TRIPURA JUTE MILLS LTD Vs. STATE OF MAHARASTRA

JUDGEMENT

(1.) Tripura Jute Mills Ltd. has filed the suit against the Standard Chartered Bank, the defendant, for recovery of a sum of Rs. 10,38,440 on the following allegations :

(2.) By a tender notice published in August, 1974, the plaintiff invited tender from the manufacturers of machinery for the supply and delivery of plant and equipment required for a jute mill to be set up at Agartala in the State of Tripura. By the letter dated September 28, 1974, addressed to the plaintiff, M/s. Bird and Co. Ltd. (hereinafter referred to as "the said sellers") offered to manufacture and sell the machinery required by the plaintiff. Thereafter, negotiations started between the plaintiff and the sellers regarding the terms and conditions of the proposed contract and in the course of such negotiations, it was agreed that the plaintiff would pay the sellers a total sum of Rs. 40,63,844 by way of advance, in instalments provided the sellers furnished a bank guarantee or guarantees in favour of the plaintiff for the sum to be advanced. Thereafter, at the request of the sellers and in consideration of the premises, the defendant executed in favour of and delivered to the plaintiff a bank guarantee, dated April 28, 1976, bearing No. Sect. 840/75/27 for the sum of Rs. 10,38,440 being the first instalments of the aforesaid advance payment. The terms and conditions of the said bank guarantee have been set out by the plaintiff in paragraph 4 of the plaint. Such bank guarantee would remain in force and be valid up to April 24,1976. A copy of the said bank guarantee is annexed herewith as annexure 'a' to the plaint. On May 8, 1975, a formal contract in respect of the manufacture and supply of the said machinery was executed by the plaintiff and the sellers and in terms thereof on May 8, 1975, the plaintiff made an advance payment of Rs. 10,38,440 to the sellers. On or about March 30, 1976, the period of the aforesaid bank guarantee was extended by the defendant till April 24, 1977. The sellers committed various breaches of the said contract dated May 8, 1975, and became liable to refund or repay to the plaintiff the amount advanced as aforesaid and consequently by letter dated April 12, 1976, addressed to the sellers, the plaintiff demanded repayment of the said advance of Rs. 10,38,440. But the sellers wrongfully failed and/or neglected to pay the said sum of any part thereof and committed default in repayment of the said advance. Then, by a letter dated April 16, 1976, the plaintiff called upon the defendant-bank to pay the said sum of Rs. 10,38,440 but notwithstanding such demand, the defendant wrongfully failed and neglected to pay to the plaintiff the said sum or any part thereof. On September 27, 1976, the sellers instituted a suit in the Ordinary Original Civil Jurisdiction in this High Court, being Suit No. 559 of 1976. against the plaintiff and defendant, interalia, for cancellation of the bank guarantee dated April 28, 1975, and for a perpetual injunction restraining the plaintiff from realising any sum under the said bank guarantee and also restraining the defendant from making any payment under the said bank guarantee. On the same date, the sellers applied the obtained an ad interim order of injunction. By an order, dated November 4, 1976, the said order of injunction was directed to continue till the disposal of the said application. But on March 10, 1977, the injunction was dismissed and the ad interim order was vacated. However, the operation of the said order dated March 10, 1977, was stayed for a week. On March 17, 1977, the sellers preferred an Appeal No. 84 of 1977 and obtained ad interim order of injunction which continued till the disposal of the appeal. On June 8, 1978, when Appeal No. 84 of 1977 was dismissed the said order of injunction was vacated and the operation of the order was ordered to be stayed for a fortnight During the pendency of the said proceeding. the defendant by its letters dated April 18, 1977. October 13, 1977, and April 10, 1978, successively extended the period of the said gurantee till October 23, 1977, April 22, 1978, and finally up to October 31, 1978. By reason of the extensions of the period of the aforesaid guarantee, the provision therein requiring the plaintiff to file a suit or action to enforce its claim under the said bank guarantee before April 24, 1976, was waived by the defendant and/or the same became impossible of performance and to have any effect. In the alternative, as the said orders of injunction were continuously operative between September 27, 1966, and June 22, 1978, the plaintiff was prevented during that period from filing any suit or action to enforce its claim under the said gurantee. The plaintiff is, therefor, entitled to exclusion of the time of continuance of the said orders of injunction in computing the time within which such suit or action is to be instituted under the said guarantee extended as aforesaid and such a term is to be necessarily implied in the contract between the parties. By the advocate's letter, dated July, 27, 1978, the plaintiff again called upon the defendant to ay the said sum of Rs. 10,38,440 due to the plaintiff under the said guarantee. The defendant refused, however, to pay the said sum on the ground that the sellers objected to such payment being made. Such refusal on the part of the defendant is wrongful and in breach of the express provisions of the said guarantee. The defendant was and is bound to pay the amount claimed by the plaintiff as aforesaid. In the circumstances, the plaintiff has filed this suit for recovery of the above amount from the defendant- bank.

(3.) The defendant-bank, in the written statement, has denied the plaintiff's claim. It is contended that as the bank guarantee was enforced by filing a suit for recovery of the amount prior to the date of expiry of the bank guarantee, the right has been forfeited, that the bank guarantee was extended up to October, 31, 1978, but the plaintiff's having failed to file any suit to enforce the bank guarantee on or before October 31, 1978, and he having filed the suit only on April 16, 1979, the bank guarantee has become unenforceable in view of the specific provisions contained in paragraph 9 of the bank guarantee copy of which is annexed as annexure 'a' to the plait. A plea has also been raised that clause 9 has become unenforceable, because the original date of performance has become impossible of performance.