Civil Revision No. 1585 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Revision No. 1585 of 2010 Date of decision:- 08.12.2011 The Indian Airlines Pilots Co-operative House Building Society Ltd. ...Petitioner Versus M/s Essel Housing Projects Pvt. Ltd. and another ...Respondents CORAM: HON'BLE MS. JUSTICE RITU BAHRI Present:- Mr. Shailendera Jain, Advocate for the petitioner. Mr. Ashish Chopra, Advocate for respondent No.1. Mr. Surjit Singh, Sr. Advocate with Mr. Jagdev Singh, Advocate. Mr. Sanjeev Manrai, Advocate. RITU BAHRI J. On 31.1.1995 a regular second appeal was filed against the concurrent findings of the Courts below whereby the suit filed by the plaintiff M/s Essel Housing Projects Private Limited under Order 37 CPC has been decreed. The present petitioner-defendant vide order dated 11.9.2008 was given liberty to furnish adequate security before the trial Court in terms of Rule 3(6) of Order 37 CPC. The defendant having failed to submit the security, the suit of the Civil Revision No. 1585 of 2010 -2- plaintiff was decreed for recovery of Rs.3,05,50,710/- alongwith interest upto-date @ 15% per annum. Vide order dated 24.10.2009 (Annexure P-4), the RSA was allowed and the judgment and decrees of the courts below were set aside. The matter was remanded back to the Civil Judge (Senior Division), Gurgaon. The appellant was granted four months time upto 23.2.2010 to furnish bank guarantee of the principal amount claimed i.e. Rs.3,05,50,710/-. The appellants were directed to pay cost of Rs.10,00,000/- in the form of bank draft to the respondent. It was made clear that if the cost and bank guarantee were not furnished, the appeal would be deemed to have been dismissed without further reference to this Court. The appeal was disposed of with the above observations and directions. In compliance of the order dated 24.10.2009 (Annexure P-4) the appellants deposited Rs.10,00,000/- as costs on 16.11.2009. The defendants approached the Indian Overseas Bank vide (Annexure P-6) on 26.12.2009 for arranging the bank guarantee. Some communications went on between the Overseas Bank as per Annexures P-7 and P-8 and finally vide letter dated 11.2.2010 (Annexure P-9) the Indian Overseas Bank expressed its inability to consider the request for grant of bank guarantee of Rs.3.5 crores. Thereafter, the appellants approached the Financial Commissioner and Principal Secretary, Co-operation Department, Government of Haryana as well as the Registrar, Co-operative Civil Revision No. 1585 of 2010 -3- Societies, Haryana on 16.2.2010. A specific prayer was made that in order to comply with the directions of the Court dated 24.10.2009 the Co-operative Department should come ahead and help the petitioner society being custodian of the Co-operative Bodies in protecting the interest of its members by directing the Gurgaon Central Co-operative Bank Limited, Gurgaon for issuance of bank guarantee. The Registrar, Co-operative Societies subsequently wrote a letter to the Deputy Registar, Co- operative Societies, Gurgaon on 19.2.2010. The Managing Director, Central Co-operative Bank Co-operative Limited was asked to give bank guarantee after following the due procedure to save the society from huge burden. Shri Brij Lal Arora, Manager was authorized to execute the necessary documents to mortgage the land in two villages for bank for procuring the required bank guarantee. Vide letter dated 22.2.2010 (Annexure P-13) the Managing Director, Central Co-operative Bank Limited, Gurgaon was informed to do the further action. After seeking the necessary legal opinion and valuation of report of immovable property (Annexure P-16), the bank guarantee was issued vide Annexure P-17 and was placed before the Court of Shri R.K. Yadav, Civil Judge (Senior Division), Gurgaon in case No.474 of 2007. On 25.2.2010 the Civil Judge (Senior Division), Gurgaon held that the order dated 24.10.1990 has not been complied by the Society as valid bank guarantee has not been Civil Revision No. 1585 of 2010 -4- submitted by 23.2.2010, the regular second appeal filed by the Society deemed to be dismissed. The mutation of the land, which was mortgaged in favour of the bank has not been sanctioned so far. Till the mutation was sanctioned, he will not accept the bank guarantee as operative nor he is bound by the same. He made a statement on 24.2.2010. Mr. Shailendra Jain, Advocate for the petitioner has vehemently argued that the affidavit of Brij Lal Arora, Manager of the Indian Airlines Pilots Co-operative House Building Society Limited was given in the Court on 23.2.2010. In the affidavit, he stated that he signed the bank guarantee agreement with the bank and would abide by the directions of the