MODI VANIJYA v. METAL SCRAP TRADE CORPORATION LTD — 1990 DIGILAW 200 (CAL)

KALYANMOY GANGULI, J. ( 1 ) IN the instant application under Article 226 of the Constitution of India, the petitioners pray for a two-fold remedy of directing the respondents in effect, to allow a reasonable extension of the validity period of the letter of credit and extension of time for shipment and restraining the respondents from invoking the performance guarantee of from demanding any payment under the bank guarantee without disposing of the application for extension of time for shipment. ( 2 ) THE petitioner No. 1 is a registered partnership firm of which the petitioner No. 2 is one of the partners but the petitioner No. 3 is a limited company having its registered office at 17, Dornars Street, London, WIP 3 DD, that is to say the petitioner No. 3 is a foreign company. The Petitioner No. 1 is the agent Of the Petitioner No. 3 in India. Pursuant to a tender, the offer of the petitioner No. 3 was accepted through the petitioner No. 1 by the respondent No. 1. A concluded contract containing various terms and conditions followed. ( 3 ) THE respondent No. 2 obtained from the Petitioner a performance guarantee bond in the form of a bank guarantee being 10% of the total the respondent No. 2 opened a letter of credit through purchase value Canara Bank. ( 4 ) ON April 20, 1988 the petitioner No. 3 effected shipment of a consignment of 35. 043 M. T. of alloy steel melting scrap under the said con- tract for the purchase of 750 M. T. For supply of such materials the petitioner No. 3 placed an order on one M/s. A. L. Waheed General Trading Co. Of Dubai for supply of 700 M. T. of stainless steel which in its turn placed on order on M/s. Asadee Commercial Centre, Dubai. Due to a devastating fire in the yard of Asadee Commercial Centre, the said firm was not in a position to supply the material within the stipulated tune. ( 5 ) IN the circumstances, the petitioner No. 3 requested the respondent No. 2 to extend the period of 90 clays to fulfil the contract and pleaded force majeure. The respondent No. 2 contended that force majeure could not be applicable. ( 5 ) IN the circumstances, the petitioner No. 3 requested the respondent No. 2 to extend the period of 90 clays to fulfil the contract and pleaded force majeure. The respondent No. 2 contended that force majeure could not be applicable. It appears that the respondent No. 2 once extended the time for the purpose of the contract and the period of letter of credit, but the petitioner No, 3 not being able to perform its part of the contract, requested for a further extension of 9,0 days. The respondent No. 1 did not accede to any further extension and tried to enforce and encash the performance guarantee. It is in the backdrop of this fact that the present writ application was moved. For reasons to be stated hereinafter other facts need not be stated in detail. It is the assertion of the petitioners that the sole intention of the respondents Nos. 1 and 2 is to encash the performance guarantee bond to the tune of about Rs. 13 lakhs from the petitioner No. 3. ( 6 ) THE performance guarantee in the form of bank guarantee was given in terms of Clause 20 of the general conditions of respondent No. 1 and is in the following terms : -20. 1 "seller shall furnish a performance Guarantee Bond in the attached proforma from a bank within 15 (fifteen) days from the date of issue of the letter of acceptance or the execution of the contract, whichever is earlier, for an amount of 10% of the value of the order. Such performance guarantee bond shall be, counter guaranteed or confirmed by the State Bank of India or by any other Indian nationalised bank. In case furnishing of an acceptable performance guarantee bond is delayed by the seller beyond the period provided above, the purchaser shall reserve the right to forfeit the entire earnest money and may declare the contract as at an end as well as to claim for liquidated damages. " there is also an arbitration clause in the contract as per Clause 23 thereof and Clause 19. 1 deals with force majeure. " there is also an arbitration clause in the contract as per Clause 23 thereof and Clause 19. 1 deals with force majeure. ( 7 ) THE main contention of the petitioners seems to be that the respondents should be restrained from acting in terms of clauses 19 and 20 of the contract and in the alternative the respondents should be restrained from taking any action arbitrarily as against the petitioners. ( 8 ) THE entire transactions and the controversies arise out of a concluded contract wherein the respondents, undoubtedly an 'authority' within the meaning of Article 12 of the Constitution of India, seek to enforce certain terms of the contract in the eventualities contemplated in the contract. It may further be noted that the transaction is a purely commercial transaction and the action proposed to be taken is also purely an action arising out of a full-fledged commercial contract devoid of any statutory flavour. There is no public law character involved in the matter. No state action is involved in the matter. It has now been laid down by a catina of decisions of both the Hon'ble Supreme Court and this High Court that in the matter of enforcement of a condition of a contract, qua contract simpliciter the writ court should not interfere and the remedy of the aggrieved party lies in an appropriate civil proceeding. It is needless to recite all the cases on the point as this has become the well settled law of the land by now. In the latest judgment delivered by this court on 20th April, 1990 in re : D. M. Enterprises, it has been so held. In the last mentioned case, the important cases on the maintainability of the writ proceeding in matters of concluded contract have already been discussed. ( 9 ) IN that view of the matter the writ court should not seek to restrain a party from claiming either performance of a contract or from claiming any right arising out of the terms and conditions of a contract and the remedy if any, of the aggrieved party lies in an appropriate proceeding before a civil court. ( 10 ) THERE is another aspect of the matter. It has almost invariably been held in India and in England that enforcement of a bank guarantee should not be restrained as a rule. ( 10 ) THERE is another aspect of the matter. It has almost invariably been held in India and in England that enforcement of a bank guarantee should not be restrained as a rule. In the unreported decision in special suit No. 1010 of 1988 decided on 11th May 1987 by Prabir Kr. Majumder, J. all the cases on this aspect of the matter have been catalogued but as this writ application is held to be not maintainable, it is not necessary to refer to all the judgements on the other aspect of the matter. ( 11 ) THERE is yet another aspect of the matter. In the petition, arbitrariness and violation of Article 14 of the Constitution of India are the sheet anchors of the petition. No infraction of any legal right has been pleaded in the petition. It may be remembered here that the real aggrieved par is the petitioner No. 3, a limited company incorporated in England. The petitioner No. 1 being merely the agent of the petitioner No. 3. Article 14 of the Constitution of India is enshrined in part III of the Constitution delineating the parameters of Fundamental Rights. Whether a limited company, although otherwise a juristic person, can have any fundamental right and/or whether a foreign company can seek to enforce any fundamental right guaranteed to a citizen are points to ponder. But as the petition disposed of on other grounds, the said points are kept open to be decided in a more appropriate case. , ( 12 ) FOR reasons stated above, this application fails and is rejected. The rule is discharged. All interim orders are vacated. ( 13 ) THERE will, however, be no order as to costs. Application rejected.