KUNJANNAMMA Vs. KERALA FISHERIES CORPORATION

JUDGEMENT

(1.) The plaintiffs are the revision petitioners. Plaintiffs' predecessor-in-interest late Sri. Varghese entered into an agreement with the 1st defendant, namely the Kerala Fisheries Corporation for hiring a boat for a period of one year. The suit is to restrain the Corporation from demanding any payment from the 2nd defendant, the State Bank of Travancore, Cochin Branch, who was the guarantor as per the bank guarantee executed by the 2nd defendant and also for recovering damages of Rs. 4941/- on settlement of accounts. Along with the suit the plaintiffs filed a petition for temporary injunction restraining the 1st defendant from invoking the bank guarantee given by the 2nd defendant on behalf of the plaintiffs' predecessor-in-interest. Both the courts below refused to grant injunction. This civil revision petition is directed against that order.

(2.) The learned counsel for the plaintiffs referred to the guarantee issued by the 2nd defendant, especially to clause No. 2 of the guarantee. It was submitted that the demand by the Corporation for payment has to be made only if there is a loss or damage caused or suffered by the Corporation by reason of any breach of any of the terms and conditions contained in the main agreement of lease. According to the plaintiffs, the boat was not in a sea-worthy condition at the time of the lease and later, which could not be noticed before taking delivery. For repairing "the boat as well as for replacing spare parts the predecessor of the plaintiffs had to spend a large amount with the knowledge and consent of the 1st defendant. So the submission is that the plaintiffs are entitled to adjust such amounts towards the rent due to the 1st defendant. In Para.11 of the plaint the plaintiffs have given a statement regarding the respective amounts due to the plaintiffs and the amounts due to the Corporation. Therefore, according to the plaintiffs, a balance amount of Rs. 4941/- with future interest is due to them. The further submission is that for this reason the Corporation is not entitled to enforce the bank guarantee issued by the 2nd defendant.

(3.) In Premier Tyres Ltd. v. S. T. C., of India Ltd. ( (1981) 51 Comp. Cas. 316), and in M/s. B. L. R. Mohan v. P. S. Coop. S. & M. Federation Ltd. (AIR 1982 Delhi 357), the Delhi High Court has considered the nature of a bank's obligation under a bank guarantee and held that when a party is sought to be injuncted from encashing the bank guarantee what has to be looked into are the terms of the bank guarantee alone as this contract is a separate and distinct one and is not dependent on the other independent contract. It was also held that no dispute raised under the main agreement can be a reason for non payment of the amount under the bank guarantee which is an autonomous and independent contract and must have effect according to its own terms. The Supreme Court has considered a similar question in United Commercial Bank v. Bank of India ( AIR 1981 SC 1426 ) where the Supreme Court has held that a bank issuing or confirming a letter of credit is not concerned with the underlying contract between the buyer and seller, and the same considerations apply to a bank guarantee. The learned counsel for the revision petitioners placed reliance on the following observation of the Supreme Court: