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2013 DIGILAW 679 (MAD)

Roman Tarmat Limited v. Indukuru Venku Reddy

2013-01-30

K.B.K.VASUKI

body2013
ORDER 1. While O.A. No. 901 of 2012 is filed for interim injunction restraining the respondent, its directors, office bearers, agents, representatives or any person claiming through or under them from in any manner utilizing the amount of Rs. 14,59,19,989/- received by the respondent by encashing the bank guarantees provided by the applicant pending disposal of the arbitration proceedings, A. No. 4812 of 2012 is filed for directing the respondent to deposit the aforementioned sum. 2. The respondent was originally M/s. Indukuru Venku Reddy Constructions Ltd. (shortly known as IVRCL) and its name was subsequently amended as M/s. IVRCL Infrastructure and Projects Limited and the same was again amended as IVRCL Limited and the interim relief are now sought for against IVRCL Limited. 3. The facts, which led to the filing of this applications under Section 9 of the Arbitration and Conciliation Act (hereinafter shortly referred to as A&C Act) for aforementioned interim measures, are as follows:- Both the applicant and respondent are engaged in the business of construction. The respondent was during 2009, successful bidder for the project construction of automative test tracks at GARC, Chenna and the same was followed by an agreement between National Automotive Testing and Research and Development Infrastructure Project, Delhi (shortly referred to as NATRIP) and the respondent on 7-4-2010. The value of total contract was Rs. 72,35,87,416/-. The entire project was sub contracted on piece rate work basis (PRW) to the applicant at Rs. 59,16,85,328/- subject to certain terms and conditions, one among which is the applicant, who is PRW contractor shall furnish to IVRCL and unconditional and irrevocable bank guarantee towards performance guarantee for an amount equivalent to Rs. 1044.15 Lakhs and the applicant was also, in addition to performance guarantee, required to furnish a bank guarantee towards mobilization advance, equivalent to 10% of total contract price. The project work was agreed to be completed on or before 28-9-2011. Whereas, there was delay occurred in performance of the project and both the applicant and the respondent pointed the accusing finger against each other for delay. 4. The project work was agreed to be completed on or before 28-9-2011. Whereas, there was delay occurred in performance of the project and both the applicant and the respondent pointed the accusing finger against each other for delay. 4. While it is the case of the applicant that due to inordinate delay and resultant loss caused to the applicant, the applicant was not able to perform their work and the respondent as agreed between the parties, took over the responsibility of performance of contract by using machineries belonging to the applicant, according to the respondent, the inordinate delay on the part of the applicant compelled the respondent to accept the responsibility of management and execution of the work. While it is the further case of the applicant that the respondent though received payment from NATRIP for the work already executed by the applicant as well as for supply of materials, entire amount was appropriated by the respondent, who failed to make any payment to the applicant even after the applicant having submitted necessary running account receipts and even after several request made by the applicant, according to the respondent, the respondent undertook the work at the responsibility and risk and at the cost of the applicant and the applicant is due to pay for the work executed by the respondent. It is also the case of the applicant that as nothing remains to be performed by the applicant, performance of bank guarantee furnished by the applicant is unnecessary and is liable to the refunded to the applicant. Whereas, according to the respondent, the applicant was due to pay mobilization advance of Rs. 4,15,04,931/- and more amount towards cost of execution of work carried out by the respondent. Thus, there is admittedly serious dispute between the parties as to who is responsible for delay and the circumstances under which the respondent carried out the remaining contractual work and as to whether the respondent is entitled to invoke bank guarantee, the bank guarantee is liable to be refunded or not. 5. It is not in dispute that pending determination of dispute between the parties, the applicant was not inclined to extend the performance bank guarantee and intimated the respondent so. In spite of the same, the respondent invoked the performance bank guarantee of Rs. 10,44,15,058/- and the mobilization advance of Rs. 5. It is not in dispute that pending determination of dispute between the parties, the applicant was not inclined to extend the performance bank guarantee and intimated the respondent so. In spite of the same, the respondent invoked the performance bank guarantee of Rs. 10,44,15,058/- and the mobilization advance of Rs. 4,15,4,931/- and encashed the sum under the bank guarantee to the tune of Rs. 14,59,19,989/-. The applicant who has been all along blaming the respondent for the delay in carrying out the contractual work and failure of the respondent to pay the amounts due to the applicant for the work already executed by the applicant and