TMI Blog2015 (12) TMI 1880X X X X Extracts X X X X X X X X Extracts X X X X ..... he instance of M/s. RMSFC. The Respondent Nos. 2 and 3 - the State Bank of Mysore is directed to honour the same forthwith. Appeal disposed off. - Civil Appeal No. 14015 of 2015 (Arising out of SLP (C) No. 9506 of 2014) - - - Dated:- 2-12-2015 - J.S. Khehar and R. Banumathi, JJ. For the Appellant: Akhil Sibal, Sr. Adv., Ashish Prasad, Mukta Dutta, Aditya Garg and Praveen Kumar, Advs. For the Respondent: Praneet Ranjan, E.C. Vidya Sagar, Jennifer John, Subhash Chandra Sagar and B.K. Gautam, Advs. JUDGMENT J.S. Khehar, J. 1. Leave granted. 2. The Appellant - M/s. Adani Agri Fresh Ltd. (hereinafter referred to as 'M/s. AAFL') is a supplier of fruit and vegetables. It entered into a contractual agreement with M/s. RMS Fruits and Company (hereinafter referred to as 'M/s. RMSFC'), a wholesale dealer in fruits, whose proprietor is one Mahaboob Sharif (Respondent No. 1 herein). For securing payment in lieu of the products supplied by the Appellant to Respondent No. 1 - M/s. RMSFC, the Appellant required Respondent No. 1 to furnish bank guarantees, whereby the Appellant would be entitled to recover the proceeds of the products, transporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of such demand shall be made to you by us. 4. The guarantee shall not be impaired or discharged by any changes that may hereafter take place in your constitution or in the constitution of whole seller. This guarantees shall be in addition to and without prejudice to any other securities or remedies, which AAFL may now have or hereafter possess and you shall be under no obligation to marshal in our favour any such security or any funds or assets that you may be entitled. 5. We, the guarantor hereby waive the necessity of the AAFL demanding the said debt from the whole seller before presenting us with the demand. 6. AAFL shall have the fullest liberty under the guarantee deed to extend, from time to time of the performance by the whole seller and that the guarantor also waives any right of notice etc., in this regard. 7. Notwithstanding anything contained herein: a) Our liability under this bank guarantee shall not exceed Rs. 15,00,000/- (Rupees Fifteen Lakhs only); b) This bank guarantee shall be in full force until 23.12.2011. c) We are liable to pay the guaranteed amount or any part thereof under this bank guaran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing not honoured by Respondent No. 1, the bank guarantee was sought to be invoked, through the aforesaid Outstanding Certificate dated 31.05.2011, which is being extracted hereunder: Outstanding Certificate This is to certify that M/s. R.M.S. Fruit Company, Mysore has the outstanding debit balance of Rs. 62,32,328/- (Sixty Two Lakhs Thirty Two Thousand Three Hundred Twenty Eight Only) in our books towards supply of Fruit to them during last year. Thanking you, Yours truly, For Adani Agrifresh Limited Sd/- Authorized Signatory. 4. In order to wriggle out the aforesaid bank guarantee(s), Respondent No. 1 - M/s. RMSFC, filed O.S. No. 991 of 2011 before the Civil Judge (Junior Division), Mysore with Inter alia, the following prayer: Wherefore the Plaintiff humbly prays this Hon'ble Court be pleased to pass a judgment and decree in favour of the Plaintiff and against the Defendants for permanent injunction, restraining 1st and 2nd Defendant's bank for paying any schedule guarantee amount to the 3rd Defendant, until and unless the claim of Plaintiff and 3rd Defendant is settled amicably or through court of law. Or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant has placed vehement reliance on a number of judgments of this Court, we would refer to only two of them, which would suffice the purpose. In this behalf, reference may first be made to U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. (1988) 1 SCC 174, where-from our attention was invited to the following observations: 27. Our attention was also drawn to the judgment of the learned Single Judge of the Madras High Court in Arul Murugan Traders v. Rashtriya Chemicals and Fertilizers Ltd. Bombay and Anr. A.I.R. 1986 Madras 161 where the learned Single Judge expressed the opinion that there was no absolute rule prohibiting grant of interim injunction relating to Bank guarantees and in exceptional case courts would interfere with the machinery of irrevocable obligations assumed by banks, and that the Plaintiff must establish a prima facie case, meaning thereby that there is a bona fide contention between the parties or serious question to be tried, and further the balance of convenience was also a relevant factor. If the element of fraud exists, then courts step in to prevent one of the parties to the contract from deriving unjust enrichme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional case where an injunction may be granted is where it is proved that the bank knows that any demand for payment already made or which may thereafter be made will clearly be fraudulent. But the evidence must be clear, both as to the fact of fraud and as to the bank's knowledge. It would certainly not normally be sufficient that this rests on the uncorroborated statement of the customer, for irreparable damage can be done to a bank's credit in the relatively brief time which must elapse between the granting of such an injunction and an application by the bank to have it discharged. 