HARPRASHAD AND COMPANY LIMITED Vs. ALLAHABAD BANK

JUDGEMENT

(1.) 1. The most important question involved is as to under what circumstances leave to defend should be given under Order 37 of the Code of Civil Procedure (hereinafter referred to as 'Code') as it stands after the amendment by Act No. 104 of 1976. Then the question involved is as to whether in the present case leave to defend should be given or not.

(2.) The plaintiff brought a suit for the recovery of Rs. 22,27,000 from Allahabad Bank, defendant No. I on the basis of a guarantee of defendant No. 1, which was initially valid upto 31st March 1979 and was subsequently extended to 31st October 1979 and finally to 31st December 1979.

(3.) There is no dispute in respect of some of the facts. The plaintiff, by an agreement dated July 13, 1977 contracted to supply various items of railway accessories to Iranian State Railways, Iran. Interalia, the plaintiff had to supply 6244 M.T. (15,12,000 pieces) of "base plates" under that agreement. Plaintiff was approached by M/s. Kumardhubi Engineering Works Ltd., (hereinafter referred to as 'Kumardhubi'), a company with its registered office at Chartered Bank Building Calcutta and the latter proposed to manufacture and export for and on behalf of the former aforesaid base plates to the Iranian State Railways, Iran. Plaintiff issued to the said Kumardhubi a letter of Indent dated 16th November 1977 agreeing to manufacture and shipment by the latter of the aforesaid base plates to Iranian State Railways, Iran on the condition, interalia that the latter shall, either make a cash deposit in the amount of Rs. 20 lacs with the former, or, in lieu thereof, furnish unconditional bank guarantee in the amount of Rs. 40 lacs to ensure the due performance of the said contract. Kumardhubi did not deposit the amount and instead furnished a bank guarantee of Allahabad Bank, defendant No. 1. As already mentioned the guarantee was originally valid upto 3st March 1979 but the same was thereafter extended upto 31st October 1979 and afterwards upto 31st December 1979.