' The above suits have been filed by the plaintiffs on the basis of a contract between them on the one side and defendants Nos. 1 and 2 on the other side. As the main contract involved in the two suits is the same, hence it was ordered that both the suits shall be tried together. In each of the suits the plaintiffs have also filed an application for temporary injunction (C. M. A. No, 2566/1982 in Suit No, 265/1982 and C. M. A. No, 2580/82 in Suit No, 270/1982 under Order XXXIX, rules 1 and 2, C. P.
C. Both the applications are sought to be disposed of by this order. Plaintiffs and Defendants Nos. 1 and 2 in both the suits are same. The context in which the applications have been made is as under :-
2. In April, 1980 defendant No, 1 awarded to the plaintiffs a contract for construction of a hotel Chalets and staff residence to be used for winter sports and summer recreation contre at Malam Jabba, Swat of the value of approximately Rs, 3,80,00,000. Defendant No, 2 was associated with the contract as a subsidiary of defendant No,
1. A formal contract was entered into. The defendants Nos. 1 and 2 (hereinafter referred to as the employers) appointed Messrs Zaheeruddin Consultants Ltd. As their consultants in respect of the said contract.
3. On or about 17th April, 1980 the plaintiffs received an amount of Rs, 3.5 millions as mobilisation advance under the terms of the contract. This advance was to be adjusted at the rate of 10% from each running bill. The plaintiffs furnished to the employers a guarantee of defendant No, 3, that is,'
Bank of Credit & Commerce International (Overseas) Limited (hereinafter referred to as the Bank) in Suit No, 265/82 in respect of the mobilisation advance of Rs, 3.4 millions. The plaintiffs also furnished on 3rd May, 1980 a performance bond for Rs, 3.5 millions of defendant No, 3 (Adamji Insurance Co. Ltd.) in Suit No, 270/1982, to ensure execution of the work in purusuance of the contract.
4. After mobilisation, the plaintiff started work at the site. However, by their letter dated 14th March, 1982, the employers reserved the quantity of work. With consequent reduction in the value of the same from Rs, 380 millions to (according to the revised bill of quantities submitted by the plaintiffs Rs, 149 millions and odd. In May, 1982 the plaintiffs started remobilizations during the winter, work used to remain suspended due to in accessability of the site account of snowfall.
5. On or about 21st June, 1982 the plaintiffs received from defendant No, 2 a letter dated 20th June, 1982 terminating the contract for the Malam Nabba Resort Project on the alleged ground that the plaintiffs had not resumed work and had abandoned the contract. The relevant portion of this matter addressed by defendant No, 2 to the plaintiff runs as under :- `On account of your refusal to proceed with the work at all as evidenced by your conduct over the past three/four months, we have come to the obvious conclusion i. e. That you are no longer interested in the execution of balance works and have abandoned the contract. To your knowledge, your said refusal to proceed with the balance works have exposed M.J.R.L. To, inter alia, unnecessary and totally avoidable losses of revenues as well as escalated costs of completion of the project, even as per the revised scope thereof, ' This is, therefore, to notify you that your agreement with us for construction, completion and maintenance of the captioned project for us stands terminated with immediate effect i. e. From today, the 20th of June, 1982. This termination is without prejudice to our rights to claim adequate compensation for the demages suffered or to be suffered by us on account of your said abandonment of the above project."
6. The plaintiffs wrote to the consultant on 21st June, 1982 to protest against this action of the employers and alleged that the termination of the contract was in contravention of clause 17.6 of the General Conditions of the Contract. It will be advantageous to reproduce here the relevant portion of the said clause 17.6, which is as under :- "Or if the Consultants sha 11 certify in "writing to the Employer that the contractors -
(a) have abandoned the contract, or
(b) have failed to proceed with the works with such due diligence and failed to ma ke such due progress as would enable the works to be completed within the time agreed upon, or
(c) have failed to commence the works or have without any lawful excuse under these conditions suspended the progress of the works for 20 days after receiving from the Consultants written notice to proceed, or
(d) have failed to remove materials from the site or to pull down and replace work for 7 days after receiving from the consultants written notice that the said materials or work were condemned and rejected by the consultants under these conditions, or
(e) have neglected or failed persistently to observe and perform all or any of the acts, matters or things by this contract to be observed and performed by the contract or for 7 days after written notice shall have been given to the contractor requiring the contractor to observe or perform the same, or ( f) have to the detriment, of workmanship or in defiance of the consultants instructions to the contrary sublet any part of the contract. Then and in any of the said causes, the Employers with the written consent of the consultants may notwithstanding any previous waiver, after giving 7 days' notice in writing to the contractor, determine the contract:"
7. Pursuant to the termination of the contract, the defendant No, 2 called upon the Bank to pay the amount of the guarantee which is subject-matter of Suit No, 265 of 1982, in which it has been prayed inter alia ; "For a declaration that the demand made by defendant No, 2 for encashment of the bank guarantee (Annexure 'B') furnished by defendant No, 3 is illegal, unlawful, arbitrary, mala fide fraudulent, unauhorised and ultra vires of the contract documents (General Conditions of Contract) and, therefore, not valid not binding on the parties."
