BRANCH MANAGER BANK OF MAHARASHTRA Vs. DEEPALI ENTERPRISES

JUDGEMENT

(1.) This appeal arises from an order of the State Consumer Disputes Redressal Commission, Maharashtra whereby the claim of the complainant (respondent herein) was allowed with interest and costs. Some of the important facts in this case are that the respondent had approached the appellant Bank to furnish a Bank guarantee in favour of Bengal Immunity Ltd., Bombay for the purpose of his business. The Bank issued Bank guarantee in favour of the said beneficiary i.e. Bengal Immunity Ltd. after taking a fixed deposit in the sum of Rs. 50,000/- as margin money being security for the said Bank guarantee. This fixed deposit was created for a period of five years. The State Commission has proceeded on the assumption that the Bank guarantee was for a period of 12 months. That conclusion of the State Commission is not supported by the terms of the said Bank guarantee. The main clause binding the Bank under the said guarantee reads as under:

(2.) It will be seen from the above that there is no time limit set in the guarantee document itself. On the other hand it appears that this was a continuing guarantee to cover various transactions between the beneficiary and respondent from time to time and the only limit placed under the said document of guarantee was in terms of money i.e. Rs. 1.50 lakhs. Our attention was drawn to certain letters exchanged between the appellant and the respondent to create an impression that understanding between the two was that the guarantee will be for a term of one year only. That appears to be not supported by the document and the conduct of the parties. The fixed deposit created which was to remain pledged with the Bank as security was for a term of five years and not one year. There is no communication to the beneficiary or from the beneficiary limiting the operation of the guarantee to any specific period. The letter of the respondent-complainant to the Bank not to honour the guarantee is of no consequence because guarantee is a contract between the guarantor and the beneficiary and unless and until it is brought to an end by either lapse of time if there is any time limit specified in the document, itself or by discharge of the guarantee or by putting an end to the contract by the party in which case the beneficiary has to give a due discharge to the guarantor from its obligations under the guarantee.

(3.) The two other relevant facts to be noted are: