ssm sm sm IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL CIVIL CIVIL APPELLATE JURISDICTION APPELLATE JURISDICTION APPELLATE JURISDICTION WRIT WRIT WRIT PETITION NO. 3092 OF 2007 PETITION NO. 3092 OF 2007 PETITION NO. 3092 OF 2007 Bank of Maharashtra, a Banking Company governed by the provisions of the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970, having registered office at LOKMANGAL, 1501, Shivaji Nagar, Pune-411 005 and having its branch office at Sangamwadi, Branch Dhole Road, Pune. ....Petitioner. Vs. 1. Amritlal Tirathram Gupta, Age 70 years, Occu. Retired, R/o. 12/9, Boat Club Road, Pune-411 001. 2. Sushma Sanjeev Gupta, Age 50 years, R/o. 12/9, Boat Club Road, Pune-411 001. 3. Dr.Ramchand Bulehand, Age 78 years, residing at C/o. Bulchand Charitable Trust, Free Clinic, Unit No.5, Building No.2, Sadhu Vaswani Kunj, Pune-411 001. Respondents. Mr.Girish S.Kulkarni i/by Smt. Swati Deshpande and Shri Shrishailya S. Deshmukh for the Petitioner. Mr.R.D.Dhanuka i/by Smt. Vaishali M. Chaudhari for Respondent No.1. CORAM CORAM CORAM : : : ANOOP V.MOHTA, J. ANOOP V.MOHTA, J. ANOOP V.MOHTA, J. DATED DATED DATED : 4th DECEMBER, 2008. : 4th DECEMBER, 2008. : 4th DECEMBER, 2008. JUDGMENT:- JUDGMENT:- JUDGMENT:- The Petitioner Bank has challenged the impugned ( 2 ) order dated 3rd November, 2006 whereby an application under Section 144 and 145 of the Civil Procedure Code, (for short, "C.P.C.") for restoration against Respondent No.1 pursuance to the directions of Hon’ble High Court Bombay given in Appeal No.1007 of 2001 directed to deposit the amount of Rs.35,00,000/- (Rupees thirty five lacs only) along with interest @ 9% per annum forthwith, and on failure of Respondent No.1 to deposit the amount, Respondent No.3 Bank of Maharashtra is directed to deposit an amount of Rs.17,50,000/- (Rupees seventeen lacs fifty thousand only) as against the bank guarantee Exhibit-33 and on failure of Respondent Nos. 1 and 3, the Applicant is permitted to execute the order in manner provided for execution of decree as contemplated under Section 144 and 145 of the C.P.C.. 2. The present Petition is filed only by the Petitioner Bank (Original Respondent No.3) and not by Respondent No.1. 3. As per the Petitioner, the facts are:- . On 27/12/1997, under an Arbitration proceedings an Award was passed against Respondent No.1 directing him to pay a sum of Rs.35,00,000/- (Rupees thirty five lacs ( 3 ) only) to Respondent No.2. 4. In the year 1999, Respondent No.1 challenged the said Award by filing a Miscellaneous Application being M.A. No. 433 of 1999 in the District Court, Pune. Respondent No.1 being aggrieved by the order passed by the learned District Court had filed Arbitration Appeal being 1109 of 1999, impugning the order passed by the learned District Court. . This Hon’ble Court while admitting the said Arbitration Appeal was pleased to pass an order directed Respondent No.1 to deposit a sum of Rs.35,00,000/- (Rupees thirty five lacs only) in the District Court and allowed Respondent No.2 to withdraw a sum of Rs.17,50,000/- (Rupees seventeen lacs fifty thousand only) against a bank guarantee. 5. On 24/02/2000, the Petitioner issued Bank Guarantee at instance of Respondent No.2 which was valid for the period of three years. The Appeal No.1109 of 1999 was finally disposed of as also the Misc. Application No.433 of 1999. Respondent No.2 approached the Petitioner Bank for release of money under the FDR furnished as security for issuing the aforesaid Bank ( 4 ) Guarantee. 6. On 19/10/2001, the Petitioner Bank addressed a letter to the learned District Court, Pune, through the Registrar, requesting for cancellation of the said Bank Guarantee. The learned District Court did not take any cognizance of the said letter. 7. On 03/07/2003, the Petitioner addressed another letter to the learned District Court, categorically pointing out that the term of the said Bank Guarantee has expired and to return the original bank guarantee. The learned District Court did not take cognizance of the said letter too. The Petitioner Bank on expiry of the said Bank Guarantee and non renewal of the same released money to Respondent No.2. 8. In the year 2001, Respondent No.1 had filed an Arbitration Appeal being Appeal No.1007 of 2001 in this Hon’ble Court challenging the order dismissing Miscellaneous Application No.433 of 1999. 9. On 26/04/2006, the Arbitration Appeal No.1007 of 2001 was allowed by an order passed by this Hon’ble Court wherein Respondent No.1 was directed to redeposit ( 5 ) the sum of Rs.35,00,000/- (Rupees thirty five lacs only) in the District Court. 10. On 03/11/2006, Respondent No.1 filed an Application under the provisions of Section 144 and 145 of the Code of Civil Procedure impleading the Petitioners as party Respondent for seeking direction that the Petitioners be directed to deposit the sum of Rs.17,50,000/- (Rupees seventeen lacs fifty thousand only) under the said Bank Guarantee. The said Application was allowed ex-parte but on the Petitioners Application the ex-parte order was set aside and after the Petitioner filed its reply the learned District Court, Pune was pleased to allow the said Application No.566 of 2006 and directed the Petitioner to deposit a sum of Rs.17,50,000/- (Rupees seventeen lacs fifty thousand only) in the Court. 11. In the month of February, 2007, the Petitioner filed the present Writ Petition impugning the said order dated 03/11/2006. 