MAHARASHTRA STATE HANDLOOM CORPORATION LIMITED Vs. ASSOCIATION OF CORPORATIONS AND APEX SOCIETIES OF HANDLOOMS ACASH

JUDGEMENT

(1.) This is the second bout of litigation with regard to the invocation of the Bank Guarantee was not invoked as per its terms. While allowing the petition vide order dated 29.5.2003 this Court directed that the petitioner shall keep the Bank Guarantee alive till final award was given by the Arbitrator. At the same time it also observed that this order would in no manner stand in the way of the respondent in issuing a fresh letter of invocation of the Bank Guarantee alive till final award was given by the Arbitrator. At the same time it also observed that this order would in no manner stand in the way of the respondent in issuing a fresh letter of invocation of the Bank Guarantee in accordance with its terms and shall provide cause for the same.

(2.) Both the parties are Public Sector Undertakings. Petitioner is manufacturer of cloth on looms and is also the supplier of such products to various agencies. Respondent No. 1 is the umbrella body of various State level apex co-operative societies, etc. That in June 1996 the State of Bihar through Directorate of Handlooms and Sericulture, Department of Industries invited tenders for supply of Cotton Dhoties and cotton/nylon/polyester Sarees to each family of the State of Bihar living below the poverty line. The respondent No. 1 bid for the said tender, and was ultimately awarded the same. A formal Agreement was entered into on 5.3.1997 for supply of 124.52 lakh Dhoties and an equal number of Sarees. The total value of the contract was Rs. 199.854 crores. At the time of signing of the contract, the State of Bihar paid an advance of Rs. 40 crores to the respondent No. 1, which furnished a Bank Guarantee for the said amount on the said day. The said amount of Rs. 40 crores was to be used for the production/development of infrastructure and purchasing of raw material.

(3.) That upon being awarded the tender, the respondent No. 1 in turn entered into Agreements with various State-level Handloom Corporations including the petitioner for supplying the said Dhoties and Sarees to the State of Bihar. Such an agreement was entered into between the respondent No. 1 and the petitioner on 14.3.1997.