HON’BLE DR. JUSTICE G. YETHIRAJULU W.P.No. 18046 of 2000 DATE: 11-02-2008 Between: M/s. P.K. Ramaiah & Co., ……………… Petitioner and 1. The Punjab National Bank., Rep by its Senior Manager, Musheerabad Branch, Hyderabad and another. ………….. Respondents HON’BLE DR. JUSTICE G. YETHIRAJULU W.P.No. 18046 of 2000 ORDER: The petitioner approached this Court through this writ petition seeking to declare the action of the first respondent in withholding an amount of Rs.3,88,132/- which is payable to the petitioner as per the letter, dated 24-06-2000 as illegal, arbitrary, unreasonable and to direct the first respondent to pay the said amount to the petitioner forthwith along with interest from 24-06-2000 till the date of payment. 2. The petitioner is firm and it undertook the work from National Thermal Power Corporation Limited for clearing the jungle, leveling the land, laying the internal road etc. at Rehandnagar, U.P. State for a super power thermal project in October, 1982 for a total cost of Rs.1394 lakhs. Disputes arose between the parties with respect to the execution of works and ultimately the matter was referred to sole Arbitrator. Before the Arbitrator, the NTPC through its letter, dated 29- 10-1988, admitted certain claims made by the petitioner, which is a tune of Rs.131.605 lakhs. During the arbitration proceedings, relying on the letter, dated 29-10-1988, the petitioner sought for passing of an interim award for payment of the admitted amount by the NTPC. The Arbitrator was pleased to pass an interim award directing the payment of an amount of Rs.1,08,41,596/- to the petitioner herein on furnishing a security for the same. Therefore, in order to receive the amount, which is paid by the NTPC, the petitioner requested the first respondent bank to furnish a bank guarantee in favour of NTPC for the above sum and the bank guarantee was given against a fixed deposit kept in the first respondent bank in FDR No.5/93 for Rs.1,08,00,000/-. The bank guarantee was given by the first respondent in Doct. No.13-92, dated 18-11-1992 on behalf of the petitioner for a period up to 17-11-1994. Subsequently, on a letter written to the first respondent, the bank guarantee was extended for a further period of one year up to 17-11-1995. Thereafter, the petitioner never agreed for the extension of the bank guarantee and has not consented at any time for such extension. However, the NTPC appeared to have marked a copy of the letter to the bank for extension of the bank guarantee. Unless the person, who originally sought for the issuance of the bank guarantee, requests the bank to extend it for further period, it cannot be extended. During the period of bank guarantee, the first respondent was remitting interest in the current account of the petitioner and after deducting the commission charges for the bank guarantee, used to pay the balance interest to the petitioner. Since the bank guarantee was not extended from 18-11-1995, the NTPC never encashed the bank guarantee during the subsistence of the bank guarantee period. After the expiry of the bank guarantee on 17-11-1995, the NTPC has requested the bank for enforcing the bank guarantee and for encashment of the same and to send the amount to it. However, the bank had not honoured such request, as the bank guarantee period had already lapsed and since the bank guarantee was not in force as on the date of request of the NTPC, whereas the amount deposited by the petitioner in the fixed deposit was continued with the first respondent. Even though there was no necessity for continuing the same, ultimately, the final award was passed by the sole Arbitrator on 19-05-2000 confirming the interim award and without allowing any amount over and above the amount awarded under the interim award. Since the arbitration proceedings came to an end, the petitioner approached the first respondent for withdrawal of the FDR amount lying with him by producing a copy of the final arbitration award. The first respondent through the letter, dated 24-06-2000 released the FDR amounts, which were originally deposited in F.D.R.No.5/93 and renew from time to time. Surprisingly, for the bank guarantee which has expired on 17-11-1995, the first respondent charged commission for the period from 18-11-1995 to 29-06-2000, which is amounting to Rs.3,88,132/-. The balance amount of Rs.1,03,61,726/- was paid by refunding the amount. Questioning the action of the respondents in deducting the commission for the bank guarantee, the present writ petition has been filed. 3. In the letter, dated 13-04-1996, the petitioner addressed NTPC stating that it is not possible to agree for further extension of the bank guarantee. If necessary, he will give his personal surety or indemnity bond till the award of the arbitration is issued. Since the bank guarantee has already expired on 17-11-1995, he is not bound and not agreeing for further extension of bank guarantee and requested return of the bank guarantee. 4. The above letter is a clear indication that the person, who gave the bank guarantee, has no intention to extend the bank guarantee. The NTPC also never invoked the bank guarantee and never requested for encashment before 17-11-1995. In the terms and conditions of the agreement also, it is clearly mentioned that the bank guarantee will be in force till 17-11-1995. Even though once the bank guarantee is given, it may be in force till it is encashed. In view of the date fixed by the first respondent as the expiry date and renewal of the bank guarantee from time to time, it is a clear indication that there was no understanding between the first respondent and the petitioner at any time that the bank guarantee should subsist till it is encashed. 5. The learned counsel for the first respondent submitted that the bank guarantee continues to be in force till it is requested to be encasehed and out of anxiety, the petitioner has given the renewal letters of the bank guarantee though they are not required, therefore, the bank was justified in deducting the commission charges for the bank guarantee even after 17-11-1995. 6. But, after going through the entire record, I am made to understand that it was agreed between the parties that the bank guarantee should be in force till 17-11-1995 and there is no other record to show that the bank guarantee was extended beyond that period, therefore, the first respondent is not expected to recover commission for the period during which the bank guarantee was not in force. I find sufficient force in the contention of the petitioner, therefore, I am inclined to direct the first respondent to refund the amount of Rs.3,88,132/-, which was deducted towards commission of the bank guarantee, along with interest @ 6% per annum within one month from the date of this order. 7. The writ petition is, accordingly, allowed. No order as to costs. ___________________ DR. G. YETHIRAJULU, J Date:11-02-2008 YCR