Case: Punjab &amp; Sind Bank Vs. M/s. C.S. Company &amp; Others

plaintiff-bank has produced Ex-A82 and Ex-A3 which show that the invocation was done by the Chief Engineer (Civil) General as per the terms of the Bank Guarantees. It is significant to note that Ex-A4 is subsequent to Ex-A82 and relates to Bank Guarantee of Rs.19 lakhs and Ex-A7 is subsequent to Ex-A3 and relates to Bank Guarantee of Rs.1 lakh. The trial court has rightly held them to be genuine documents. The invocation of Bank Guarantees was also done when they were in force, in view of their extension. 18. Perhaps the most significant piece of evidence which has not been noticed by the trial court and though referred to by the High Court but not appreciated by it, is the letter dated 7/7/1984 (Ex-A6) in which the Managing Partner of defendant 1 has admitted execution of Bank Guarantees and expressed willingness to pay the amount. This is a letter written by defendant 1 to the plaintiff-bank in response to the demand notice dated 23/6/1984 issued to defendant 1. DW-1 in his evidence has admitted that the said letter (Ex-A6) was written by defendant 1. We deem it appropriate to quote the said letter entirely. “In response to the demand notice dated 23-6-1984 issued to me and after prolong discussion with the officials concerned, we give you this reply placing certain conditions and suggestions for a smooth banking transaction between us.A bank guarantee for a sum of Rs. 19,00,000/- was arranged by you for a contract work which we have entered into with the K.S.E.Board (Kakkad Hydro Electric Tunnel Project, costing Rs. 6.5 Crores). The work is going on in a full swing and for the continuation of the work we have invested a huge amount for the purchase of machineries and other things. It is relevant to state here that the contract is for a sum of Rs.6.5 crores. Unfortunately, allegations were levelled against the concerned Minister regarding this contract and this matter as referred for a finding before Justice Janaky Amma Commission. The Commission came to the conclusion that all the charges levelled against the Minister were false. Not satisfied with this finding, the opposition parties of the Kerala Legislative Assembly have now raised certain questions regarding this matter in the Assembly. All allegations levelled against the Minister was regarding allowing a sum ofRs.19,00,000/- as mobilization advance. As per the agreement, we have entered into with the K.S.E.Board, we are entitled to get a sum of Rs.20 lakhs. To be immune from the allegations the Board has withdrawn the amount advanced to us without even issuing a notice either to us or to the Bank.We could have approached before a civil court and obtained a stay, but we avoided it only to maintain a good relationship with KSEB for a smooth execution of the contract. Now you have issued a notice asking us to remit the outstanding amount of Rs. 14,43,037.92. Since we have invested a huge amount and since we want to proceed with the work and since we have not so far as received any amount from the department for the work we have done till the date, we are now not in a position to remit the entire amount. As per the conclusion of the discussion with the bank officials on 6-7- 1984, we hereby undertake to remit 10% of the amount of every bill from our coming running part payments.To face the financial situation, we have reconstituted our partnership by including new partners who are substantially rich and well experienced in the field of contract work and by way of increasing the capital.Now we are approaching you for an clean over-draft for a sum of Rs. 20,00,000/- (Rupees Twenty Lakhs only) and for sanctioning it we are prepared to give sufficient additional securities the bank requires. Being an outstanding contract, without this much of amount we cannot proceed with the work and only to face this circumstance we make this request and it is just from the part of the bank to sanction our request.We hereby make a suggestion that we would make arrangements from some sources to deposit a substantial amount to the bank. We make this arrangement to face the financial condition, if any, of the bank. Hence, it is prayed that in the circumstances mentioned above, your goodself may be pleased to make immediate arrangements to sanction the request we have made above.” 19. In this letter defendant 1 has accepted the case of the plaintiff-bank and undertaken to remit 10% of the amount of every bill from the running part payments receivable by it. Once defendant 1 admits execution of the Bank Guarantees and expresses its desire to repay the amount and when Counter Guarantees, number of title deeds, encumbrance certificates and confirmation letters are on record, in the facts of this case, decree must follow. In our opinion, the conduct of the defendants needs to be deprecated. After having taken the benefit of the Bank Guarantees, the defendants have tried to persuade the court to absolve them of the liability to repay the amount by taking up untenable and false contentions. In O.P. No.62 of 1986 in the schedule of properties under the heading “assets of partners”, defendant 1 has categorically stated that the said properties are mortgaged to the Bank as security for Bank Guarantee of Rs.20 lakhs. It is surprising that to evade their liability to make payments, defendant took a contrary stand in this case and tried to mislead the court. The trial court was, therefore, right in decreeing the suit. In the circumstances, the plaintiff-bank must succeed. We must, however, express our extreme displeasure about the conduct of the officers of the plaintiff-bank. The plaintiff- bank is a nationalized bank. It is surprising how the originals of the Bank Guarantees could not be produced by it in the trial court. Such conduct is not expected from the officers of the plaintiff-bank who deal with public money. They have dealt with this matter with extreme casualness.