M/S. Atlinga Builders Pvt Ltd & ... vs Catholic Syrian Bank Ltd & Ors.
2011 Latest Caselaw 5627 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         RFA No.347/2007

%                                                 22nd November, 2011

M/S. ATLINGA BUILDERS PVT LTD & ORS.           ..... Appellants
                     Through:   Mr. Rajiv Bakshi, Adv.


                    versus


CATHOLIC SYRIAN BANK LTD & ORS.            ..... Respondents

Through: Mr. Rajan Sabharwal with Ms. Rashmi Srivastava, Advs. for R.1

CORAM:

HON'BLE MR. JUSTICE VALMIKI J. MEHTA

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in the Digest?

VALMIKI J. MEHTA, J (ORAL)

1. The challenge by means of this Regular First Appeal filed

under Section 96 of the Code of Civil Procedure (CPC), 1908 is to the

impugned judgment of the Trial Court dated 23.3.2007. By the

impugned judgment, the Trial Court decreed the suit of the respondent

no.1-bank against the appellants inasmuch as the respondent no.1-bank

had paid amounts under two bank guarantees issued by it on the

request of the appellants in favour of the beneficiary-M/s. Kisan Sehkari

Chini Mills Ltd.

2. The facts of the case are that at the request of the

appellants, the respondent No.1-bank issued two bank guarantees, one

dated 10.3.1984 and other dated 8.5.84 in favour of M/s. Kisan Sehkari

Chini Mills Ltd. These two bank guarantees were invoked by the

beneficiary-M/s. Kisan Sehkari Chini Mills Ltd. vide its letters dated

16.8.1985. Since the respondent no.1-bank did not release the amounts

under the bank guarantees to the beneficiary, purportedly because the

bank guarantees were invoked beyond the period specified therein, the

said beneficiary filed a civil suit for recovery making the respondent

no.1-bank and the appellants herein as parties to the said suit. That suit

was decreed by the Court of the Additional Civil Judge, Lakhimpur Kheri,

UP vide judgment dated 29.9.1998 and the respondent no.1-bank was

ordered to pay a sum of `2,34,297/- in one suit pertaining to one bank

guarantee and a sum of `1,20,000/- in the other suit pertaining to the

second bank guarantee along with interest at 18% per annum from

16.9.1985 till realization. The respondent no.1-bank therefore paid a

sum of `12,66,169/- on 3.1.2000 to the beneficiary and thereafter filed

the subject suit for recovery.

3. Before the Trial Court, the appellants contended that they

were not liable to make payments of the amounts because the bank

wrongly paid the amounts to the beneficiary under the bank guarantees

whose validity period had expired as the invocation was beyond the

period as specified in the bank guarantees. It was also contended on

behalf of the appellants in the Trial Court that the respondent no.1-bank

had self-inflicted the losses and therefore the appellants were not liable

for the amounts claimed, much less with interest at 18% per annum

which was prayed for.

4 Before the Trial Court, it was not disputed that the bank

guarantees were issued by the respondent no.1-bank in favour of the

beneficiary and which were exhibited as Ex.D.2W1/P1 & Ex.D.2W1/P2. It

was also not disputed that counter guarantees were executed by the

appellants in favour of the respondent no.1-bank and which were

exhibited as Ex.PW2/1 and Ex.PW2/2. The judgment of the Civil Court at

Lakhimpur Kheri, UP has been exhibited as Ex.PW2/6. The invocation

letters dated 16.8.1985 by which the beneficiary claimed the amounts

of the bank guarantees were exhibited as Ex.C.1 and Ex.C.2.

5. Before this court, learned counsel for the appellants laid

stress on two main points:-

i) The first point of argument is that though the bank

guarantees were invoked by the beneficiary beyond the period

as specified in the bank guarantees, however the appellants

never objected to payments of the bank guarantees and

therefore the respondent no.1-bank ought to have made

payments of the bank guarantees on the letters of invocation

being received by it. It is argued on account of the failure of the

respondent no.1-bank to appropriate the margin monies and

make payments of the bank guarantees resulted in the decree

being passed by the Civil Court and whereby, huge liability has

been fastened upon the appellants.

ii) The second argument which is raised is that the suit has not

been properly instituted and filed.

