MANZOOR HUSSAIN S1AL, J: --M/s. National Construction Limited, the appellants herein, by leave of this Court have called in question, the validity of judgment dated 1-12-1991, of the Lahore High Court, whereby FA.O. No.203 of 1990, filed by the appellants was dismissed and the order dated 26-9-1990, passed by the learned Civil Judge, refusing to grant temporary injunction restraining the respondent from encasing the bank guarantee furnished by Habib Bank Limited, in favour of the respondent was maintained.
2. The appellants through a deed of contract dated 24-7-1985, had undertaken to construct a building known as Aiwan-e-Iqbal Complex, Lahore, for the respondent. The appellants received in advance approximately a sum of ''s.1,15,00,000, for due procurement, transport of construction plant etc. And the performance of the contract. The amount received was deduct able from each running bill at the rate of 10% of the work done and afterwards at the rate of 20%.
3. According to the terms of contract the construction work was to be computed by 4-12-1987. The time was, however, extended upto 31-10-1989.
For some reasons the project could not by completed within the extended time and the construction work had stopped. The respondent took steps to en cash the bank guarantee and the performance bond. The appellants, therefore, filed an application under section 20 of the Arbitration Act, 1940, in the Civil Court and sought injunction restraining the respondent from getting the bank guarantees en cashed.
The learned Civil Judge refused to grant stay as according to him the appellants were not to suffer irreparable loss in the absence of temporary injunction. The appellants preferred appeal against the aforesaid order but the same was dismissed on 1-12-1991, by the learned Single Judge of the Lahore High Court. Hence this appeal.
3. Learned counsel for appellants contended that the appellants had already executed the project for more than the amount received in advance from the respondent. In case the bank guarantees are en cashed, they will not be able to recover the amount due to them, in the event, they ultimately succeed in the arbitration proceedings. It was also submitted that the learned Covets below erroneously held that the appellants shall not suffer irreparable loss. In support of his submissions learned counsel for the appellants relied on M/s. Jamia Industries Limited v. M/s. Pakistan Refinery Limited PLD 1976 Kar. 644, MacDonald Layton & Co. Ltd. v. Pakistan Service Limited and others 1983 CLC 2252.
On the contrary learned counsel for respondent submitted that the appellants did not abide by the terms of the contract and delayed the completion of the project thereby caused considerable loss to the respondent due to escalation of prices. It was pointed out that the bank guarantees furnished clearly stipulated that the same would be encashable without reference to any dispute before any arbitrator or Court. He cited Pakistan Engineering Consultants v. Pakistan International Airlines Corporation and B.C.C.I. And others 1993 CLC 882, in support of his submission.
4. We have considered the contentions raised by the learned counsel for the parties and have also perused the record. The contents of para. 3 of mobilization advance guarantee, clearly visualized that the respondent can get en cashed guarantee without any question or without any reference of any nature, whatsoever to the contractor (appellants) and irrespective of any dispute between the parties or before any arbitrator or any Court of law. The. Precedents cited by learned counsel for the appellants are distinguishable. The case reported as M/s. Jamia Industries Limited v. M/s. Pakistan Refinery Limited PLD 1976 Kar. 644 does not deal with bank guarantee given against the mobilization advance. Similarly. In MacDonald Layton & Co. Ltd. v. Pakistan Service Limited and others 1983 CLC 2252, the employer terminated the contract in contravention of the clauses of the agreement, when the plaintiffs did not abandon the work, consequently injunction was issued. The contention of the learned counsel for the appellants that in the event, the appellants succeeded in the arbitration proceedings they will not be able to recover the amount is beyond the point in issue.
In the instant case, therefore, the bank guarantees furnished by the appellants contain categorical undertaking and impose absolute obligations on the banks to pay the amount, irrespective of any dispute which may arise between the parties regarding the breach of contract. In our view the Courts must given effect to the covenants of the bank guarantees, the performance guarantees, for the smooth performance of the contracts. Those guarantees are independent contracts and the bank authorities must construe them, independent of the primary contracts. They should encash them notwithstanding any dispute arising out of the original contract between the parties.
In the instant case, therefore, the encashment of the bank guarantees cannot be postponed pending decision of the arbitration proceedings, which may take years to conclude.
5. The discretion exercised by the Courts below in refusing to grant temporary injunction by restraining the respondent from encashment of the bank guarantees in respect of the amount advanced to the appellants can neither be deemed to be arbitrary nor fanciful. The respondent is, therefor, held entitled to encash the bank guarantees to the extent of the balance unadjusted amount. I (, In the result, we find no merit in this appeal and it is dismissed.)
A.A./N-363/S