Contract

Procuring Agency (Transport and Mass Transit Department), relying on S.20 Contract Act, 1872, unilaterally cancelled contract with Insurance Company (Appellant)

Validity

Appellant ought to have been given a proper notice to explain any grievance the Respondents may have had, before they unilaterally cancelled the agreement; by not doing so, the Respondents had violated established principles of natural justice being audi alteram partem (no one should be judged unheard) and nemo judex in causa sua (rule against bias), as well as legal rights of the Appellant protected under the Arts. 4, 10-A and 25 of Constitution

Appellant (as any citizen) was entitled to a fair hearing and was protected against any bias which prima facie was shown against them in the instant matter, as the Respondents did not provide any opportunity for a fair hearing or notice to the Appellant to explain / redress their grievance before cancellation of the agreement

Therefore the High /Appellate Court set aside the impugned stay-declining order, returning the matter /suit to the Trial Judge for adjudication on merits

Appeal was allowed accordingly.

Procuring Agency (Transport and Mass Transit Department), relying on S.20 Contract Act, 1872, cancelled contract with Insurance Company (Appellant) submitting / claiming that the agreement was contradictory to law and void

Validity

Respondents in their cancellation letter had, absurdly, stated that the agreement (which they entered into with the Appellant) was contradictory to law and void; which appeared bizarre considering that the same was the Respondent's own agreement, and it would be contrary to the principles of law and justice for the Respondents to be allowed to issue a void contract and then rely on the illegality of the contract to absolve themselves from the obligations contained therein

If such argument were permitted, it would open a plethora of litigation for any person/agency who did not wish to continue with their obligations under a contract by simply claiming that their own issued agreement was illegal and unlawful

Respondents in said regard had relied on S.20 Contract Act, 1872, which was not applicable in the circumstances while Ss. 5 & 22 of the Contract Act, 1872, would be better applicable to the matter in hand, but even these provisions of law would not help the plea of the Respondents but, to the contrary, would aid the Appellant

Respondents being duty bound could not divest themselves from their contractual obligations under the agreement in such manner, as certain rights would have accrued to the Appellant upon entering the agreement

Therefore the High /Appellate Court set aside the Impugned stay-declining order, returning the matter /suit to the Trial Judge for adjudication on merits

Appeal was allowed accordingly.

When forming contracts, parties to the contract often use templates or forms with boilerplate clauses (boilerplate language, used as standard language)

Such clauses refer to the standardized clauses in contracts, and they are to be found towards the end of the agreement

Including boilerplate clauses is the process by which parties to the contract may better define their relationship and the will to provide certainty if terms in the contract are ever disputed

Boilerplate clauses are standard contractual terms that are routinely included in many contracts

In the present case, all the agreements were executed on different dates at the registered office of the defendant at Karachi and this was not disputed by the parties

Lahore High Court lacks territorial jurisdiction to pass any judgment and decree against the defendant; the plaint was returned under O. VII, R. 10 of the Civil Procedure Code, 1908, for presenting it before a Court of competent jurisdiction

Suit was disposed of accordingly.

When forming contracts, parties to the contract often use templates or forms with boilerplate clauses (boilerplate language, used as standard language)

Such clauses refers to the standardized clauses in contracts, and they are to be found towards the end of the agreement

Including boilerplate clauses is the process by which parties to the contract may better define their relationship and the will to provide certainty if terms in the contract are ever disputed

Boilerplate clauses are standard contractual terms that are routinely included in many contracts

In the present case, all the agreements were executed on different dates at the registered office of the defendant at Karachi and this was not disputed by the parties

Lahore High Court lacks territorial jurisdiction to pass any judgment and decree against the defendant; the plaint was returned under O. VII, R. 10 of the Civil Procedure Code, 1908, for presenting it before a Court of competent jurisdiction

Suit was disposed of accordingly.

