Case: State Of Maharashtra  Vs. National Constrn.Co Bombay

and Rule 2 of Order 2 are based on the rule of law that a man shall not be twice vexed for one and the same cause. In the case of Mohd. Khalil Khan v. Mahbub Ali Khan, AIR 1949 PC 78 , the Privy Council laid down the tests for determining whether Order 2 Rule 2 of the Code would apply in a particular situation. The first of these is, "whether the claim in the new suit is in fact founded upon a cause of action distinct from that which the foundation for the former suit". If the answer is in the affirmative, the rule will not apply. This decision has been subsequently affirmed by two decisions of this Court in Kewal Singh v. Lajwanti, 1980(1) SCC 290 and in Inacio Martinss case (1993 AIR SCW 2163) (supra).10. It is well settled that the cause of action for a suit comprises of all those facts which the plaintiff must aver, and if traversed, prove to support his right to the judgment. 11. It is the contention of the appellants that the two suits are in respect of two separate causes of action. The first suit was filed to enforce the bank guarantee, while the second suit was filed to claim damages for breach of the contract relating to the work.12. In the plaint of the Short Cause Suit, the foundation of the appellants claim rested upon the performance guarantee No.57/22. The basis of the appellants claim was that under the terms of the bank guarantee, the Bank was liable to make good to the appellants all losses that became due by reason of any default on the part of the contractor in the proper performance of the terms of the contract. The appellants annexed particulars and laid out facts to show that the contractor had, by allegedly abandoning the work, failed to observe the terms of the contract. The appellants further alleged that these actions of the contractor had caused them to incur losses of Rs.76,37,557.76. However, in view of the limitation prescribed in the bank guarantee, the appellants had limited their claim to Rs.14,12,836/-. 13. At this juncture it seems necessary to analyse the law relating to bank guarantee. The rule is well established that a bank issuing a guarantee is not concerned with the underlying contract between the parties to the contract. The duty of the bank under a performance guarantee is created by the document itself. Once the documents are in order, the bank giving the guarantee must honour the same and make payment. Ordinarily, unless there is an allegation of fraud or the like the Courts will not interfere, directly or indirectly, to withhold payment, otherwise trust in commerce, internal and international, would be irreparably damaged. But that does not mean that the parties to the underlying contract cannot settle their disputes with respect to allegations of breach by resorting to litigation or arbitration as stipulated in the contract. The remedy arising excontract is not barred and the cause of action for the same is independent of enforcement of the guarantee. See UCO Bank v. Bank of India, 1981(3) SCR 300; Centax (India) Ltd. v. Vinmar Impex Inc., 1986(4) SCC 136 and U.P. Co-operative Federation Ltd. v. Singh Consultants & Engineering (P) Ltd., 1988(1) SCC 174. 14. The legal position, therefore, is that a bank guarantee is ordinarily a contract quite distinct and independent of the underlying contract, the performance of which it seeks to secure. To that extent it can be said to give rise to a cause of action separate from that the underlying contract. However, in the present case we are handicapped because the High Court (both the learned single Judge and Division Bench) had no occasion to analyse the nature of the bank guarantee. We, therefore, refrain from making any observation regarding the true nature of the bank guarantee except pointing out that the two causes of action may not be identical. That would be a matter for the trial Court to consider on a true analysis of the bank guarantee at the appropriate stage.15. In the plaint of the Spl. Suit, the main relief sought by the appellants was on the basis of the contract entered into between the appellants and the contractor. The appellants alleged and laid out facts and particulars to the effect that the abandonment of work by the contractor was in breach of the contract and this had caused the appellants to suffer losses worth Rs.1,13,27,298.16. This amount was inclusive of the claim of Rs.14,12,836/- based on the performance guarantee No.57/22 for which the contractor and the Bank were jointly and severally liable. 16. The relief sought in the Short Cause Suit was therefore based on a different cause of action from that upon which the primary relief in the Spl. Suit was founded. 17. In Sidramppa v. Rajashetty, 1970(1) SCC 186, this Court held that where the cause of action on the basis of which the previous suit was brought, does not form the foundation of the subsequent suit, and in the earlier suit, the plaintiff could not have claimed the relief which he sought in the subsequent suit, the plaintiffs subsequent suit is not barred on Order 2, Rule 2. Applying this ruling to the facts of the present case, it is clear that, in the first suit, the appellants could not claim reliefs in respect of Rs.14,12,836/- which was the maximum amount stipulated in the performance guarantee. They could not have claimed reliefs of Rs.1,13,27,298.16 which they did in the second suit on the basis of the contract relating to the work to be performed by the contractor. 18. It is, therefore, clear that when the appellants, by way of Short Cause Suit No. 491/72, sought to enforce the performance guarantee No.57/22, they were seeking reliefs on the basis of a cause of action which was distinct from the one upon which they subsequently based their claim in Spl. Civil Suit No. 29/83.

