Radha Traders vs The Food Corporation of India and Another

V.K. Bali, J.—Plaintiff Radha Traders, Sultanpur Road is in revision against the order dated March 4, 1991 passed by Additional District Judge, Kapurthala vide which the appeal carried by the plaintiff against the order passed by Sub judge dismissing his application under Order 39, Rules 1 and 2 C. P. C was found without any substance and as such was dismissed.

Radha Traders filed a suit for permanent injunction against the respondent Food Corporation of India praying for a restrain order against the Corporation so that it could hot encash the guarantee executed by it in favour of Corporation from the State Bank of India. The case as set up in the plaint reveals that the plaintiff had taken the offer to shell 1200 M. T. I. R II of paddy on 5-5-1988 for the paddy season 1987-88 and it submitted a Bank guarantee to carry out the said contract, in the State Bank of India at Kapurthala. The said contract is stated to have been carried out and no amount of rice was stated to be due from the plaintiff concern. Inasmuch as no amount was due for the contract period 1987-88, the Corporation had no right whatsoever to encash the Bank guarantee.

The suit as also the application filed by the plaintiff under Order 39, Rules 1 and 2 C. P. C. were contested and it was inter alia pleaded that an amount of Rs. 46,079/- was due from the plaintiff to the Corporation regarding the crop year 1987-88 and a sum of Rs. 2,89,295.14 paise was due to the Corporation with regard to the crop year 1977-78 to 1978-79. It was further pleaded that Gian Chand, attorney of the plaintiff, who was dealing with the case of the plaintiff with the Corporation had furnished an affidavit on behalf of the plaintiff wherein it was mentioned that a guarantee of Rs. 3 lacs shall be submitted. An amount of Rs. 2,89,295.14 paise due to be paid by the plaintiff is pleaded to have been detected on audit report and it is in consequence of the said report that the plaintiff was asked to furnish a Bank guarantee of Rs. 3 lacs and an affidavit was submitted by Gian Chand, attorney of the plaintiff as referred to above. In the aforesaid affidavit, it was also agreed that the Bank guarantee bearing No. 88/09, dated 27-5-1988 for Rs. 5 lacs would remain valid upto 26-11-1988 against milling contract of 1987-88 lying with the Corporation. It was further agreed that the said guarantee be withheld till the plaintiff was to furnish fresh Bank guarantee of Rs. 3 lacs. The terms contained in the affidavit sworn by Gian Chand attorney were not adhered to by the plaintiff. The plaintiff had neither paid nor adjusted the amount due to the Corporation in any manner nor furnished Bank guarantee of Rs. 3 lacs. It is in the aforesaid circumstances that the action of the Corporation was pleaded to be justified. As referred to above, Sub Judge 1st Class, Kapurthala vide orders dated March 4, 1991 declined to interfere in the matter and the appeal carried by the plaintiff found no merit with the Additional District Judge.

Mr. L. M. Suri, the learned counsel appearing for the petitioner vehemently contends that the Bank guarantee to the tune of. Rs. 5 lacs was furnished for the contract period 1987-88 for which contract period admittedly only an amount of Rs. 46,079/- was stated to be due. The major amount due i.e. Rs. 2,89,295.14 paise as per the pleadings of the Corporation itself, related to the contract period for the year 1977-78 and 1978-79 regarding which no information at any stage was ever given to the plaintiff, and the same could not be recovered for variety of reasons inclusive of that the claim made with regard to the amount in question will be barred by the law of limitation, contends the counsel. He also contends that the Bank guarantee of Rs. 5 lacs pertains to the contract period 1987-88 and the same could not be encahsed in consequence of the amount which is alleged to be due for the contract period 1977-78 and 1978-79. On the strength of aforesaid grounds, the counsel contends that it was a case of bond fide contest and serious questions were to be tried in the suit as also that the balance of convenience was clearly in favour of allowing the injunction, particularly when the plaintiff, in case no injunction was granted was to suffer an irreparable loss. For his afore-cited contention, the learned counsel relies upon the judgment of Supreme Court in United Commercial Bank Vs. Bank of India and Others, .

