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2007 DIGILAW 1573 (BOM)

Ind Synergy Ltd. v. Bharat Heavy Electricals Ltd.

2007-10-31

A.B.CHAUDHARI

body2007
JUDGMENT:- All appeals are admitted. Heard finally by consent of the parties. 2. These four appeals arise out of judgments and orders dated 23.4.2007 in Misc. Civil Application No.346/2007 and dated 24.4.2007 in Misc. Civil Application No.345/ 2007 against invoking the Bank Guarantee Nos.APGNDH070032 dated 11.1.2007 and 316020 165829-AA dated 5.1.2007, which were issued by respondent No.2,-Bank This applications were filed under Section 9 of the Arbitration and Conciliation Act, 1996 for interim measure. 3. In A.O. Nos.71/2007 and 72/ 2007, the appellant therein has sought modification of the judgments and orders dated 23.4.2007 and 24.4.2007 and prayed for continuing the injunction order till conclusion of arbitral proceedings instead of two months as ordered by the learned District Judge and also for expunging the observations made against the officers of the appellant in the said impugned orders. FACTS: 4. The appellant - Ind Synergy, Limited in A.OF. Nos.4212007 and 4312007 wanted to have its Integrated Steel Plant c comprising of Sponge Iron Plant, Railway Siding, Steel Melt Shop, Coal Washery and] Captive Power Plant at village Kotmara and Mahuapali, Tahsil, & District Raigarh, Chattisgarh. 5. The financial closure statement shows total sanctioned amount from the Bank and financial institutions to the tune of Rs.815 crore. The appellant required STG Set, BFBC Boiler and various other auxiliary units for installation of 50 MW Captive Power Plant and as such upon enquiries with respondent No.1 BHEL, (Bharat Heavy Electricals Limited) it made an offer to the appellant. Finally, the appellant issued purchase orders on 29.12.2006 one for design, manufacture and supply of 1 X 210 TPH BFBC Boiler with auxiliaries for Captive Power Plant for total consideration of Rs.3,99,00,000/-. The other purchase order was for design, manufacture and supply of 1 x 50 MW STG Set for Captive Power Plant for total consideration of Rs.36,60,00,000/-. 6. There was requirement of furnishing bank guarantee for 10 per cent amount of total contract value as per Clause - 3 of the purchase orders. In terms of the purchase orders, the appellant released 10 % amount of total contract by Demand Draft dated 18.1.2007. Clause - 10 of the purchase order provided for effective date of contract which in the instant case was date of full initial advance payment. The respondent No.1 accordingly furnished bank guarantee worth Rs.3,99,00,000/- and 3,66,00,000/-. In terms of the purchase orders, the appellant released 10 % amount of total contract by Demand Draft dated 18.1.2007. Clause - 10 of the purchase order provided for effective date of contract which in the instant case was date of full initial advance payment. The respondent No.1 accordingly furnished bank guarantee worth Rs.3,99,00,000/- and 3,66,00,000/-. After completion of the above requirement a kick off meeting was held between the parties on 13.2.2007 at Trichurappali in relation to BFBC Boiler and the minutes of that meeting were recorded and the minutes were no way concerned with the purchase order relating to STG Set. Clause - 9 of the purchase order provided for contractual delivery schedule for supply of 1 X 210 TPH BFBC Boiler within 18 months from the effective date of contract and Clause - 19 thereof provided the said limit as two months from the effective date of contract for Load Date and General Arrangement Drawings. The respondent No.1, however, failed to provide the Lord Date and General Arrangement Drawings, P and ill's within the stipulated period from the effective date and as a result the appellant could not take effective steps for carrying out supply work which was expected to be completed well before monsoon. The period of two months expired on 17.3.2007 but the respondent No.1 failed to provide the said date etc. and, therefore, on 3.4.2007 the appellant issued a letter by R.P.A.D., which was received by respondent No.1 on 7.4.2007 reminding the respondent No.1 about the various contractual obligations contained in the purchase orders. The respondent No.1 did not comply even after receipt of the said reminder letter. The appellant, therefore, issued a letter dated 14.4.2007 to respondent No.2 - Bank and made demand for encashment of the bank guarantee in both the cases. The bank did not honour the demand but the respondent No.1 served E-mail dated 17.4.2007, admitting that there was some delay but then assured that the Load Data would be supplied within a day or two. It made no reference to the said reminder letter dated 3.4.2007 received on 7.4.2007. The respondent No.1 filed applications under Section 9 of the Arbitration and Conciliation Act, 1996 for interim measure. These applications were registered as Misc. Civil Application