12. Respondent No.3 in the Petition is an arbitrator who is expired. Therefore, there is no question of bringing Legal heirs of arbitrator. The name of Respondent No.3, therefore, by order dated 12th ( 6 ) November, 2008 is deleted. 13. Heard finally, by consent of the parties as already ordered. 14. Before the Trial Court, the original Respondent No.1 proceeded ex-parte, Respondent No.2 is a formal party and Respondent No.3 Bank resisted the Petition. There is no dispute, the Petitioner Bank issued a Bank Guarantee Exhibit 33, on 23/02/2000. The relevant clauses of the Bank guarantee dated 23rd February, 2000 are as under:- "THE HONOURABLE DISTRICT JUDGE, PUNE, SHIVAJINAGAR PUNE : 411 005. . Hereinafter referred to as "HON.COURT" (which expression shall unless repugnant to the context or meaning thereof mean and include his heirs, executors, administrators and assigns) of the OTHER PART : . WHEREAS the Misc. Application No.433/99 is pending in the Hon.Court between:" ( 7 ) . "Accordingly the application is made to the Hon. District Court and the Hon’ble Court has also allowed to withdraw the balance amount of Rs.17,50,000/- on furnishing the bank guarantee as security and passed order accordingly on the Ex. 31 dated 22/08/2000." . "NOW THEREFORE WE; . BANK OF MAHARASHTRA . SANGAMWADI BRANCH, . DHOLE PATIL ROAD, . PUNE : 411 001, . in consideration of the amount of Rs.17,50,000/- deposited in the court by the Applicant as per the order of the Hon’ble High Court, do hereby become surety and bind ourselves to repay the amount of Rs.17,50,000/- (Rupees seventeen Lacs Fifty Thousand only) to the District Judge, Pune in the event of the said amount is required and ordered by the ( 8 ) District Judge, Pune to be so deposited and subsequent to the failure of said respondent to return and deposit the same. This Bank Guarantee shall be for the period of three years from the date of issue and thereafter may be extended till the disposal of the said proceedings or as may be ordered by the Hon’ble Court." . "We also agree that the liability to repay the amount withdrawn by the said respondent shall continue and remain inforce till we are discharged by the District Judge, Pune." 15. There is nothing on record to show that the District Court, Pune at any point of time permitted/or discharged the Bank from its liability though requested by various letters, including letters dated 19/10/2001 and 03/07/2003. There is no order from the Court to continue with the same after expiry of three years. But the facts remained that even after expiry of three years, the said bank guarantee need to be continued till the disposal of the said proceedings. There is a clear clause in the deed of Bank Guarantee that the Bank ( 9 ) agreed the liability to repay the amount withdrawn by the said Respondent, shall continue and remain in force till the Petitioner is discharged by the District Judge, Pune. The Petitioner Bank is not a party to the Arbitration Proceedings but in view of the deed of surety which was based upon the order passed by the High Court and with reference to the pending Appeal No. 1109/1999 including Misc. Application No. 433 of 1999, in absence of any positive order, the Bank was bound to continue the same. The Bank guarantee given to the District Court, Pune, in the facts and circumstances of the case, ought not to have been discharged without the order of the Court. It is not only the expiry of the three years but unless ordered otherwise and as agreed it was continued till the disposal of the said proceedings, specially when the Court refused to grant order of discharge though requested. The bank ought not to have released the money after expiry of three years, as done in the present case. In this background, the contention as raised by the learned counsel appearing for the Petitioner that the Bank was never party to the Arbitration Proceedings and after expiry of three years and as there was no positive order to continue the said bank guarantee they were free to release the amount after expiry of the period as they stood discharged ( 10 ) automatically, has no force. He relied upon the Judgment of Makharia Brothers Vs. State of Nagaland & Makharia Brothers Vs. State of Nagaland & Makharia Brothers Vs. State of Nagaland & Ors. Ors. Ors. (2000) 10 S.C.C., 503 (2000) 10 S.C.C., 503 (2000) 10 S.C.C., 503 and contended that the rights and liability of the contractors at whose instance the bank guarantee is issued cannot be said that the rights and obligations of the Bank. As observed by the Apex Court in the said matter. 16. The facts and circumstances of the present case are totally different including the explicit terms of the bank guarantee in question. The terms and conditions of the Bank guarantee has to be read in conjunction of the terms of the contract in pursuance of which it is issued as observed by the Apex Court in Makharia Brothers Makharia Brothers Makharia Brothers (Supra). (Supra). (Supra). Therefore, the premature encashment is allowed by the bank though there is no clear order as discharged by the Court and as the matter was pending, the order of restitution as passed by the Courts below in no way can be said to be perverse or bad in law. 17. The reliance placed on the Apex Court Judgement in 2006(6) 2006(6) 2006(6) S.C.C., 293 State Bank of India & Anr. Vs. S.C.C., 293 State Bank of India & Anr. Vs. S.C.C., 293 State Bank of India & Anr. Vs. Mula Mula Mula Sahakari Sakhar Karkhana Ltd. Sahakari Sakhar Karkhana Ltd. Sahakari Sakhar Karkhana Ltd., is also of no assistance. Considering the facts and circumstances of the case, that was not the case of encashment of the ( 11 ) Bank guarantee without the permission of the Court as the Bank Guarantee in the present case was given to the Court and it was subject to order of the Court pending the proceedings. 