for supply of materials and machinery, approached Bombay High Court by filing Arbitration Petition (CO) 1293/2012 for restraining the respondent from in any manner utilizing the amount of Rs. 14,59,19,989/- received by encashing bank guarantee and for directing the respondent to deposit the same amount into Court. The application was seriously contested by the respondent herein on the ground that Bombay High Court has no jurisdiction to deal with the matter. The Bombay High Court disposed on the issue relating to jurisdiction and arrived at a conclusion that Bombay High Court has no jurisdiction and directed the petition to be returned for being presented before proper jurisdictional Court. Thereafter, the applicant has come forward with the present applications under the provisions of A&C Act before this Court. 6. According to the applicant, the respondent, having committed default in performance of work under the agreement, has illegally encashed the bank guarantee without any authority to do so and in the event of the respondent being allowed to do so, the same will likely to frustrate the applicants claim made before the arbitrator and cause financial loss to the applicant. It is also contended by the learned counsel for the applicant that the respondent is not keeping sound financial position and the respondent is black listed by several Government organisations and the same is under investigation on serious charges of bribery and cheating and the respondent abandoned various projects due to financial bankruptcy, as such, it is but necessary to direct the respondent not to utilize the bank guarantee and to deposit the same into Court. 7. Such contention raised by the applicant is seriously opposed by the respondent both legally and factually. 7. Such contention raised by the applicant is seriously opposed by the respondent both legally and factually. The legal objection raised by the respondent herein is that the applicant, having approached Bombay High Court and invited an order for the return of the petition and representation of the same before proper jurisdictional Court, ought to have represented the same petition before the appropriate Court and the failure to do so and filing of fresh applications for the same relief amounts to abandonment of earlier claim made by the applicant herein and the same is barred under the relevant provisions of Civil Procedure Code. The other legal objection raised against the relief sought for herein is that the same is contrary to well laid down legal principles of our Supreme Court in catenna of judgments. 8. On facts, the objection raised by the respondent is that the applicant is responsible for the inordinate delay in performance of contractual work and the respondent undertook execution of work not on the basis of any modification in any of the original terms and conditions, but at the risk and cost of the applicant under the terms of the agreement. It is also contended by the respondent that though the applicant is bound to extend the bank guarantee until completion of performance of work and until expiry of defect rectification period (DRP), the refusal of the applicant to extend the same pending completion of the work, compelled the respondent to invoke the bank guarantee to safeguard the right of the respondent. 9. The respondent has also seriously denied the allegation against ill-financial condition of the respondent and produced the auditors balance-sheet and profit and loss account for the year ending 31-3-2011 and unaudited balance-sheet and profit and loss account for the year ending on 31-12-2011. It is argued by the learned counsel for the respondent that as per the annual reports so produced, the gross turn over of the company is Rs. 56,592.40 million and the Reserves and Surplus held by the company is Rs. 19,339.65 Million and the value of the current orders of the respondent company was increased to Rs. 239,790/- million. 10. Both the learned counsel for the applicant and respondent in support of their legal contentions, cited the following authorities. 56,592.40 million and the Reserves and Surplus held by the company is Rs. 19,339.65 Million and the value of the current orders of the respondent company was increased to Rs. 239,790/- million. 10. Both the learned counsel for the applicant and respondent in support of their legal contentions, cited the following authorities. The authorities cited on the side of the applicant are 2000 (1) Karnataka Law Journal 584: (1999 AIHC 1186), Seenappa and others v. Subbaiah and others. The authorities cited on the side of the respondent are: (i) AIR 1978 SC 765 , Udai Chand v. Shankar Lal and others (ii) 1997 (88) Comp Cas 149 (SC), Ansal Engineering Projects Ltd. v. Tehri Hydro Development Corporation Ltd. and another. (iii) AIR 1997 SC 2477 , Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and another. (iv) AIR 2004 SC 1433 , Firm Ashok Traders and another etc. v. Gurumukh Das Saluja and others etc. (v) AIR 2006 SC 1148, BSES Ltd. v. Fenner India Ltd. and another. (vi) A1, Biz Solutions Chennai rep. by its Chief Executive Officer, Ujwal Rao v. Cascade Billing Center Incorporated rep. by its President Dev Anderson; and (vii) Hydroair Tectonics (PCD) Ltd. v. Sirupooluvapatti Common Effluent Treatment Plant Pvt. Ltd. Rep by its Managing Director Mr. N. V. Murthy and Vijay Bank Chembur Mumbai Branch Kumkum Rep. by its Chief Manager. 