bank. Vide Annexure P-19 the Branch Manager, Gurgaon Central Co- operative Bank was informed by the Administrators of the Society that they were operating the account No.7928 of the Indian Airlines Pilots House Building Society Limited, Pilots Court, Essel Towers, Sector 28, Gurgaon. They authorized the Bank Manager to debit the said account number of the society bearing No.7928 in their branch at 2% per annum alongwith other charges on Rs.3,05,50,710/- every month. The bank guarantee was provided by the bank to M/s Essel Housing Projects Private Limited on charging every month till the decision of the court fee or appeal/revision before the higher courts. The demand promissory note was issued by Brij Lal Arora on behalf of Society on 23.2.2010 (Annexure P-20) that they shall deposit 2% Civil Revision No. 1585 of 2010 -5- commission per annum to the Central Co-operative Bank Limited, Gurgaon on the sum of Rs.3,05,50,710/-. Mr. Brij Lal Arora, Manager of the appellant Society appeared before the Court of Civil Judge, Gurgaon on 25.2.2010 and made a statement that after taking due permission from the Registrar, Co-operative Societies, after depositing the original title deeds and completing all the formalities the bank has furnished the bank guarantee in the Court on 23.2.2010. The order of the High Court has been complied. Statement of Shri S.K. Jain, Advocate on behalf of plaintiff was recorded that as per the Bank Manager, no bank guarantee was operative. The orders of the High Court dated 24.10.1990 have not been complied with and the appeal was liable to be dismissed. He has finally placed reliance of the Supreme Court judgment in Jattu Ram versus Hakam Singh and others AIR 1994 Supreme Court 1653 to contend that the entries made in the mutation did not confer any title, they are only made for physical purpose. For all intents and purposes the bank has accepted the title deed of the valuation report of the land of the society. After completing the due procedure i.e. after permission was granted by the Registrar Co-operative Society, the bank had decided to give the requisite bank guarantee. The entry in the mutation was to create a lean in favour of the bank. As far as the bank guarantee was concerned, it has been issued by following the due procedure. The Court for all intents and Civil Revision No. 1585 of 2010 -6- purposes was to accept the bank guarantee, which was duly signed by the Manager on behalf of Managing Director of the Co- operative Bank, Gurgaon. A statement made by the bank manager that till the mutation was entered, the bank guarantee is not operative, will not rendered bank guarantee (Annexure P- 17) as invalid. The entry in the mutation was relevant that in future if the society undertakes to sell the land or alienate the land the prospective buyer is aware that bank has a lean. Abhey Singh, the Senior Accountant was charg-sheeted by the bank vide (Annexure P-33) dated 27.7.2010. The bank has given a promissory note and charged Rs.3,36,150/-as commission against the bank guarantee w.e.f. 23.3.2010 till 23.8.2010 (Annexure P-34). The impugned order Annexure P-28 is liable to be set aside. Mr. Ashish Chopra, counsel for respondent No.1 has not disputed the fact that after filing the suit for recovery the RSA was filed in the Court and the order was passed on 24.10.2009 and the matter was remanded back for fresh consideration. However, he admits that Rs.10,00,000/- costs was deposited on 16.11.2009. Mr. Brij Lal Arora, Manager of the appellant Society had sent a letter dated 16.2.2010 (Annexure P- 11) to the Financial Commissioner and Principal Secretary, Co- operative Department and the Registrar, Co-operative Societies, State of Haryana seeking appropriate help from the Government to protect the interest of members of the Society by giving Civil Revision No. 1585 of 2010 -7- directions to the Central Co-operative Bank, Gurgaon to give required bank guarantee. It has been mentioned in the letter that on an earlier occasion the Indian Overseas Bank had declined to give the bank guarantee as some of the members had created doubts in the mind of the bank. Most of the members, who had opposed the decision to give bank guarantee while present in the general body meeting on 29.1.2009 did not oppose the resolution at that time. He has made reference to Section 9 of the Haryana Apartments Laws 2007 which debarred the Society from mortgaging any constructed property in the Society. The description of the title deed given to the bank describes the land as vacant land whereas there are apartments constructed on the land. The title deeds given by the Society include the land which falls in the share of the plaintiff-respondent. For all