8. Simultaneously the employers also called upon defendant No,
3. Insurance Co. To pay up the amount of the performance bond which is subject-matter of Suit No, 270/82, in which it has been prayed inter alia.
"For a declaration that the demand made by defendant No, 2 for encashment of the performance bond (Annexures "B and B/1") furnished by defendant No, 3 is illegal, unlawful, arbitrary, mala fide, fraudulent, unauthorised and ultra of the contract documents (General Conditions of Contract), and, therefore, not vaild and binding on the parties."
' Besides the above relief, common reliefs have also been sought in both the suits which are as under.
(a) "for a declaration that the termination of the contract for construction of Malam Jabba resort at Swat by defendant No, 2 vide its letter dated 20th June, 1982 (Annexure 'E' is illegal, unlawful, mala fide, arbitrary, unauhorised and in contravention of the contract document (General Conditions) and, therefore, not valid and binding on the plaintiffs.
(b) For a permanent injunction restraining the defendants Nos. 1 and 2 their officers, agents and servants from obstructing, preventing or in any other manner restricting the implementation of the said contract by the plaintiffs and further restraining the said defendants, their officers, agents and servants from taking over possession of the said site of works at Malam Jabba, Swat and/or the plaintiffs plant, equipment, machinery, materials, articles and goods lying at the site and/or taking any other action to dispossess the plaintiffs and its officers, agents and servants from site of work."
9. In the injunction application in Suit No, 265/82 (C. M. A. No, 2566/82) it has been prayed inter alia that the employers may be restrained from encashing the bank guarantee from defendant No, 3 i. e. The Bank, and the Bank may be restrained from making payment of the amount of the guarantee to the employers (defendants Nos. 1 and 2) during the pendency of the suit.
10. In the injunction application in Suit No, 270/82 it has been prayed inter alia that the employers may be restrained from encashing the performance bond from defendant No, 3 (Adamji Insurance Co.) and that the latter he restrained from making payment of the amount under the performance bond to the employers.
11. Besides the above prayers, certain common interim reliefs have also been sought in the injunction applications in the two suits. These common reliefs are contained in para. No, 1 of the injunction application in each suit, in identical language which runs as under :- "1. It is prayed on behalf of the plaintiff above-named that for the reasons disclosed in the accompanying affidavit this Hon'ble Court be pleased to grant and issue a temporary injunction restraining the defendants Nos. 1 and 2 from obstructing, preventing or in any manner restricting work of the plaintiffs at Malam Jabba, Swat, pursuant to the contract awarded to the plaintiffs as mentioned in the plaint and be further pleased to restrain the defendants Nos. 1 and 2, their officers, agents and servants from dispossessing the plaintiffs, its officers, agents, and servants and/or taking over possession of the plaintiff's plant, equipment machinery, materials, and articles and goods lying at the site and/or from interfering with the plaintiff's work in any manner whatsoever pending the hearing and final disposal of the above suits.
' These common interim reliefs have been sought in purstiance of the common reliefs in the main suits which have been reproduced in para. 8 above,
12. All the parties in the two suits are represented by counsel, except Adamji Insurance Co., the defendant No, 3 in Suit No, 270/1982, who have not contested the matter. However, the main contesting parties are the plaintifis and the employers i. e. Defendants Nos. 1 and 2 in both the suits, who have controverted the averments made in the injunction applications by filing counter- affidavits. Their main contentions are as under :-
(1) The suit as framed is not maintainable, particularly in respect of the prayers which have been quoted above as "common reliefs" on the plea that a contract relating to these reliefs, is not specifically enforceable and consequently no temporary injunction in respect of these reliefs can be granted.