11. Heard the rival submissions made on both sides. 12. The facts that the respondent entered into an agreement with NATRIP for project work and the respondent inturn engaged the applicant as PRW contractor and entered into a contract having arbitration clause and the applicant did not complete the project and the respondent undertook the responsibility of management and execution of work i.e., performance of contract by using all the materials and machinery belonging to the applicant and serious dispute arose between the parties regarding reason for the delay in performance of contractual work and the circumstances under which the respondent was entrusted with the responsibility of carrying out the remaining part of the work and the party, who is liable to pay the amount and the quantum of amount due and payable etc. and the applicant has duly invoked the arbitration clause as contained in the agreement, are not seriously denied. 13. and the applicant has duly invoked the arbitration clause as contained in the agreement, are not seriously denied. 13. It is also not in dispute that the applicant has, at the time of entrustment of work, furnished performance bank guarantee and other bank guarantee, the particulars of which are as follows:- Sl. B.G. No. Name of Beneficiary Amount Expiry Claim No. customer date expiry date 1 50201BGIS ROMAN TARMAT IVRCL 104415058 15.9.12 15.9.12 100170 2 50201BGIS ROMAN TARMAT IVRCL 19168533 15.9.12 15.9.12 100181 3 50201BGIS ROMAN TARMAT IVRCL 10000000 15.9.12 15.9.12 100182 4 50201BGIS ROMAN TARMAT IVRCL 10000000 15.9.12 15.9.12 100183 5 50201BGIS ROMAN TARMAT IVRCL 10000000 15.9.12 15.9.12 100184 6. 50201BGIS ROMAN TARMAT IVRCL 10000000 15.9.12 15.9.12 100185 7 50201BGIS ROMAN TARMAT IVRCL 10000000 15.9.12 15.9.12 100186 The bank guarantees shown as Sl. Nos. 2 to 7 are furnished towards 10% of mobilisation advance, out of which, the applicant has, after stoppage of work, already returned Rs. 2 crores and the applicant was due to pay Rs. 4,15,04,931/- towards mobilisation advance. The applicant has after stoppage of work not inclined to extend the bank guarantees beyond 15-9-2012. The respondent, on being informed so by the applicant, invoked the bank guarantees and encashed performance bank guarantee of Rs. 10,44,15,058/- and other bank guarantees of Rs. 4,15,04,931/- (in total Rs. 14,59,19,089/-). Thus, the applicant unsuccessfully approached Bombay High Court against utilisation of amount received by encashment of bank guarantees and thereafter approached Madras High Court for the relief as stated supra. 14. The first legal objection raised against the maintainability of fresh proceedings before Madras High Court is answered by the applicant by relying upon the judgment of Karnataka High Court in 2000 (1) Karnataka Law Journal 584: (1999 AIHC 1186), Seenappa and others v. Subbaiah and others. 14. The first legal objection raised against the maintainability of fresh proceedings before Madras High Court is answered by the applicant by relying upon the judgment of Karnataka High Court in 2000 (1) Karnataka Law Journal 584: (1999 AIHC 1186), Seenappa and others v. Subbaiah and others. The learned single Judge of Karnataka High Court under identical situation observed that the order passed by the City Civil Court for return of the plaint and respresentation of the same before proper Court is only a concession shown to the plaintiff so as to seek the same relief before the competent Court and in the event of the plaintiffs failure or omission to avail such concession and in filing fresh suit in the Court of competent jurisdiction, will not render the fresh suit legally barred and the fresh suit filed before the competent Court is not hit by any of the provisions under Order 7, Rule 10, CPC and the failure of the plaintiff to represent the plaint so returned before the proper Court of competent jurisdiction does not amount to withdrawal of earlier suit or abandonment of earlier claim. This Court finds agreement with such observation of the learned brother Judge of Karnataka High Court. Applying the same view herein, this Court is inclined to hold that failure on the part of the applicant to represent the petitioners filed under Section 9 of A&C Act returned by Bombay High Court, will in no way render the present applications barred under any of the provisions of CPC and the objection regarding maintainability of these applications are answered against the respondent. 15. On facts, the disputes arose between the parties as referred to above, are matters for adjudication before the arbitrator, as such, this Court is not inclined to go into the same in detail. At this juncture, in my considered view, this Court is only required to go into the question that when the disputes between the par-ties are pending determination by the arbitrator, the relief against encashment of bank guarantees is legally maintainable or not? 16. Even otherwise, the legal claim available to the applicant is for recovery of amount, due to and loss if any sustained by the applicant and the only relief that can be sought for by the applicant is to seek appropriate safeguard for the amount that is likely to be held, due and payable. 