STATE BANK OF INDIA Vs. JAMALWALA INDUSTRIES

JUDGEMENT

(1.) The plaintiff is the appellant.

(2.) The plaintiff, namely, State Bank of India filed the suit for recovery of a sum of Rs. 56,151/- from the defendants. The facts leading to the filing of the suit, out of which this appeal arises, may briefly be summarised as follows.

(3.) The first defendant entered into a milling contract with Food Corporation of India (hereinafter referred to as 'the FCI') for conversion of gram into gramdal. The FCI required the first defendant to furnish a bank guarantee for fulfilment of the contract. Accordingly, the first defendant approached the plaintiff-bank to furnish the bank-guarantee. The bank agreed to the same on certain conditions and also on furnishing guarantee of third party. The first defendant complied with the conditions stipulated by the bank and accordingly the plaintiff-bank stood as a guarantee for the due performance of the contract by the first defendant in favour of the FCI. The bank furnished four different securities for the fulfilment of the contract with the FCI; one for a sum of Rs. 72,000/- on 4.7.1973, second one for Rs. 96,000/- on 20.8.1973, third one for Rs. 64,000/- on 5/6.11.1973 and the fourth one for Rs. 30,000/- on 4.2.1974. Defendants Nos.2 and 3 and the first defendant created an equitable mortgage by deposit of title in favour of the plaintiff-bank. According to the terms of the security furnished by the bank on behalf of the defendants, the bank undertook to indemnify the FCI against any loss in case of failure of performance of the contract by the first defendant entered into with the FCI. There is no dispute with regard to the security furnished by the bank in respect of the guarantees created on 20.8.1973, 5.11.73 and on 4.2.1974, but the first defendant did not fulfil its contract/obligation for the supply of gram-dal to the FCI. The dispute is in respect of the terms covered by the first security furnished by the bank for Rs. 72,000/- to the FCI on 4.7.1973. Since there is a failure on the part of the first defendant to fulfil the contract with the FCI, the FCI invoked the security furnished by the bank and demanded the bank to remit the loss incurred by the FCI in respect of the said contract. On account of this the bank paid a sum of Rs. 50,645/- to the FCI. The bank filed the suit for recovery of this amount along with interest amounting to Rs. 5,506/against all the defendants.