No.345/2007 and 346/2007. It made no reference to the said reminder letter dated 3.4.2007 received on 7.4.2007. The respondent No.1 filed applications under Section 9 of the Arbitration and Conciliation Act, 1996 for interim measure. These applications were registered as Misc. Civil Application No.345/2007 and 346/2007. The Principal District Judge, Nagpur heard the applications and passed the impugned orders issuing injunction for a period of two months till the time respondent No.1 takes steps for appointment of arbitrator and also made some observations about the officers of respondent No.1 - BHEL. Hence, these appeals. ARGUMENTS: 7. Advocate Shri. S. V. Manohar for appellant in A.O. Nos.42/2007 and 43/2007 made the following submissions; (1) Upon conspectus of all earlier decisions of the Supreme Court of India, in the case of Himadri Chemicals Industries Ltd. Vs. Coal Tar Refining Company, reported in 2007(9) SCALE 631: [2007 ALL SCR 2324], the Apex Court has reiterated the principles governing the issue of injunction in relation to Bank Guarantee or Letter of Credit. According to him the bank giving a bank guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The first exception to the above rule is fraud committed in the notice of the bank and injustice of the kind which would make it impossible for the guarantor to reimburse himself. (2) The purchase orders were placed on 29.12.2006 but the effective date will have to be taken as 18.1.2007 because the advance payment was made on that date. The respondent No.1 did not complete its obligation within the time stipulated by providing load data and General Arrangement Drawings with which effective steps for carrying out the civil work well before monsoon could be undertaken. According to Advocate Shri. Manohar, the respondent No.1 adopted pathetic approach and when the reminder was sent by R.P.A.D., which was received by respondent No.1 on 7th April, 2007, the respondent No.1 did not even bother to attend to it nor any steps were taken even after the expiry of stipulated period to do the needful. There was, therefore, a clear cut breach of contract on the part of respondent No.1 and, therefore, appellant was justified in invoking the bank guarantee. There was, therefore, a clear cut breach of contract on the part of respondent No.1 and, therefore, appellant was justified in invoking the bank guarantee. (3) Inviting my attention to various clauses in the bank guarantee, he argued that it was a clear cut unconditional contractual instrument having the obligation to honour the commitment under the bank guarantee upon demand made by the appellant. (4) Continuing his argument, he submitted that E-mail dated 17.4.2007 shows admission on the part of the respondent No.1 about the delay though the same is described as minor delay and further there is again a doleful promise that load data would be furnished in a day or two. Thus, according to him even as on 17.4.2007 there was admittedly no supply of the Load Data and General Arrangement Drawings P & ID's. (5) The defence taken up by the respondent No.1 that the appellant had no adequate resources and funding to purchase the equipments when they placed the purchase order is not only after thought but also dishonest. Finally, he prayed for reversal of the order made by the learned Principal District Judge. 8. Per contra, Advocate Shri. A.C. Dharmadhikari for respondent No.1 in A.O. Nos.42/2007 and 43/2007 made following submissions; (1) The respondent No.1 is a Public Sector Undertaking and is one of the Navratna companies. There is, therefore, no element of any adversary attitude towards the appellant on the part of the respondent No.1. (2) The appellant - company had falsely represented to the respondent No.1 that it had adequate resources and finances to meet the obligations for purchase of equipments and as a matter of fact the respondent No.1 was induced to accept the purchase orders based on such representations. According to him, the appellant had no financial capacity to pay for the entire costs of the equipments ordered and in the absence thereof fraud on the part of the appellant can clearly be inferred. The fraud is played on respondent No.1 by the appellant and, therefore, one of the tests laid down by the Hon 'ble Supreme Court is required to be applied in the instant case. The fraud is played on respondent No.1 by the appellant and, therefore, one of the tests laid down by the Hon 'ble Supreme Court is required to be applied in the instant case. (3) The respondent No.1 incurred considerable amount of money towards expenditure for procuring various input materials from different suppliers at huge costs and now if the appellant is allowed to encash the bank guarantee the respondent No.1 would be put to irretrievable injustice and loss. The appellant has paid only 10% of the advance amount and wants the entire equipments without making