Venkataramiah, J. - (1.) This is an appeal by special leave under Art. 136 of the Constitution against the judgment and order dated November 13, 1978 of the High Court of Kerala in M. F. A. No. 145 of 1976.
(2.) The facts leading to this appeal may be briefly stated thus:The appellant is the Maharashtra State Electricity Board (hereinafter referred to as 'the Electricity Board'). Cochin Malleables (P) Ltd.. (in liquidation) (hereinafter referred to as 'the Company in liquidation') used to enter into contracts with the Electricity Board before it was ordered to be wound up by the High Court of Kerala to supply goods to the Electricity Board pursuant to tenders which were being issued from time to time. One of the terms usually found in such tenders was that the intending supplier of goods should pay as earnest money and/or security to the Electricity Board along with every tender a sum approximately equivalent to 10% of the estimated price of the goods in question. There was, however, a provision for exempting payment of such earnest money or security deposit in the case of those tenderers who would keep a permanent deposit of Rs. 50,000/- either in cash or in any form approved by the Electricity Board and one such approved form was a bank guarantee to the tune of Rs. 50,000/-. The effect of such deposit of Rs. 50,000/- made by an intending tenderer with the Electricity Board under this condition was that he acquired the privilege of offering his tender for the supply of goods of any value to the Electricity Board and of such tender being considered along with other tenders made by others who had in the ordinary course paid 10% of the estimated goods as security deposit as per the usual condition. Such privilege was available to him in the case of any tender that he might make as long as the deposit remained intact with the Electricity Board. In other words, on depositing a sum of Rs. 50,000/- an intending tenderer could offer to supply goods of any value either under one or more tenders without complying with the condition which required him to deposit along with the tender a sum equivalent to 10% of the estimated value of goods which he intended to supply. The security of Rs. 50,000/- thus given did not relate to any specific tender but it was open to the Electricity Board to appropriate the whole or any part of it towards any amount due from the tenderer under any supply contract entered into during the relevant period. Any balance which remained unadjusted became refundable to the person who had made it on demand provided that there was no other subsisting liability towards which the said balance could be adjusted and on such refund being made the person ceased to enjoy the exemption from the requirement of making an earnest deposit in respect of any future tender. Any bank guarantee given by any such intending tenderer in lieu of the cash deposit of Rs. 50,000/- was deemed to be equivalent to the cash deposit made on the date of the guarantee and the Electricity Board could realise the bank guarantee amount or any part of it at its will on any day irrespective of whether any tender had been made by the person concerned during the period or not. On such realisation of the bank guarantee amount, the Electricity Board could deal with it in accordance with the terms of the contract as if the said amount had been deposited with it in cash on the date of the bank guarantee. The liability of the bank which gave the bank guarantee under these terms was unconditional and did not vary according to the number of tenders offered, the value of the goods offered for sale under those tenders, and the defaults, if any, committed by the tenderer in the supply of goods.
(3.) Pursuant to the above term, the Company in liquidation. offered on Sept. 1, 1966 a bank guarantee for a sum not exceeding Rs. 50,000/- given by the Canara Bank Ltd. (now known as Canara Bank and hereinafter referred to as 'the Bank'). The relevant part of the said guarantee was as follows: " "The Canara Bank Ltd.", hereby agrees unequivocally and unconditionally to pay within 48 (Forty-eight) hours on demand in writing from the Maharashtra State. Electricity Board or any officer authorised by it in this behalf, of any amount up to and not exceeding Rs. 50,000/- (Rupees fifty thousand only) to the said Maharashtra State Electricity Board, Bombay on behalf of M/s Cochin Malleables (Private) Ltd., Trichur, who have tendered and/or contracted or may tender or contract hereafter for supply of materials, equipment or service to the Maharashtra State Electricity Board and have been exempted from payment of earnest money and/or security deposit against such tenders or contracts.";