Decided on June 04,2003

C.S. COMPANY Appellant


- (1.) Defendants 1, 2, 4, 7 and 8 are the appellants. Suit was instituted by the first respondent Bank for realisation of money on the strength of two bank guarantees alleged to have been executed on 11.5.1983 and 24.6.1983 in favour of Kerala State Electricity Board. Suit was decreed. It was also ordered that if the Bank could not realise full amount due to it by sale of hypothecated properties, Bank could proceed against defendants 2 to 4 personally against the assets of defendants 1 to 4 to realise the balance amount due to it.
(2.) First defendant is a partnership firm engaged in the business of engineering and other defendants are its partners. They undertook execution of certain civil engineering works awarded by the Kerala State Electricity Board. Defendants had approached the plaintiff Bank to furnish bank guarantee for Rs. 20 lakhs in favour of the Electricity Board. Bank had agreed to offer the bank guarantee subject to certain terms and conditions. Defendants executed necessary documents and furnished security by making immovable properties by deposit of title deeds. Plaintiff Bank on 11.5.1983 offered bank guarantee to the Kerala State Electricity Board for Rs. 1 lakh. Another bank guarantee for Rs. 19 lakhs was offered on 24.6.1983. Second defendant deposited the title deeds of his property in Kottayam Village with intent to create a security in favour of the plaintiff. Fifth defendant deposited the title deeds of his property scheduled in the plaint with intent to create security by way of mortgage Fifth defendant also confirmed the deposit of title deeds of his property by memorandum executed on 11.5. 1983. Sixth defendant acting through his power of attorney holder deposited the title deeds of his property with the Bank by way of mortgage. Defendants 7 and 8 deposited their title deeds in respect of their property with intent to create security. Fourth defendant furnished security of fixed deposit receipt for a sum of Rs 25,000/-. By letter dated 19.6.1984 Electricity Board demanded and called upon the plaintiff to pay the sum of Rs. 19 lakhs. Plaintiff informed this fact to the first defendant. First defendant was called upon to pay the amount to the plaintiff. Plaintiff did not pay the amount. Hence plaintiff appropriated Rs. 4,56,962.80 for fixed deposit amount. After adjusting the said amount, amount of Rs. 14,43,037.92 is due. Defendants are liable for 20% interest. First defendant requested the plaintiff to extend the bank guarantee for one lakh for a period of one year. Plaintiff extended the period of Bank guarantee upto 11.5.1985. Kerala State Electricity Board terminated the contract and has proceeded to take further action against the defendants. Defendants did not pay the amount. Suit was instituted to realise the said amount.
(3.) Joint written statement was filed by defendants 1, 2 and 4. They stated that the plaintiff be put to strict proof regarding the dates of the guarantee. The deed of indemnity and guarantee were not admitted. Further it was also stated that even if bank had honoured guarantees they were not validly or legally invoked. Defendants 6 to 8 had stated that they had never gone to the plaintiffs Bank on 11.5.1983 or on any other date or deposited the title deeds of the properties to the plaintiff Bank for security. No mortgage was created in favour of the Bank in respect of the schedule property. Fourth defendant by letter dated 4.4.1983 forwarded the title deeds described in the plaint for the purpose of scrutiny. Further it was also stated that even though mobilisation advance was given to the first defendant, it was not on the condition that the first defendant firm would give a bank guarantee in favour of the Kerala State Electricity Board. Defendants 6 to 8 in their joint written statement had stated that they had not created any equitable mortgage in respect of their properties in favour of the plaintiff and also denied the execution of the deed of indemnity and guarantee dated 11.5.1983. In the written statements filed by defendants 6 to 8 it is stated that the plaintiff had taken blank signed papers from them on 11.5.1983 when the first bank guarantee for Rs. 1 lakh was issued in favour of the K.S.E. Board and those signed papers were utilised for the purpose of creating equitable mortgage, indemnity and guarantee and other documents.;

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