6. Taking the second arguments first, this argument is an

argument of desperation to say the least. The Trial Court has

exhaustively dealt with filing and institution of the suit in paras 11 to 16

of the impugned judgment by referring to Order 29 CPC, the exhibited

power of attorney as Ex.PW1/2, and Section 85 of the Indian Evidence

Act, 1872. Therefore the notarized power of attorney can be looked into

in the facts of the present case. These findings are sufficient to hold

that the suit is validly instituted. In fact, the Trial Court need not have

gone into such detailed findings inasmuch as now it is settled law vide

the judgment of the Supreme Court (given 10 years prior to passing of

the impugned judgment) in the case of United Bank of India vs.

Naresh Kumar, AIR 1997 Supreme Court 3 that the very fact that

the suit by bank is contested to the hilt right till the stage of final

judgment is itself enough to hold that the suit is in terms of Order 29

CPC validly instituted. This argument raised on behalf of the appellants

is therefore rejected.

7. The first argument raised on behalf of the appellants equally

is without merit for the reason that firstly I find that the counsel for the

appellants is not correctly stating the facts that the appellants never

objected to the respondent no.1-bank for paying the amounts under the

bank guarantees to the beneficiary. On the contrary, I find from the

Trial Court record an admitted document Ex.P6 being a letter dated

18.9.1985 by the appellant no.1 to the respondent no.1-bank that the

bank guarantees have been invoked after the validity period had

expired and therefore the respondent no.1-bank has no liability in this

regard. By this letter, it was therefore stated by the appellants that the

margin monies in fact should be transferred back to the current account

of the appellant no.1. I therefore hold that the appellants are

deliberately stating incorrect facts. It is quite clear that in fact the

appellants objected to making payments under the bank guarantees.

8. So far as the argument that the respondent no.1-bank has

caused huge losses to the appellants by not making payments of bank

guarantees, the same is already covered in the above paragraph,

however, I note that the appellants were very much parties to the suit

which was filed by the beneficiary for payments of the amounts under

the bank guarantees, and the said judgment also binds the appellants,

as it binds the respondent no.1-bank. The said judgment is res judicata

against the appellants with respect to valid invocation of the bank

guarantees and the consequent liability of the respondent no.1-bank to

make payments to the beneficiary. Admittedly, the appellants have till

date never challenged the said decree by the Civil Court at Lakhimpur

Kheri, UP passed against them. The amount which is paid by the

respondent no.1-bank to the beneficiary is exactly in terms of the

decree passed by the Civil Court at Lakhimpur Kheri, UP, and therefore,

the amounts claimed in the suit were payable by the appellants to the

respondent.

9. I must also note that the Trial Court has referred to two

important aspects for granting a decree for the complete amounts as

prayed for by the respondent no.1-bank. The first aspect which is

referred to by the Trial Court is that in the bank guarantees issued by

the respondent no.1-bank in favour of the beneficiary showed that the

respondent no.1-bank was in fact liable to pay interest at the prevailing

bank rate in case of delayed encashment thereof. In this case, delay in

encashment of bank guarantees was not on account of the respondent

no.1-bank, and in fact the respondent no.1-bank had sought to help the

appellants by not making payments of the bank guarantees, but was

ultimately forced to pay on account of the decree passed by the Civil

Court at Lakhimpur Kheri, UP, and as already stated, to which legal

proceedings, the appellants were defendants but they chose not to

appear and contest the proceedings.

10. The second aspect that the Trial Court has noted for passing

the decree is that the indemnity bonds i.e. counter guarantees,

exhibited as Ex.PW2/1 and Ex.PW2/2, before the Trial Court, show that

the appellants had agreed to indemnify the respondent no.1-bank

against all losses, damages, etc. which the respondent might incur on

account of the guarantees Ex.D2W1/P1 and Ex.D2W1/P2. The Trial

Court has therefore rightly decreed the suit of the respondent no.1-bank

for the complete amount paid as the decree obtained by the beneficiary.

11. A resume of the aforesaid facts show that the respondent

no1-bank tried at the outset to help the appellants by not making

payments under the bank guarantees, and in fact the appellants

themselves vide Ex.P6 dated 18.9.1985 informed the bank that the bank

guarantees had expired and therefore the margin monies be paid back

to the appellants, i.e. in effect the claim of the beneficiary-M/s. Kisan

Sehkari Chini Mills Ltd. be not entertained. The respondent no.1-bank

however had no option thereafter but to comply with the decree of the

Civil court at Lakhimpur Kheri, UP and therefore it paid the amounts and

thereafter filed the subject suit.

12. In view of the above, there is no merit in the appeal, which

is accordingly dismissed, leaving the parties to bear their own costs.

VALMIKI J. MEHTA,J NOVEMBER 22, 2011 ak