Higher Education Commission (HEC) filed suit for recovery of the scholarship funds extended to a scholar, claiming that breach of the scholarship agreement was occasioned as the defendant/scholar did not serve in Pakistan for 5 years in terms of the scholarship agreement after completion of her Ph.D degree

Plaintiff/HEC filed constitutional petition being aggrieved of an order passed by the Trial Court whereby abatement of the suit against defendant/guarantor, due to his death, was ordered

Plea of the respondent (defendant/scholar) was that her father (defendant), who stood as a guarantor for her, had passed away before the suit was filed

Argument of the petitioner (HEC), with reference to the declaration of assets of the guarantor accompanying the surety bond, was that the guarantor's property was subject to a charge and was burdened with the obligation under the guarantee

Validity

Said argument was not supported by the language of the declaration

Applying the settled principle that an instrument of guarantee is to be strictly construed, there should have been express language in the surety bond or in the declaration of assets if such assets were to be charged with the obligation under the surety bond for the liability to travel with the assets irrespective of their ownership by the guarantor or his legal heirs

For a charge to be inferred, some express language to that effect must appear in the instrument itself

On its proper construction in terms of S. 100 of the Transfer of Property Act, 1882, the instrument of declaration of assets was only furnished to demonstrate that the guarantor was a man of means capable of satisfying the obligation under the bond, but a declaration of sufficiency of assets does not per se entail that those assets have been secured for the purposes of discharge of an obligation under an instrument of guarantee or bond

Resultantly, the impugned order was correct to conclude that the suit to the extent of defendant/ guarantor (father of scholar) was to abate on his death

Constitutional petition, filed by Higher Education Commission, was dismissed.

Higher Education Commission (HEC) filed suit for recovery of the scholarship funds extended to a scholar, claiming that breach of the scholarship agreement was occasioned as the defendant/scholar did not serve in Pakistan for 5 years in terms of the scholarship agreement after completion of her Ph.D degree

Plaintiff/HEC filed constitutional petition being aggrieved of an order passed by the Trial Court whereby abatement of the suit against defendant/guarantor, due to his death, was ordered

Plea of the respondent (defendant/scholar) was that her father (defendant), who stood as a guarantor for her, had passed away before the suit was filed

Contention of the petitioner (plaintiff/HEC) was that the guarantee bound the legal heirs and the suit could continue with guarantor/defendant 's legal heirs impleaded

Petitioner (HEC) referred to the language in the surety bond executed jointly by the two defendants (scholar and guarantor) which contained the language as "we hereby bind ourselves, each of us, and each of our heirs, executors administrators jointly and severally" ('language-in-question')

Whether the language-in-question was effective to bind the legal heirs of the guarantor for them to be impleaded in his stead and for the suit to continue against them?

Held, that pertinently, language-in-question appeared in an instrument titled "surety bond" which, in a strict sense, is not the same thing as an instrument of guarantee

Instrument of guarantee executed by the father of scholar (guarantor/defendant) was expressly titled "Guarantee" in which no language binding his heirs or successors appeared

Instrument in which the language-in-question appeared was titled "surety bond" and, by executing two separate instruments in the same transaction with different titles, it could not be said that both the instruments were guarantee instruments

Expression "bond" is not defined in the Contract Act, 1872, while the expression "guarantee" is

Expression "bond" does appear in other statutes i.e., apart from the Limitation Act, 1908, S. 2(5) of the Stamp Act, 1899, defines "bond"; cumulative effect of which is that the expression "bond" entails a personal liability and in the ordinary course does not apply to the estate of a person

As per S. 514(6) of Criminal Procedure Code, 1898, the death of a surety to a bond dying before the bond's forfeiture leads to his estate being discharged from all liability in respect of the bond

A bond generally is given for the performance by the giver of a personal obligation and not for the performance of a contractual promise of a third person (e.g. bail bond, indemnity bond, bottomry bond etc. through a performance bond or bid bond may be exception to this general rule)

Therefore, a much higher threshold has to be met where the argument for survival of liability beyond death relates to a bond

Resultantly, the impugned order was correct to conclude that the suit to the extent of defendant/guarantor(father of scholar) was to abate on his death

Constitutional petition, filed by Higher Education Commission, was dismissed.

