VIKAS LAMINATOR LIMITED Vs. INDIAN OVERSEAS BANK

JUDGEMENT

(1.) The above named plaintiff has moved IA No.4763/2002 under Order XXXIX Rules 1 & 2 read with Section 151 CPC seeking an ad interim injunction restraining defendant No.1 bank from making payment of the bank guarantees in question to defendant No.2 till the disposal of the suit.

(2.) The plaintiff has filed a suit for permanent injunction with the averments and allegations that it is a company incorporated under the Companies Act, 1956; defendant No.1 is a banking company while defendant No.2 is also a company incorporated under the Companies Act, 1956 having been formed for assisting small scale industrial units in the country in several ways, one of which being to extend raw-material assistance to the units in procuring raw-material from the canalised/government agencies for and on behalf of the said units. The plaintiff is engaged in the manufacturing of flexible packaging and for that purpose it has been purchasing raw material from various companies and for which defendant No.2-corporation agreed to provide financial assistance to the plaintiff-company and accordingly an agreement dated 30th July, 1997 was entered into between the plaintiff and defendant No.2. In terms of the said agreement, the plaintiff had given the following five bank guarantees issued by defendant No.1 in favour of defendant No.2:-

(3.) The plaintiff claims that it had paid uptodate interest for all the outstanding loans and fulfilled all its obligations under the agreement uptil a few months prior to the filing of the suit but due to the recession in the business, the goods manufactured by the plaintiff could not be sold in the market and as a result whereof the stock of finished and semi-finished goods has piled up. Due to this reason, the plaintiff suffered heavy losses and could not fulfill its obligations and has become sick industry as per the provisions of Sick Industrial Company (Special Provisions) Act, 1985 (SICA) and had approached the Board of Industrial & Financial Reconstruction (BIFR), for being declared sick and for framing of scheme in terms of the said Act and for rehabilitation of the plaintiff-company. While the matter was pending consideration before the BIFR, the defendant No.2 without any rhyme or reason and knowing fully well, with mala fide intention and ulterior motives and contrary to the terms and conditions of the agreement and bank guarantees, invoked the said bank guarantees and asked the bank/defendant No.1 to encash the bank guarantees without showing if the plaintiff has committed any breach of any terms and conditions of the agreement and the extent of loss/damage/charges and expenses suffered due to any default/delay on the part of the plaintiff. The said demands of defendant No.2 are stated to be contrary to the terms of the agreement as well as the guarantee executed by defendant No.1 in favour of defendant No.2. It is further alleged that defendant No.2 has not settled the accounts in terms of the agreement nor has it raised any demand whatsoever on the plaintiff informing that the plaintiff had neglected in making the payments of any amount. On this score, it is also pleaded that the action of defendant No.2 in invoking the bank guarantees without even settling the accounts is contrary to the terms of the bank guarantees and is mala fide and has been made with ulterior motives in order to pressurise the plaintiff to agree to illegal and unlawful demands of defendant No.2.