further payments and now cancellation of contract would definitely result into serious injustice to respondent No.1. (4) The contract of bank guarantee is in the nature of contract of indemnity and it is difficult to call the said contract as the one of bank guarantee having regard to the various terms and conditions therein. The contract of bank guarantee which is in fact the one of indemnity is also conditional and, the before, is not enforceable until all the conditions are satisfied. (5) It will be for the arbitrator ultimately to decide whether the contract of bank guarantee is in fact the contract of indemnity and whether the same was conditional and further whether there was really a breach of contract on the part of respondent No.1. According to him therefore unless the arbitral dispute is decided or the Arbitrator comes to a prima facie conclusion on the said aspects, the District Judge was right in not allowing encashment of bank guarantees. (6) If the bank guarantees are allowed to be encashed, there remains nothing for adjudication by the Arbitrator and, therefore, in order to protect the interest of respondent No.1 rightly the impugned judgment and order came to be passed. He, therefore, prayed for confirmation of the impugned judgment and order. Arguing his A.O. Nos.71/2007 and 72/2007, Advocate Shri. Dharmadhikari submitted that the learned District Judge ought to have continued the injunction order made by him until conclusion of the arbitral proceedings by the arbitrator instead of only two months as ordered by him. He argued that the learned District Judge having found a clear cut prima facie case in favour of appellant - BHEL, there was no reason for restricting the injunction only for a period of two months. He argued that the learned District Judge having found a clear cut prima facie case in favour of appellant - BHEL, there was no reason for restricting the injunction only for a period of two months. He, therefore, argued that the same was liable to be modified by allowing the appeals preferred by appellant - BHEL. Continuing his argument, Advocate Shri. Dharmadhikari submitted that the learned. District Judge has made observations against the officers of the respondent No.1 which according to him are based on no materials. He therefore, prayed for expunging the said remarks. 9. None appeared on behalf of respondent No.2 in all four appeals though served. 10. Advocate Shri. Dharmadhikari for respondent No.1 in A.O. NosA2/2007 and 43/2007 cited following decisions; (1) AIR 1996 Supreme Court 2268 (Hindustan Steel Works Construction Ltd. Vs. Tarapore and Co. and another). (2) (2006)2 Supreme Court Cases 728 : [2006(2) ALL MR (S.O.) 85] [BSES Ltd. (Now Reliance Energy Ltd.) Vs. Fenner India Ltd. and another]. (3) 2007 AIR SCW 4182 (State Bank of India & Anr. Vs. Mula Sahakari Sakhar Karkhana Ltd.). (4) (2002)10 Supreme Court Cases 508 (State of Haryana and others Vs. Continental Construction Ltd.). CONSIDERATION: 11. Looking at the various decisions of the Supreme Court on the subject matter of the present appeals, I find that the recent decision of the Supreme Court in the case of Himadri Chemicals Industries Ltd. [2007 ALL SCR 2324] (cited supra) clearly culls out the principles in the matter of grant of injunction in relation to encashment of Bank Guarantee or a Letter of Credit and, therefore, I would like to decide these appeals in the light of the law laid down by the Apex Court in the said decision. It would be useful to quote paragraph Nos. 10 and 11 in the said decision; "10. The law relating to grant or refusal injunction in the matter in invocation of a Bank Guarantee or a Letter of Credit is now well settled by a plethora of decisions not only of this court but also of the different High Courts in India. In V.P. State Sugar Corporation Vs. Sumac International Ltd. [ (1997)1 SCC 568 ], this court considered its various earlier decisions. In V.P. State Sugar Corporation Vs. Sumac International Ltd. [ (1997)1 SCC 568 ], this court considered its various earlier decisions. In this decision, the principle that has been aid down clearly on the enforcement of a Bank guarantee or a Letter of Credit is that in respect of a Bank Guarantee or a Letter of Credit which is sought to be encashed by a beneficiary, the bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. Accordingly this Court held that the courts should be slow in granting an order of injunction to restrain the realization of such a Bank Guarantee. It has also been held by this court in that decision that the existence of any dispute between the parties to the contract is not ground to restrain the enforcement of Bank guarantees of Letters of Credit. However this court made two exceptions for grant of an order of injunction to restrain the enforcement of a Bank Guarantee or a letter of Credit. (i) Fraud committed in the notice of the bank. which would vitiate the very foundation of guarantee; (ii) injustice of the kind which would make it impossible for the guarantor to reimburse himself. 