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

Explanation:
1[ds]7. In its impugned order, the High Court of Bombay has taken note of the fact that the Short Cause Suit was dismissed on the technical ground of non-joinder of a necessary party i.e. the contractor. It has, however, stressed the fact that in the appeal against the order of the lower Court, the appellants had made the contractor a party and yet the appeal was dismissed. The High Court has relied on this fact to come to the conclusion that the second suit was barred by res judicata. However, the High Court did not take note of the fact that in rejecting the appeal, the appellate Court had held that the suit was bad since there was no adjudication or legal determination of the plaintiffs dues and, for this reason, the suit was not maintainable against the 2nd Defendant only. the High Court, therefore, failed to take note of the fact that the appellate Court did not consider the merits of the case, but confirmed the dismissal of the suit by the lower Court on a technicalthe principle of res judicata and Rule 2 of Order 2 are based on the rule of law that a man shall not be twice vexed for one and the same cause.10. It is well settled that the cause of action for a suit comprises of all those facts which the plaintiff must aver, and if traversed, prove to support his right to the judgment.The legal position, therefore, is that a bank guarantee is ordinarily a contract quite distinct and independent of the underlying contract, the performance of which it seeks to secure. To that extent it can be said to give rise to a cause of action separate from that the underlying contract. However, in the present case we are handicapped because the High Court (both the learned single Judge and Division Bench) had no occasion to analyse the nature of the bank guarantee. We, therefore, refrain from making any observation regarding the true nature of the bank guarantee except pointing out that the two causes of action may not be identical. That would be a matter for the trial Court to consider on a true analysis of the bank guarantee at the appropriate stage.15. In the plaint of the Spl. Suit, the main relief sought by the appellants was on the basis of the contract entered into between the appellants and the contractor. The appellants alleged and laid out facts and particulars to the effect that the abandonment of work by the contractor was in breach of the contract and this had caused the appellants to suffer losses worth Rs.1,13,27,298.16. This amount was inclusive of the claim of Rs.14,12,836/- based on the performance guarantee No.57/22 for which the contractor and the Bank were jointly and severally liable.In Sidramppa v. Rajashetty, 1970(1) SCC 186, this Court held that where the cause of action on the basis of which the previous suit was brought, does not form the foundation of the subsequent suit, and in the earlier suit, the plaintiff could not have claimed the relief which he sought in the subsequent suit, the plaintiffs subsequent suit is not barred on Order 2, Rule 2. Applying this ruling to the facts of the present case, it is clear that, in the first suit, the appellants could not claim reliefs in respect of Rs.14,12,836/- which was the maximum amount stipulated in the performance guarantee. They could not have claimed reliefs of Rs.1,13,27,298.16 which they did in the second suit on the basis of the contract relating to the work to be performed by the contractor.It is, therefore, clear that when the appellants, by way of Short Cause Suit No. 491/72, sought to enforce the performance guarantee No.57/22, they were seeking reliefs on the basis of a cause of action which was distinct from the one upon which they subsequently based their claim in Spl. Civil Suit No. 29/83.