intents and purposes the bank guarantee is not valid. The Society at best could give title deeds of the land, which fell in their share for the purpose of security to the bank. Heard counsel for the parties and after going through the file in detail, while passing the order the Court has given a finding that once the statement was made by the Branch Manager that the bank guarantee is not operative till the mutation is sanctioned, the order of the High Court dated 24.10.2009 was not complied with and in that situation the appeal of the appellant stood dismissed. The claim arising out against the Company would be made by the invocation of the Civil Revision No. 1585 of 2010 -8- bank guarantee. There was no condition in this bank guarantee as well as bank guarantee agreement that it was not to be operative till the mutation was sanctioned. The bank had accepted the title deeds of the land of Society measuring 42 Kanal 15 Marla subject to payment of bank charges as per bank norms from time to time. The society was restrained from alienating or transferring the abovesaid land without approval of the bank. The demand promissory note was executed by Brij Lal Arora, Manager of the Society that it will pay the requisite commission on the sum of Rs.3,05,50,710/- @ 2% per annum, which shall be debited from the Society's account bearing No.7928. Ever since the bank guarantee was issued, the appellant-defendants are paying Rs.3,36,150/- as 2% commission vide Annexure P-34 w.e.f. 23.3.2010. Affidavit of Brij Lal Arora to this effect has been given on 23.3.2010 (Annexure P-18). Any statement made by the Bank manager, which does not find mentioned in the bank guarantee (Annexure P-17) in the agreement of bank guarantee is not binding on the bank. The Court has not accepted the bank guarantee, which was duly submitted on 23.2.2010. Counsel for the appellant has informed the Court that the mutation has also been sanctioned on 28.3.2010. The inter se dispute between the parties will not rendered the bank guarantee as invalid. The bank is liable to make the payment to the beneficiary on demand, the amount, which has been secured by the bank. It is not concerned with Civil Revision No. 1585 of 2010 -9- any dispute between the parties. The Supreme Court in National Thermal Power Corporation Ltd. versus Flowmore Private Limited and another (1995) 4 Supreme Court Cases 515 has held that the bank cannot be prevented by issuing injunction from honouring the guarantees as and when demanded by the beneficiary, except in cases of fraud vitiating the entire transaction. In paragraph 10 it has been observed as under:- “10. Both these submissions cannot be accepted. It is true that the bank guarantee of Rs.85,000/- contains an express term to the effect that any demand made by the owner shall be conclusive and binding on the bank notwithstanding any difference between the owner and the contractor or any dispute pending before any court, tribunal, arbitrator or any other authority. Nevertheless, this express term merely reiterates the nature of a bank guarantee which is payable on demand being made by the beneficiary of the bank guarantee. A bank guarantee which is payable on demand implies that the bank is liable to pay as and when a demand is made upon the bank by the beneficiary. The bank is not concerned with any inter se disputes between the beneficiary and the person at whose instance the bank had issued the bank guarantee.” In the facts of the present case the main ground challenging the bank guarantee by the respondents is that the appellant-Society mortgaged the title deeds of the land, which include some of the land belonging to the plaintiff. On this Civil Revision No. 1585 of 2010 -10- ground the bank guarantee cannot be held to be invalid as total cost of the land measuring 42 Kanal 15 Marla is about rupees ninety nine crores and this land includes the land of the Society as well as of the respondents. So far as compliance of the order in RSA No.3608 of 2009 is concerned, the Society for all intents and purposes has complied with both the conditions, first, depositing of Rs.10,00,000/- and second, presentation of valid bank guarantee on 23.1.2010 issued by the Central Bank, Gurgaon. The civil revision is allowed. The order dated 25.02.2010 (Annexure P-28) is set aside. The trial Court is directed to proceed with the suit No.252 of 24.10.2007 afresh after accepting the bank guarantee submitted by the petitioner on 23.02.2010. One opportunity will be granted to the respondents to file replication after granting three effective dates for leading their evidence. The suit be decided within a period of one year. No costs. 08.12.2011 ( RITU BAHRI ) Vijay Asija JUDGE