SHARMA, J. - (1.) THIS appeal under Section 96 CPC arises out of the judgment and decree dated 11. 9. 1987 passed by the learned Additional District Judge No. 1, Kota whereby the learned Judge has decreed the plaintiff's suit for Rs. 2,72,000/ -.
(2.) THE plaintiff respondent, Food Corporation of India filed a suit against the defendant appellants with the allegation that pursuant to the tenders invited by it for conversion of gram into `dal', the firm M/s. Rajasthan Agro Industries submitted its tender, which was accepted. THE Regional Manager vide telegram dated 8. 8. 77 informed the firm about acceptance of tender. THEreafter the Plaintiff and the firm entered into a contract and as per the terms of contract, the Firm M/s. Agro Industries had to convert 453 metric tons of gram into `dal'. According to the terms and conditions of the tender, the Rajasthan Agro Industries extended two bank guarantees, one for Rs. 1,82,000/- and another for Rs. 18,000/- in favour of Food Corporation of India. THE bank guarantees were extended to meet the loss which may be suffered by the Food Corporation of India in the event of failure to perform the contract by the Rajasthan Agro Industries. THE Rajasthan Agro Industries received in all 849 Quintals and 78. 900 Kgs. Gram, the cost, in accordance with the rate mentioned in the tender, was Rs. 2,16,696/ -. THE conversion of gram into `dal' was to be made in terms of specifications contained in Appendix-5 of the tender. As per the allegation in the plaint, the Firm failed to covert gram into `dal' as per the specification, inasmuch as the Manager Quality Control found that the sample of dal as converted by the firm was not in accordance with the specification prescribed in Appendix 5. Therefore, it was pleaded that there was breach of agreement and as such the plaintiff was not bound to accept the delivery of `dal'. As per the terms of Bank guarantee the plaintiff was entitled to meet the loses that may be suffered on account of breach of terms of agreement, by getting the bank guarantees of Rs. 1,82,000/- and 18,000/- encased. The bank guarantee was effective till 15. 4. 1978 and its period was further extended by one month. The plaintiff alleged that since the Firm breached the agreement during the period the bank guarantee was in existence and that the gram for the value of Rs. 2,16,696 was already lying with the Firm and accordingly caused loss to the plaintiff, therefore, the plaintiff Corporation is entitled to get the bank guarantee encashed. The plaintiff further alleged that Rajasthan Agro Industries apprehending encashment of bank guarantee by the plaintiff on account of breach of agreement, filed a suit and obtained ex- parte injunction order, but the same was quashed by the court vide order dated 31. 1. 78. Thereafter the plaintiff submitted Bank guarantee No. 38/77 and issued telegram on 2. 2. 78 for getting bank guarantee No. 39/77 encashed, but the defedant Bank did not encash the bank guarantee and accordingly breached the terms and conditions of the bank guarantee and therefore, the plaintiff is entitled to receive Rs. 2 lacs in terms of aforesaid bank guarantees. The plaintiff averred that since there was breach of agreement, the defendant bank was obliged to encash the bank guarantee extended on behalf of the firm. With the above allegations, the plaintiff filed a suit, thereby claiming Rs. 2 lacs under the bank guarantees and Rs. 72,000/- as interest thereon. The defendant bank denied the allegations made in the plaint by filing written statement. The trial court, on the basis of pleadings of the parties framed issues and at the conclusion of trial, decreed the plaintiffs suit against the defendant bank, holding that plaintiff is entitled to receive Rs. 2 lacs as against the amount of bank guarantees and Rs. 72,000/- as interest thereon. Hence the present appeal by the defendant bank. Mr. D. K. Soral, learned counsel for the appellant has strenuously submitted that the plaintiff respondent never intimated about the loses alleged to be suffered by it. It has further been submitted that the Bank guarantee extended by the State Bank of Bikaner & Jaipur on behalf of the Firm M/s. Rajasthan Agro Industries was neither unconditional nor unequivocal in terms, inasmuch as it has not been stated that Bank would be liable to meet the entire loss that may be suffered by the plaintiff on account of breach of its agreement with the Rajasthan Agro Industries. On this strength it has been argued that the plaintiff is not entitled to receive the amount covered by the bank guarantee. In support of his contention, Mr. Soral has relied upon a decision of the Apex Court in Hindustan Construction Co. Ltd. vs. State of Bihar and others (AIR 1999 SC 3710 ).
(3.) PER contra, Mr. J. P. Goyal appearing for the respondent has vehemently contended that there was clear breach of contract by the Rajasthan Agro Industries, thereby causing loss of more than Rs. Two lacs to the plaintiff Food Corporation of India and therefore the defendant Bank extending guarantee on behalf of Rajasthan Agro Industries is responsible to meet the loss suffered by the plaintiff, out of the amount covered under the Bank Guarantee. Learned counsel submitted that the bank guarantee is like a credit note for all purposes and, therefore, the bank is liable to pay the amount covered under the bank guarantee, which imposes an absolute obligation on the bank in its terms. In support of his argument learned Advocate has relied upon M/s. Basant Rlymers Alwar vs. State Chemical & Pharmaceuticals Corporation of India (AIR 1986 Raj. 1), United Commercial Bank vs. Hanuman Synthetics Ltd and others (AIR 1985 Calcutta 96), M/s. Banwari Lal Radhe Mohan vs. Punjab State Cooperative Supply & Marketing Federation Ltd. (AIR 1982 Delhi 357), Dena Bank vs. The Fertilizer Corporation of India Ltd. and others (AIR 1990 Patna 221) and Hindustan Construction Co. Ltd. vs. State of Bihar and others (AIR 1999 SC 3710) (supra ). I have considered the rival submissions and gone through the evidence and the judgments cited at the bar. PW. 3 Indrajeet Singh, who was Regional Manager of the plaintiff Corporation has stated that Agro Industries did not covert Gram into Gram dal according to the specifications of FCI. Since Dal was not in terms of specification, therefore, it was rejected. The witness further stated that the contract rate of Gram was Rs. 255/- per quintal. In cross examination the witness stated that about 85 metric tons of gram was supplied to M/s. Rajasthan Agro Industries for its conversion into `dal', the cost of which comes to the tune of Rs. 2,16,696/ -. It is thus evident that plaintiff Corporation suffered loss of more than Rs. 2 lacs on account of breach of agreement inasmuch as gram dal was not up to the specifications of the Corporation. Pw. 1 Madhu Sudan, District Manager of the Corporation has deposed that Agro Industries had extended two bank guarantees, one for Rs. 18000/- and another for Rs. 1,82,000/-, which are Exs. 1 and 2, respectively. The Raj. Agro Industries were required to covert gram into gram dal as per the specifications contained in Appendix 5, but it did not convert gram into gram dal as per the specifications contained in Appendix 5. ;