R.S.A. No. 192 of 2007 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. R.S.A. No. 192 of 2007 Date of Decision: February 2, 2011 Food Corporation of India …..Appellant Vs. M/s Aggarwal & Company and another …..Respondents CORAM: HON’BLE MR. JUSTICE M.M.S. BEDI. -.- Present:- Mr.K.K. Gupta, Advocate for the appellant. Mr.V.K. Jindal, Advocate. Mr.C.B. Goel, Advocate. -.- M.M.S. BEDI, J. (ORAL) Suit of the plaintiff- respondents for declaration and mandatory injunction has been decreed by the Courts below holding that the bank guarantee cannot be invoked by the defendant- appellant Food Corporation of India in view of the letters Ex.PW2/C and PW2/D dated November 10, 1997 and November 11, 1997. The Courts below have held that the Food R.S.A. No. 192 of 2007 [2] Corporation of India is not entitled to encash the bank guarantee and the agreement Ex.P1 was frustrated due to non-performance on part of Food Corporation of India and had become not-enforceable. It was also held by the Courts below that the Bank guarantee had been obtained by Food Corporation of India on false assurances given by the FCI and a futile attempt has been made by the FCI to cover up its own acts of omission and lapses. The Food Corporation of India could not deliver the paddy of good quality for custom milling to the firm. 3672 tonns of inferior quality of paddy was supplied to the plaintiff- respondent firm by the Food Corporation of India. After custom milling the firm had supplied 10372.51 quintals of rice to the Food Corporation of India. However, the remaining paddy was lifted from the premises of the plaintiff- firm by Food Corporation of India as such no more was left to be recovered by the Food Corporation of India from the plaintiff- firm. In view of said observations, the Courts below have rightly held that Food Corporation of India was not entitled to direct the bank to encash both the bank guarantees and then remit the cash to it after encashing the same. In view of the concurrent finding of fact on issue Nos. 1 to 4, there is no ground to interfere in the judgments and decrees passed by the Courts below but it is clarified that in arbitral proceedings an award has been passed on March 12, 1999. The said Award does not, in any manner, bind the plaintiff- respondents regarding the bank guarantee. The arbitration proceedings already stand challenged in another proceedings pending between the parties under the Arbitration and Conciliation Act. R.S.A. No. 192 of 2007 [3] While decreeing the suit of the plaintiff- respondents, the rights of the appellant-Food Corporation of India accruing from the award dated March 12, 1999 have been left open to be decided separately irrespective of the decision of the Courts below. No substantial question of law is involved in the appeal as such the same is dismissed without prejudice to the rights of the defendant- appellant to recover any amount due under the provisions of Arbitration and Conciliation Act, 1996. February 2, 2011 (M.M.S.BEDI) sanjay JUDGE