(2) Plaintiffs' plea that defendant No, 2 who had terminated the contract, was not empowered to do so, was controverted by claiming that the main agreement has been executed as between the plaintiffs and defendant No, 2 and that the bank guarantee as well as the performance bond have been executed in favour of defendant No, 2 (Malam Jabba Resort Limited).
(3) That no irreparable loss is likely to be caused to the plaintiffs if no injunction is issued, or.
(4) That the defendants have no intention of misusing any material or equipment belonging to the plaintiffs for which they are prepared to make a joint inventory.
13. Nothing has been said in the counter-affidavits about contravention of clause 17.6 of the General Conditions by the employers. It is thus not denied that the employers had not consulted their own consultants (Zaheeruddin Ltd.) before terminating the contract, and that no prior notice of 7 days was given as contemplated by clause 17.5 of the General Conditions. It is also not denied that after mobilization, the plaintiffs had started work at the site. On the contrary a letter Annexure 'E' dated 24th November, 1981 produced by defendant No, 2 with his counter-affidavit (in both the suits) shows that some running bills submitted by the plaintiffs for the work, were pending with defendant No, 2 for payment. Again it is also not denied that after as many as two years of the date of the contract, the quantity of the work was reduced and that the value of the reduced work was also reduced to about more than half of the original value and that there was some dispute between the parties over the revised rates of the quantities submitted by the plaintiffs in respect of the reduced work. The plaintiffs have, therefore, emphatically pleaded that the impugned action of the employers was calculated to pressurise the plaintiffs to accept the rates dictated by them in respect of the reduced work.
14. I have heard learned counsel for the parties at length. During their arguments they have made certain concessions to each other's due to which the matter has become simple. It was conceded by the learned counsel (Mr. A. H. Mirza) for the plaintiffs that the prayers described as "common reliefs" quoted above in the two suits, are not .Maintainable, because the contract of this nature is not specifically enforceable and that the contractor cannot be thrust upon an unwilling employer even if the latter has been guilty of breach of the contract. Learned counsel agreed that the employers cannot be compelled to allow the contractor to continue the work under the contract which was, rightly or wrongly terminated by the employers. Reference in this connection may be made to clause (1) of section 56 and clause (b) of section 21 of Specific Relief Act, 1877. The contract in suit falls in the category of contracts as contemplated by clause (b) of section 21 of the said Act, which are not specifically enforceable, because the contract runs into such minute or numerous details and its nature is such that the Court cannot enforce performance of its material terms. According to section 56 (1) of the said Act no injunction can be granted to prevent the breach of a contract the performance of which would not be specifically enforced.
15. So far as the prayer of the plaintiffs regarding their material and equipment lying at the site, are concerned it has been specifically averred by the defendants in their counter-affidavit, that they have no intention to use or appropriate them. They are also prepared to make a joint inventory of the same. Learned counsel for the defendants even offered to the plaintiffs that they shall be at liberty to remove their material and requirement etc. From the site. The claim of the plaintiffs in Suit No, 265/ 1982 has thus been reduced to non-enforceability of the bank guarantee and in suit No, 270/1982 to the non-enforceability of the performance bond. Similarly the prayers of the plaintiffs in their injunction applications also have been confined to the Bank Guarantee and the performance bond only.
16. So far as the injunction application in respect of performance bond is concerned it will be appropriate to refer to the contents of this bond so as to determine under what circumstances payment thereunder can be claimed by the employers from the surety i. e. Adamji Insurance Co.
Ltd. The relevant portion of the bond which is for an amount of Rs, 3.5 Millions is reproduced hereunder :- "Now the condition of this Bond is :-
(1) That the said \ MacDonald Layton and Company Limited shall carry out the work "the work of Winter Sports and Summar Recreation Centre for the Employers strictly in accordance with the terms and conditions on which the work has been awarded to them and shall complete the work in terms of the contract.
(2) And if the said Messrs MacDonald Layton & Company Limited do not complete the execution of the work within the stipulated period or such extended period as may be allowed to them by the Employers, or abandon the work or leave it partially completed or do not commence the work or commence the work but do not complete it or commit a breach of failure in the performance of any part of the contract, the said Bond shall come into force, and the amount payable to the employer under this Bond shall be that as advised by the employer which shall be conclusive and fully binding on the surety and the surety shall not question the correctness thereof on any grounds and shall pay without any objection and without reference to the contractor and irrespective of disputes, if any, between the Employer and the Contractor.