Higher Education Commission (HEC) filed suit for recovery of the scholarship funds extended to a scholar, claiming that breach of the scholarship agreement was occasioned as the defendant/scholar did not serve in Pakistan for 5 years in terms of the scholarship agreement after completion of her Ph.D degree

Plaintiff/HEC filed constitutional petition being aggrieved of an order passed by the Trial Court whereby abatement of the suit against defendant/guarantor, due to his death, was ordered

Argument of the petitioner (plaintiff/HEC), referring to S. 131 of the Contract Act 1872, was that the guarantee was a continuing guarantee in that several installments of scholarship funds were paid and the revocation of a continuing guarantee was expressed subject to a contract to the contrary, and that the language purporting to bind the legal heirs was to be taken to be a contract to the contrary

Validity

Said contention/interpretation did not follow because S. 129 of the Contract Act, 1872 defines a continuing guarantee as one winch extends to a series of transactions, whereas, in the present case, the transaction was only one, namely, the funding of the scholarship

Petitioner's argument would have carried substance if the guarantor spanned various scholarships from time to time, but there was only one scholarship for one course of study and the mere fact that the scholarship funds were released in installments to correlate with the fee payment schedule of the University did not make it a continuing guarantee for such reason alone

Even assuming that the surety bond in question was a continuing guarantee, the language on which HEC relied was ineffective to bind the legal heirs

Resultantly, the impugned order was correct to conclude that the suit to the extent of defendant/guarantor(father of scholar) was to abate on his death

Constitutional petition, filed by Higher Education Commission, was dismissed.

Definition.

Question as to whether bank was under a duty not to execute instruction if on inquiry that could result in misappropriation of customer's funds; whether such duty only arose where instruction was given by customer's agent; and whether bank was in breach of duty owed to customer

Scope of duty of care owed by the bank to its customers in cases of "authorised push payment" (APP) fraud stated.

Despite the fact that the defendant was proceeded against ex parte, the Trial Court in order to satisfy itself with regard to the execution of the document, exercised its discretion by asking the petitioners/plaintiffs to produce evidence in support thereof

Law had provided a procedure for production of documents through the person concerned along with its original record

If the procedure for production of the document was not followed in the manner prescribed by law, the same could not be taken into consideration

Petitioners produced the document through their representative, who neither prepared nor attested the same

Even the original record of these documents were not produced in the Trial Court for comparison

Besides, production of the marginal witnesses of the documents in the Court was a condition precedent under Article 79 of the Qanun-e-Shahadat, 1984, but the needful was not done

Petitioners had failed to prove the execution of the documents relied upon, as such, did not confirm the contents of the plaint

Petitioners had abused the process of law by filing vexatious and frivolous claims, wasting the precious time of the Courts

Petition for leave to appeal was dismissed with costs of Rs. 100,000, and leave was refused.

Where an effective and enforceable contract is not structured by the parties, it is not the domain or province of the Court to make out a contract for them, and the lis would be decided on the basis of terms and conditions agreed and settled down in the contract.

Redundancy cannot be attributed to express words of contract and any other interpretation would lead to absurd result.

Where contract involves two parties, one party cannot single handedly determine the contract.

Approach towards economic duress adopted by the Courts in jurisdictions of Australia, New Zealand, Canada, Singapore and United States stated.

Circumstances in which a lawful threat or pressure is sufficient to constitute duress.