Mr. Hemant Kumar Advocate appearing for the Corporation seriously contests the cause of the petitioner and contends that an amount of Rs. 2,89,295.14 paise was found to be due from the plaintiff in the audit report and the plaintiff was informed vide letter dated 27-11-1987. It is in consequence of the aforesaid information given to the plaintiff that Gian Chand, attorney of the plaintiff who was dealing with the Corporation on behalf of the plaintiff had furnished an affidavit wherein in no unequivocal terms it was admitted that a Bank guarantee to the tune of Rs. 3 lacs shall be furnished. It was further agreed that the Bank guarantee in the amount of Rs. 5 lacs with regard to contract period 1987-88 shall remain valid upto 26-11-1988 and shall be withheld by the Corporation till the Plaintiff had furnished Bank guarantee of Rs. 3 lacs and it was in consequence of the aforesaid undertaking given on behalf of the plaintiff that the Bank guarantee bearing No. 88/09 pertaining to the contract period 1987-88 was revalidated upto 24-12-1988. It is only in consequence of non-furnishing Bank guarantee of Rs. 3 lacs that the Corporation had proceeded to encash the Bank guarantee of Rs. 5 lacs to the extent the amount was found due from the plaintiff.

After going through the records of the case and hearing the counsel for the parties, I am of the view that this revision has no merit and the same, thus, deserves to be dismissed. It is settled by a string of judgments that no injunction can be granted staying the encashment of Bank guarantee unless a case of fraud or likelihood of i irretrievable injustice between the parties was made out. Reference can be made to decision of Supreme Court in General Electric Technical Services Company Inc. Vs. M/s. Punj Sons (P) Ltd. and another, ", as also judgment of this Court in National Project Construction Corporation Ltd. Vs. M/s. Sadhu and Company a unit of Kular Constructions Ltd. and others, ".

Further, the facts of this case would reveal that the plaintiff while submitting an affidavit, the terms of which have already been indicated in the earlier part of judgment, had admitted its liability with regard to amount due pertaining to the contract period 1977-73 and 1978-79. Lest it might prejudice the case of either of the parties, I do not want to go into the question as to whether the claim with regard to period 1977-78 and 1978-79 is barred by time or not, suffice it to say that the amount as per facts mentioned above is due to be paid to the Corporation and the plea of limitation cannot partake the character of plea of fraud or that of irretrievable loss. In so far as the contention of learned counsel for the petitioner that the amount due for the contract period 1977-78 and 1978-79 cannot be adjusted for the contract period for the year 1987-88 for which contract alone, Bank guarantee of Rs. 5 lacs was furnished also has no substance! Clause with the heading ''Set Off'' for the contract period 1977-78 reads as follows :-

"In the event of the Corporation having any claim or claims ascertained or otherwise against the agent under any of the conditions of this contract, or arising from or out of this contract or under the conditions of any other contract, the SRM/RM/LM shall be entitled to retain to the extent of such claim or claims any money which may be due (including security deposit returnable by the Corporation to the Agent under this or any other contract, and shall be entitled to, appropriate such money including security deposit returnable) in or towards satisfaction of such claim or claims".

A perusal of the clause aforesaid would demonstrate that in the event of the Corporation having any claim or claims ascertained or otherwise against the agent under any of the conditions of this contract, or arising from or out of this contract or under the conditions of any other contract the Corporation shall be entitled to retain to the extent of such claim or claims any money which may be due. It is true that the word "Bank guarantee" is not specifically mentioned in the clause aforesaid but that does not mean that it would not cover the word "security deposit" as mentioned in the clause aforesaid. Further, at the most the plaintiff during the currency of the suit had to part with the amount stated to be due and that alone cannot be treated to be an irreparable or irretrievable loss.

For the reasons stated above, this petition fails and as such is dismissed. However, there shall be no order as to costs.