ALLAHABAD BANK Vs. MECON DORANDA RANCHI

JUDGEMENT

(1.) This appeal is directed against the judgment dated 11th February, 2003 and decree dated 21-2-2003 passed in Money Suit No. 83 of 1996 whereby the learned Sub Judge-IV, Ranchi decreed the suit.

(2.) The case of the plaintiff-respondent, in brief, is that the Regional Manager of defendento, by his letter dated 20-2-1992 requested the plaintiff-Mecon Company to enlist them as bankers of the plaintiff and requested for opening an account with them. After discussions held on 26-2-1992 with the General Manager, Deputy General Manager and Regional Manager of the defendants about specific requirement of Banking Services, the defendants, vide their letter dated 27-2-1992 intimated their acceptance to provide the following services on opening an account with them :

(3.) The plaintiff, in response to their letter dated 27-2-1992 Informed the defendants, vide letter dated 28-2-1992, that in course of its business the plaintiff is required to furnish necessary Bank Guarantee against the advances received from its clients and the plaintiff being a public sector undertaking, its clients are mostly public sector undertakings and government organizations except a few private parties, so a request was made to waive any commission If payable for issuance of such Bank guarantees. The plaintiff informed that necessary margin money for the Bank guarantee would be kept in deposit with defendants. Thereafter plaintiff submitted two applications dated 24-3-1992 and 30-3-1992 respectively for sanction of bank guarantee limit of Rs. 25.00 crores each totaling to Rs. 50.00 crores to the defendants as the plaintiff was expecting a big order from a public sector undertaking. The plaintiff, vide its letter dated 7-5-1992, informed the defendants that it had received a letter of intent from Steel Authority of India Ltd., Rourkela Steel Plant for slab casting shop with accessories SMS-2 under the modernization of their Steel Plants and the value of the said work was Rs. 360.00 crores, for which the plaintiff would require to furnish Bank Guarantee for 10% towards advance payment and another Bank Guarantee for 5% towards security deposit and as such plaintiff required bank guarantee to the extent of Rs. 54 crores for the said work and requested the defendant to accord necessary sanction for the same and in reply to that the defendants forwarded the sanction limit of bank guarantee to the extent of Rs. 50 crores to the plaintiff by letter dated 14th July, 1992 without contemplating for any commission to be charged for such guarantee but plaintiff was required to keep 10% of the Bank guarantee amount as margin with the defendants. The defendants in the forwarding letter had stated that the said sanction was made on their understanding that they would get substantial deposit from the plaintiff, which they assumed to be deposited to the tune of Rs. 42.00 crores as per their cost analysis submitted to their Head Office. The plaintiff, immediately on receipt of the aforesaid sanction letter, informed the defendants by its letter dated 27-7-1992 that the plaintiff cannot ensure the defendants for keeping the deposits of the order mentioned in the defendants' letter dated 14-7-1992. However, the plaintiff assured to keep their trade surplus from time to time with the defendants. The defendants, on receipt of the aforesaid letter dated 27-7-1992 of the plaintiff, did not respond and, therefore, it was reasonable for the plaintiff to infer that the defendants' aforesaid assumption to keep deposit to the extent of Rs. 42.00 crores would not be an impediment in obtaining the Bank guarantee from them and on the basis of aforesaid letter, the terms and conditions of the contract for the bank guarantee were as follows :