TaxTMI 
TaxTMI 
2007 (7) TMI 685
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....y. 3. The terms and conditions included the furnishing of a bank guarantee and the defendant bank furnished three guarantees to the plaintiff, the details of which are as under: S.No. Bank Guarantee Amount Date of Issue Valid up to Number 1 614(Ex. P-3) Rs. 50.00 lakh (reduced to 9.6.1988, 8.12.1988, extended on 10.12.1988, Rs. 25.00 lakh) 13.6.1988 27.5.1989, 5.12.1989 up to 8.6.1990 2 615 16.5 lakh 9.6.1988 extended on 27.5.1989 & 5.12.1989. (Ex. D-5) 8.6.1989, Valid up to 8.6.1990 3 626 12.00 lakh 12.9.1988 extended on 13.4.1989, (Ex. P-5) Valid up to 11.6.1989 11.3.1989, extended on 13.4.1989, 27.5.1989 & 5.12.1989. Valid up to 11.6.1989 4. It is claimed that there was a default on the part of Dany Dairy consequent to which a demand notice was sent on 21.03.1990 for the encashment of the bank guarantees but the defendant failed to make payment. 5. A suit is stated to have been filed in the Court of the 1st Additional Civil judge Saharanpur in which the defendant was also impleaded. In the said suit, an injunction is stated to have been granted on 17.01.1991 restraining the defendant from making payments which was vacated on 13.02.1992. Thereafter, a telex is stated ....
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....present the bank guarantee. The other bank guarantees being no. 614 and 626 were invoked on 21.03.1990. It is thus averred that as the present suit has been filed only on 22.05.1993, it is barred by time. 11. It is averred that Dany Dairy is a necessary and proper party in the present suit and the present suit cannot be adjudicated without the impleadment of Dany Dairy. The defendant has also taken the plea that a bank guarantee cannot be permitted to be used as a means for unjust enrichment and can be interdicted on a prima facie demonstration of fraud on the part of the beneficiary. 12. It is also alleged that the plaint has not been verified and filed by a duly authorized person. 13. Insofar as the merits of the case are concerned, the stand of the defendant is that the plaintiff is not entitled to any monies. It is claimed that the amounts advanced by the plaintiff to Dany Dairy covered by bank guarantee nos 614 and 615 were to be proportionately refunded by Dany Dairy to the plaintiff. It is averred that against the said two guarantees, the plaintiff made a cash advance and had adjusted in their books of accounts the cash advance and the bank commission charges. It is....
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.... PW 2 and Sh. Harmesh Mohan Sood as PW 3. An affidavit was also filed of Mr. Sudhir Avasthi (PW 4) but on 11.04.2005, the same was withdrawn. On behalf of the defendant Mr. P.K Maheswari was examined as DW 1 and Mr. R.K. Gupta was examined as DW 2. 17. Learned Counsels for the parties were heard at length on various dates. Issue 1: Is the present suit not maintainable for the reasons disclosed in the Preliminary Objection No.1? OPD 18. The first issue pertains to the objection taken by the defendant under Section 10 of the said code in view of the suit filed by Dany Dairy in Saharanpur. Insofar as the said suit is concerned, the same is stated to have been filed in late 1990 and an injunction was granted on 17.01.1991 which was thereafter vacated on 13.02.1992. On 29.07.1993 the said suit is stated to have been dismissed in default. It is also stated that Dany Dairy was ordered to be wound up by the Allahabad High Court in C.P. No. 4/1992 vide an order dated 18.03.1993 and an official liquidator was appointed. 19. In view of the dismissal of the said suit, the objection is no longer pressed by the defendant. The issue thus does not survive for consideration. Issue 2.....
