Bremels Rubber Industries Private Limited vs. Karnataka State Road Transport Corporation

The said bank guarantee was purportedly issued at the instance of the petitioner herein in favour of the respondent No.3 to be encashed by the respondent No.3 against any default in supply by the petitioner herein and/or any loss or damage caused to or suffered or which may be caused to or suffered by the respondent No.1-Corporation by reason of any breach by said contractor, any of the terms and conditions contained in the Letter of Intent.

The perusal of bank guarantee indicates that the same has been issued pursuant to certain Letter of Intent dated 15.02.2020. Despite repeated queries, learned counsel for the petitioner is not able to point out the said HC-KAR NC: 2026:KHC:1620 Letter of Intent dated 15.02.2020. However, he refers to a document dated 03.02.2021 produced at page No.208 of Volume No.1 of the writ petition papers and submits that the same has been treated by the parties as Letter of Intent (LoI). Perusal of the said document indicates that the same appears to be extension/encashing of bank guarantees and the dates of its expiry and does not relate to the one referred to in the bank guarantee as noted hereinabove.

Learned counsel for the petitioner further drawing attention of this Court to the purported proceedings of the meeting dated 08.01.2018 produced at Annexure-AAAAE at page No.446 of Volume No.2 of the writ petition papers submits that the bank guarantee has been issued pursuant to the discussions, understanding and the proceedings subject matter of the said document. He further submits that the petitioner has been supplying tyres to the respondent No.1-Corporation, since the year 2007 onwards. There were claims and counter claims between the petitioner as well as the respondent No.1-Corporation, right from the year 2007 till the date of issuance of bank guarantee. He submits that HC-KAR NC: 2026:KHC:1620 the respondent No.1-Corporation was due and liable to pay an aggregate sum of Rs.9,86,93,463/- and the petitioner was under severe financial constraints. It is under those circumstances respondent No.1-Corporation has obtained the bank guarantee impugned in this petition which is a format insisted by the respondent No.1-Corporation. That the petitioner had no occasion to issue such bank guarantee except under duress and constricted circumstances. He submits that the bank guarantee has no reference to any of the transactions or Letter of Intent (LoI) as contended. He submits that the entire process of obtaining the bank guarantee was fraud and clear illegality. Therefore, writ juri iction of this Court needs to be invoked to grant the relief as sought for by the petitioner.

On the other hand, learned counsel appearing for the respondent Nos.1 to 4 submits that the very writ petition itself is not maintainable, inasmuch as the bank guarantee has already been invoked and encashed on account of breach of terms of the understanding between the parties, which is a clear case involving of the disputed HC-KAR NC: 2026:KHC:1620 questions facts and a writ of this nature cannot be issued. Referring to paragraph No.4A to 4H of the statement of objections, he submits that the respondent had floated a tender dated 24.07.2015 for procurement of materials for itself and its sister corporation. Petitioner being L1, was issued a purchase order on 24.02.2016. In terms of the tender condition, pro-rata recovery was raised by respective sister corporations against the successful bidder which will have to be recovered by the respondent from the petitioner. Accordingly, a consolidated claim was raised against the petitioner for a sum of Rs.3,58,92,264.00/- inclusive of GST. Several letter correspondence were exchanged between the petitioner and the respondents in furtherance to the demand and the request of the petition for reconciliation. It is under these process, the Bank Guarantee was issued which has been encashed and petitioner is still due and liable to pay a sum of Rs.2,72,93,865/-. Petitioner has also not furnished bank guarantee as per the understanding arrived at in this regard. HC-KAR NC: 2026:KHC:1620

He also refers to the order passed by the National Company Law Tribunal, Bengaluru, in the very case of the petitioner appointing the Resolution Officer under the Insolvency and Bankruptcy Code, 2016. Therefore, he submits that since the disputed questions of facts and law are involved in this matter writ petition is not maintainable. Hence, seeks for dismissal of the petition.

Learned counsel for the respondent No.5-Bank referring to the contents of the statement of objections submits that Bank is under the contractual and legal obligation to pay the beneficiary namely the respondent No.1, the amount demanded pursuant to the bank guarantee not withstanding any dispute raised between the contractor and beneficiary and no fault or illegality can be attributed to the respondent No.

Hence, seeks for dismissal of the petition.

Heard and perused the records.

As already noted above, the bank guarantee has been issued by the respondent No.5-Bank at the instance of HC-KAR NC: 2026:KHC:1620 the petitioner purportedly in furtherance to a Letter of Intent dated 15.02.2020. Learned counsel for the petitioner though unable to point out the said Letter of Intent, perusal of proceedings of the meetings held on 08.01.2018 produced at Annexure-AAAAE, indicates that there are pending pro-rata claims to be settled by the petitioner, which amounts to Rs.6,06,96,373/-. The said document also indicates the details of the bank guarantee and outstanding payments to be made by the petitioner herein which also runs into Rs.9,86,93,463/-.

That apart as noted above in the statement of objections filed by the respondent Nos.1 to 5, there appears to be a consolidated claim for Rs.3,58,92,264/- inclusive of GST being made by the respondent No.1- Karnataka State Road Transport Corporation and its sister concern namely NWKRTC, NEKRTC (KKRTC) and BMTC and that even after encashment of the bank guarantee, petitioner is allegedly due and liable to pay Rs.2,69,54,478/-. HC-KAR NC: 2026:KHC:1620

Clearly, there has been an ongoing dispute between the parties from the year 2007, which aspect is not disputed by both the parties. The bank guarantee apparently issued by the petitioner, terms of which, as already noted above would indicate that the respondent No.1-Corporation is entitled to invoke the same in the event of there being any breach or default in supply of materials by the petitioner. The learned counsel for the petitioner however vehemently submits that there is no subsisting contract between the parties and the bank guarantee has been obtained and invoked fraudulently by deceptive means.

Thus, the petitioner is raising convoluted and disputed questions of facts apparently running on and after the year 2007 till culmination of the proceedings in the year 2018 as per Annexure-AAAAE. Whereas, the present writ petition is filed in the year 2023. 13. It is settled position of law that maintainability and the entertainability of writ petition are two different and distinct aspects of the matter and the Hon'ble Apex Court in HC-KAR NC: 2026:KHC:1620 the case of Whirlpool Corporation. Vs. Registrar of Trade Marks, reported in (1998) 8 SCC 1 at paragraph 15 has held as under:

Under Article 226 of the Constitution, the High Court, having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. But the High Court has imposed upon itself certain restrictions one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its juri iction. But the alternative remedy has been consistently held by this Court not to operate as a bar in at least contingencies, namely, where the writ petition has been filed for the enforcement of any of the Fundamental Rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without juri iction or the vires of an Act is challenged....."

In the instant case merely because the respondent/authorities are discharging the public duty would alone cannot be a ground to entertain the writ petition. More particularly, when the disputed questions of facts involving performance and breach of terms of the agreement with the allegations of fraud and misrepresentation, as made in the present writ petition, this Court is of the considered view that same cannot be gone into under Article 226 of Constitution of India. HC-KAR NC: 2026:KHC:1620

For the aforesaid reasons, without expressing any view on the merits or otherwise of the claim being made by the petitioner, petition is disposed of, reserving liberty to the petitioner to seek and avail such remedy as may be available and permissible under law.

All contentions are kept open. (M.G.S. KAMAL) JUDGE