- (1.) On 20.01.1997 the State Trading Corporation (hereinafter referred to as the petitioner) invited tenders for purchase of argentine wheat. The offer made by Tradigrain (hereinafter referred to as the respondent no.3) was accepted by the petitioner.
(2.) Parties entered into a contract on 04.02.1997. In terms of this contract respondent no.3 was to give a Performance Guarantee to the petitioner to ensure the due performance of its obligation under the contract. It was agreed that in case of disputes matter would be referred to the Grain and Feed Trade Association (GAFTA). Respondent no.3 approached its Swiss Banker-UBS AG (hereinafter referred to as the respondent no.2) who in turn approached the State Bank of India (hereinafter referred to as the respondent no.1) and requested it to issue a performance guarantee on behalf of respondent no.3 in favour of the petitioner. Respondent no.1 asked for a counter guarantee in its favour from respondent no.2. Accordingly respondent no.2 issued a counter guarantee on 13.02.1997 which was subsequently amended on 14.02.1997, in terms whereof parties were to be governed by the Indian law. Pursuant thereto respondent no.1 issued a performance bank guarantee in favour of the petitioner valid up to 04.8.1997 which was extended up to 04.11.1997 and finally up to 19.11.1997.
(3.) A dispute arose qua the discharge money claimed by the petitioner which as per the petitioner was wrongly calculated by respondent no.3. On 25.9.1997 the petitioner invoked the performance guarantee; submission being that respondent no.3 has failed to perform its obligation under the contract and called upon respondent no.1 to immediately remit an amount in US Dollar 908250 and credit the payment in their account. Respondent no.1 vide telex of the same date i.e. 25.9.1997 called upon respondent no.2 to pay the aforesaid sum against the counter guarantee issued by it in favour of respondent no.1. Respondent no.2 vide a telex message dated 26.9.1997 informed respondent no.1 that the Swiss Court (in proceedings initiated by respondent no.3 against respondent no.2) had vide an order of the same date injuncted respondent no.2 from making any payment of the guarantee amount. On 21.01.1998 respondent no.1 paid Rs.3,27,87,825/- (equivalent to US $ 908250 at the prevailing exchange rate) to the petitioner vide a cheque dated 21.1.1998.;