1989 PLP 379 (SCMR)

SAAD SAOOD JAN, J.‑‑This is a petition for special leave to appeal from the order dated 15‑9‑1988 made by a Division Bench of the Sind High Court in an Intra‑Court Appeal from the order of the learned Single Judge.

2. The firm known as Pakistan Engineering Consultants entered into a contract with the Pakistan International Airlines for the completion on turn key basis of a project of the latter for the modernization and extension of its flight kitchen at the Karachi Airport. Under the terms of' the contract the firm was to prepare the layout plans of the project, the architectural and structural air‑conditioning, plumbing, electrical and kitchen equipment layouts, specifications, and do all other things as were necessary and incidental to the execution of the project. In addition, it was also required to nominate a building contractor and supervise his work. The total costs of the project was estimated at 43.9 million and the firm was to be paid 3 % of the project cost as consultancy charges. The project was to be completed within a period of two years.

3. The contract further provided that the Airlines would pay 10% of the project cost the firm as mobilization advance with one week of the furnishing of a Guarantee in the like amount. The mobilization advance was to be adjusted out of the running bills at the rate of 10% of each bill. Accordingly, the firm furnished a guarantee given by the Bank of Credit and Commerce International. In addition, as required by the contract, the firm also provided a performance bond to the Airlines. On its part, the Airlines gave a mobilization advance in substantial amounts to the firm.

4. For some reasons the project could' hot be completed within. The stipulated period. The Airlines annulled the contract and took steps to encash the bank guarantee and the performance bond. In justification of its action, the airlines took the position that the firm with which it had entered into agreement stood dissolved by reason of the death of one of the partners and that it had suffered huge losses on account of the delay in the completion of the project and further that the work already done and the equipment supplied were sub standard.

5. The firm, which is the petitioner before a brought a quit in the Hi ;h Court against the Arilines for the recovery of a large amount on account of the work done and damages for the breach of contract. It also sought a permanent injunction inter alia to restrain the Airlines from encashing the bank guarantee and the performance bond. Alongwith the institution of the. suit it also applied for interim relief by way of temporary injuction to prevent the Airlines from encashing the bank guarantee and the performance bond during the pendency of the suit. Initially, a learned Single Judge allowed the prayer for interim relief by an ex parte order but later, on the application of the Airlines. rejected it. The petitioner filed an Intra‑Court Appeal from the order of the learned Single Judge. By the order which is impugned before us, a Division Bench of the High Court partly accepted the appeal. It granted the petitioner's prayer in so far as the performance bond was concerned: but with regard to the bank, guarantee, it made the following order:‑‑ We are of the view that t a just and proper order would be that the P.I.A. may be allowed to encash the bank guarantee to the extent of the balance unadjusted amount minus Rs. 2,00,000 (Rupees two lacs) on account of the above two running bills but they may be restrained from encashing the performance bond. We order accordingly." The a petitioner being dissatisfied, seeks leave to appeal from this Court.

6. In support of this petition, it is contended that after the Division Bench had forbidden the Airlines from encashing the performance bond pendente lite, there was no justification why it should not have made a similar order in respect of the bank guarantee; apart from that the petitioner had a strong prima facie case in its favour as it was not open to the Airlines to annul the contract unilaterally for reason merely of the demise of a partner. for, under section 47 of the Partnership Act, even a dissolved firm could carry on a contract entered into before its dissolution, and, that the other reasons given by the Airlines for putting an end to the contract were also insubstantial. It is further contended that the bank guarantee could not be equated with a letter of credit so as to give an unqualified right to the beneficiary thereunder to encash the same. In support of this contention reliance has been placed on Elian and Rabbath v. Matsas and Matsas (1966 Vol. 2 LLoyd's Law Reports 495), Messrs Jamia Industries v. Messrs Pakistan Refinery (P L D 1976 Kar. 044), Province of West Pakistan v. Messrs Mistri Patel (P L D 1969 SC 80), Tradax Ocean Transportations v. The Muslim Commercial Bank (1984 SCMR 360) and h1/s. Bancrjee & Banerjee v. Hindustan Steel Works Construction (AIR 1986 Calcutta 374). It is also averred that the amount payable by the Airlines on account of the work already done far exceeds the amount of the guarantee.

7. On the other hand, it is inter alia stated on behalf of the Airlines that a very large amount, including $ 218.tNX), paid to the petitioner for the execution of the work and purchase of equipment abroad stands unaccounted for, and that there is no reason why the encashment of the guarantee should be postponed during the pendency of the suit which may take many years to conclude.

8. This is a case where claims and counter‑claims have been made. The question whether the: Airlines was justified in annulling the contract and whether the amount payable to the petitioner on account of the work already done and damages exceeds the amount of guarantee can only be decided after a proper trial. In the circumstances the High Court hits already granted an interim relief to the petitioner so far as the performance bond is concerned and allowed a partial relief with regard to the guarantee given in respect of the mobilization advance. This Court does not ordinarily interfere with the interim orders made during the pendency of a suit. After hearing the learned counsel, we are unable to hold that the discretion exercised by the High Court in this case is either arbitrary oil otherwise insupportable.

9. The judgments cited by the learned counsel for the petitioner in support of his case are distinguishable. The case reported as Messrs Jamia Industries v. Messrs Pakistan Refinery (P L. D 1976 Kar. 644) does not deal with he bank guarantee given against a mobilization advance. In the case reported as Elian and Rabbath v. Matsas and Matsas, the bank guarantee wits sought to be enforced in respect of lien which was not in the contemplation of the parties when the same was given. In the case reported as M/s. Banerjee V Banerjee v. Hindustan Steel Works Construction (AIR 1980 Calcutta 374), a temporary injunction was in fact issued to prevent encashmcnt of a bank guarantee given against the mobilization advance but then the learned Judge who issued the injuction did not further examine the question whether the injunction should extend to the entire amount of the guarantee or to a part of it. On the other hand, in the case before us, the High Court has gone into this aspect of the matter and passed an order which it thought to be appropriate in the circumstances of the case. We are not satisfied that its order in this regard suffers from any infirmity. The other two cases reported as Province of West Pakistan v. Messrs Mistri Patel (P L D 1969 SC 80) and Tradax Ocean Transportations v. The Muslim Commercial Bank (1984 SCMR 360) are irrelevant.

10. For the reasons stated above, no case for interference with the order of the High Court has been made out. Leave to appeal is refused. A.A./P‑66/S Leave to appeal refused.