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....siness, not an additional one. The Explanation to Section 20 of the said code is as under: 20. Other suits to be tried where defendants reside or cause of action arises [Explanation].-A corporation shall be deemed to carry on business at its sole or principal office in [India] or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place. 24. Learned Counsel for the plaintiff submitted that though the bank guarantees do not expressly state the place of payment, by necessary implication the place would be Delhi from where the plaintiff invoked the said guarantees. In support of his submission, learned Counsel referred to the cross examination of DW 2 wherein it was stated that the bank guarantees were to be paid by the Saharanpur Branch but they could be paid at any place at the request of the plaintiff. It was thus averred that other than the execution of the bank guarantee document which took place at Saharanpur, all other aspects of the cause of action including place of performance, place of breach and place of payment are at Delhi. 25. Learned Counsel placed reliance on the judgment of learned single jud....
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....rring territorial jurisdiction. Even if it was found that a part of the cause of action has arisen within the jurisdiction of the court, on the principles of forum non convenience, or otherwise, it may refuse to exercise jurisdiction in the matter. 29. Learned Counsel for the defendant, on the other hand, submitted that the request for issuance of the bank guarantees was received by the defendant from Dany Dairy at Saharanpur and the said bank guarantees were issued from the Saharanpur Branch. The bank guarantees were evocable in accordance with the tenor of the respective instruments at the Saharanpur Branch and the payments, if warranted under law were also to be made at the Saharanpur Branch. Further it was submitted that the notice invoking the guarantees was also received at the Saharanpur Branch and did not stipulate payments at Delhi. 30. It was contended the Bank Guarantees, being 'credits' within the meaning of the Uniform Customs and Practices of Documentary Credits (for short, UCP), each branch of the bank is considered to be a separate bank for the said purposes. Learned Counsel for the defendant made a reference to the UCP. Article 2 of the UCP pertains t....
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....td (1996) 3 SCC 442, which was referred to in that judgment, it was observed that merely because the bank guarantee was executed at Delhi and transmitted for performance to Bombay does not constitute a cause of action to give rise to the respondent to lay the suit on the original side of the Delhi High Court. It was thus contended that there must be a cause of action other than the execution of the bank guarantee for the court to entertain the suit. 34. A perusal of the aforesaid as also the bank guarantees shows that while all three bank guarantees were issued by the Saharapur Branch of the defendant, the said bank guarantees did not specify any place of payment. In his cross examination, DW 2 has also affirmed that though the said bank guarantees are payable only by the Saharanpur branch of the defendant, the same could be paid at any place. Thus, Delhi is certainly one of the places where the bank guarantees were payable. 35. Further the letter dated 9.06.1988 (Ex. P-6) which is the covering letter sent with bank guarantee No. 614; letter dated 13.06.1988 (Ex. P-4) for the amendment of bank guarantee no 614, Letter dated 09.06.1988 with regard to issue of bank guarantee no....
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....ess the balance of convenience is strongly in favor of the defendant. In determining whether a more appropriate forum exists, connecting factors, such as those effecting the convenience of parties, expenses involved and the law governing the relevant transactions are to be looked into. The mere fact that a part of the cause of action has arisen within the jurisdiction of the court may itself not be considered to be a determinative factor compelling the court to decide the matter on merits. In determining which of the available forums is the forum convenienc in a given matter, the convenience of all the parties had to be seen. In this behalf, reference may be made to the recent judgment of this Court in (India TV) Independent News Service Pvt. Limited v. India Broadcast Live LLC and Ors. (I.A Nos. 651/2007, 1336/2007 & 2611/2007) decided on 10.07.2007.In the present case, both the plaintiff and the defendant have branches/offices at Delhi. The bank guarantees were payable at any place including Delhi. Thus, Delhi cannot be said to be a forum non convenience in the present matter. 42. There is also no dispute that all three bank guarantees were issued by the Saharanpur branch of t....
