Anu Enterprise vs State Bank Of Mysore And Anr.
2003 Latest Caselaw 10 Del

JUDGMENT

B.N. Chaturvedi, J.

1. Though not a party to the suit, M/s.Anu Enterprise(appellant) has filed instant appeal seeking to challenge a judgment and decree dated 21.4.1998 of the learned Single Judge passed in S.No.1044/96 in favor of M/s.Hindustan Photofilms Manufacturing Company Limited(respondent No.2/plaintiff) and against the State Bank of Mysore(respondent No.1/defendant) for a sum of Rs.10 lakhs with costs and interest @ 18% per annum with effect from 1st October, 1993 until filing of the suit as well as pendente lite and future interest.

2. Relevant facts may be noticed first.

3. M/s.Hindustan Photofilms Manufacturing Company Limited(Respondent/plaintiff) was dealing in photo sensitized products. It appointed M/s.Anu Enterprise(appellant) as their stockists in respect of Graphic Art products and Still Photo Products. They entered into agreements initially for a period of five years, which were subsequently renewed in the year 1989 for a further period of five years. In terms of the agreements, the appellant was entitled to a credit period and to a trade discount on the product value in addition to commission. However, bank guarantees/Revolving Letter of Credit/Insurance Guarantees in favor of the respondent-plaintiff were required to be furnished to avail of such credit facility. Consequently, some bank guarantees were furnished whereupon the respondent-plaintiff started supplying goods on credit to the appellant. Subsequently, as the amount of credit facility being enjoyed by the appellant was increasing, the value of the guarantees needed to be increased. Earlier bank guarantees were, thus, replaced by fresh ones of equivalent or enhanced value. In the process, in lieu of bank guarantee No.86/89 dated 20.10.1989 for Rs.10 lakhs issued by Vyas Bank Limited, Connaught Place, New Delhi, Bank Guarantee No.79/91 dated 20.10.1991 for Rs.10 lakhs, extended up to 26.11.1993, was issued by the respondent-defendant Bank and it was confirmed that the guarantee would cover the liabilities due against the Bank guarantee No.86/89 issued by Vyas Bank. The terms of this Bank guarantree read as under:-

"W HEREAS the company has agreed to extend to the buyer such facility/facilities at its absolute discretion on condition of the Bank securing the due performance of the agreement by the buyer to meet the bills of the company by furnishing a guarantee irrevocably and unconditionally guaranteeing to pay the company outstanding and due from the Buyer.

WHEREAS the Bank, in consideration of the fact that the buyer is its customer and in consideration of the company affording credit facilities and cheque issue facilities to the buyer its sole discretion hereby irrevocably and unconditionally guarantee that the bank would pay the company such amounts as the company may call upon the bank to pay as being due and outstanding to the company from the buyer on account of supplies of goods made to the buyer by the company from time to time.

The Bank hereby agrees that the company will be entitled to enforce the guarantee herein contained from time to time by making a written demand on the bank for the sum/sums claimed as due from the buyer and make the payment thereof forthwith notwithstanding the fact that there might be any dispute between the buyer and the company in respect of or any of the amounts claimed.

The Bank further agrees that the company can enforce this guarantee from time to time by making demands.

The Bank further agrees that this will be continuing guarantee in respect of all transactions relating to supply of goods by the company to the buyer during the period of the guarantee which is from 27.11.1991 to 26.11.1992 and that this guarantee will remain in force as long as any amount is outstanding from the buyer to the company in respect of transactions concluded during the said period and a demand thereof has been made to the Bank."

4. M/s.Anu Enterprise started committing defaults in making payments. Even the bills of exchange discounted by the said bank were dishonoured. In spite of promising time and again, M/s.Anu Enterprise failed to make the payment of outstanding amount to liquidate their liability. Consequently, over Rs.1.5 crores fell due from it by the year 1993 which was duly acknowledged by it. M/s.Hindustan Photofilms Manufacturing Company Limited having failed to realise the outstanding amount from M/s.Anu Enterprise, invoked the said bank guarantee and sought release of the amount of bank guarantee. The State Bank of Mysore, respondent-defendant, however, did not accede to the request so made on behalf of M/s.Hindustan Photofilms Manufacturing Company Limited and kept on evading payment there under on one excuse or the other. This made M/s.Hindustan Photofilms Manufacturing Company Limited to file a suit being No.1044/96 under Order xxxvII CPC against State Bank of Mysore on the basis of the aforesaid bank guarantee executed by it.

5. The State Bank of Mysore on being served with summons for judgment applied for leave to defend the suit, which was, however, declined and the suit was decreed in favor of Hindustan Photofilms Manufacturing Company Limited, as stated at the outset.

6. M/s.Anu Enterprise(appellant) seeks to assail the impugned judgment and decree against the State Bank of Mysore(defendant/respondent No.1) on the grounds mentioned in the memorandum of appeal. It, however, appears unnecessary to take note of such grounds as the very locus of the appellant to maintain the present appeal is questionable.

