Usha Mehra ( 1 ) [ed. facts : Petitioner had entered into a contract with respdt. for special repairs of Main Runway etc. at IGI Airport at estimated cost of more than Rs. 2. 87 crore in July, 1990. Petitioner was to get mobilisation advance against ace Bank Guarantee. The advance was recoverable from running bills. Petitioner had received sad advance of about Rs. 28 lakh and had given guarantee of about Rs. 17. 98 lakhs. The advance was recovered from running bills to fail. the extent of Rs. 22 lakh. Petitioner had also given Bank Guarantee of Rs. 1 lakh in respect of huts built by its labour as a security that huts would be removed after labour finishes its work. Petitioner had also given performance guarantee of about Rs. 5 lakh Respondent terminated the contract by letter dt. 4. 1. 92. Petitioner filed application u/s. 20, Arbitration Act and questioned the action of Respondent in invoking the various Bank Guarantees. The Court upheld its plea about guarantee relating to mobilization advance and about removal of huts]. After detailing above, Judgment is : ( 2 ) LEARNED counsel for the petitioner contended that the bank guarantee could be invoked in two cases : One, When the amount of advance had not been utilised fully or partly for the purpose of the work and secondly when then that advance is not fully recovered adjusted by the Authority. In this case, it is not the case of respondent that advance has not been utilised for the purpose of this work. Nor it is the case of the respondent that an amount of Rs. 22 lacs has not been recovered. Hence respondent could not have invoked the bank guarantee for the full amount of advance. As per the terms of the guarantee respondent was under obligation to indicate in the letter of invocation that so much is only left to be recovered against the petitioner because balance had already been recovered from the running Account Bills. ( 3 ) THE petitioner had executed the work to the tune of Rs. 80 lacs and as per the term of the contract, Rs. 3 lacs was debited from each of the seven running bills (out of nine) totalling Rs. 22 lacs approximately. Thus only a sum of Rs. 6,12,752. 00 remained outstanding as on 31. 12. 91. ( 3 ) THE petitioner had executed the work to the tune of Rs. 80 lacs and as per the term of the contract, Rs. 3 lacs was debited from each of the seven running bills (out of nine) totalling Rs. 22 lacs approximately. Thus only a sum of Rs. 6,12,752. 00 remained outstanding as on 31. 12. 91. This fact finds support from a letter issued by Mr. Ashok Kumar, Accounts Manager of the respondent dt. 31. 12. 91. The said letter reads : ". . . IT is to state that a sum of Rs. 6,12,752. 00 is outstanding as on 31. 12. 91 against the Mobilization Advance of Rs. 28, 77, 191. 00 paid for the work special repair of Main Runway 10/28 and other operational payment at IGI Airport being executed by your firm under the agreement No. 3/tfd/90-91. . . . , ( 4 ) THIS letter is a clear admission of the fact that after adjusting the mobilisation advance from the Running Account Bill, only a sum of Rs. 6,12,752. 00 remained outstading Therefore, it was not justified for respondent to invoke the bank guarantee to the full extent of Rs. 17,98,244. 00. Hence, the invocation is not as per the term of the bank guarantee. The bank guarantee stipulates that advance had to be recovered from the bills of contractor proportionately as the work proceeds. It was only when the authority failed to recover or adjust fully the advance then the authority could invoke the bank guarantee to the extent of the amount of of the guarantee. This finds support from the language of the bank guarantee where it is specifically mentioned that the claim made by the authority on the bank will be for the loss or damage caused to or suffered by reason of the authority not having been able to recover in full. Beside this, view can be supported from the fact that original bank guarantee was for a sum of Rs. 28,77,191. 00 which was furnished on 10. 7. 90 To it own addendum, was issued on 28. 8. 1991 extending the bank guarantee up to 31. 1. 92 but amount of guarantee was reduced to the extent of Rs. 17,98,244. 00. This was because by then from the running account of Rs. 11 lacs approximately had been recovered. 28,77,191. 00 which was furnished on 10. 7. 90 To it own addendum, was issued on 28. 8. 1991 extending the bank guarantee up to 31. 1. 92 but amount of guarantee was reduced to the extent of Rs. 17,98,244. 