After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount

Plea of power generation facility that had the arbitration clause in the GSA did not cover the Payment Agreement, and thus the Sole Arbitrator exceeded his jurisdiction by deciding the issues arising out of the Payment Agreement

Held, that the arbitration clause in the GSA covered disputes, disagreements or default of the seller and buyer "in connection with or arising out of" the GSA

Dispute under the Payment Agreement was inarguably a dispute connected to the GSA, and also arose out of the obligations under the GSA

Controversy arising out of Payment Agreement was a progeny of the GSA and could not be divorced from the parent GSA

Arbitration clause contained in the GSA would therefore be the "centre of gravity" and would be deemed to be anchored in the Payment Agreement which itself was merely an implementation of the GSA

Disputes "arising out of" the GSA were thus wide enough to cover the Payment Agreement

Neither was it commercially sensible nor realistic to hold that both the agreements were to be decided by separate forums

Had this been the case, the parties, as rational businessmen, would have been prudent in expressly excluding the arbitration clause from the Payment Agreement

Appeal was dismissed.

Survey of case law from the United Kingdom, Singapore, Hong Kong, India and Pakistan.

After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount

Question as to whether the GSA and the Payment Agreement were comprised of interconnected or inter-dependent contracts to be treated as "indivisible whole contract" or whether they were separate and independent from each other

Held, that the both the agreements i.e GSA and the Payment Agreement were by and between the same parties

Obligations undertaken under the Payment Agreement were for the accomplishment of a single goal i.e. the fulfillment of the terms of the GSA

Both the contracts were economically interdependent and had a common origin.

Scope and significance.

Courts cannot rewrite the terms of a contract.

Terms of the contract were to bear that meaning as they would have for, or convey to, a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

When there was a doubt about the meaning of a contract, the words would be construed against the person who put them forward

Said rule was a principle not only of law but of justice.

After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount

Plea of power generation facility that had the arbitration clause in the GSA did not cover the Payment Agreement, and thus the Sole Arbitrator exceeded his jurisdiction by deciding the issues arising out of the Payment Agreement

Held, that the arbitration clause in the GSA covered disputes, disagreements or default of the seller and buyer "in connection with or arising out of" the GSA

Dispute under the Payment Agreement was inarguably a dispute connected to the GSA, and also arose out of the obligations under the GSA

Controversy arising out of Payment Agreement was a progeny of the GSA and could not be divorced from the parent GSA

Arbitration clause contained in the GSA would therefore be the "centre of gravity" and would be deemed to be anchored in the Payment Agreement which itself was merely an implementation of the GSA

Disputes "arising out of" the GSA were thus wide enough to cover the Payment Agreement

Neither was it commercially sensible nor realistic to hold that both the agreements were to be decided by separate forums

Had this been the case, the parties, as rational businessmen, would have been prudent in expressly excluding the arbitration clause from the Payment Agreement

Appeal was dismissed.

After determination by an expert ('expert determination') a separate "Payment Agreement" was executed between parties for payment of disputed amount

Question as to whether the GSA and the Payment Agreement were comprised of interconnected or inter-dependent contracts to be treated as "indivisible whole contract" or whether they were separate and independent from each other

Held, that the both the agreements i.e GSA and the Payment Agreement were by and between the same parties

Obligations undertaken under the Payment Agreement were for the accomplishment of a single goal i.e. the fulfillment of the terms of the GSA

Both the contracts were economically interdependent and had a common origin.

Scope and significance.

Terms of the contract were to bear that meaning as they would have for, or convey to, a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

When there was a doubt about the meaning of a contract, the words would be construed against the person who put them forward

Said rule was a principle not only of law but of justice.

Landlords filed suit for recovery of price of articles which were removed by the tenant while handing over possession of the suit property

Trial court decreed the claim to a certain extent

Validity

Landlords had to first prove that at the time of handing over possession of the property on rent, said articles were installed and handed over to the tenant

Trial Court had erred in law while holding that the tenant had failed to prove that the articles belonged to him, hence, he had no right to remove the same and as such liable to pay price so that the landlords be compensated

Landlords had not alleged that at the time of handing over the possession of the suit property on rent to the tenant said articles were installed

Revision petition was allowed, concurrent findings of the courts below were set aside and the suit was dismissed, in circumstances.

