D.P. Wadhwa ORDER
Saiyed Saghir Ahmad, J.
1. Leave granted in both the Special Leave Petitions.
2. Hindustan Construction Company Limited (for short, 'HCCL') was awarded a contract for the construction of Icha Dam across the river Kharkai in village Kuju by the State of Bihar (for short, 'the defendants'). The contract was awarded in the sum of Rs. 39,71,31,019 on 25.4.1989. The period of contract was 42 months and the work was to be completed by 24th of October, 1992. In terms of the agreement, HCCL was required to furnish, and it did furnish, a Bank Guarantee for 10 per cent of the contract price as "Performance Guarantee" in the sum of Rupees Three Crores Ninety Seven Lakhs Thirteen Thousand One Hundred and Two only. Another Bank Guarantee which was required to be furnished by HCCL, and which it did furnish, was the Guarantee against "Mobilisation Advance" which was to be provided by the defendants from time to time to the HCCL during the course of the contract. HCCL has already furnished fifty "Mobilisation Advance" Bank Guarantees aggregating in all to Rs. 532 lacs. In addition to these Bank Guarantees, HCCL had also furnished another "Mobilisation Advance" Bank Guarantee dated 2.7.1991 for Rs. 40 lacs, for which no advance has been paid by the State of Bihar. This Bank Guarantee is, however, not in question in these proceedings.
3. Both the Bank Guarantees were invoked by the defendants and it was, at this stage, that HCCL filed a suit on 21.10.1992 in the Bombay High Court against State bank of India, State bank of Patiala and Indian Bank (defendants 1 to 3) and the State of Bihar and its officers (defendants 4 to 6) for various reliefs, including principal relief that defendants 1 to 3 may be restrained from making payment of the amount covered by the aforesaid Bank Guarantees to defendants 4 to 6. An interim order was passed by the Single Judge in the suit on 27.10.1992 and under this interim order, the defendants were restrained from invoking the Bank Guarantees and the Banks were restrained from making payment of the amount covered by the Bank Guarantees to the defendants. The interim order was confirmed on 9.2.1996.
4. Defendants 4 to 6, who contested the suit, pleaded, inter alia, that HCCL had not adhered to the schedule of work and had rather abandoned the work after it had received" Mobilisation Advance" and it was for this reason that both the Bank Guarantees were invoked.
5. The order passed by the Single Judge was challenged in appeal by the defendants before the Division Bench and the Division Bench, by the impugned judgment dated 20.3.1998, vacated the injunction order in respect of Bank Guarantee relating to "Mobilisation Advance", but the injunction order in respect of the "Performance Guarantee" was maintained.
6. Mr. F.S. Nirman, Senior Advocate, appearing on behalf of HCCL has assailed the order of the Division Bench of the Bombay High Court on various grounds, including the ground that invocation of the Bank Guarantee relating to "Mobilisation Advance" was wholly illegal and the High Court was wrong in vacating the injunction order relating to that Guarantee. It is contended that this Bank Guarantee could be invoked only if the amount lent to HCCL as "Mobilisation Advance" had become payable in '. terms of Clause 9 of the principal contract which was specifically referred to in the Bank Guarantee and since the conditions contemplated by Clause 9 did not exist, the invocation itself was bad. The Single Judge, it is contended, was right in granting t........