11. Except under these circumstances, the courts should not readily issue injunction to restrain the realization of a Bank Guarantee or a Letter of Credit. So far as the first exception is concerned, i.e. of fraud, one has to satisfy the court that the fraud in connection with the Bank Guarantee or Letter of Credit would vitiate the very foundation of such a Bank Guarantee or Letter of Credit. So far as the second exception is concerned, this court has held in that decision that it relates to cases where allowing encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. " Following portion quoted in paragraph 13 of the said decision would also be relevant; "13. ...........To avail of this exception, therefore exceptional circumstances which make it impossible for the guarantor to reimburse himself it he ultimately succeeds, will have to be decisively established. Clearly, a mere apprehension that the other party will not be able to pay, is not enough." The Hon'ble Supreme Court in the aforesaid case finally laid down following principle in paragraph No.14; "14. Clearly, a mere apprehension that the other party will not be able to pay, is not enough." The Hon'ble Supreme Court in the aforesaid case finally laid down following principle in paragraph No.14; "14. ...........(i) While dealing with an application for injunction in the course of commercial dealings, and when an unconditional Bank Guarantee of Letter of Credit is given or accepted, the Beneficiary is entitled to realize such a Bank Guarantee or a Letter of Credit in terms thereof, irrespective of any pending disputes relating to the terms of the contract. (ii) The Bank giving such guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. (iii) The Courts should be slow in granting an order of injunction to restrain the realization of a Bank Guarantee or a Letter of Credit. (iv) Since a Bank guarantee or a Letter of Credit is an independent an a separate contract and is absolute in nature, the existence of any dispute between the parties to the contract is not a ground for issuing an order of injunction to restrain enforcement of Bank Guaraotees or Letters of Credit. (v) Fraud of an egregious nature which would vitiate the very foundation of such a Bank Guarantee or Letter of Credit and the beneficiary seeks to take advantage of the situation. (vi) Allowing encashment of an unconditional Bank Guarantee or an letter of Credit would result in irretrievable harm or injustice to one of the parties concerned." 12. Now coming to the facts and pleadings in the present case, respondent No.1 - BHEL has in so for as aspect of fraud is concerned, averred that it acted on the representations about the financial capability of the appellant and was thus induced to accept the purchase orders and that therefore there is a fraud played on the respondent No.1 by the appellant. In support of the said ground except following averments, the petition under Section 9 does not contain adequate material or pleadings for inferring fraud. "The Petitioner, who' acted on the representations of the Respondent No.1, inter alia, in its capability to pay for the equipment and believed the same to be correct, was induced by the respondent No.1 to accept the said Purchase Order based, inter alia, on such representations. "The Petitioner, who' acted on the representations of the Respondent No.1, inter alia, in its capability to pay for the equipment and believed the same to be correct, was induced by the respondent No.1 to accept the said Purchase Order based, inter alia, on such representations. The financial capacity of the Respondent No.1 to pay for the Equipment was very important and material aspect as the Equipment cost was Rs.36.90 crores and the Petitioner was to spent considerable amount of money in procuring various input materials from different suppliers at the huge cost. The Respondent No.1 having realized that the Petitioner has achieved substantial progress in the terms of the Purchase Order and the Respondent No.1 would be obliged to pay a further sum of Rs.7.32 Crores to the Petitioner, mischievously, fraudulently and dishonestly addressed a letter dated April 14, 2007 to the Respondent No.1 purporting to invoke the said Bank Guarantee. The Petitioner now understands that the Respondent no. 1 did not have the adequate resources and funds to purchase the Equipments when they placed the purchase order on the Petitioner and is dishonestly and fraudulently seeking to renege on the purchase order by encashing the said Bank Guarantee. The petitioner reviewed the entire conduct of the Respondent no.1 when it realized and concluded that the petitioner was wrongfully and dishonestly induced by the Respondent No.1 to enter into the Purchase order/Contract by the Respondent