"Force majeure" was a French term that literally meant "greater force" or "superior force" and could be defined as an event or effect that could be neither anticipated nor controlled; especially, an unprecedented event that prevented someone from doing or completing something that he or she had agreed or officially planned to do

"Force majeure" included both, acts of nature (e.g. floods and hurricanes) and acts of people (e.g. riots, strikes and wars) and referred to events beyond control of parties which prevented one or both of them from performing their contractual obligations

Parties may include a force majeure clause in their contract specifying the consequences of certain supervening events and there was no standard force majeure clause

Such clauses generally focused on impossibility, impracticability and illegality but parties may negotiate it like any other term of a contract and interpretation, scope and application of a force majeure provision would depend on its precise language and party seeking to avoid contract had to show that such event fell within ambit of force majeure clause

Covenants of force majeure clause would also determine remedies available to parties and some contracts may provide for immediate termination of contract on the happening of a force majeure event, while others may stipulate that contract would be put on hold till resolution of a force majeure event and some contracts may make provision for suspension of certain obligations.

"Impracticability" was a concept different from "impossibility", for while latter was absolute, former introduced at all events, some degree of reason and involved some regard for practice

"Impracticable" presupposed that an action was "possible" but owing to certain practical difficulties or other reason it was incapable of being performed

Something was said to be impossible when it was not practicable, and a thing is impracticable when it can only be done at an excessive or unreasonable cost

Doctrine of impracticability of performance excused performance by a contracting party because happening of event unforeseen by parties destroyed value of performance or object of contract.

Most important factor that distinguished a lease from a license was that in the former there was a transfer of interest in immovable property while in latter said element was excluded; and it was a "license" when a person was accorded right to use premises without becoming entitled to its exclusive possession

Agreement, if it was for use of property in a particular way and on certain terms, while such property remained in possession or control of owner, then such agreement operated as a license.

Deposit for safe custody was a branch of law of bailments and bailment was delivery of movable property by one person (the bailor to another, the bailee) on condition that it shall, in due course, be redelivered to bailor on his/her order

Person who hired a locker retained some control over it by having one key with himself but if said locker could be operated without any key then at once any impediment in the way of control and possession of the Bank to whom the locker belonged and in those strong-room it was to be found, would be removed and it could be said that such Bank was in position of a bailee

When Bank was bailee, then care which Bank was obliged to take was such care as an ordinarily efficient and prudent person could take in similar circumstances

Bank would not be liable if property held in safe custody was destroyed by fire or otherwise, lost or stolen unless there was negligence on the part of Bank, and degree of negligence required to establish liability would depend on the relevant circumstances of a case.

Document could not constitute a valid "contract" if same appeared to have been obtained under undue influence and a valid contract also required consent of parties which must be free, mutual and communicated to each other

Consent was not free when obtained through duress and undue influence

Transactions between parties enjoying unequal bargaining position had to be viewed with suspicion and undue influence could also be inferred from such circumstances

Undue influence may be inferred when benefit was such as the taker had no right to demand either in law or equity and when grantor had no rational motive to give same.

Clause in said agreement required that disputes be submitted to arbitration in the Netherlands and imposed substantial administrative and filing costs for arbitration proceedings

Driver commenced proceedings in Ontario court in Canada against the company for violation of employment standards legislation

Company sought stay of proceedings based on arbitration clause

Questions as to whether proceedings in Ontario court should be stayed; whether validity of arbitration agreement should be decided by the court or arbitrator, and whether arbitration agreement unconscionable

[Per Abella and Rowe, JJ (Majority view): Due to the extensive fees for initiating arbitration, there was a real prospect that if the matter was sent to be heard by an arbitrator, the driver's challenge to the validity of the arbitration agreement may never be resolved

Validity of the arbitration agreement must therefore be resolved by the court

Driver's claim that the arbitration clause was unconscionable required considering two elements: whether there was an inequality of bargaining power and whether there was a resulting improvident bargain

