CREST COMMUNICATIONS LIMITED Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) HEARD the learned Counsel for the plaintiff and the learned Counsel for defendants.

(2.) THE suit filed by the plaintiff is for declaration that the services rendered and films provided by the plaintiff to 2nd defendant were in accordance with the specifications under the purchase order and that invocation of performance guarantee by the 2nd defendant be declared to be fraudulent and unlawful and the bank guarantee be cancelled and returned back to the plaintiff. A notice of motion has been taken out by the plaintiff in the suit praying for temporary injunction restraining the 1st defendant from paying to the 2nd defendant a sum of Rs. 6,73,100/- or any part thereof under the performance guarantee dated 8-12-1998.

(3.) BY the purchase order dated December 1, 1998 plaintiff agreed to sell four films to the 2nd defendant details of which have been given therein for a consideration of Rs. 67,30,950/ -. The material terms of the said purchase order provide thus; delivery of the material was required to be effected within 30 days from the date of the receipt of advance as per Clause 7 (i); delivery was required to be made as per the schedule; delivery should be made as per the schedule failing which the order is liable to be cancelled and material shall be procured by the purchasers 2nd defendant from other sources. It is also provided therein that the performance guarantee furnished in the form of bank guarantee for supply of material in time will also be invoked in the event of default. Under clause 7 of the purchase order, 60% of the contractual value of the goods was to be made in advance and 40% of the contractual value of the goods was to be released after the satisfactory installation and testing of the instrument against submission of the documents, namely (i) commercial signed invoice in duplicate for 40% value of the goods and (ii) test and acceptance certificate issued by VSNL. As per purchase order 100% payment was to be released after satisfactory installation and testing of the equipments and presentation of documents stated therein. Clause 6 provides for liquidated damages. The performance guarantee was given by the 1st defendant on behalf of the plaintiff on 8-12-98. The performance guarantee is in the sum of Rs. 6,73,100/ -. The material terms of the performance guarantee read thus: nd WHEREAS it has been stipulated by you in the contract that the supplier shall furnish you with a Bank Guarantee by a recognised Bank for the sum specified therein as security for compliance with the suppliers performance obligations in accordance with the contract. AND WHEREAS we have agreed to give the supplier a Guarantee ; therefore WE hereby affirm that we are guarantors and responsible to you, on behalf of the Supplier, upto a total of Rs. 6,73,100/- (Rupees Six Lacs Seventy-three Thousand One Hundred Only) and we undertake to pay you, upon your first written demand declaring the Supplier to be in default under the contract and without civil or argument, any sum or sums as specified by you, within the limit of Rs. 6,73,100/- (Rupees Six Lacs Seventy-three Thousand One Hundred Only) as aforesaid, without your needing to prove or to show grounds or reasons for your demand on the sum specified therein. This guarantee is valid until the 10th day of December, 1999. "notwithstanding anything contained herein; (a) our liability under this Bank Guarantee shall not exceed Rs. 6,73,100/- (Rupees Six Lacs Seventy-three thousand one hundred only ). (b) this Bank Guarantee shall be valid upto 10th December, 1999; and (c) we are liable to pay the guaranteed amount or any part thereof under this Bank Guarantee only and only if you serve upon us a written claim or demand on or before 10th December, 1999 (date of expiry of Guarantee)".