00. This was because by then from the running account of Rs. 11 lacs approximately had been recovered. ( 5 ) HENCE it is apparent that the respondent could only invoke that much guarantee which had not been adjusted or recovered so far from running account bills. ( 6 ) IN view of these submissions made at the bar, the question for consideration is whether having already recovered/adjusted a substantial amount of the advance from the running bills of the petitioner, could the authority invoke the guarantee to the fullest extent? The guarantee in law is in fact given by the parties for an object and purpose namely that the beneficiary may recover amount easily from the guarantor without undergoing the botheration. But guarantee is not a means to be used for enrichment. When the purpose of the guarantee is fulfilled the beneficiary cannot invoke the guarantee. Take for example, if instead of Rs. 22 lacs, the total amount of Rs. 28 lacks had been recovered from the running bills, could the authority still invoke the bank guarantee after having already recovered the advance as stipulated in the guarantee ? The answer would naturally be in the negative. The liability of the petitioner under the guarantee is to the maximum extent of the amount mentioned therein, but that does not mean that the authority can invoke to the fullest extent the amount of the bank guarantee and also recover the amount from the running bills. This would tantamount to taking double benefit which is not permissible under law. ( 7 ) MR. Kapur on the other hand contended that this Court has no power to take into consideration these facts because the authority has been empowered to invoke the bank guarantee irrespective of the fact whether the amount has been recovered or not. He, in order to strengthen his arguments, placed reliance on G E T S CO. vs. M/s. Punj Sons 1991 (4) JT. He, in order to strengthen his arguments, placed reliance on G E T S CO. vs. M/s. Punj Sons 1991 (4) JT. =1992 Rajdhani LR (N) 10 and in particular the observation of the Supreme Court to the extent that "when the mobilisation advance was to be recovered from the bank by the beneficiary it would not make the invocation defective nor it was necessary for the authority to mention to the bank as to how much amount had been recovered from the running bills and what amount remained payable. The bank is not concerned with the outstanding amount payable under the running bills. The right to recover the amount under the running bills has no relevance under guarantee. The liability of the bank remained intact irrespective of the recovery of the moblisation advance or the non payment under the running bills". The Supreme Court had also observed that "the failure on the part of the beneficiary to certify the remaining mobilisation advance in the letter for encashment of bank guarantee is of little consequence to the liability under the guarantee". The bank has to pay as per the term nor the bank could be injuncted from paying the same. Therefore, relying on these observations of the Supreme Court, Mr. Kapur contended that this Court cannot go behind the invocation to determine as to how much amount was recovered from the running bill and what amount remains payable by the petitioner. Moroever, the Accounts Manager had no authority to issue that letter. These arguments of Mr. Kapur are without force. The facts in GETS Co. vs M/s. Punj Sons are quite distinguishable. In that case the guarantee was a composite bank guarantee. [the facts in that case are then mentioned. ] ( 8 ) THE perusal of the facts as discussed by the High Court in the case of Punj Sons, shows that the High Court took into consi- deration the fact the GETSCO could not encash the bank guarantee on account of the non-performance of contract. The High Court was of the view that it is only the amount vacated from the mobilisation advance which GETSCO could adjust towarads performance guarantee. On these observations, the Supreme Court opined that the High Court misinterpreted theterms of the bank guarantee. The recovery or adjustment of the mobilisation advance had nothing to do with the performance guarantee. The High Court was of the view that it is only the amount vacated from the mobilisation advance which GETSCO could adjust towarads performance guarantee. On these observations, the Supreme Court opined that the High Court misinterpreted theterms of the bank guarantee. The recovery or adjustment of the mobilisation advance had nothing to do with the performance guarantee. The performance guarantee was distinct and on contractor committing breach of contract the authority was proving its right to invoke the guarantee. In view of breach having been alleged and invocation being of performance guarantee, the deduction or recovery made against mobilisation advance was of no consequences. It was under these circumstances the above observations were made. But that does not mean that if the guarantee is given for securing the mobilisation advance and the amount having already been recovered still the beneficiary will not give benefit of the same while invoking the bank gurantee. Such an invocation, to my mind, would not be as per the terms of the bank guarantee. Therefore, I find force in the submission of Mr. Shiv Dayal, Sr. Adv. for the petitioner that the invocation is not as per the terms of the guarantee. The principle of special equities are in favour of the petitioner. So far as the mobilisation advance guarantee is concerned, the petitioner never gave any performance guarantee with it. Therefore, it does not lie in the mouth of the respondent to allege that it was dot necessary for it to have mentioned as to how much mobilisation advance had been recovered from the running bills. Moreover, respondent now cannot turn round and say that the letter issued by the Accounts Manager was of no consequences. So far as the petitioner is concerned, it is an admission of fact by respondent. There is not an iota of evidence by the respondent to prove that Accounts Manager had no authority to issue this letter or that instead of Rs. 6,12,752. 