16. Even otherwise, the legal claim available to the applicant is for recovery of amount, due to and loss if any sustained by the applicant and the only relief that can be sought for by the applicant is to seek appropriate safeguard for the amount that is likely to be held, due and payable. In that event, this Court is required to decide the maintainability of the relief sought for herein and also the financial status of the respondent to answer any money claim that is likely to be awarded in favour of the applicant. 17. In this context, this Court is constrained to quote with approval the legal principles laid down by the Supreme Court in the authorities cited on the side of the respondent. The Hon’ble Apex Court, in the judgments reported in (i) (1997) 83 Company cases 149 (SC): (1996) 5 SCC 450 , Ansal Engineering Projects Ltd. v. Tehri Hydro Development Corporation Ltd. and another; (ii) AIR 1997 SC 2477 , Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and another and (iii) AIR 2006 SC 1148, BSES Limited (Now Reliance Energy Ltd.) v. Fennar India Ltd. and another, has categorically laid down the following principles: 18. In (1997) 88 Company cases 149 (SC): (1996) 5 SCC 450 , Ansal Engineering Projects Ltd. v. Tehri Hydro Development Corporation Ltd. and another case: (i) Bank guarantee is independent and distinct contract between bank and beneficary and is not qualified by underlying transaction and validity of primary contract between person at whose instance, bank guarantee is given and the beneficiary; (ii) It does not depend on the result of the dispute between the person on whose behalf the bank guarantee was given by the bank and the beneficary; (iii) The beneficiary cannot be restrained from encashing bank guarantee even if dispute between beneficiary and person at whose instance bank guarantee is given by bank, had arisen in performance of contract or execution of works undertaken in furtherance thereof; (iv) The bank uncondionally and irrevocably promised to pay, on demand, the amount of liability undertaken in the guarantee without any demur or dispute in terms of the bank guarantee; (v) The object behind is to inculcate respect for free flow of commence and trade and faith in the commercial banking transactions unhedged by pending disputes between the beneficiary and the contractor; (vi) The underlying object is that an irrevocable commitment either in the form of bank guarantee or letters of credit solemnly given by the bank must be honoured. (vii) The Court exercising its power cannot interfere with enforcement of bank guarantee/letters of credit except where fraud or special equity is prima facie made out in the case as triable issued by strong evidence so as to prevent irretrievable injustice to the parties; (viii) The trading operation would not be jettisoned and faith of the people in the efficacy of banking transactions would not be eroded or brought to disbelief. (ix) The liability of the bank is absolute and unequivocal; it would thereby be clear that the bank is not concerned with the ultimate decision of a Court and a tribunal in its finding, after adjudication as to the amount due and payable. (x) What would be material is the quantification of the liability in the letter of revocation and the bank should verify whether the amount claimed is within the terms of the bank guarantee or letters of credit. (x) What would be material is the quantification of the liability in the letter of revocation and the bank should verify whether the amount claimed is within the terms of the bank guarantee or letters of credit. (xi) At the stage of invocation of bank guarantee, the need for final adjudication and decision on the amount due and payable would run contrary to the terms of the special contract in which the bank had undertaken to pay the amount due and payable by the contractor, as such, there is no question of making out any prima facie case much less strong evidence or special equity or exceptional circumstances for interference by way of injunction. 19. The Supreme Court in para 21 of the judgment reported in AIR 1997 SC 2477 , Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and another, referred to some of its earlier decisions reported in (i) AIR 1994 SC 626 , Svenska Hand elsbanken v. Mis. Indian Charge Chrome and others (ii) AIR 1996 SC 334 , Larsen & Toubro Ltd. v. Maharashtra State Electricity Board and others (iii) AIR 1996 SC 131 , Hindustan Steel Works Construction Ltd. v. G. S. Atwal & Co. (Engineers) Pvt. Ltd. and (iv) AIR 1997 SC 1644 , U.P. State Sugar Corporation v. Sumac International Ltd. and extracted the general principles, which are laid down by this Court and are summarised in the case of U. P. State Sugar Corpn. as follows : The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The Courts should, therefore, be slow in granting an injunction to restrain the realization of such a bank guarantee. The Courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take the advantage, he can be restrained from doing so. The Courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence if there is such a fraud of which the beneficiary seeks to take the advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country. 