(3) And, if the said Messrs MacDonald Layton & Company Limited shall duly execute the contract in terms of the conditions of the contract and hand over the work to the Employer after completion this obligation shall be void.
' This bond will remain in force from 5th day of May, 1980 to 4th day of May, 1982. For and on behalf of Messrs Adamjee Insurance Company Limited.
It is thus clear that before claiming payment of the amount under the bond the employers have to prove-
(i) that the contractors have abandoned the work ; or
(ii) that the contractors have committed breach of the contract ; or
(iii) that they failed to complete the work within the stipulated period and/or
(iv) that they do not commence the work.
17. It has been argued by the learned counsel for the plaintiffs that none of the above conditions have been prima facie shown to exist, so as to entitle the employers to enforce the performance bond. There is much force in this contention of the learned counsel. The plaintiffs have prima facie made out a case that they did not abandon the work on the contrary it is the defendants who, in contravention of clause 17.6 of General Conditions have terminated the contract. Thus, the plaintiffs are not only entitled to maintain a suit for injunction but are prima facie also entitled to restrain the employers from claiming payment under the Bond from defendant No, 3 during pendency of the suit. Mr. Bilal A. Khawaja, learned counsel for the employers, has not been able to show as to how the employers can demand payment of the amount under the performance bond without first proving existence of the prerequisites which render the bond enforceable. Learned counsel conceded that this bond is conditional. But he has not adverted to the most important question whether the conditions have been fulfilled. In fact his opposition to the injunction application in respect of the performance bond has been halfhearted. The main emphasis of his argument has been on the enforceability of the bank guarantee which is subject matter of the other suit and which shall be discussed later. Consequently the injunction application (C. M. A. No, 2580/82 in Suit No, 270 of 1982) is partly allowed only to the extent that defendants Nos. 1 and 2 shall not claim payment under the performance bond from defendant No, 3 and that defendant No, 3 shall not made payment on account of the performance bond to defendants Nos. 1 and 2 pending final disposal of the suit.
18. So far as the Bank guarantee in Suit No, 265 of 1982 is concerned, it was furnished by the Bank in favour of the employers to ensure proper utilization of the mobilization advance of Rs, 3.5 millions by the plaintiffs. It has been argued that any claim for payment under this guarantee shall have to be determined with reference to the terms and conditions contained in the document of the guarantee itself and not with reference to the main contract in which there is no stipulation about such guarantee. It will, therefore, be appropriate to reproduce the bank guarantee which is to the following effect :- "Whereas under the terms of the said contract, you have agreed to pay sum "of Rupees 35,00,000 (Rupees thirty-five lacs only) to Messrs MacDonald Layton & Co. Ltd. As Mobilization Advance for execution of the said work. This advance is to be recovered proportionately at the rate of 10% (ten per cent) from each running bill, till the entire amount is recovered. IN CONSIDERATION of the above, we hereby undertake to pay you on behalf of the Contractor, the sum of Rs, 35,00,000 (Rupees thirty-five lacs only) or the balance of advance which may not have been repaid through the monthly bills of the contractor upto the date of such demand whichever will be lower, unconditionally and without reference to the contractor. However, our liability in no case shall exceed Rs, 35,00,000 (Rupees thirty-five lacs only).
' This guarantee will be irrevocable and shall remain in force till the advance has been repaid in full by the contractor or till 20th August, 1982, whichever is earlier and after which date no claim will be entertained by the bank.
' We further undertake to extend the date of validity of this guarantee at your request provided it is made within the validity period of the guarantee."
19. It has been argued by learned counsel for the plaintiffs that the bank guarantee, like the performance bond, is also conditional and that it is not encashable unless the conditions mentioned therein are complied with. According to him encashment of this bank guarantee is subject to rendition of account by the employers and that only the balance would be payable to the employers, that also at the rate of 10% from each running bill. Reference has also been made to the letter dated 24th November, 1981 (A nnexure 'E') produced by defendant No, 2 alongwith his counter-affidavit showing that as many as nine running bills submitted by the plaintiffs are pending with the employers for payment. Hence it is argued that the amount under the bank guarantee can only be recovered at the rate of 10% from the running bills. In other case it will be payable only if the plaintiffs are responsible for abandoning the contract or contravening the terms and conditions of the contract or have failed to utilise the mobilization advance for the purpose for which it was made.
