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Judgment
B.V. Pinto, J.—This writ petition is filed seeking to set aside the order dated 10.08.2011 passed by the Principal I Civil Judge, Mysore, (herein after referred as trial Court) in IA No. 1 in O.S. No. 991/2011 and the order dated 17.12.2011 passed by the II Additional Senior Civil Judge, Mysore, (hereinafter called as Lower Appellate Court) in M.A. No. 68/2011. The parties are referred to as per their ranking before the trial court. The petitioner herein is the defendant No. 3 and the first respondent is the plaintiff in O.S. No. 991/2011.
The plaintiff has filed a suit before the trial court alleging that the third defendant has supplied 8 loads of apples to the plaintiff and in respect of the cost of the said apples, bank guarantees were issued by the first and second defendants for different periods. Bank Guarantee 3/2010-11 was given for the period from 24.12.2010 to 23.12.2011 for a sum of Rs. 15,00,000/-. Bank Guarantee No. 4/2010-11 was covering for the period from 10.02.2011 to 09.02.2012 for a sum of Rs. 15,00,000/- and Bank Guarantee No. 5/2010-11 was for a period of 09.02.2011 to 08.02.2012 for a sum of Rs. 40,00,000/-.
The aforesaid eight loads of apples, namely, Farm-Pik and Kashmir apples in boxes were supplied by the third defendant to the plaintiff during March and April 2010, the total value of which was Rs. 62,32,328-/. Since the first and second defendant banks had issued bank guarantees, the said defendants were obliged to pay the cost of the apples to the third defendant. However, it is the case of the plaintiff that the eight loads of the apples supplied by the third defendant were found decayed and destroyed due to improper maintenance in transportation as they had not sent the same in AC functioning Lorries. It is the case of the plaintiff that due to the said negligent act of the third defendant, he could not sell the apples even for 1/4th amount of the value of the said goods and therefore he has lost huge amount in the transaction. Therefore it is the case of the plaintiff that bank guarantees were not required to be entertained by the banks. Hence he has filed a suit praying for grant of permanent injunction restraining the first and second defendant banks from paying guaranteed amount to the third defendant until and unless the claim of the plaintiff and the third defendant is settled amicably or through the court of law. The plaintiff had prayed for an alternative relief restraining the third defendant from receiving the said amount from the first and second defendant banks until and unless the matter is settled amicably or through the court with proper costs and other reliefs. Along with the suit the plaintiff had filed an application under Order 39 Rule 1 and 2 read with Section 151 of CPC praying for an ad-interim ex-parte temporary injunction against first and second defendant banks thereby prohibiting them from making payment of amount to the third defendant in any manner or vice-versa till the disposal of the suit between the plaintiff and the third defendant.
The trial court after hearing the respondent had passed the interim order on 10.08.2011 restraining first and second defendant banks from making payment of schedule amount to the third defendant till the disposal of the suit either amicably or judiciously between the plaintiff and third defendant subject to the conditions that the plaintiff shall extend the bank guarantee executed through first and second defendant banks in favour of the third defendant for every six months, till the disposal of the suit; after expiry of the period under the bank guarantee No. 5/2010-11 for the period commencing from 10.02.2011 to 09.02.2012. The trial court has also further directed that in case, the plaintiff files-in the suit, the plaintiff shall compensate third defendant by paying interest at the rate of 18% per annum on the total value of the goods to the third defendant from the date of suit till the disposal of the suit.
The third defendant being aggrieved by the order passed by the trial court filed an appeal in M.A. No. 68/2011 before the second Additional Senior Judge, Mysore. The said lower appellate court after hearing both the parties passed an order dated 17.12.2013 confirming the order passed by the trial court and thus dismissing the miscellaneous appeal filed by the third defendant. Hence the third defendant is before this court challenging the concurrent findings of the courts below.
Heard Sri. Jayakumar S. Patil, learned senior counsel for the petitioner and Sri. H.R. Hegde Hudlamane, learned counsel for the first respondent.
Learned counsel for the petitioner submits that once bank guarantee is issued, the bank is duty bound to respect the bank guarantee issued by it and that once bills are presented by the person in whose favour the bank guarantee is issued, the bank cannot withhold the payment. If there is any dispute, it is for the beneficiary of such bank guaranty to proceed against such person on whose behalf the bank makes the payment.
