Sabyasachi Mukharji, J. - (1.) This is an application in Suit No. 562 of 1972 whereby the petitioner, Textile Machinery Corporation Ltd. hereinafter referred to as Texmaco Ltd. asked for an injunction against the State Bank of India, State Trading Corporation of India and the Projects and Equipment Corporation of India Ltd. restraining the State Bank of India from releasing or making any payments to the State Trading Corporation of India and the Projects and Equipment Corporation of India Ltd. under or in respect of the performance Guarantee issued by the State Bank of India.
(2.) In order to appreciate the contentions, it may be necessary briefly to refer to certain facts. It appears that on 23rd Oct. 1970, there was an agreement between the Community of the Yugoslav Railways and the State Trading Corporation of India Ltd. briefly referred to hereinafter as S. T. C. for manufacture in India and supply in Yugoslavia for different railways, known as ZTPs 1300 Gas type and 2300 EAS type wagons. Art. 10 of the said agreement provided that the technical guarantee was regulated by the provisions stated in Annexure VI. Annexure VI to the agreement provided that S. T. C. should give the guarantee for the high quality of the delivered wagons for a period of one year after the acceptance of the wagons in Yugoslavia. RUDNAP, a Yugoslav firm was the agent of the Community and also a confirming party to the agreement. On 4th June, 1971 back to back contract between S. T. C. and the plaintiff for manufacture and supply of 434 Gas wagons, 425 EAS wagons on the same terms and conditions of the export contract dated 23rd Oct. 1970 was entered into. The terms and conditions of the export contract including the terms as to the period of guarantee of one year were incorporated in the back to back contract. In the said contract, inter alia, it was stipulated as follows: "TEXMACO hereby indemnify and shall keep the S. T. C. indemnified against all actions, claims, proceedings, demand, damages, losses, costs and expenses in respect of or in connection with or in relation to or arising out of any matter under this contract and/or Export Contract relating to the WAGONS due to Texmaco's failure to perform any of its obligations under the contract." Thereafter, on or about 18th Sept.. 1971 there was an agreement between S. T. C. and the Braithwaite and Co. whereby Braithwaite agreed to manufacture and supply 425 EAS wagons. In Dec. 1972 the wagons to be supplied to ZTP could only be shipped in knocked down condition and contained various parts not available in India. An assembly contract was entered into between Indian manufacturers including the plaintiff and RUDNAP whereby RUDNAP were required to assemble the components of the wagons and to fit into the same the other imported parts. RUDNAP gave necessary undertakings and guarantees to the Indian manufacturers for due performance of its obligations. On 20th Jan. 1973 a tripartite agreement between S. T. C. the plaintiff and Braithwaite and Co. Ltd., for reallocation between the plaintiff and the Braithwaite for the manufacture and delivery of the Railway wagons was made. Then, pursuant to the back to back contract, the State Bank of India, on or about 26th Feb. 1973 at the instance of the plaintiff gave a Bank guarantee in favour of S.T.C. for a sum of Rs. 49,50,570/- being 5 per cent of the price of the wagons for due performance by the plaintiff in an orderly manner their contractual obligations under the back to back contract. It is now relevant to refer to the said document. The said guarantee after reciting the previous contract, mentioned hereinbefore, recited that there was a back to back contract signed by the S. T. C. and Texmaco on 4th June, 1971 and a tripartite agreement had been entered into between the Textile Machinery Corporation Ltd., Braithwaite and Co. Ltd. and the State Trading Corporation of India Ltd. on the 20th Jan. 1973 and the Texmaco had agreed to manufacture and sell as follows: "AND WHEREAS by a Back to Back Contract signed by STC and TEXMACO on 4th June, 1971 and a tripartite agreement into between Textile Machinery Corporation Ltd. Braithwaite and Co. (India) Ltd. and State Trading Corporation of India Ltd. on the 20th Jan. 1973 (hereinafter referred to as Back to Back Contract) TEXMACO have agreed to- (a) manufacture and supply 867 GAS wagons (hereinafter referred to as wagons) at the total price of Rs. 9,90,11,400/- (Rupees Nine crores ninety lacs eleven thousand and four hundred only) (hereinafter referred to as the price) and (b) perform and observe all the obligations covenants and agreements required to be performed and observed on the part of STC under the Export Contract insofar as these related to the Wagons."
(3.) Thereafter, after reciting the Back to Back Contract, TEXMACO had to provide STC with a performance Bank Guarantee for five per cent of the price guaranteeing orderly performance of TEXMACO'S contractual obligations.;