ASHIM GANGULY Vs. INDIAN OXYGEN LTD

JUDGEMENT

(1.) This is an appeal by the plaintiff and is directed against the order dt. 14-8-87, passed by the Second Assistant District Judge, Alipore in T.S. No. 37/87 of that Court, setting aside an order of injunction granted ex parte in favour of the appellant, restraining the respondent 1, Indian Oxygen Company Ltd. from enforcing the bank guarantees furnished on behalf of he appellant in favour of the respondent company.

(2.) The short question we are called upon to answer in this Misc. Appeal is whether in the ordinary course of business, Court should interfere by way of injunction to prevent the beneficiary of a bank guarantee from enforcing the same. We feel no hesitation to say and hold in the negative that Court should seldom do it, unless there is a serious dispute and a very good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties.

(3.) Briefly stated, the facts are that the plaintiff as proprietor and carrying on business in the name and style of M/s. West Bengal Wire Industries having its factory at Kalyani, filed a suit against the respondent 1 Company for recovery of Rs. 18,51,681.98 p. and for a declaration that he actually sustained damages on account of the process loss and other liquidated damages with a prayer for further declaration that respondent 1 Company is not entitled to enforce the bank guarantees furnished by the plaintiff-appellant pursuant to the express terms of contract between the parties. Pursuant to an offer made by the respondent company, the appellant was entrusted with the job work of collecting metallic wires of different sizes and quality to be delivered back to the respondent company after processing according to specification contained in various agreements which were entered between the parties for the purpose of administrating and regulating the said job from time to time since 1978. The last such agreements are dt. 19th Mar. 1981 and 24th Dec., 1982. The said agreements inter alia provided allowance of process loss in course of such processing, furnishing of bank guarantees and physical verifications. In terms of such agreements the appellant furnished through its Banker, United Commercial Bank, respondent 3, two bank guarantees to the tune of Rs. 3,00,000/- with a specific stipulation that the liability of the bank under the guarantees shall be absolute and unconditional. Unfortunately, according to the appellant, due to higher rate of process loss, reluctance on the part of the respondent company to revise the rate of labour charges and adjust the weighment difference in quantum of raw materials and to supply the required amount of raw materials to make such transaction financially viable, the appellant ran into financial stringency and other troubles and thereby declared closure of his firm with effect from 14-8-86. The appellant had to suffer such loss as the respondent company failed to honour their assurances to help him in this regard. In vain, the appellant requested the respondent company to come to his help in this regard and lastly the company sought to encash the bank guarantees furnished by the appellant. Finding no other way out the appellant was compelled to file the suit and obtained an order of ad interim injunction restraining the respondent from encashing the bank guarantees till the hearing of injunction matter. The respondent Company filed a petition under Order 39, R.4 read with S.151, C.P.C. for setting aside such order of interim injunction denying all the material allegations of the appellant and asserting at the same time that the respondent company had taken into consideration the process loss weighment differences and other incidentals in terms of the agreements between the parties but the appellant declared closure of his firm and failed to send back the materials admittedly lying in the godown in spite of repeated reminders from the respondent company and the same suffered loss in consequence thereof. The respondent company by its letter dated 5-11-86 gave ultimatum to the appellant that on his failure to return the stock, the respondent company would have no other alternative but to enforce the bank guarantees with an intimation to the bank demanding payment in terms of such guarantees. According to the respondent company, the bank, respondent 3 being aided and abated by the appellant also denied the right of the respondent company to enforce such guarantees which runs counter to the accepted principles of Trade and Commerce and public policy as well causing vital prejudice to the financial interest of the respondent company.