TEXMACO LTD Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) This is an application in Suit No. 562 of 1972 whereby the petitioner, Textile Machinery Corporation Ltd. hereinafter referred to as Texmaco Ltd. asked for an injunction against the State Bank of India, State Trading Corporation of India and the Projects and Equipment Corporation of India Ltd. restraining the State Bank of India from releasing or making any payments to the State Trading Corporation of India and the Projects and Equipment Corporation of India Ltd. under or in respect of the performance Guarantee issued by the State Bank of India.

(2.) In order to appreciate the contentions, it may be necessary briefly to refer to certain facts. It appears that on 23rd Oct. 1970, there was an agreement between the Community of the Yugoslav Railways and the State Trading Corporation of India Ltd. briefly referred to hereinafter as S. T. C. for manufacture in India and supply in Yugoslavia for different railways, known as ZTPs 1300 Gas type and 2300 EAS type wagons. Art. 10 of the said agreement provided that the technical guarantee was regulated by the provisions stated in Annexure VI. Annexure VI to the agreement provided that S. T. C. should give the guarantee for the high quality of the delivered wagons for a period of one year after the acceptance of the wagons in Yugoslavia. RUDNAP, a Yugoslav firm was the agent of the Community and also a confirming party to the agreement. On 4th June, 1971 back to back contract between S. T. C. and the plaintiff for manufacture and supply of 434 Gas wagons, 425 EAS wagons on the same terms and conditions of the export contract dated 23rd Oct. 1970 was entered into. The terms and conditions of the export contract including the terms as to the period of guarantee of one year were incorporated in the back to back contract. In the said contract, inter alia, it was stipulated as follows:

(3.) Thereafter, after reciting the Back to Back Contract, TEXMACO had to provide STC with a performance Bank Guarantee for five per cent of the price guaranteeing orderly performance of TEXMACO'S contractual obligations.