ESCORTS LIMITED Vs. MODERN INSULATOR LIMITED

JUDGEMENT

(1.) This is yet another case where an attempt has been made to see that a commitment made by the Bank to a beneficiary by virtue of a bank guarantee is not honoured despite the position in law being well settled and, possibly, well understood by all the parties.

(2.) Briefly stated, the facts are that a contract had been entered into between the plaintiff and defendant 1 on 9th May, 1986 whereby the plaintiff was to supply to defendant 1, one 1000 KVA Diesel Generating Set which included one 1000 KVA Kirloskar Cummins Diesel Engine and other items. It was a part of the contract that the plaintiff was to erect and commission the said generating set. This set was warranted against any defect due to bad workmanship or defective material for a period of 24 months from the date of despatch or 5000 hours from the date of installation, whichever was earlier. Other parts had different periods of warranty. It is not necessary to give any greater details at this stage.

(3.) One of the terms of the contract was| that the plaintiff was obliged to furnish a bank guarantee for satisfactory performance of the diesel generating set which was to be supplied by the plaintiff.