No.1, who suggested that they (Respondent No.1) would have the necessary resources and finances to purchase the equipment valued at Rs.39.90 Crores, a fact which was not true and which the Respondent No.1 did not believe to be true when they issued the purchase order. The lack of resources and finances with the Respondent No.1 were actively concealed from the Petitioner when the Petitioner was induced by the Respondent No.1 to enter into the Contract except the Purchase order. The Respondent No.1 had induced the petitioner to enter into the contract without any intension of performing it." 13. From the perusal of the above pleadings it is clear that the respondent wants to contend that the appellant had no financial capacity to purchase all the equipments ordered. The Respondent No.1 had induced the petitioner to enter into the contract without any intension of performing it." 13. From the perusal of the above pleadings it is clear that the respondent wants to contend that the appellant had no financial capacity to purchase all the equipments ordered. In the first place there is absolutely no pleading or explanation anywhere as to whether respondent No.1 did not satisfy itself about the financial status of the appellant before accepting the purchase orders and even acting on that. Secondly, there is a total absence of pleadings as to whether the financial status of the appellant changed from good to bad after the purchase orders were accepted by respondent No.1. There is no material placed on record as to the basis on which respondent No.1 averred that the appellant had no adequate resources and funds to purchase the equipments. In paragraph No.26 of the petition a vague statement is made that respondent No.1 now understands that the appellant had no adequate resources and funds and neither any details are furnished nor explained about this so called understanding. As regards the pleadings regarding inducement are concerned, the same are vague and do not at all point out as to how there was an inducement made by the appellant to respondent No.1. No details of the alleged inducement are furnished. On the contrary, the financial closure statements filed with the appeal at Annexure-A and A-I by the appellant reflect to the contrary and there is no denial on the part of the respondent No.1 to the same. The said statements clearly show the availability of resources and finances and, therefore, the very defence of fraud raised in the matter by the respondent No.1 clearly appears to be after thought. Further no such plea was taken by respondent No.1 when it received the reminder letter dated 3.4.2007 on 7.4.2007. The same was also not taken when the respondent No.1 issued E-mail dated 17.4.2007. On the contrary, the said E-mail clearly shows readiness on the part of respondent No.1 to perform the contract. Had the respondent No.1 having realised about the alleged financial status of the appellant it would have definitely made the mention thereof in the said E-mail dated 17.4.2007. On the contrary, the said E-mail clearly shows readiness on the part of respondent No.1 to perform the contract. Had the respondent No.1 having realised about the alleged financial status of the appellant it would have definitely made the mention thereof in the said E-mail dated 17.4.2007. On the contrary, reading of the said E-mail shows that the respondent No.1 is apologetic about the delay on its part in complying with the requirements and not only that there is a further promise to supply the Load Data in a day or two. It is, therefore, amply clear that 'the averments about the fraud in relation to the financial status of the appellant were made for the first time in the petition under Section 9 only with a view to some how plead a case of fraud. In my opinion therefore no case of fraud is at all made out by respondent No.1 as argued by Advocate Shri. Dharmadhikari. At any rate, looking to the test laid down by the Hon'ble Supreme Court, the fraud has to be in the notice of the Bank, which would vitiate the very foundation of the Bank guarantee but then the respondent No.2 - Bank has failed to take any stand on this aspect. Hence, the contention raised by respondent No.1 about fraud has to be rejected outright. 14. Now coming to the second aspect of the matter in relation to the bank guarantee about irretrievable injustice, it appears that in the case of Himadri Chemicals Industries Ltd. [2007 ALL SCR 2324], cited supra, it was pointed out to the Hon'ble Supreme Court that the respondent in that case was foreign company from Iran having no assets in India and, hence, on that basis it was claimed that there would be irretrievable injustice. The Hon 'ble Supreme Court held that only because the respondent had no assets in India, the appellant therein was not entitled to injunction. 