Punjab & Sind Bank vs M/S. C.S. Company & Ors

We shall, however, for the sake of convenience refer to the parties as per their status in the trial court.

3. At the outset, we must make it clear that we have reached a conclusion that the defendants have taken a dishonest stand to evade the liability to make payment to 3 the plaintiff-bank. At the cost of making this judgment prolix, we need to make a detailed reference to the pleadings of the parties because our conclusion, to a large extent, is substantiated by the pleadings. The facts, as disclosed by the plaintiff-bank in the plaint, are as under:

Thereafter, the plaintiff-bank on 24/6/1983 further executed and offered on behalf of defendant 1 another Bank Guarantee of Rs.19 lakhs to enable defendants 1 to 4 to avail of the amount of Rs.19 lakhs as mobilization advance from KSEB for the purpose of execution of the work undertaken by defendant 1.

According to the said Bank Guarantee, the sum of Rs.19 lakhs was payable to KSEB on demand by the Chief Engineer (Civil) General at any time, during the currency including the period covered by its extension without any demur and on a mere demand. The Guarantor had agreed that such demand made on the plaintiff-bank shall be conclusive as regards the amounts due and payable under the Bank Guarantee and the Guarantor had to make the payment without any demur. As consideration for giving the said Bank Guarantee, defendant 1 by its partners viz.

e) The plaintiff-bank produced in the trial court the Deed of Indemnity and Guarantee executed by defendants 2, 3 and 4 together with a copy of Bank Guarantee of Rs.19 Lakhs, the Deed of Indemnity and Guarantee executed by defendants 2, 3, 4, 5, 6, 7 & 8 as further security and the Memoranda dated 24/6/1983 of deposit of title deeds of various properties executed by the defendants confirming deposit of title deeds of their properties. Defendant 1 availed of Rs.19 lakhs as mobilization advance from the KSEB on the strength of the second Guarantee mentioned hereinabove.

g) The plaintiff-bank called upon the defendants to pay the amount of the Bank Guarantee of Rs.19 lakhs. The defendants gave assurances that the amount would be paid but did not make any payment. The plaintiff-bank, therefore, 15 appropriated a sum of Rs.4,56,962.80 being the balance amount of the fixed deposit after adjusting the over paid interest on the fixed deposit. After appropriating and adjusting the said amount, a sum of Rs.14,43,037.92 together with interest at 20% per annum remained due and payable by the defendants in respect of the second Bank Guarantee as on 24/5/1986 being the date on which the suit was filed by the plaintiff-bank.

They did not admit the Deed of Indemnity and Guarantee dated 11/5/1983 but stated that the Managing Partner of defendant 1 had given a power of attorney in favour of the plaintiff-bank authorizing the plaintiff-bank to adjust 5% of the bill amount due to defendant 1 from KSEB through the 18 plaintiff-bank and, the amount so withheld was allowed to be held as security by defendant 1 in case KSEB invoked the Bank Guarantee. They denied that defendants 2 to 8 went to the plaintiff-bank on 11/5/1983 to deposit the title deeds of their properties. It was, however, admitted that defendant 4 had by his letter dated 4/4/1983 forwarded to the plaintiff-bank title deeds of the properties described in the Schedule for the purpose of scrutiny. They admitted that on the insistence of KSEB to furnish the Bank Guarantee, the plaintiff-bank was requested to furnish Bank Guarantee of Rs.19 lakhs in favour of KSEB. They put the plaintiff-bank to proof regarding the terms and conditions of the said Bank Guarantee. Securities and Deed of Indemnities were not admitted. They denied that any of the defendants went to the plaintiff-bank on 24/6/1983 to make any declaration. They admitted the assignment of fixed deposit of a sum of Rs.4,75,000/-. They admitted that mobilization advance of Rs.19 lakhs was availed of by defendant 1. They, however, stated that it was not availed 19 of on the strength of Bank Guarantee but the basis thereof was supplementary agreement executed between KSEB and defendant 1 in which, there was no stipulation to furnish any Bank Guarantee. They put the plaintiff-bank to proof regarding the amounts which are said to have been paid by it to KSEB. They denied their liability to pay the amount to KSEB since, according to them, the invocation of Bank Guarantee and the alleged payment made by the plaintiff-

7. By judgment and order dated 1/1/1991, the trial court decreed the suit. It directed the defendants to pay Rs.19,00,000/- with interest at the rate of 18.5% per annum from 23/6/1984 till date of the suit with future interest on Rs.14,43,037.20 (Rs.19,00,000/- minus Rs.4,56,962.80 adjusted by the plaintiff-bank) at the rate of 18.5% per annum from the date of suit till realization. The trial court further directed the defendants to pay to the plaintiff-bank Rs.1,00,000/- with interest at the rate of 18.5% per annum from 15/10/1984 till realization. The trial court held that the plaintiff-bank is entitled to realize the above amounts and costs by sale of the properties shown in the Schedule to the plaint and directed that, in case, the plaintiff-bank is unable to realize the full amounts due to it by sale of the hypothecated properties, the plaintiff-bank will have the right to proceed against defendants 2 to 4 personally and against the assets of defendants 1 to 4 to realize the balance amounts due to it.

15. The title deeds are at Ex-A39 to Ex-A43, Ex-A45 to Ex-

A48, Ex-A53, Ex-A54 and Ex-A63. The tax and revenue receipts relating to the properties are at Ex-A57 to Ex-A62, Ex-A65 and Ex-A67. Encumbrances certificates upto April, 1983 are at Ex-A44, Ex-A49, Ex-A50, Ex-A51, Ex-A55, Ex-

A56, Ex-A64 and Ex-A66. Confirmation letters regarding 34 deposit of title deeds are at Ex-A24, Ex-A30, Ex-A34 and Ex-

A9 to Ex-A15, Ex-A22, Ex-A23, Ex-A25, Ex-A26, Ex-A28, Ex-

16. The defendants' contention that the plaintiff-bank illegally encashed the Fixed Deposit Receipts in the sum of Rs.4,75,000/- must also be rejected. It is the plaintiff-

17. So far as invocation of Bank Guarantees is concerned, in our opinion, there is no infirmity in the case of 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.

20. In view of the above, we set aside the impugned order dated 4/6/2003. We restore the judgment and decree of the trial court dated 1/1/1991. We direct the Registry to 43 forward a copy of this judgment to the Chairman of the Punjab and Sind Bank for information.

21. The appeal is disposed of in the aforestated terms.