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.... it is always payable, that is payable forthwith and a demand is not a condition precedent for the amount to become payable. The meaning attached to the expression "on demand" as "always payable" or "payable forthwith without demand" is not one of universal application. The said meaning applies only in certain circumstances. The said meaning is normally applied to promissory notes or bills of exchange payable on demand. We may refer to Articles 21 and 22 in this behalf. Article 21 provides that for money lent under an agreement that it shall be payable on demand, the period of limitation (3 years) begins to run when the loan is made. On the other hand, the very same words "payable on demand" have a different meaning in Article 22 which provides that for money deposited under an agreement that it shall be payable on demand, the period of limitation (3 years) will begin to run when the demand is made. Thus, the words "payable on demand" have been given different meanings when applied with reference to "money lent" and "money deposited". In the context of Article 21, the meaning and effect of those words is "always payable" or payable from the moment when the loan is made, whereas in ....
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....bove, the following illustration may be useful: Let us say that a creditor makes some advances to a borrower between 10-4-1991 and 1-6-1991 and the repayment thereof is guaranteed by the guarantor undertaking to pay on demand by the creditor, under a continuing guarantee dated 1-4-1991. Let us further say a demand is made by the creditor against the guarantor for payment on 1-3-1993. Though the limitation against the principal debtor may expire on 1-6-1994, as the demand was made on 1-3-1993 when the claim was "live" against the principal debtor, the limitation as against the guarantor would be 3 years from 1-3-1993. On the other hand, if the creditor does not make a demand at all against the guarantor till 1-6-1994 when the claims against the principal debtor get time-barred, any demand against the guarantor made thereafter say on 15-9-1994 would not be valid or enforceable. 45. Insofar as the aforesaid judgment is concerned, learned Counsel for the plaintiff contended that the same is not applicable as in that case, the question before the court was with regard to a letter of guarantee given by the borrower in which ultimate balance due to the bank was guaranteed. It ....
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....4(g) of the Indian Evidence Act, 1872 (for short, the 'Evidence Act'). In this behalf learned Counsel referred to the judgment of the Supreme Court in Gopal Krishna Ketkar v. Mohamed Haji Latif and Ors. [1968]3SCR862 . It was observed in this case that even if the burden of proof does not lie on a party the court may draw an adverse inference if he withholds important documents in his possession which can throw light on an important issue. Withholding best evidence which can throw light on the issues in controversy was observed not to be sound practice. 49. Learned senior counsel for the plaintiff also made a reference to the provisions of Section 63 of the Evidence Act to contend that as DW 1 had admitted that the liabilities as regards the bank guarantees had not been written off and the relevant balance sheets had not been produced, the same may be secondary evidence. The relevant provision is as under: 63. Secondary Evidence - Secondary evidence means and includes. 5. Oral accounts of the contents of a document given by some person who has himself seen it. 50. Learned Counsel for the defendant in this context contended that the plaintiff could no....
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....nder the provisions of Section 15 of the Limitation Act, the period during which an order of injunction was in operation for the purpose of computation of limitation i. e. from 18.03.1993 to 23.04.1996 has to be excluded and if such period is excluded, the filing of the suit is perfectly within the period of limitation. 54. One of the contentions of the learned Counsel for the defendant is that the limitation period commenced from 21.02.1990 when the plaintiff sent the letters invoking the bank guarantees and the suit has been filed only on 22.05.1993 which is beyond the limitation period. The judgment in Syndicate Bank case (supra) relied on by the defendant is to the effect that where a bank guarantee is payable on demand and in the demand, no time period has been specified for making the payment, the guarantor commits breach by not complying with the demand and the breach occurs when the demand is served upon the guarantor. 55. It may be noticed however, that as held in the judgment in M.M.T.C. Ltd case (supra), in view of the provisions of Section 15 of the limitation Act, the period during which an injunction is in operation has to be excluded while computing the period ....
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....tation under Section 18 of the Limitation Act. The said provision is as under: 18. Effect of acknowledgment in writing - (1) Where before the expiration of the prescribed period for a suit or application in respect or any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derived his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing thee acknowledgement is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act,1872 ( 1 of 1872), oral evidence of its contents shall not be received. Explanation - For the purposes of this section, - (a) An acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a ....
