SYNDICATE BANK Vs. VIJAY TANKS AND VESSELS LIMITED

JUDGEMENT

(1.) AMONG the credit facilities which were extended by the Syndicate Bank, the petitioner in this company petition, to the respondent-company Vijay Tank and Vessels Limited, the petitioner issued a Bank Guarantee for and at the request of the respondent to a company known as Southern Petrochemical Industries Pvt. Ltd. (S. P. I. C. ). The Bank Guarantee, bearing No. 11/80, was in the amount of Rs. 33,65,200/- and was an unconditional and irrevocable guarantee issued on 7th May, 1980. As is usual in the case of other unconditional Bank Guarantees, the petitioner irrevocably and unconditionally guaranteed that it would pay an amount of Rs. 33,65,200/- on a demand in writing made by the beneficiary under the guarantee without recourse to the respondent. The respondent had entered into a contract with the beneficiary under the guarantee-S. P. I. C. for the establishment of an Ammonia Terminal Facility and in pursuance of that contract, an unconditional and irrevocable Bank Guarantee, as aforesaid, came to be furnished. The guarantee provided that it had been issued towards the faithful performance of the contractual obligations assumed by the respondent and that any amounts certified by S. P. I. C. as due and payable shall be accepted as conclusive evidence by the petitioner. It may only be noted that another Bank Guarantee No. 93/81 had been issued by the petitioner in favour of S. P. I. C. in the amount of Rs. 50,00,000/- but, that is not the subject matter of these proceedings. On 5th May, 1980, the respondent issued a counter guarantee in favour of the petitioner in consideration of the issuance of the Bank Guarantee by the petitioner to S. P. I. C. This was lodged by the respondent with the petitioner by a letter dated 5th May, 1980, together with a Board Resolution dated 19th April, 1980 of the respondent company in support thereof. The Bank Guarantee issued by the petitioner was renewed from time to time, the last of the renewals being upto 31st March, 1983. By a letter dated 24th December, 1982, S. P. I. C. , the beneficiary under the Bank Guarantee invoked the Bank Guarantee in issue in the present case. The respondent filed a suit being Suit No. 31 of 1983 for an injunction restraining S. P. I. C. from invoking the Guarantee. An ad interim injunction having been granted, by an order dated 11th July, 1983, the injunction granted in respect of Bank Guarantee No. 11/80 was confirmed. In an appeal preferred by the respondent-company, the Appellate Court by a consent order dated 31st August, 1983, permitted S. P. I. C. to recover a sum of Rs. 29,65,000/- under Bank Guarantee No. 11/80.

(2.) S. P. I. C. HAD instituted a suit on the Original Side of the Madras High Court being Suit No. 659 of 1983 to which the petitioner was joined as the defendant for a decree and order against the petitioner in the amount of the Bank Guarantee. During the pendency of the suit, the respondent issued an undertaking to the petitioner on 13th January, 1995, recording that at the request of the respondent, the petitioner had issued two Bank Guarantees in favour of S. P. I. C. , including the Bank Guarantee in question, in respect of which a suit had been filed by S. P. I. C. before the Madras High Court. The respondent by its undertaking confirmed that in the event of the High Court deciding the matter in favour of S. P. I. C. , the respondent would be liable to pay the amount of the guarantee along with interest, costs and charges to the petitioner. A Board resolution in support thereof was also passed by the respondent.

(3.) THE suit instituted by S. P. I. C. against the petitioner was decreed by a judgment and order of learned Single Judge of the Madras High Court, Mr. Justice S. S. Subramani delivered on 31st August, 1995. The High Court came to the conclusion that the Bank Guarantee was an unconditional and irrevocable Bank Guarantee and that the petitioner as the guaranteeing banker was obliged to pay the amount thereunder in accordance with the principles of law laid down by several judgments of the Supreme Court. In these circumstances, the plaintiff before the Madras High Court, S. P. I. C. , was held to be entitled to recover from the petitioner herein, a sum of Rs. 29. 65 lakhs with interest at the rate of 12% from the date of the suit until realisation. The judgment and order of the learned Single Judge of the Madras High Court has been affirmed in Appeal by a Division Bench of the High Court on 28th June, 1999 in O. S. A. No. 26 of 1996, in so far as Guarantee No. 11/80, which forms the subject matter of the present proceedings is concerned. It must be noted that the petitioner-Bank had duly contested the proceedings before the learned Single Judge as well as before the Division Bench of the Madras High Court and it was the case of the Bank that the Guarantee had stood discharged. The suit having been decreed by the learned Single Judge, that judgment has, as stated earlier been affirmed in appeal. On 2nd May, 1997 after the judgment came to be delivered by the learned Single Judge of the High Court, the Bank made the payment of S. P. I. C. which was due and payable under the terms of the guarantee and in accordance with the judgment and order passed by the learned Single Judge of the Madras High Court. It has been stated in the company petition that S. P. I. C. had instituted an Execution Application being Application No. 77 of 1997 to enforce the decree and order of the learned Single Judge upon which, payment was made by the petitioner and a receipt came to be executed on 5th May, 1997 by S. P. I. C.