S. ALI ASLAM JAFRI, J.---This appeal is directed against the order dated 21-10-1998 of a learned Single Judge of this Court on Original Side rejecting the application of the appellant/plaintiff under Order 39 rules 1 and 2 read with section 151, C.P.0 seeking a restraint order against the respondents/defendants from encashing the bank guarantee dated 10-9-1996 for a sum of Rs,23,28,530 furnished by the defendant No,2 in favour of defendant No,1 on behalf of the plaintiff.
2. The facts in brief are that the appellant/plaintiff and the respondent/defendant No,1 entered into an agreement whereby the plaintiff was required to supply thermal insulation and accessories for Chakwal Cement Factory a project of respondent/defendant No,1. A sum of Rs,23.38.530 being the 20% of the total agreed amount was paid by defendant No,1 to the plaintiff as mobilization advance to be adjusted in instalments from the running bills of the plaintiff. It appears that the defendant No,1 by a letter dated 3-12-1997 (Annexure ' 1' to the plaint) addressed to the plaintiff demanded refund of Rs,14,13.924 being the balance after adjustment of the amount of certain instalments on the ground that the project for which the advance was made was cancelled due to interruption. By a letter dated 5-12-1997 (Annexure 'H' to the plaint) the defendant No,1 demanded an amount of Rs,14,13,923 from the defendant No,2 viz. The bank by way of encashment of the guarantee.
3. The plaintiff thereafter filed a suit for declaration, injunction and damages and prayed for judgment and decree as under:-
(A) Declare that the demand for encashment of the Bank Guarantee (Annexure 'B' with plaint) being based on fraud and/or illegality and/or not being in conformity with the specific conditions attached thereto is unjust, mala fide and illegal;
(B) That an Injunction be granted restraining the defendants 1 and 2 their agents, successors-in- interest, attorneys, employees and/or any other person or persons acting or claiming through or vide any of them from encashing the Bank Guarantee bearing Guarantee No,SNB/KHI/191/96 (Annexure 'D' hereto):
(C) Decree be passed awarding damages of Rs,3,787,740 with markup thereon at 19% per annum from date of filing of this suit till payment thereof subject to adjustment, if any, of residual amount from the Bank Guarantee against the defendant No,1:
(D) That preliminary decree be passed on the footing of fraudulent and wilful default under the direction of this Honourable Court for such purpose and a Commission be duly appointed for such purpose with specific directions to the Commissioner to ascertain and probe into all the assets of the defendant No,1 be it movable or immovable for the plaintiffs protection;
(E) Costs or the suit proceedings;
(F) Any other relief/reliefs and/or order/orders which this Honourable Court deems just and proper in the circumstances of the case.
4. An application under Order XXXIX, Rules 1 and 2 read with section 151, C.P.C. Was also filed by the plaintiff alongwith the plaint seeking interim injunction pending the disposal of the suit.
5. In its written-statement, the Defendant No,1 has disputed the claim of the plaintiff and contended that the Defendant No,1 has every right to get the guarantee encashed and to recover the balance amount of the mobilization advance. According to the Defendant No,1 it is an independent contract between the Defendants Nos. 1 and 2 and the plaintiff has no right to raise any objection for encashment of the said guarantee and the defendant No,2 bank has also no right to question the same or to refuse the encashment. Legal pleas regarding maintainability of the suit and the locus standi of the person filing the same were also raised. Counter-affidavit has also been filed to the application for grant of interim injunction. However, it appears that Defendant No,2 bank has neither filed the written-statement nor any counter-affidavit to the application for interim relief.
6. We have heard Mr. Qadir H. Sayeed, learned counsel for the appellant/plaintiff, and Mr. A. Qadir Siddiqui, learned counsel for the respondent/Defendant No,
1. The learned counsel for the appellant in support of his contention has placed reliance on the following cases (i) R.D. Harbottle (Merchantile) Limited and another v. National Westminister Bank Limited and others 1977(2) All ER 862, (ii) Messrs. Banerjee and Banerjee v. Hindusthan Steel Works Construction Limited and others (AIR 1986 Calcutta 374 and (3) United Commercial Bank v. Bank of India and others AIR 1981 SC 1426.