20. The Supreme Court has in the same judgment dealt with two exception circumstances, where injunction may be granted against invocation of bank guarantee i.e., (i) fraud and (ii) irretrievable injury. The Supreme Court has also dealt with what is fraud and irretrievable injury. It is held that fraud has to be an established fraud and resulting of irretrievable injury has to be such a circumstance which would make it impossible for the guarantor to reimburse himself, if the ultimately succeeds and the same has to be decisively established and it must be proved to the satisfaction of the Court that there would be no possibility whatsoever of the recovery of the amount from the beneficiary by way of restitution. It is also reproduced therein the observations of Sir John Donaldson, M. R. in Bolivinter Oil SA v. Chase Manhattan Bank case (1984) 1 All ER 351, which reads as follows:- The wholly exceptional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the banks knowledge. But the evidence must be clear, both as to the fact of fraud and as to the banks knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a banks credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the bank to have it discharged. 21. The Supreme Court has in paras 30 to 32 of the same judgment strongly deprecated the tendency of the subordinate Courts in not applying the settled principles and in passing whimsical orders, which read as follows: 30. We are constrained to make these observations with regard to the manner in which the High Court had dealt with this case because this is not an isolated case where the Courts, while disobeying or not complying with the law laid down by this Court, have at times been liberal in granting injunction restraining encashment of bank guarantees. 31. It is unfortunate, that notwithstanding the authoritative pronouncements of this Court, the High Courts and the Courts subordinate thereto, still seen intent on affording to this Court innumerable opportunities for dealing with this area of law, thought by this Court to be well settled. 32. When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate Courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adverturism cannot be permitted and we strongly deprecate the tendency of the subordinate Courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops. 22. Such judicial adverturism cannot be permitted and we strongly deprecate the tendency of the subordinate Courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops. 22. The Supreme Court has ultimately arrived at conclusion that in encashment of bank guarantee the applicability of the principle of undue enrichment has no application and having found fault with the bank for not honouring the bank guarantee, observed that the bank has not shown professional efficiency and has acted in a partisan manner and the bank though was under a legal and moral obligation to honour its commitments, failed to do so and in the absence of established fraud, the Court ought not to have granted injunction relating to encashment of bank guarantee and set aside the order of injunction. 23. In AIR 2006 SC 1148, BSES Limited (Now Reliance Energy Ltd.) v. Fenner India Ltd. and another, the Supreme Court dealt with the relief of injunction sought against the beneficiary seeking to enforce his/her rights under a bank guarantee on the ground that lack of good faith or enforcing with an oblique purpose constituted further exceptions to the general rule against intervention of the Court. The Supreme Court has from para 9 onwards dealt with general rules and exceptions relating to intervention of Court against invocation of bank guarantee. The general rule is, according to the Supreme Court, a bank guarantee is an independent contract between the bank and the beneficiary thereof and irrespective of any dispute between the beneficiary and the party at whose instance the bank has given the guarantee, the bank is obliged to honour its guarantee, as long as the guarantee is unconditional and irrevocable. Two exceptions to this rule are (i) clear fraud of which the bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction and (ii) when there are special equities in favour of injunction, such as when irretrievable injury or irretrievable injustice would occur, if such an injunction were not granted. 24. The earlier judgments referred to in the earlier paragraph are also referred to in para 10 of this Supreme Court judgment. 24. The earlier judgments referred to in the earlier paragraph are also referred to in para 10 of this Supreme Court judgment. The learned senior counsel appearing for the appellants in that case attempted to expand upon the settled exceptions to the rule by first relying on the order of the Supreme Court in State of Haryana v. Continental Construction Ltd. (2002) 10 SCC 508 and then foreign judgments of Queens Bench Division in TTI Team Telecom Limited v. Hutchison 3G UK Ltd. (2003) EWHC 762 (TCC): (2003) 1 All ER (Comm.) 914 and also Elian and Rabbath (Trading as Elian and Rabbath) v. Matsas and Mastsas, etc. (1966) 2 L Rep. 495 and Samwoh Asphalt Premix Pte. Ltd. v. Sum Cheong Piling Pte. Ltd. (2002) 1 SLR 1 and further exceptions sought to be brought in are (i) breach of faith (ii) invalid or threatened call and (iii) oblique purpose, thereby using the performance guarantee as a bargaining chip as a deterrent or in an abusive manner. 