UNION BANK OF INDIA Vs. MILKFOOD LTD

JUDGEMENT

(1.) THE instant appeal concerns, two of the several purchase orders placed by the respondent ,,Milkfood Ltd. upon M/s.Dany Dairy Food Engineer Ltd. (DDFE) i.e. the purchase orders dated May 25, 1988 and September 10, 1988, for due performance of which, at the asking of DDFE, the appellant, Union Bank of India, had issued three bank guarantees No.614 dated June 09, 1988 in sum of RS.50,00,000/- (Rupees Fifty lakhs), reduced later on to RS.25,00,000/- (Rupees Twenty five lakhs) and extended up to June 08, 1990; bank guarantee No.615 dated June 09, 1988 in sum of RS.16,50,000/- (Rupees Sixteen Lakhs Fifty thousand) valid up to June 08, 1990 and; bank guarantee No.626 dated September 12, 1988 in sum of RS.12,00,000/- (Rupees twelve lakhs) valid up to June 11, 1990.

(2.) UNDISPUTABLY, the three bank guarantees are unconditional and payable on demand, without demur.

(3.) UPON learning about the bank guarantees being invoked when appellant wrote to DDFE, suit for permanent injunction was filed by DDFE in the Court of the Civil Judge, Saharanpur to restrain appellant from making payment under the bank guarantee. An ex-parte ad-interim injunction was granted by the learned Civil Judge restraining the appellant from making any payment under the three bank guarantees, which injunction was finally vacated on February 13, 1992 and it needs to be simply highlighted that while granting the ex- parte ad-interim injunction, the learned Civil Judge at Saharanpur observed with respect to grant of injunction and balance of convenience as under:- "Against this restraining the defendant No.2 from making payment to Defendant No.1 till disposal of the case, without making payment to Defendant No.1 will not result in irreparable loss to him as the option of invocation of Bank Guarantee and right to receive payment from Defendant No.1 will remain open in case the Plaintiff fails and the guarantee will also be intact with bank."