55. From the above discussion, what appears to me is this: The sound banking system may, however require more caution in the issuance of irrevocable documentary credits. It would be for the banks to safeguard themselves by other means and generally not for the court to come to their rescue with injunctions unless there is established fraud. In the result, this appeal must be allowed. The judgment and order of the Allahabad High Court dated February 20, 1987 must be set aside and the order of learned Civil Judge, Lucknow dated August 8, 1986 restored. (Emphasis is ours) 8. Reliance wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiary thereof. The bank is always obliged to honour its guarantee as long as it is an unconditional and irrevocable one. The dispute between the beneficiary and the party at whose instance the bank has given the guarantee is immaterial and of no consequence. In BSES Limited v. Fenner India Ltd. this Court held: 10. There are, however, two exceptions to this rule. The first is when there is a clear fraud of which the Bank has notice and a fraud of the beneficiary from which it seeks to benefit. The fraud must be of an egregious nature as to vitiate the entire underlying transaction. The second exception to the general rule of non-intervention is when there are 'special equities' in favour of injunction, such as when 'irretrievable injury' or 'irretrievable injustice' would occur if such an injunction were not granted. The general rule and its exceptions has been reiterated in so many judgments of this Court, that in U.P. State Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568 (hereinafter 'U.P. State Sugar Corpn') this Court, correctly declare that the law was 'settled'. 13. In Himadri Chemicals Industries Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporated in the guarantee executed by the bank. On careful analysis of the terms and conditions of the guarantee in the present case, it is found that the guarantee is an unconditional one. The Respondent, therefore, cannot be allowed to raise any dispute and prevent the Appellant from encashing the bank guarantee. The mere fact that the bank guarantee refers to the principle agreement without referring to any specific clause in the preamble of the deed of guarantee does not make the guarantee furnished by the bank to be a conditional one. XXX XXX XXX 24. The next question that falls for our consideration is as to whether the present case falls under any of or both the exceptions, namely, whether there is a clear fraud of which the bank has notice and a fraud of the beneficiary from which it seeks to benefit and another exception whether there are any special equities in favour of granting injunction. 25. This Court in more than one decision took the view that fraud, if any, must be of an egregious nature as to vitiate the underlying transaction. We have meticulously examined the pleadings in the present case in which no factual foundation is laid in sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contracting parties, or alternatively if the Court was satisfied that an irreparable injury or some irretrievable injustice would be caused to the concerned party. 10. Insofar as the present controversy is concerned, the defence of Respondent No. 1 is entirely based on a communication dated 14.01.2011, stated to have been addressed by the Appellant to Respondent No. 1. The aforesaid communication, which constitutes the basis of the defence of Respondent No. 1, is extracted hereunder: ADANI AGRIFRESH LIMITED 14th January, 2011 To Mr. Mahaboob Shariff, M/s. R.M.S. Fruits Company, # 1875, Anesarui Street, Behind Deveraja Market, Mysore 50 001 Sub: Settlement of amount Sir, We inform you that, our settlement talk held at Mysore, regarding destroyed and damage of 8 (eight) Loads of Apples supplied to you, four firm agreed to receive 1/4th value of total value. Hence, you are directed to send the amount in installments as agreed after we supplying Apple load as earlier. Sincerely Yours, Sd/- Authorised Signatory Seal. In addition to the relying on the above communicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs Private Ltd. v. HCL Infosystems Ltd. (supra). Having given our thoughtful consideration to the law laid down by this Court, in respect of grant/refusal of an injunction of an unconditional bank guarantee, and keeping in mind the terms and conditions, more particularly of the contractual conditions extracted and narrated above, we are satisfied that the courts below were not justified in injuncting the invocation of the three bank guarantees, executed by the State Bank of Mysore, at the instance of M/s. RMSFC. We accordingly hereby direct Respondent Nos. 2 and 3 - the State Bank of Mysore to honour the same forthwith. 14. While accepting the claim raised by the Appellant as has been recorded by us in our conclusions hereinabove, it is also imperative for us to record, that we had required the learned Counsel representing the Appellant, to obtain instructions from the Appellant, whether or not the Appellant was truthful in describing the communication dated 14.01.2011 as fabricated and doctored. In case, the Appellant had accepted it to be genuine, we would have permitted the bank guarantees to be invoked, for the reimbursement of 1/4th of the total value of the goods, in conso ..... X X X X Extracts X X X X X X X X Extracts X X X X
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