25. The Supreme Court has in para 14 of its judgment declined to rely upon foreign case laws as law is well settled in India and was pleased to observe that the appellant, as per the terms of the bank guarantee itself, is the best Judge to decide as to when and for what reason the bank guarantes should be encashed and it is no function either of the bank or of this Court, to enquire as to whether due performance had actually happened when, under the terms of the guarantee, the bank was obliged to make payment when the guarantee was called in, irrespective of any contractual dispute between the appellant and the first respondent. The Supreme Court in para 22 has reiterated the observation of the Supreme Court in its earlier judgment in (1991) 3 SCR 412 : ( AIR 1991 SC 1994 ), General Electric Technical Service Company Inc. The Supreme Court in para 22 has reiterated the observation of the Supreme Court in its earlier judgment in (1991) 3 SCR 412 : ( AIR 1991 SC 1994 ), General Electric Technical Service Company Inc. v. Punj Sons (P) Ltd. that the bank was not concerned with the outstanding amount payable under the running bills and the right to recover the amount under the running bills has no relevance to the liability of the bank under the guarantee and the liability of the bank remained intact irrespective of the recovery of mobilisation advance or the non- payment under the running bills and the failure on the part of the beneficiary to specify the remaining mobilisation advance in the letter for encashment of bank guarantee is of little consequence to the liability of the bank under the guarantee. 26. The Supreme Court in paras 24 and 25 was of the view that there is no egregious fraud or irretrievable injury, if the appellant in case in hand is allowed to encash the bank guarantees and for justice can always be rendered to the first respondent, if he succeeds before the arbitrators. The Supreme Court, having observed so, found that the Madras High Court erred in interfering with the bank guarantees and in granting injunction as sought for and set aside the order of Madras High Court with the observation that the same shall be subject to adjustment in the arbitral proceedings. 27. The Division Bench of Madras High Court in Hydroair Tectonics (PCD) Ltd. v. Sirupooluvaptti Common Effluent Treatment Plant Private Limited, by relying upon the judgment of Supreme Court in Hindustan Steelworks Construction Ltd. v. Tarapore & Co. (1996) 5 SCC 34 : ( AIR 1996 SC 2268 ) held that an invocation of an arbitration clause or a pendency of arbitration would not be a ground to prevent the beneficiary to get the benefits of a bank guarantee and dismissed the appeals. Thus, the well settled legal position laid down by the Supreme Court in the judgments as referred to above and followed by our High Court, is that intervention of the Court by way of injunction order against invocation of bank guarantees is totally uncalled for except under two exceptions situations of fraud and irretrievable injury of special equities. 28. Thus, the well settled legal position laid down by the Supreme Court in the judgments as referred to above and followed by our High Court, is that intervention of the Court by way of injunction order against invocation of bank guarantees is totally uncalled for except under two exceptions situations of fraud and irretrievable injury of special equities. 28. In the instant case, there was admittedly delay in carrying out the project and both the parties have been blaming each other for such delay and for breach of material contractual obligations and the dispute is now being referred to arbitration. However, pending determination of the dispute through arbitration, the respondent encashed bank guarantee for Rs. 14,59,19,989/- and when the entire amount was demanded to be refunded, the demand was not complied with, which compelled the other party to come forward with the applications for the reliefs stated supra. Notwithstanding the nature of the dispute between the parties, this Court is of the view that the issue relating to invocation of bank guarantee can be resolved, by applying the legal principles laid down by the Supreme Court and our High Court in the authorities cited above. The general principles laid down are that the banks are bound to honour their commitments, as and when sought for by the person in whose favour bank guarantee is given and there can be no intervention of this Court against invocation of bank guarantee except under two circumstances i.e., fraud and irretrievable injury. As rightly argued by the learned counsel for the respondent, the applicant herein is unable to make either of the exceptional grounds as mentioned above warranting interference by this Court by way of injunction against invocation of bank guarantee or injunction against utilisation of the amount. When the applicant failed to establish their right to seek either of the injunction reliefs as stated above, the question of directing the respondent to refund the amount to the applicant or deposit the same into Court does not at all arise herein. However, it is now made clear that the respondents right to invoke bank guarantee and right to utilise the amount are subject to the outcome of and subject to adjustment, in the event of any award made in favour of the applicant in the arbitration proceedings. Except observing so, the applicant is disentitled to get any relief in these two applications. 29. Except observing so, the applicant is disentitled to get any relief in these two applications. 29. In the result, both the applications are dismissed. Petition dismissed.