TRIPURA JUTE MILLS LTD Vs. STANDARD CHARTERED BANK

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 tenders from the manufacturers of machinery for the supply and delivery of plant and equipment required for a Jute Mills to be set up at Agartala in the State of Tripura. By the letter, dated 28th September, 1974 addressed to the plaintiff, M/s. Bird & Co. Ltd. (hereinafter referred to as the said sellers) offered to manufacture and sell the machinery required by the plaintiff. Thereafter the negotiations started between the plaintiff and the sellers regarding the terms and conditions of the proposed contract and in course of such negotiation 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 sums 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. Sec. l0/75/27 for the sum of Rs. 10,38,440 being the first instalment, 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 upto April 24, 1976. A copy of the said Bank guarantee is annexed herewith as Annexure' A ' to the plaint. On 8th May, 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 8th May, 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 24th April, 1977. The sellers committed various breaches of the said contract dated 8th May, 1975 and became liable to refund or repay to the plaintiff the amount advanced as aforesaid and consequently by the letter, dated 12th April, 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 or any part thereof and committed default in repayment of the said advance. Then by a letter dated 16th April, 1976 the plaintiff called upon the defendant Bank to pay the said sum of Rs. 10,38,440 but notwithstanding such demand the defendant and wrongfully failed and neglected to pay to the plaintiff the said sum or any part thereof. On 27th September, 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 the defendant, inter alia, for cancellation of the Bank guarantee, dated 28th April, 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 for and 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 application 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 against the said Order, dated March 10, 1977 being 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 the 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 letter, dated April 18, 1977, October 13, 1977 and April 10, 1978 successively extended the period of said Guarantee till 23rd October, 1977, 22nd April, 1978 and finally upto 31st October, 1978. By reasons 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 plaintiff was prevented during that period from filing any Suit or Action to enforce its claim under the said Guarantee. The plaintiff is, therefore, entitled to exemption 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 27th July 1978, the plaintiff again called upon the defendant to pay 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 of 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 not 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 upto 31st October, 1978 but the plaintiff having failed to file any Suit to enforce the Bank Guarantee on or before 31st October 1978 and he having filed the Suit only on 16th April, 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 plaint. The plea has also been raised that the Clause 9 has become of unenforceable because the original date of performance has become impossible of performance.