7. In support of plea to maintain the appeal, reference was made to a decision of the Supreme Court in " Smt.Jatan Kanwar Golcha Vs. M/s.Golcha Properties Private Limited(In Liquidation)" , . This was a case where on a report of the Official Liquidator under Section 457 of the Companies Act, 1956, the Company Judge ordered sale of lease-hold rights of the Company under liquidation without any notice of the proceedings to the landlady either by the Official Liquidator or by the Court. The landlady filed an appeal under Section 483 of the Companies Act, 1956 against the order of sale. On appeal, the High Court held that since the appellant/landlady had not appeared before the Company Judge, she was not entitled to maintain the appeal, and it was observed that the only remedy available to the appellant was by way of a suit after obtaining leave of the Company Judge under Section 446 of the Companies Act. Noticing that the provision of Rule 103 of the Company (Court) Rules (1959) expressly provided for issue of a notice before exercising power under Section 457(1)(c) and in the absence of such a notice, the landlady could not be deprived of her right to file appeal under Section 483 on the ground that she failed to appear before the Court of Company Judge, it was laid down by the Supreme Court that a person, who is not a party to the suit, may prefer an appeal with the leave of the appellate court and such leave should be granted if the appellant would be prejudicially affected by the judgment. It was observed that it would be a travesty of justice if a party is driven to file a suit which would involve long and cumbersome procedure when an order has been made directly affecting that party and redress can be had by filing an appeal which is permitted by law.

8. In the facts of the present case, clearly the ratio of decision in Smt.Jatan Kanwar's case(supra) is not attracted as in that case there was an express provision for issue of a notice to the landlord being the affected party before exercising power under Section 457(1)(c) of the Companies Act and the order of sale was passed overlooking such express provison prejudicially affecting the appellant's right in the property for sale. An appeal filed by the landlady after being unsuccessful in her appeal before the Rajasthan High Court was held competent. The situation in the present case is, however, different.

9. The terms of bank guarantee, extracted herein above, signify that it was an irrevocable and unconditional guarantee to pay the plaintiff/respondent company such amounts as it called upon the bank to pay as being due and outstanding from M/s.Anu Enterprise on account of supplies of goods made to it from time to time. It was stipulated that the guarantee to the said effect could be invoked from time to time by making a written demand on the bank for the sum/sums as due from the appellant and the respondent-bank was obliged to pay the amount in terms of the bank guarantee. Where the bank guarantee is in unequivocal terms, unconditional and recites that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee and the person on whose behalf the guarantee was furnished, the bank is obliged to pay the amount of a bank guarantee on its invocation by the beneficiary. The bank has simply to verify whether the amount claimed is within the terms of the bank guarantee.

10. In "Ansal Engineering Projects Limited Vs. Tehri Hydro Development Corporation Limited & Another", , it was held that a bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the validity of the primary contract between the person at whose instance the bank guarantee was given. The liability of the bank was held to be absolute and unequivocal and it was not concerned as to the amount actually due and payable. What would be material is quantification of the liability in the letter of invocation. In view of this legal position, the liability of the defendant/respondent-bank could not be affected on account of the pleas sought to be raised on behalf of the appellant in the grounds of appeal. Being an independent and distinct contract between the plaintiff-respondent company and defendant/respondent-bank, M/s.Anu Enterprise, at whose behest the bank guarantee had been executed by the defendant respondent bank, was totally alien to the whole controversy constituting subject matter of the suit and for complete and effective adjudication of the controversy, the presence of M/s.Anu Enterprise was in no way required before the learned Single Judge in S.No.1044/96. That way, the appellant was neither a necessary nor a proper party to the suit. The pleas sought to be raised by way of instant appeal may be relevant in a suit, if any, filed against the respondent-company or the defendant/respondent-bank, as the case may be and not in the context of present controversy between the plaintiff/respondent-company and defendant/respondent-bank. The defendant/respondent-bank does not appear to have challenged the order of the learned Single Judge declining leave to defend the suit and decreeing the suit, as aforesaid. If payment of the amount under the bank guarantee pursuant to the impugned judgment and decree adversely affect the interest of the appellant, it is not open to it to question the order and judgment of the learned Single Judge refusing the application made by the defendant/respondent-bank for leave to defend the suit and decreeing the plaintiff/respondent's claim. If at all the appellant is aggrieved by payment of the amount of the bank guarantee pursuant to the impugned judgment and decree, remedy on its part lies in bringing a separate suit against the plaintiff/respondent and/or the defendant/respondent-bank. The appellant, thus, cannot be permitted to maintain the present appeal by way of proxy for the defendant/respondent-bank when the bank chose not to challenge the impugned judgment and decree by filing an appeal against the same.

11.  It    was  pleaded  on behalf of the appellant that in another Suit No.1043/96 under Order xxxvII CPC between the same parties, leave to defend the suit was granted though conditionally, while in the present suit out of which this appeal has arisen, leave to defend has been declined.  This aspect hardly requires any examination for the simple reason that the appellant has no locus to assail the same by means of instant appeal.
 

12.  For the reasons aforesaid, the appeal is dismissed as not maintainable.  No costs.