In the present case, there was inequality of bargaining power between the company and driver because the arbitration clause was part of an unnegotiated standard form contract, there was a significant gap in sophistication between the parties, and a person in the driver's position could not be expected to appreciate the financial and legal implications of the arbitration clause

Arbitration clause was improvident because the arbitration process required US$ 14,500 in up-front administrative fees

Resultantly, the arbitration clause was unconscionable and therefore invalid]

[Per Brown, J (concurring but with his own reasons): Arbitration clause, in the present case, was invalid, not due to the doctrine of unconscionability but because of being contrary to public policy as it denied access to justice

Arbitration agreement effectively barred any claim that the driver might have against the company and was disproportionate in the context of the parties' relationship

Such form of limitation on legally determined dispute resolution undermined the rule of law and was contrary to public policy]

[Per Côté, J dissenting (Minority view): Validity of the arbitration clause, in the present case, should be determined by an arbitral tribunal under the rule of systematic referral

Arbitration clause was not unconscionable as it did not result in a improvident bargain

Evidence did not support a finding that the company had constructive knowledge of the driver's alleged peculiar vulnerability

Arbitration clause was also not invalid under public policy as the Arbitration Act, 1991 (of Canada) and the International Commercial Arbitration Act, 2017 (of Canada) were strong statements of public policy which favoured enforcing arbitration agreements

Even if the arbitration clause was held to be unconscionable or contrary to public policy, the selection of the International Chamber of Commerce Rules and the place of arbitration clause could be severed from the agreement under the doctrine of severance

In the light of the evidence that the driver could not afford the upfront fees, the company should be required to advance the filing fees to enable him to initiate arbitration proceedings

Arbitration clause in the present case should be upheld and the parties referred to arbitration]

Appeal was dismissed.

Whereas notional severance called for the application of a bright line test of illegality, blue-pencil severance could be effected where the court could strike out the portion of the contract it wanted to remove by drawing a line through it without affecting the meaning of the part that remained.

Argument that vulnerability in the contracting process may arise from provisions in standard form contracts which were dense or difficult to read or understand

Such argument set the threshold so low as to be both practically meaningless and open to abuse

Such sweeping restriction on arbitration clauses in standard form contracts would be best left to the legislature, especially since the vital and growing concept of "sharing economy", which depended on standard form contracts that were agreed to electronically, could be stifled if a reduced threshold for inequality of bargaining power was adopted.

Scope and purpose of doctrine of unconscionability and its implications for standard form contracts, stated.

Grounds and factors to be considered by a court to determine whether a limitation on dispute resolution imposed by a clause or arbitration clause in an agreement caused undue hardship, and thus was invalid for public policy reasons.

Unconscionability doctrine applied where there was a significant inequality of bargaining power stemming from a weakness or vulnerability; a resulting improvident bargain; and where the stronger party knew of the weaker party's vulnerability

Key question in relation to the significant inequality of bargaining power was whether the weaker party had a degree of vulnerability that had the potential to materially affect their ability, through autonomous, rational decision making, to protect their own interests, thereby undermining the premise of freedom of contract

Personal characteristics or attributes of the weaker party were a fundamental consideration in such regard.

Plaintiff agreed to deposit monthly instalments on the last day of each month failing which he was required to be penalized at the rate of 1% per day for late payment

Defendants before imposing penalty were required to serve three day's notice upon the contractor for doing the needful and in case of failure to pay instalment the penalty was to be imposed

Plaintiff committed default in payment of instalments and penalty

Plaintiff filed suit against the said penalty which was dismissed by the Trial Court but Appellate Court decreed the same

Validity

Entire clause of contract for the purpose of imposition of penalty should be read and a part thereof could not be interpreted in isolation from the rest of the contents of said clause

Plaintiff for invoking penal clause should have been served with a notice for payment of instalments within three days when first ever default was committed and contract should have been cancelled for non-payment of instalments

Defendants never opted to invoke the penal clause as per agreed terms but they waited till expiry of contract