18. In the present case as noted, the Bank Guarantee was furnished by Respondent No.3-Bank on behalf of Respondent No.1 and on the basis of said Bank Guarantee Rs.17,50,000/- (Rupees Seventeen lacs fifty thousand only) was paid to her during the pendency of M.A.No. 433 of 1999 without the order of the Court and inspite of the Clauses referred above. 19. The parties were fully aware of the pending proceeding as even recorded in Appeal From Order No.1007 of 2001 by order dated 28th November, 2001 whereby statement was made on behalf of Respondent No.1 that the "Bank Guarantee is valid till December, 2002". It is also recorded in order dated 24th September, 2002 on behalf of the Respondent that "he will keep the bank guarantee alive till the matter reaches for admission and/or order". On 26th April, 2006, the Court has passed the order. The relevant portion is as under:- "3. It is a common ground that during the ( 12 ) pendency of this appeal, the respondent no.1 has withdrawn Rs.35,00,000/- from the Court. he is directed to re-deposit the amount in the Court within a period of Eight weeks from today with interest at the rate of 9% per annum. The deposit shall be made with due intimation to the appellant. On the amount being deposited, the appellant shall be permitted to withdraw the amount." 20. There by clear directions was issued against Respondents, who withdraw Rs.35,00,000/- (Rupees thirty five lacs only) from the Court. In this background the party who deposited the money pursuance to the award/ decree which is set aside is entitled to withdraw the said amount as the said amount was deposited in pursuance to the order passed by the Court and in this background the order of restitution, as passed cannot be faulted with which include the order against Bank- Respondent No.3, in the present proceedings. As they are in breach of terms and conditions permitted to encash the amounts without courts order and permission. Therefore, in this background, Respondent No.3- Bank is liable to deposit the amount in the Court as bank guarantee was given to the Court and as they were not ( 13 ) discharged or invoked earlier in view of the order of restitution the bank has no choice but to deposit the amount in the Court and in this back ground as ordered by the Court in the present case, in my view, is within the framework of law and the record. 21. The submission that other party has played fraud is not the matter between the Petitioner Bank, has nothing to do with the order passed by the Court. The parties to the documents are bound by the same. The clauses of the said Bank guarantee cannot be read in isolation. The Registrar of the Court or Court also is not empowered to cancel Bank Guarantee or give discharge of the same without due orders from the Court. In the present case, therefore, there is no such discharge given by the Registrar nor by the Court. The Bank liability to repay the amount continues, though the said amount alleged to have been withdrawn by Respondent No.2. It is also required to be noted, after a party deposits the amount in the Court and Court allowed other party to withdraw the said amount subject to Bank Guarantee, the party who deposited the amount is entitled to receive the amount back if order pursuance to which he had deposited the amount, is reversed and passed an order of restitution/ refund of the said ( 14 ) amount. Therefore, once the said order is quashed and set aside and reversed, the concerned bank and the party is bound to refund the said amount. In the present case, the Court has permitted to withdraw the amount subject to bank guarantee. The Bank in pursuance to the same agreement was bound to obtain the order from the Court to discharge from the said liability or before encashing the said Bank Guarantee. There is no permission obtained from the Court at any point of time. Therefore, even if there is any dispute, as the said bank guarantee was encashed without the Courts permission by the bank and paid the amount to other side, so far as the bank is concerned, is bound to encash the bank guarantee as the court ordered to encash it. The Bank is, therefore, bound to deposit the said amount in Court, once the bank guarantee is invoked by the Court as referred above. The Court, as well as, the concerned party, once the order of restitution is passed, is entitled to have the money back, pursuance to the said bank guarantee. The Bank cannot absolve its liability because of its own negligence or inaction. 22. Taking all this into account, I see there is no merit in the Petition, it is dismissed. The interim order also stand vacated. ( 15 ) 23. Rule discharged. No order as to costs. 24. The learned counsel appearing for the petitioner submits to continue interim order granted by this Court on 21.04.2007 for further period of eight weeks. Considering the facts and circumstances of the case, I am inclined to grant the same for a period of eight weeks from today. ( ANOOP V. MOHTA, J.) ANOOP V. MOHTA, J.) ANOOP V. MOHTA, J.)