15. Now in so far as the present case is concerned, as earlier stated, there was hardly any pleading or material in relation to the financial status of the appellant - company right from beginning. The is not pleading about the assets of the appellant - company and impossibility of recovery of money. The only pleading in this connection can be found in paragraph No.41 of the application, which is quoted as under; "41. The is not pleading about the assets of the appellant - company and impossibility of recovery of money. The only pleading in this connection can be found in paragraph No.41 of the application, which is quoted as under; "41. It is submitted that invocation and payment under the said bank guarantee would cause grave irreparable irretrievable harm, injury and prejudice to the Petitioner. The respondent No.1 has already become liable to release to the petitioner further 20% of the contract value of the equipment. The dishonest and fraudulent conduct of the Respondent No.1 in invoking the bank guarantee in question would make it impossible for the Petitioner to not only recover the amounts that the Respondent No.1 is liable to pay but would also lead to a virtual impossibility in terms of the recovery as the Respondent No.1 is not sound financially and doesn't have resources to meet its contractual obligations." 16. From the reading of the above pleadings, I am not inclined to hold that the respondent No.1 would suffer any irreparable loss as alleged. On the contrary, the financial closure statements show otherwise. At any rate, looking to the Clause - (iv) in paragraph No.14 of the judgment in the case of Himadri Chemicals Industries Ltd. [2007 ALL SCR 2324], cited supra, it is not a ground for issuing injunction order for restraining enforcement of bank guarantee only because a dispute is raised by its customer or that there exists any dispute between the parties to the contract. 17. Now coming to the argument raised by Advocate Shri. Dharmadhikari about the nature of bank guarantee which according to him is conditional indemnity, the following clauses in the bank guarantee would clearly show that it is not an indemnity but a bank guarantee and that too unconditional giving absolute authority to the appellant by reason of any default to invoke the same; "We, the Bank at the request of Supplier/ contractor do hereby undertake to pay to ISL an amount not exceeding for Rs.3,99,00,000/- against any loss or damage caused to or suffered or would be caused to or suffered by the by the ISL by reason of any breach by the said Supplier/contractor of any of the terms or conditions contained in the said Purchase/Work order. We, the bank do hereby undertake to indemnify ISL and keep ISL indemnified to the extent of the sum of Rs.3,99,00,000/-(Rupees Three Crore Ninety Nine Lac only) from and against any loss or damage caused to or suffered by you in relation to the advance payment paid/to be paid by ISL to the contractor as aforesaid by reason of any defaults on the part of the supplier/contractor in due supply of any plant machinery or equipment or carrying out any work under the said contract in respect of which advance payment as aforesaid is to e made by ISL to the supplier/contractor or otherwise in the observance and performance of any of the terms and conditions relating thereto in accordance with the true intent and meaning thereof and in the event of any default or defaults on the part of the supplier/contractor as aforesaid we shall forthwith on receipt of a written demand pay to you any sum or sums not exceeding in the total of the said sum of Rs.3,99,00,000/- (Rupees Three Crores Ninety Nine Lac only) as may be claimed by you to be due from the contractor I by way of refund of such advance payment or any portion or otherwise as your losses and damages, costs, charges or expenses by reason of such default or defaults on the part of the Supplier/contractor as aforesaid without demur or without reference to M/s. BHEL (Supplier/contractor). We the Bank do hereby undertake to pay the amounts due and payable under this Guarantee without any demur merely on receipt of a written demand from the ISL. stating that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the ISL for reason of breach by the said Supplier/contractor of any of the terms or conditions contained in the said Agreement or by reason of the Supplier's/contractor failure to perform the said Agreement. Any such demand received by the Bank shall be conclusive as regards to the amount due and payable by the bank under this Guarantee. However, our liability under this Guarantee shall be restricted to an amount not exceeding for Rs.3,99,00,000/- (Rupees Three Crores Ninety Nine Lac Only). Any such demand received by the Bank shall be conclusive as regards to the amount due and payable by the bank under this Guarantee. However, our liability under this Guarantee shall be restricted to an amount not exceeding for Rs.3,99,00,000/- (Rupees Three Crores Ninety Nine Lac Only). We, the Bank undertake to pay unconditionally and irrevocably to ISL any money as demanded within three days from the date of receipt of notice notwithstanding any dispute or disputes raised by supplier/contractor in any suit or proceedings pending before any Court or Tribunal relating thereto our liability under this present being absolute and unequivocal." 