- (1.) Leave granted. We have heard counsel for both sides.
(2.) This appeal by special leave arises from the Judgment of the Kerala High Court, made on November 14, 1996 in A.S. No. 394 of 1996.
(3.) The admitted facts are that the appellant laid a suit to enforce the Bank Guarantee against the respondent pursuant to the Agreement dated April 23, 1991 entered into between the appellant, M/s. Fenner (India) Ltd., 3 Madurai Melakkal Road, Madurai and M/s. Vijay Exports, 23/393, Panampally Nagar, Kochi under which the appellant had agreed thus: "In order to finance purchase of raw nuts and processing for exports, the Processor requires financial support and the Exporter has agreed to advance up to Rs. 30,00,000/- (Rupees thirty lakhs only) as Purchase advance to be secured by a Bank Guarantee." The Bank Guarantee executed on April 24, 1991 by the respondent Punjab and Sind Bank, the Guarantor in favour of M/s. Fenner (India), the Purchaser, covenanted that the Purchaser shall repay the amount advanced and in case of default, apart from invoking the arbitration clause, the Bank would be entitled to enforce the Bank Guarantee for recovery thereof. It is not disputed that the Purchaser had advanced up to a sum of Rs. 20,00,000/- (Rupees twenty lakhs only) under the aforesaid agreement. Since M/s. Vijay Exports, Kochi committed breach in payment thereof, the appellant invoked the Bank Guarantee against the respondent-Bank for a sum of Rs. 39,28,408/- inclusive of all items mentioned in the suit. The trial Court decreed the suit and in appeal the High Court reversed it holding that since the appellant had failed to advance the agreed amount of Rs. 30,00,000/- for utilisation of procuring processing cashew nuts, it was entitled to invoke the Bank Guarantee. ;