Sri. Jayakumar S. Patil, learned senior counsel vehemently argued that on no ground the bank can resile from an obligation of a bank guarantee since the bank guarantee has been issued for consideration by the bank and that all the commercial transactions have been carried on by issuing bank guarantees and the order passed by the trial Court restraining the bank from honoring the bank guarantees after the transactions have been effected is against the settled principles of law. Therefore he submits that both the courts below have not considered this aspect of the case in the right perspective and hence he prays that this writ petition may be allowed and the orders passed by the trial court as well as the lower appellate court may be set aside. Learned senior counsel also relied on the following rulings in support of his contention:
Mahatma Gandhi Sahakra Sakkare Karkhane Vs. National Heavy Engg. Coop. Ltd. and Another, ,
Rameshwari Devi and Others Vs. Nirmala Devi and Others, .
Himadri Chemicals Industries Ltd. Vs. Coal Tar Refining Company, .
Sri. S.R. Hegde Hudlamane, leaned counsel for the first respondent on the other hand submits that normally the bank guarantee has to be honored when the bills are presented to it by the beneficiary of the bank guarantee. However there are two exceptions to the said proposition one being fraud and second one injustice to the party. It is also further submitted by him that it is the case of the plaintiff that the apples supplied by the third defendant were decayed and destroyed and to substantiate the same learned counsel has produced certain photographs which were presented before the trial court also indicating therein that the transportation of the apples were not done as expected and that if the bank guarantee is honored plaintiff would suffer injustice. It is also his submission that this objection of the plaintiff has been raised immediately after receipt of the apples supplied by the third defendant and the representatives of the third defendant have in fact verified the condition of the apples immediately after their arrival to Mysore. It is his submission that the said act of the third defendant is not only negligent it also causes injustice to the plaintiff. If once the bank guarantee is honored, it is nothing but the payment being made to the third defendant. On the other hand it is his submission that the trial court has taken caution to see that no injustice is done to the third defendant. The trial Court has held that if the plaintiff fails in the suit he has to pay to the defendant No. 3, the entire cost along with an interest at the rate of 18% per annum and thus he submits that the interest of the third defendant has also been safeguarded.
Learned counsel for the first respondent has also cited the following rulings in support of his case.
Ouseph Mathai and Others Vs. M. Abdul Khadir,
AIR 2000 3495 (SC)
Mani Nariman Daruwala alias Bharucha (Deceased) through Lrs. and Others Vs. Phiroz N. Bhatena and Others,
Chandavarkar Sita Ratna Rao Vs. Ashalata S. Guram,
1954 SCC 565 (p) in the case of Varinas and Amarnatha
United India Insurance Co. Ltd. Vs. Rajendra Singh and Others,
1968 (1) Mys. L.J. 553 in the case of Rangamma Vs. Krishnappa and etc.,
I have carefully gone through the materials placed on record, more particularly, the plaint averments in which the plaintiff has categorically stated that the fruits supplied by the defendants have been decayed and were not at all suitable for sale by the plaintiff. The suit has been filed on 04.06.2011 and in the suit itself he has taken a contention that nearly 75% of the apples supplied to him could not be sold and this fact has been brought to the notice of the representatives of third defendant also. Under these circumstances, the stand taken by the plaintiff in his suit appears to be reasonable though at this stage, no opinion can be recorded as to whether the action of the third defendant amounts to fraud or negligence. It can only be decided during the full pledged trial.
However, on a careful consideration of the order passed by the trial court it is seen that the said order has been passed after considering the pleadings of the parties and also the relevant materials on record. I do not find any illegality or perversity in the order passed by the trial court in directing the second and third defendant banks not to honor the guarantees executed in favour the third defendant. The trial court is also cautious enough to see that in the event of failure of the plaintiff, he is directed to compensate the third defendant by paying interest at the rate of 18% per annum, which, I am of the opinion, is to safeguard the interest of the third defendant. Hence I do not see any ground to interfere with the well considered order passed by the trial Court by exercising the writ jurisdiction of this court. I have also gone through the order passed by the lower appellate court confirming the order of the trial court. The lower appellate court after carefully considering the materials again, has come to the conclusion that the order passed by the trial court is in accordance with law and in accordance with the settled principles of law.
Under these circumstances, I am of the opinion that the writ petition has no merits and therefore the same is dismissed.
In view of the fact that huge amount of the petitioner is at stake, the trial court is directed to expedite the matter and dispose of the same as early as possible within an outer limit of nine months from the today.