00 some other amount is due. Therefore, so far as mobilisation advance guarantee is concerned, to my mind, the respondent cannot invoke the bank guaranttee to the full extent. Authority can invoke the guarantee for the unrecovered amount. The liability of the bank in term of the bank guarantee stood reduced as when the authrity recovered or adjusted the mobilisation advance from the running bills. Therefore, so far as mobilisation advance guarantee is concerned, to my mind, the respondent cannot invoke the bank guaranttee to the full extent. Authority can invoke the guarantee for the unrecovered amount. The liability of the bank in term of the bank guarantee stood reduced as when the authrity recovered or adjusted the mobilisation advance from the running bills. ( 9 ) IN the the case of Punj Sons (supra), the Supreme Court observed that when there is a serious dispute between the parties, the bank guarantee cannot be encashed. Even otherwise, I find that the special equity is also in favour of the petitioner because the respondent cannot be permitted to deduct the amount of mobilisation advance from the running bills and also claim the same amount from the bank by invoking the bank guarantee. [in para 18, objection of petitioner that invocation was barred by time is negatived]. ( 10 ) SO far as the bank guarantees namely NP/g/21/46 for Rs. 2 lakh and NP/g/21/157 for Rs. 1 lakh and NP/g/21/256 for Rs. 2 lakh are concerned, these were furnished by the petitioner on account of security under Clause 10 of the Agreement which reads as under: "the contractor, whose tender is accepted, will be required to furnish by way of security deposit for the due fulfilment of his contract, such as will amount. . . . . . (l ). . . (ii ). . . (iii ). The security deposit will be collected by deductions from the running bill of the contractor at the rates mentioned above and the earnest money deposited at the time of tender, will be treated as part of the security deposit. The security amount will also be accepted in cash or in the shape of guarantee bonds of Nationalised banks and State Bank of India will also be accepted for this purpose provided confirmatory advice is forthcoming from the Reserve Bank of India. " ( 11 ) THIS shows that these bank guarantees were furnished by the petitioner for the due performance of the contract. As per the affidavit filed by the respondent of one Shri Ashok Messon, Assistant Engineer, the contract of the petitioner stood terminated vide letter dated 3. 1. 92 posted on 4. 1. 92. Mr. " ( 11 ) THIS shows that these bank guarantees were furnished by the petitioner for the due performance of the contract. As per the affidavit filed by the respondent of one Shri Ashok Messon, Assistant Engineer, the contract of the petitioner stood terminated vide letter dated 3. 1. 92 posted on 4. 1. 92. Mr. Kapur, therefore, contended that once the contract is terminated the consequences have to follow as per Clause 3 of the Agreement, which provides inter alia as follows:- "the Engineer-in-Charge may without prejudice to his right against the contractor in any respect of any delay or inferior workman ship or otherwise or to any claim for damage in respect of any breaches of the contract and without prejudice to any rights or remedies under any of the provisions of this contract or otherwise and whether the date for completion has or has not elapsed by notice in writing, absolutely determine the contract. " ( 12 ) WHEN the contractor has made himself liable for action under any of the cases aforesaid the Engineer-in-Charge on behalf of the IAAI of India shall have powers : (A) To determine or rescind the contract as aforesaid (of which termination or rescession notice in writing to the contractor under the hand of the Engineer-in-Charge shall be conclusive evidence ). Upon such determination or rescession the security deposit of the contractor shall be liable to be forefeited and shall be forefeited and shall be absolutely at the disposal of IAAF. " ( 13 ) MR. Kapur, therefore, contended that having invoked the provision of Clauses 3 of the Agreement, the Authority of the Engineer-in-Charge, cannot be challenged before this Court under the present proceedings. The petitioner instead of depositing the security amount in cash as stipulated in the contract had furnished the bank guarantee in lieu thereof. Since the contract has been terminated and the Engineer-in-Charge, has invoked Clause 3 of the agreement and also invoked the bank guarantee which was furnished by way of security, this Court cannot go behind the same to find out whether the contract had been rightly terminated or that there was no breach of contract on the part of the contractor. ( 14 ) MR. ( 14 ) MR. Dayal, appearing for the petitioner, on the other hand contended that there was a delay on the part of the respondent in making available the run way for approximately 8 months which fact is admitted by the Chief Engineer of the respondent vide its endorsement dated 23. 10. 91 made on the para wise comments furnished by the Superintending Engineer dt. 22. 10. 91. The C. E. has made the following endorsement, "under the present circumstances and breach of contract on the part of the Department, to make available runway for a period of approximately 8 months, we have to accept delay in completion of work. "he, therefore, contended that since there is no breach on the part of the petitioner, the security could not be forefeited nor the bank guarantee furnished in lieu of the same can be encashed. These arguments of the counsel for petitioner have no force because this Court cannot go into the merits of the case nor can determine as to whose fault it was, which led to the termination of the contract and whethere was delay or not. These are the questions of fact which have to be gone into by or before the arbitrator. In fact, instead of depositing the security amount, the petitioner had furnished the bank guarantee in lieu thereof, and the S. E. , having already invoked his power, u/cl. 3. it is not necessary for the authority to prove before this Court that the contractor has committed a breach of contract or that loss thereby is being caused to the beneficiary. The purpose of the bank guarantee furnished in lieu of security is not merely indemnification. The object is to secure the payment of a sum of money guaranteed by the bank as if it is a cash deposit made by the bank in favour of the promisee. Hence the respondent cannot be restrained from encashing the bank guarantees which were furnished in lieu of security mentioned above. These performance guarantees were accepted by the authority instead of asking the petitioner to deposit the security in cash. It is the case of the respondent authority thatpetitioner has failed to perform the contract as per the terms and conditions. Whether breach is on the part of petitioner or respondent, these issues are to be determined. These performance guarantees were accepted by the authority instead of asking the petitioner to deposit the security in cash. It is the case of the respondent authority thatpetitioner has failed to perform the contract as per the terms and conditions. Whether breach is on the part of petitioner or respondent, these issues are to be determined. These issues do not relate to the obligation of the bank under the guarantee given and the bank is also not a party to the suit. The law as to the contractual obligations under the bank guarantee has been settled in U. P. Coop. Ltd. vs. Singh Consultants 1988 (1) S. C. C. 174. In that case. Supreme Court observed that unless there is a good prima facie case of fraud, special equity and serious dispute, bank cannot be interdicted by the court. The demand in the present cash is under the guarantee and as per the terms thereof. No case of fraud or special equity has been made out in this case hence bank cannot be restrained from discharging its obligation under these three bank guarantees, ( 15 ) AS regard the guarantee for Rs. 1lakh is concerned, that was furnished by the petitioner in lieu of the land provided by the respondent for setting up labour camps. This was also in term of the Cl. 10 of the Special Conditions which reads : "no labour camps will be permitted within the Airport limits and the contractor shall make the necessary arrangements, at his own cost with the prior approval of the Engineer-in -Charge in respect of situating the camps. " ( 16 ) THIS security of Rs. 1 lakh was furnished for the land on which the labour huts had been contructed by the petitioner. It was stipulated that on completion of the project the petitioner was to remove the hutments from there. Mr. Y. K. Kapur, appearing for the respondent admitted that the land has been taken possession of by the respondent in view of the same, when the land is with the respondent and there is no hinderance by the petitioner, I do not think the bank guarantee can be encashed because the bank could only be made liable if it had been the case of the respondent that the land has not been handed over to the respondent. Since it is stated at the bar that the possession of the land has been taken over by the respondent the authority cannot be permitted to enrich itself by also encashing the bank guarantee, for which the security was taken. Therefore, taking these factors into consideration I find that special equity is in favour of the petitioner because if the respondent is allowed to encash the bank guarantee it would amount to irretrievable injustice to the petitioner. Therefore, prima facie I am of the view that qua this bank guarantee, the respondent should be restrained from encashing the same. ( 17 ) IN view of my above discussion, it is hereby ordered that the respondent cannot encash the mobilisation advance guarantee to full amount nor can it encash the bank guarantee for Rs. 1 lakh. As regards the rest of the three performance bank guarantees furnished in lieu of security u/cl. 10 of the agreement, the bank cannot be restrained from, encashing the same.