20. The particular bank guarantee which is subject-matter of this suit is of a peculiar nature which should not be equated with ordinary bank guarantees. It was furnished by the plaintiffs to ensure that the mobilization advance of Rs, 3.6 millions is properly utilized for the purpose for which it was made. It is a matter of common knowledge that in. Execution of works of the nature undertaken by the plaintiffs a lot of preliminary work, generally called mobilization work, is first carried out which entails heavy initial expenditure. Mobilization work involved in this contract must be commensurate with the magnitude of the main work of the value of Rs, 380 millions. The quantity of this mobilization work may be more than the ordinary works because it had to be carried out 'through extraordinary terrain, the passage through which remains show-bound for six months in a year.
21. It is not the defendant's plea that no mobilization work was at all undertaken by the plaintiffs. On the contrary-the running bills submitted by the plaintiffs prove that the work the contract had progressed much beyond the mobilization work. The main work under the contract could not have been commenced without first carrying out the mobilization work. Hence the presumption is that prima facie the plaintiffs have appropriated the mobilization advance towards the work or which it was made. If this is so and prima facie it must be presumed that it is so, then it can be argued on behalf of the plaintiffs that the only manner of recovering the advance is by way of deductions at the rate of 10% from each running bill and that the employers are not entitled to make arbitrary demand from the bank for making payment of the amount of the bank guarantee.
22. From the above it would appear that the plaintiffs have got an arguable or a prima facie case for the purpose of determining the injunction application in respect of the bank guarantee. The question of balance of convenience must also be decided in favour of the plaintiffs because there is a genuine dispute as to whether the bank guarantee has matured and is liable to be encashed in whole or in part by the employers. If no injunction is issued and the employers are allowed to recover the entire amount of the bank guarantee, it will result in multiplicity of litigation in case it is fouild later that the employers were not entitled to encash the bank guarantee.
23. Mr. Bela' A. Khawaja learned counsel for the employers, has mainly relied on the case of Alvisons Ltd. v. Government of East Pakistan and another, in support of his plea that no suit is maintainable for declaration that a bank guarantee is not encashable and that no injunction can be granted either for preventing the beneficiaries of a bank guarantee from encashing the same. In the above case the plaintiffs had filed a declaratory suit against the defendants to the effect that the plaintiffs have not committed any breach whatsoever of the terms and conditions of the contract between the plaintiffs and the defendant No, 1 and therefore, the security in the form of bank guarantee to the extent of Rs, 66,000 is not liable to be cashed by defendants Nos. I and 2 from defendant No,
3. It was held by the learned Single Judge that the declaration sought cannot be granted in the suit under section 42, Specific Relief Act, 1877 and for that reason the suit was incompetent and not maintainable. It was further held that under section 42 of the said Act a declaration can be sought only with respect to plaintiffs' legal character with regard to any right or property which right was not available to the plaintiffs whose remedy, it was further held, would be either a suit for rescission of the contract or for a specific performance if so permitted, or for damages for its breach.
24. A different view was, however, taken in the case of Messrs Jamia Industries Ltd. v. Messrs Pakistan Refinery Ltd., Karachi, in which it was held by Zafar Hussain Mirza, J. That considerations for grant of injunction under Order XXXIX, C. P. C. Need not be the same as applied to the grant of relief of permanent injunction under the Specific Relief Act. These observations were made in a suit the subject-matter of which was encashment of a bank guarantee by the defendants. The maturity of the bank guarantee and the entitlement of the beneficiaries of the guarantee to claim payment thereunder was disputed by the plaintiffs who had also applied for a temporary injunction for restraining the beneficiaries from encashing the bank guarantee. The learned Judge made following observations in respect of maintainability of injunction application in a suit of this nature :- "It would, therefore, be exposing the plaintiff to injury or loss by the bank appropriating their funds towards the guarantee debt as well as they would be exposed to the rights of litigations with the bank. All this would be obviated if the guarantee is held over to be utilised in terms of the award when the liability of the plaintiffs will have been determined."
' In this case the learned Judge had also referred to the case of Alvisons Limited quoted above and held that it was not applicable to the facts of the case in question.
25. In my view the law laid down in the case of Messrs Jamia Industries Ltd. Is on all fours with the facts of the present case. I, therefore, hold that the plaintiffs are entitled to restrain the employers from encashing the bank guarantee until disposal of this suit. The Miscenallous Application (C. M. A.1 2 No, 256611982) is, therefore, partly allowed to the extent indicated above. Injunction application in the other suit is also partly allowed as stated in para. 17 above. PLD 1968 Kar. 222 PLD 1967 Kar. 644