SYNDICATE BANK, GANDHINAGAR BRANCH, GANDHINAGAR, BANGALORE, R/BY ITS ASST. GENERAL MANAGER SRI. H.S. RAO Vs. KARNATAKA HOUSING BOARD, KAVERI SHAVAN, BANGALORE, R/BY ITS COMMISSIONER, THE EXECUTIVE ENGINEER, KARNATAKA HOUSING BOARD, MYSORE DIVISI

JUDGEMENT

(1.) APPELLANT is challenging the legality and correctness of the judgment and decree passed by XXX Addl. City Civil Judge, Bangalore dated 1.4.2004 in OS No. 1035/1996. Appellant was the 1st defendant in the suit. R -1 and 2 were the plaintiffs and R -3 was the 2nd defendant before the court below. Admitted facts are as hereunder: 1st plaintiff is the Karnataka Housing Board which is a statutory body and 2nd plaintiff is the Chief Executive of the 1st plaintiff. Construction of houses under scheme known as 'Ashraya Scheme' was entrusted to the 2nd defendant M/s Anchor Lines (P) Ltd. In order to award contract to the 2nd defendant, 2nd defendant was required to deposit EMD at the rate of 1% of the costs of construction. In lieu of such deposit, 2nd defendant agreed to furnish bank guarantee to the plaintiffs. Accordingly. 1st defendant furnished three bank guarantees No. 17/92 for Rs. 1,64,700/ -, No. 18/92 for Rs. 1,64,700/ - and No. 19/92 for Rs. 1,73,400/ -in all for a total sum of Rs.5,02,800/ -. All the three bank guarantees were furnished by 1st defendant who is the appellant herein in favour of plaintiffs on 6.3.1992 and stood as guarantor for due performance of the contract entrusted to the 2nd defendant by the plaintiffs. It was agreed under the Deed of Bank Guarantee that the bank guarantee shall be in force for a period of one year till 6.3.1993 and as and when the bank guarantee is invoked by the plaintiffs, due to the breach of contract by the 2nd defendant such invocation shall be honoured by the 1st defendant. Contending that 2nd defendant failed to fulfill its obligations, the contract entrusted to the 2nd defendant was terminated plaintiffs requested 1st defendant to honour the claim made by them by invoking the guarantee. On the ground that the 1st defendant failed to send the amount pursuant to the payment made by the plaintiffs, plaintiffs filed the suit for recovery of the amount covered under the bank guarantee with interest at 18% p.a.. 1st defendant alone filed the written statement. 2nd defendant though engaged the services of a counsel, did not file the written statement. Appellant/defendant admitted the issuance of three bank guarantees in favour of the plaintiffs on behalf of the 2nd defendant. However, it was contended that there is no breach of contract by the 2nd defendant and that the bank guarantee would not have been invoked by the plaintiffs. In addition to several grounds urged in the written statement, the main contention of the defendant was suit filed by the plaintiffs was barred by limitation and therefore appellant requested the court to dismiss the suit. Based on the above pleadings, following issues were framed by the court below: 1. Whether the plaintiffs prove that the 2nd defendant had furnished three bank guarantee issued by the 1st defendant in all a total sum of Rs. 5,02,800/ - on 6.3.1992?

(2.) WHETHER the plaintiffs prove that the 1st defendant stood as guarantor for due performance of the contract work entrusted to the 2nd defendant?

(3.) WHETHER the plaintiffs prove that the 2nd defendant committed breach of contract?