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....s, in their relation to the facts of the particular case. In the present case, DW 1 in his cross examination admitted that the liability under the bank guarantee had not been written off and would continue to be reflected in the balance sheets of the bank from year to year. While DW 2 had stated that he would be able to produce the balance sheets, the stand taken on the next date was that the record is very old and is thus not available. 62. The balance sheets of the relevant period were sought for the first time only in the cross examination of DW 2 on 15.11.2006. The records were of the years 1988-1993 and are thus over 13 years old and as contended by learned Counsel for the defendant the mandatory period for which the same were to be maintained had expired. In the circumstances considering the time period an adverse presumption cannot really be drawn against the defendant. There is thus nothing on record besides the stand of DW 1 that the liabilities are reflected in the balance sheets. As regards the plea of the plaintiff under Section 63 of the evidence Act, all that has been stated by DW 1 is that the liabilities have not been written off and the same would be reflected i....
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.... re compensatory and not encashable. In this behalf, reliance was placed on the judgment of a Division Bench of this Court in Satluj Jal Vidyut Nigam Ltd. v. Jai Prakash Hyundai Consortium AIR2006Delhi239 . In the said judgment, the court took note inter alias of the judgment in Samwoh Asphalt Premix PTE Ltd. v. Sum Cheong Piling PTE Ltd [2002] BLR 459 wherein it was observed that a demand under the performance guarantee can only be made where the seller has failed or refused to fulfill his obligations under the contract and the sellers demand or refusal as a condition precedent to the buyer making a demand. An assertion to that effect is implied in a demand made to a buyer. In the Satluj Jal Vidyut Nigam Ltd. case (supra) it was observed that a performance guarantee sought to be invoked not in terms of the agreement but in terms of something alien to the agreement would be something unconscionable and lack bona fides. The argument of the respondent that the call was made in bad faith was accepted by the court. 68. It was contended that the plaintiff admittedly reconciled the accounts of Dany Dairy on 30.06.1989 admitting a liability of Rs. 66,901.10. Learned Counsel drew the at....
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....e 'Buyer') having agreed to grant an advance of Rs. 50,00,000/- (Rupees Fifty Lacs Only) to M/S Dany Dairy & Food Engineers Limited, 7/4 Km. Stone, Dehradun Road, Saharanpur (hereinafter called the said 'Supplier') under the terms and conditions of a purchase order dated 25.05.98 made between the Buyer and M/S Danay Dairy and Food Engineers Ltd. for the supply, erection and commissioning of Evaporating Plant (hereinafter called 'The said Purchase Order') on production of a Bank Guarantee for Rs. 50,00,000/- (Rupees Fifty Lacs Only), we Union Bank of India, Railway Road, Saharanpur (hereinafter called 'The Bank') do hereby undertake to pay the Buyer an amount not exceeding Rs. 50,00,000/- (Rupees Fifty Lacs Only) against any loss/damage caused to or suffered, would be caused or suffered by the Buyer by reason of any breach by the said supplier of any of the terms and conditions contained in the said purchase order. 2. We, Union Bank of India, do hereby undertake to pay the amounts due and payable under this guarantee without any demur merely on a demand from the Buyer stating that the amount claimed is due by way of loss or damage caused to o....
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....tee without any demur, merely on a demand from the Buyer stating that the amount claimed is due by way of non performance of the contractual obligations as aforesaid by the supplier or by reason of the supplier's failure to perform the said contractual commitments/purchase order, any such demand made on the Bank shall be conclusive as regards the amount due and payable by the Bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 16,50,000/- (Rupees Sixteen Lacs Fifty Thousand Only) being the amount equal to 15% of the total order value. 74. The terms of the said bank guarantee also provide that in case of failure by the supplier to perform the purchase order, the buyer is entitled to an amount of 15 per cent of the order value and the demand made by the buyer itself will be conclusive evidence and proof that the supplier has failed to perform or fulfill his obligations and neither the supplier nor the bank will be entitled to raise any disputes regarding the reasons for the failure. Thus, the terms of bank guarantee shows that the defendant would be liable to make payment of the amount of the bank guarantee ....