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]14. The defendants case regarding blank signed papers is not substantiated by any evidence except their say so. The trial court has rightly rejected this story and we concur with the trial court. Apart from the fact that there is nothing on record to establish the case of the defendants that thewas party to such a fraud of creating fabricated documents after obtaining blank signed papers from the defendants, it also does not stand to reason that the defendants and its partners and other defendants are so gullible as to hand over to theseveral signed blank papers. Falsity of their case is seen from the documents on record.15. The title deeds are at5 to Ex54 andThe tax and revenue receipts relating to the properties are at5 andEncumbrances certificates upto April, 1983 are at, Ex6. Confirmation letters regarding deposit of title deeds are at34 and ExA72. We have carefully perused these letters. It is impossible to come to a conclusion that thehas fabricated these letters on the blank signed papers allegedly given to it by the defendants. There is no manner of doubt that they are genuine documents. There are Memoranda of deposit of title deeds duly signed by the defendants giving details of the properties. They are at Ex, Ex3. We have seen these exhibits also. We are convinced that they are genuine documents. The defendants have not been able to give any valid acceptable explanation as to how so many original title deeds came in the custody of thePertinently, the trial court has noted that defendant 1 has filed O.P. No.62 of 1986 in theat Ernakulam against thefor recovery of Rs.In the schedule of properties under the headingit is clearly stated that these properties are mortgaged to the Bank as security for Bank Guarantee of Rs.20 lakhs. The trial court has further noted that whenwas confronted with this fact, he had no reply. At the cost of repetition, it needs to be stated that it is the case of defendants 6 to 8 in their written statement that they are not partners of defendant 1; they have no connection with the Bank Guarantee and, hence, there is no question of there being any equitable mortgage; that the original title deeds were only given for scrutiny and that thehad taken blank signed papers from them when the first Bank Guarantee for Rs.1 lakh dated 11/5/1983 was taken. This explanation itself falsifies the case of defendants 6 to 8. They have admitted that the first Bank Guarantee of Rs.1 lakh dated 11/5/1983 was executed. Even assuming without admitting that some blank papers with their signatures were taken by thefrom them, unless they were concerned with the Bank Guarantee, such documents would not be demanded from them nor would they have given such documents to theTheir efforts to disassociate themselves from defendantand the Bank Guarantees cannot, therefore, be countenanced. It is equally impossible to accept that these documents were taken for scrutiny by theNone of the defendants have successfully explained why and for what purpose, the scrutiny of their documents was necessary. We concur with the trial court that all these documents cut at the very root of the defence regarding theof the equitable mortgage. The case of the defendants that there was no equitable mortgage will have to be, therefore, rejected.16. The defendants contention that theillegally encashed the Fixed Deposit Receipts in the sum of Rs.4,75,000/must also be rejected. It is the plaintiffbanks case that this amount was deposited as security for the Bank Guarantee of Rs.19 lakhs availed of by theand the liability incurred bydefendants contend that the said Fixed Deposit Receipts were given to thefor safe custody. Against the background of the aforementioned facts, the story that the Fixed Deposit Receipts were deposited with theSo far as invocation of Bank Guarantees is concerned, in our opinion, there is no infirmity in the case of plaintiffbank. It is true that in the plaint, there is a reference to Ex7, which indicates that the invocation is done by the Secretary of KSEB but when an objection was raised by the defendants that the invocation was not proper, theA82 andwhich show that the invocation was done by the Chief Engineer (Civil) General as per the terms of the Bank Guarantees. It is significant to note thatis subsequent toand relates to Bank Guarantee ofRs.19 lakhs ands subsequent tod relates to Bank Guarantee ofRs.1 lakh. The trial court has rightly held them to be genuine documents. The invocation of Bank Guarantees was also done when they were in force, in view of their extension.In this letter defendant 1 has accepted the case of theand undertaken to remit 10% of the amount of every bill from the running part payments receivable by it. Once defendant 1 admits execution of the Bank Guarantees and expresses its desire to repay the amount and when Counter Guarantees, number of title deeds, encumbrance certificates and confirmation letters are on record, in the facts of this case, decree must follow. In our opinion, the conduct of the defendants needs to be deprecated. After having taken the benefit of the Bank Guarantees, the defendants have tried to persuade the court to absolve them of the liability to repay the amount by taking up untenable and false contentions. In O.P. No.62 of 1986 in the schedule of properties under the headingdefendant 1 has categorically stated that the said properties are mortgaged to the Bank as security for Bank Guarantee of Rs.20 lakhs. It is surprising that to evade their liability to make payments, defendant took a contrary stand in this case and tried to mislead the court. The trial court was, therefore, right in decreeing the suit. In the circumstances, themust succeed. We must, however, express our extreme displeasure about the conduct of the officers of thenk is a nationalized bank. It is surprising how the originals of the Bank Guarantees could not be produced by it in the trial court. Such conduct is not expected from the officers of thewho deal with public money. They have dealt with this matter with extreme casualness