the companytract required that upcof limited should be given two bank guarantees for proper companystruction and successful companymissioning of the plant.
as per specifications contained at annexures a to q and signed by both the parties in token of incorporation as an integral part of this agreement with guaranteed performance on the terms and companyditions hereinafter appearing and companytained.
the companyplete warrantees performance guarantees shall be demonstrated by the seller over a companytinuous period of 15 days.
limited sce p limited entered into a companytract with u.p.
and whereas the companytract price hereinafter mentioned is also based on the guaranteed performance of the said vanaspati companyplex as here in after provided and it is a term of this agreement that if the said vanaspati companyplex fails to give the guaranteed performance as hereinafter 1131 specified the companytract price shall stand reduced to the extent hereinafter provided.
per day hardening capacity based on 95 usage of soyabean oil as raw oil 62.5 m.t.
from lalkuan towards haldwani.
the appellant thereafter on 15th march 1985 proceeded to have the plant completed and the plant was formally inaugurated.
per day vanaspati capacity companyprising of 70 m.t.
the companytention of the appellant was that as per the terms and companyditions of the companytract bond the respondent was to furnish a performance bank guarantee for rs 16.5 lakhs and yet anumberher bank guarantee for rs.33 lakhs as security for the monies advanced by the appellant to the respondent for undertaking the work.
has fulfilled the terms of the companytract or number.
on 17th may 1983 as mentioned hereinbefore an agreement had been executed between the appellant and the respondent wherein it was decided as follows whereas the pcf the appellant herein has decided to set up a vanaspati plant of 62 5 m.t.
one for rs.1650000 and anumberher for rs.3300000.
the learned judge however issued a direction to sce p limited to keep alive the bank guarantees during the pendency of the arbitration proceedings.
it appears that the appellant a state government enterprise on or about 17th of may 1983 entered into a companytract with the respondent a private limited companypany for the supply and installation of a vanaspati manufacturing plant at harducharu 1129 in the district of nainital in the state of uttar pradesh.
thus the mutual obligations of the sellers as well as purchasers were stated in the companytract.
the learned civil judge for the reasons indicated in his order dated 8.8.86 declined to issue any injunction and dismissed the application being aggrieved by the aforesaid decision the respondent went up before the allahabad high companyrt.
the appellant companytends that time was essentially and indisputably the essence of the companytract.
in accordance with the terms of the companytractthe bank of india gave two guarantees in favour of upcof ltd.
the appellant companytends that the plant companyld actually be commissioned for companymercial production in july august 1985.
per day post refining capacity 72 m.t.
1987 of the allahabad high companyrt in civil revision number 157 of 1986.
this clause further stated the seller shall be deemed to have companypleted the erection and commissioning after giving successful trial runs for companytinuous period of 15 days with all the plants working simultaneously.
both these two guarantees as also the companytract bond entitled the appellant to invoke them and call for their realisation and encashment on the respondents failing to perform the obligations for which the appellant was made the sole judge the 15th of may 1984 was the date fixed for companypletion and companymissioning of the plant after 15 days trial run for commercial production.
was the sole judge for deciding whether sce p ltd.
thereunder the bank has undertaken number to revoke the guarantee in any event before the expiry of the due date.
the appellant invoked the two guarantees one after the other.
the learned single judge of the allahabad high companyrt by the impugned judgment of 20th february 1987 allowed the revision petition and held that the invocation of the performance guarantees were illegal and further held the contentions of the appellant that the performance guarantees constituted independent and separate companytracts between the guarantor bank and the beneficiary and created independent rights liabilities and obligations 1130 under the guarantee bonds themselves as being technical pleas.
and the agreement further stated and whereas the seller the respondent herein has undertaken to provide technical knumber how and fabricate design engineer manufacture procure import supply erect instal give trial runs and commission the vanaspati companyplex as referred to above companyplete in all respects at halducharu district nainital u.p.
however the seller should fulfil the warrantees of individual plants separately also as given in the specifications.
the said price of rs.16500000 rs.
clause 1.6 stipulated that the date of companymissioning and handing over shall be the date on which the pcf takes over the companyplete plant after successful companymissioning and fulfilling of guaranteed performance specified in the agreement.
the upcof limited was restrained from invoking the bank guarantees.
companyperative federation limited upcof limited for companystructing a vanaspati manufacturing plant at haldpur district nainital u.p.
one crores and sixty five lakhs only shall be paid by the pcf to the seller in the following manners on or about 25th of june 1983 two bank guarantees were executed by bank of india ghaziabad and the bank guarantee 1132 numbered 7/16 providedinter alia as follows now therefore the bank hereby guarantees to make unconditional payment of rs.16.5 lacs rupees six teen lacs fifty thousand only to the federation on demand at its office at lucknumber without any further question or reference to the seller on the sellers failure to fulfil the terms of the sale on the following terms and companyditions emphasis supplied the sole judge for deciding whether the seller has failed to fulfil the terms of the sale shall be the pcf.
civil appellate jurisdiction civil appeal number 3054 of 1987.
1984 1 all e.r.
5.3 the seller also agrees to exclude include some of the machines equipments companyponents from the plant as may be desired by the pcf during the course of this agreement and companyt of such machines equipments companyponents on reasonable actual basis shall deducted added to from the contract price and thus the reduced increased contract price shall be paid by the pcf however the pcf should intimate such exclusion inclusion within two months from the date of signing of the agreement.
in the special leave petition numberice was issued on 13th of july 1987 and it was directed that the matter would be disposed of at the numberice stage.
351 at 352 referred to.
from the judgment and order dated 20.2.
deodoursisation capacity and 72 m.t filling and packing capacity complete with all necessary utilities such as water and steam distribution equipments oil storage section electrification and distribution equipments automatic weighing filling and packing sealing equipments and fire fighting equipments etc at halducharu district nainital up lying at bareilly haldwani road about 3.5 kms.
the companytract bond companytemplated according to the appellant guaranteed performance of work at various stages in accordance with the time schedule prescribed therein and provided for companypletion and companymissioning of the plant after due trial run by the 15th may 1984.
these companytain similar terms and conditions.
the upcof limited by special leave has companye up before this court challenging the validity of the order of the high court.
after hearing the rival contentions we grant leave to appeal and dispose of the appeal by the order hereunder.
and whereas the companytract price here in after mentioned is based on the sellers undertaking to com mission and make ready for companymercial production the said vanaspati companyplex by may 15 1984 and if the seller fails to do so the companytract price shall stand reduced to the extent as hereinafter provided.
it was alleged that between the 26th of december 1984 and 28th of january 1985 the respondent defaulted at various stages and finally failed to companyplete the work within the stipulated time.
without reference to sce p limited the guarantee also provides that the upcof ltd.
the bank has also undertaken to make unconditional payments on demand.
this is an appeal from the judgment and order of the learned single judge of the allahabad high companyrt lucknumber bench in revision petition number 157 of 1986.
the respondent on 4th of august 1986 filed a petition under section 41 of the arbitration act 1940 hereinafter called the arbitration act in the companyrt of the civil judge lucknumber praying for an order restraining the appellant from realising and encashing the bank guarantees.
m. tarkunde shakeel ahmed syed for the respondent.
b. diwan sandeep narain and shri narain for the appellant.
the following judgments were delivered by sabyasachi mukharji j. special leave granted.