Learned counsel for respondent No,1 has placed reliance on (i) Messrs National Construction Ltd. v.
Aiwan-e-lqbal Authority PLD 1994 SC 311, (ii) Pakistan Engineering Consultants v. Pakistan International Airlines Corporation and another 1989 SCM R 379 and (iii) Pakistan Engineering Consultants v. Pakistan International Airlines Corporation and others 1993 CLC 1926 in support of his contention.
7. Now, the point for determination is whether under the circumstances of the present case the appellant/plaintiff is entitled for the grant of interim injunction, as prayed, till the disposal of the suit.
8. It has been argued by Mr. Qadir H. Sayeed, the learned counsel for the appellant/plaintiff, that the advance payment guarantee/mobilization advance guarantee dated 10-9-1996 is not an unconditional guarantee so as to entitle the Defendant No,1 to get it encashed unilaterally and the bank should not encash the same. In order to appreciate the contention of the learned counsel we feel it necessary to reproduce Condition No,1 of the said guarantee which reads as follows:-- "To make unconditional payment of Rs,2,328,530 (Rupees Two Million Three .Hundred Twenty-Eight Thousand Five hundred Thirty only) to the employer above mentioned without recourse question or reference to the Contractor of any other person or party on your written intimation that the Contractor has failed to perform any of its obligations under the agreement. (Underlining is by us)." Thus, it will be seen that the guarantee could he encashed if written intimation to the effect that the contractor has failed to perform any part of its obligations under the agreement was sent to the bank. There are number of letters/correspondence between the plaintiff and the Defendant No,1 available on record to show that the plaintiff has all along been requesting the Defendant No,1 to take delivery of the material to be supplied by the plaintiff which was ready for dispatch but the Defendant No,1 was avoiding to take delivery for lack of storage facility. A letter dated 3-12-1997 addressed to the plaintiff from the Defendant No,1 clearly shows that the contract was cancelled by the Defendant No,1 due to the "interruption of the project". The said letter does not show any breach of the contract on the part of the plaintiff. There is another letter dated 5-12-1997 addressed to the Defendant No,2/Bank from the Defendant No,1 with a copy to the plaintiff demanding the encashment of the guarantee amount. This letter as well does not indicate any breach of the contract on the part of the plaintiff. The relevant part of the letter dated 5-12-1997 is reproduced as below:-- "Since the contract has not been completed and the balance of Rs,14,13,923 remains unpaid. We hereby ask you to pay us the said amount."
9. The Condition No,1 in the agreement of guarantee, as reproduced above, prima facie shows that the guarantee could be encashed on the demand of Defendant No,1 if the contractor failed to perform any of its obligations under the agreement. The two letters dated 3-12-1997 and 5-12-1997 as referred to above do not show any violation of the terms and condition on the part of the contractor! Plaintiff.
10. We are, therefore, of the considered view that there is a strong prima facie case in favour of the plaintiff. The balance of convenience also appears to be in favour of the plaintiff who has claimed damages as well from the Defendant No,1 for breach of the contract on the part of the latter.
Whether such relief can be granted or refused can only be decided after recording of the evidence.
There is no cavil with the proposition that a guarantee for repayment of mobilization advance is a separate guarantee between the parties to such bond. However, the fact remains that the guarantee bond in this case is not an unconditional bond A so that the Defendant No,1 could claim encashment of the guarantee bond unilaterally. The Defendant No,1 has to establish that the contractor viz. The plaintiff has failed to perform any of his obligations under the agreement. Prima facie, we do not find any such material on record. Keeping in view the facts of the suit, the material placed on record and the settled case law on the point we are of the considered view that the appellant/plaintiff is entitled for the grant of temporary injunction as prayed.
Defendants/Respondents are restrained from encashing the bank guarantee in respect of the mobilization advance till the disposal of the suit. There will be no order as to costs. The appeal is allowed.
Interim injunction granted.