Defendants after receiving entire contract amount had started recovery of penalty by pressing into service the penal clause of the contract

Defendants remained quiet in continuous default of contractor for his non-payment of monthly instalments within due time for eight months and had accepted amount being deposited after stipulated period

Principle of acquiescence was applicable in the present case

Defendants could not press into service the penal clause of contract after expiry of contract period

Three day's notice was sine qua non for invoking the penal clause of contract and in absence of said notice no penalty could be imposed

Controversy should have been resolved on the agreed terms and conditions of contract

Defendants had not served any notice to the plaintiff for making payment of instalments within three days from the first ever default

Contractor could not be penalized, in circumstances

Revision was dismissed accordingly.

Contract of correspondence was deemed to be made at place where letter of acceptance was posted.

In civil construction projects, an advance was given to a contractor which was known as "Mobilization Advance" and basic purpose of such "Mobilization Advance" was to extend financial assistance within the terms of a contract to the contractor to mobilize the men and material resources for timely and smooth take off of a project.

Commercial transactions must go on the solemn Bank guarantee irrespective of any dispute between contracting parties regarding whether or not the work carried out at a construction site was up to the contractual standard

Banks could not be absolved of their responsibility to meet such obligations

Employer/developer extended facility of Mobilization Advance to a contractor against a Bank guarantee under the assurance that nothing would prevent it from getting it back if contractor committed default in fulfilling its obligations arising out of a contract

Bank guarantee, therefore, constituted an agreement between a Bank and a developer/employer under which there was an absolute obligation on the Bank to make the payment to the employer merely on demand

Banks were prohibited under a Bank guarantee from raising any objections to such payment

Only exceptions were cases where there was established fraud (based on material events and not on bald pleadings in the application for stay) of egregious nature of which Bank had knowledge and where allowing encashment would result in irretrievable injustice to one of the parties concerned, and in such cases Court may interdict encashment of a bank guarantee.

Stay/restraining of encashing of Bank guarantees provided by contractor to Development Authority against mobilization advance

Scope

Petitioner/contractor sought quashing of orders of Arbitrator as well as restraining operation of letters issued by Development Authority whereby it sought to encash Bank guarantees provided by petitioner

Validity

Although court was vested with the powers to grant interim relief, but such discretion must be exercised sparingly and only in appropriate cases

Such discretion ought to be exercised in the exceptional cases when there was adequate material on record, leading to a definite conclusion that Development Authority was likely to render entire arbitration proceedings infructuous, by frittering away the properties or funds either before or during the pendency of arbitration proceedings or even during the interregnum period from the date of arbitration award to its execution

Demand of encashing of bank guarantee through impugned letter was to be deemed to be a conclusive evidence regarding failure of the petitioner to comply with contractual terms and thus, Bank was bound to honour commitment made in the guarantee

Such encashment of Bank guarantee could not be put off until the culmination of proceedings of S. 20 of the Arbitration Act, 1940 before Trial Court or the announcement of award to be made by the arbitrators merely on the ground that a dispute existed between the parties to the contract and therefore injunction sought by petitioner/contractor could not be allowed

Constitutional petition was dismissed, in circumstances.

Intent to award the contract did not create the vested right to claim a concluded contract.

Various types of "business contracts/agreements" used, enumerated and meaning thereof explained.

Guarantee contains the ingredients of dedicated commitment, absolute undertaking, an unambiguous assurance, unconditional willingness, definite certainty, compliance without objections, sacred obligation and definite responsibility

Guarantee once given cannot be avoided, except on the ground of fraud or misrepresentation.

Primary rule for interpretation of a contract is that the context of the contract and the intent of the parties at the time of entering into the contract have to be seen.

Any violation of law, unjust and partial practice, which adversely affects rights of citizens for lawful participation of obtaining contracts through general tender, is unconstitutional

Jurisdiction under Art.199 of the Constitution can be invoked in such circumstances

Scope and significance.