VIJAYA BANK Vs. NAVEEN MECHANISED CONSTRUCTION PRIVATE LIMITED

JUDGEMENT

(1.) THIS appeal is filed against the order dated 22-2-2002 passed in W. P. No. 26909/2000 wherein the learned single Judge directed the 2nd appellant Bank to release the securities and margin money as mentioned in Schedule-I.

(2.) THE necessary facts in brief are, the 1st respondent is a leading National Bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings)Act, 1980 and the 2nd respondent is its branch. Petitioner No. 1 is a Private Company registered under the Companies Act and the 2nd petitioner is its Managing Director. The 2nd respondent Bank extended 200 credit facility of Rs. 2,460 lakhs and the 2nd respondent-Bank agreed to furnish bank guarantee to the extent of Rs. 708. 02 lakhs. The petitioners deposited the securities as mentioned in Schedule-1 to the writ petition and thereafter the second respondentbank had executed bank guarantee. However, all the bank guarantees were cancelled due to the completion of the work undertaken by the petitioner Company and in terms of the contract. Accordingly, an application was made to the second respondent-Bank to return the securities mentioned in Schedule-I to the writ petition and the margin money. The second respondent refused to release the securities on the ground that amounts were due from the group of companies owned by R. N. Shetty who is also a Director of the first petitioner Company. In view of the refusal of the second respondent-Bank to return the security after all the bank guarantees furnished by the second respondent-Bank were cancelled without justifiable ground and as the same violated the rights of the Company, the second petitioner who is the Managing Director filed writ petition for a mandamus to return the securities as mentioned in Schedule-I to the writ petition.

(3.) RESPONDENTS 1 and 2 resisted the writ petition by filing objections contending that the fixed deposit mentioned in Schedule-I pertains to the security given by the petitioners for furnishing bank guarantee and the deposit shown in Schedule-I arises out of 25% cash margin money deposited by petitioner No. 1 towards issue of fresh as well as extended bank guarantee against the bank guarantee limit of Rupees 795 lakhs granted to the first petitioner. That R. N. Shetty, who is one of the Directors of the first petitioner-Company, who is a Director of M/s. Murudeshwara Foods and Exports ltd. , (for short the MFEL); and since the amount borrowed by the said Company which has been secured by the guarantee of R. N. Shetty has not been repaid an application for recovery of the said money has been filed before the Debt Recovery Tribunal in Original Application No. 127/97; and therefore the securities furnished as per annexure-R1 have been withheld by the bank exercising power of lien by the second respondent-Bank. It is also averred that the securities have been withheld in exercise of the right of lien to retain the amount until discharge of liability to the first petitioner and its guarantor R. N. Shetty, to pay the dues in respect of the case filed against mfel, himself and others in O. A. No. 127/1997 before the Debt Recovery Tribunal, bangalore, for recovery of Rs. 7. 46 crores plus interest and costs in exercise of the power under Section 171 of the Indian Contract Act.