor of any of the terms and conditions contained in the original contract between the parties on the basis of which this bank guarantee was given by the bank. copy of the letter of.....
Judgment:

Jagdish Chandra, J.

(1) By means of this application brought under Section 41 read with Second -chedule of the Arbitration Act, 1940 and Order 39 Rules 1 & 2 of the Code of Civil Procedure the petitioner Em & Em Associates seeks a stay against the respondent Delhi Development Authority (to be referred to as DDA), their officers, agents and servants from encashing the bank guarantee/guarantee bond No. 44/82 for Rs. 46,300.00 .

(2) This application is resisted by the respondent/DPA.

(3) The perusal of the bank guarantee shows that the Syndicate Bank (hereinafter to be referred to as the Bank) undertook to pay the amount due and payable under this guarantee without any demur on demand from the Dda staling that the amount claimed is due by way of loss or damages caused to or would be caused to or suffered by the Dda by reason of any breach on the part of the petitioner-contractor of any of the terms and conditions contained in the original contract between the parties on the basis of which this bank guarantee was given by the Bank. Copy of the letter of demand by the Dda upon the Bank is Annexure P-2 dated 15-10-1984 in which the following relevant lines appear :

'....INthis connection I am to state that the three agreements in question have been closed. We propose to encash the aforesaid bank guarantees. You are, thereforee requested to send a demand draft for Rs. 1,73,637.60 in favor of the E.E./CPD-Vlll per messenger of this letter

(4) This letter nowhere alleges or mentions that this amount has become due to the Dda on account of any loss or damages caused to or to be caused to or suffered by the Dda by reason of any breach of the original contract on the part of the petitioner-contractor. Not staling these averments in the aforesaid letter renders the letter not in consonance with the terms of the bank guarantee and under the circumstances this letter of the Dda is defective and consequently the bank guarantee cannot be invoked by the DDA. In this view of the matter the petitioner is entitled to the stay as prayed for.

(5) The contention of the learned counsel for the respondent/DDA that this bank guarantee was contract only between the bank on the one hand and the Dda on the other for which reason the petitioner-contractor was not competent to move this stay application in respect of the invoking of the bank guarantee, does not appear to be tenable because the bank guarantee has arisen out of the original main contract between the petitioner on the one hand and respondent/DDA on the other and the money covered under the bank guarantee, even though payable by the Bank, shall ultimately remained the liability of the petitioner-contractor.

(6) In view of the above discussion, Dda is restrained from encashing the bank guarantee on the basis of the aforesaid letter dated 15-10-1984 on account of its defective nature as pointed out above. Copy of this order may be sent to the Bank.


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