18. I, therefore, do not find any difficulty in coming to the conclusion that the appellant was justified in invoking the bank guarantee. It appears that the learned District Judge got swayed away with the fact that the appellant demanded reduction in price by 8.4 crore and the damages. In my opinion, even if the appellant demanded the said reduction in price and damages, the same has nothing to do with the invocation of bank guarantee. Hence, I hold that the impugned and order made by the learned Principal District Judge is illegal and liable to be set aside. 19. Now coming to the A.O. Nos.71/ 2007 and 72/2007 preferred by BHEL is concerned, since I have already held that the impugned judgment and order recorded by the learned Principal District Judge is illegal, the prayer for modification of the said judgment does not survive and hence, the A.O. Nos.71/ 2007 and 72/2007 in so far as prayer Clause (ii) is concerned will have to be dismissed. In so far prayer Clause - (iii) therein is concerned, I find that the learned Principal District Judge has made the following observations; "Here I must observe that the applicant, which is a Government Undertaking suffers from activities of its officers. It can be said that in the present case also the officers of the applicant had not taken concrete steps for recovery of progress advance even when it had taken steps in furtherance of contract and the Officers were on defensive. Due to approach of the officers, Government Undertakings are loosing even in courts. It can be said that in the present case also the officers of the applicant had not taken concrete steps for recovery of progress advance even when it had taken steps in furtherance of contract and the Officers were on defensive. Due to approach of the officers, Government Undertakings are loosing even in courts. Though it was submitted that the officers of the applicant subsequently realized that respondent No.1 has no resources the possibility that to enable the respondent No.1 to get the finance from various banks this work order was accepted by BHEL officers cannot be ruled out. These possibilities are also required to be kept in mind and the persons like respondent No.1 cannot be allowed to be benefited, if there is such possibility. The circumstances that the officers did not take concrete steps to recover the further amount which had become due creates suspicion against them." 20. Having regard to the entire facts narrated herein before, so also the pleadings of the parties and the documents on record, in my opinion, the aforesaid observations are not based on any materials on record and they have been abruptly made by the learned Principal District Judge. At any rate, the respondent No.1 or its officers were not put on notice before making such observations. In the case of State of Madhya Pradesh Vs. Nandlal Jaiswal reported in AIR 1987 Supreme Court 251 at page 287, the Hon'ble Supreme Court observed thus; "We may observe in conclusion that Judges should not use strong and carping language while criticising the conduct of parties or their witnesses. They must act with sobriety moderation and restraint. They must have the humility to recognise that they are not infallible and any harsh and disparaging strictures passed by them against any party may be mistaken and unjustified and if so, they may do considerable harm and mischief and result in injustice." 21. For all these reasons, therefore, the Appeal Against Order Nos.71/2007 and 72/ 2007 will have to be accepted only in terms of prayer Clause - (iii) Hence, the following order. 22. Appeal Against Order Nos.42/2007 and 43/2007 are allowed. The impugned orders dated 23.4.2007 and 24.4.2007 at Annexure - 13 and 15 respectively made by the Principal District Judge, Nagpur are set aside and Misc. Civil Application Nos.346/2007 and 345/2007 are dismissed. No order as to costs. 23. 22. Appeal Against Order Nos.42/2007 and 43/2007 are allowed. The impugned orders dated 23.4.2007 and 24.4.2007 at Annexure - 13 and 15 respectively made by the Principal District Judge, Nagpur are set aside and Misc. Civil Application Nos.346/2007 and 345/2007 are dismissed. No order as to costs. 23. Appeal Against Order Nos.71/2007 and 72/2007 are partly allowed and they are accepted in terms of prayer Clause - (iii) of the Appeals. Relief claimed in prayer Clause (ii) in both appeals is rejected. No order as to costs. 24. This judgment is suspended for a period of eight weeks at the request of learned Counsel for the respondent. Ordered accordingly.