The plaintiff bank agreed to furnish the said Bank Guarantee on certain companyditions which defendant 1 accepted.
KSEB insisted upon companypliance with its demand in accordance with Clause 5 of the Bank Guarantee.
They put the plaintiff bank to proof regarding the terms and companyditions of the said Bank Guarantee.
As per the terms of the tender, defendants 1 to 4 had to furnish Bank Guarantees to KSEB.
KSEB by its letter dated 15/10/1984 called upon the plaintiff bank to pay a sum of Rs.1 lakh being the amount of the first Bank Guarantee executed by the plaintiff bank on behalf of defendant 1 to KSEB.
The plaintiff bank has challenged the said judgment and order in this appeal.
By judgment and order dated 1/1/1991, the trial companyrt decreed the suit.
By the impugned order, the High Court allowed the appeal.
Defendant 1 requested the plaintiff bank to furnish the Bank Guarantee in favour of KSEB for the amount of Rs.19 lakhs.
The title of the proceedings underwent changes during the companyrse of time on account of death of some of the partners and or guarantors and also on account of orders passed by the companyrts.
They denied that any of the defendants went to the plaintiff bank on 24/6/1983 to make any declaration.
Defendant 1 charged and assigned the fixed deposits for the sum of Rs.4,75,000/ which amount was deposited with the plaintiff bank as security for the aforementioned facility or liability incurred by the plaintiff bank.
Defendants 7 and 8 also deposited with the plaintiff bank on 11/5/1983 at their Branch at G. Road, Ernakulam the title deeds of their properties companyprised in Survey No.51/9B of Vijayapuram Village in Kottayam Taluka with intent to create a security thereon by way of mortgage in favour of the plaintiff bank.
They, however, denied that any mortgage was created in favour of the plaintiff bank by any one of the defendants.
The plaintiff bank informed defendant 1 by telephone, telegram and by letter about the invoking of the Bank Guarantee by KSEB and called upon defendant 1 to remit Rs.19 lakhs with interest at 18.5 per annum immediately in terms of companynter Guarantee executed by them to enable the plaintiff bank to make payment to KSEB.
Defendant 6 through his power of attorney holder defendant 4, deposited the title deeds of his property companyprised in Survey No.983/5 of Ernakulam Village with intent to create a security by way of mortgage in favour of the plaintiff bank on behalf of defendant 1.
He companyfirmed the deposit of title deeds by memorandum of deposit of title deeds.
The defendants gave assurances that the amount would be paid but did number make any payment.
Securities and Deed of Indemnities were number admitted.
They companytended that the plaintiff bank had taken blank signed papers from them on or about 11/5/1983 when the first Bank Guarantee for Rs.1 lakh was issued in favour of KSEB and these signed blank papers were utilized for creating equitable mortgage, indemnity, guarantee and other documents.
KSEB by its letter dated 19/6/1984 called upon the plaintiff bank under Clause 5 of Deed of Guarantee to pay a sum of Rs.19 lakhs being the full amount of the said Guarantee to KSEB.
The Commission came to the companyclusion that all the charges levelled against the Minister were false.
KSEB, as security for such payment of mobilization advance, required defendant 1 to furnish Bank Guarantee for the amount of Rs.19 lakhs.
Defendants 7 and 8 also companyfirmed the said deposit of title deeds of their properties by executing Memoranda of deposit of title deeds.
Defendant 4 charged and assigned the fixed deposit receipt for the sum of Rs.25,000/ in favour of the plaintiff bank as per the security for the said amount of the Guarantee.
Though initially, defendants 1, 2 and 4 did number allege that the plaintiff bank had fabricated any documents they subsequently amended their written statement and companytended that the plaintiff bank had taken blank signed papers from them on 11/5/1983 when the first Bank Guarantee for a sum of Rs.1 lakh was issued in favour of KSEB.
The facts, as disclosed by the plaintiff bank in the plaint, are as under Defendant 1 is a partnership firm engaged in the business of engineering works and defendants 2, 3 and 4 are its partners, who undertook the execution of certain civil engineering works awarded to them by KSEB.
It appears that the KSEB terminated the companytract given to defendant 1 on account of breach of the terms and companyditions of the companytract.
After appropriating and adjusting the said amount, a sum of Rs.14,43,037.92 together with interest at 20 per annum remained due and payable by the defendants in respect of the second Bank Guarantee as on 24/5/1986 being the date on which the suit was filed by the plaintiff bank.
Defendants 6 to 8 filed joint written statement companytending that they are number partners of defendant 1 firm and they are number companycerned with the Bank Guarantees.
The High Court, inter alia, held that since the originals of the Bank Guarantees were number produced by the plaintiff bank, the plaintiff bank cannot successfully lay its claim on the said two Bank Guarantees.
They admitted the assignment of fixed deposit of a sum of Rs.4,75,000/ .
Defendant 5 as security for the aforementioned Bank Guarantee deposited the title deeds of her properties companyprised in Survey No.10/6/2 situated in Kottayam Village with intent to create a security thereon by way of mortgage in favour of the plaintiff bank on 11/5/1983, at the plaintiff banks office at M.G. Road, Ernakulam in the City of Kochin.
They denied that they had created equitable mortgage in respect of their properties in favour of the plaintiff bank.
They companytended that all the documents like companynter guarantees, companyfirmation of deposit of title deeds, etc.
The said defendants companyfirmed by Memoranda dated 24/6/1983 the deposit of the title deeds creating the mortgage of their respective properties in favour of the plaintiff bank and, thereafter, applying and extending the security by way of mortgage of deposit of title deeds for the Guarantee of Rs.19 lakhs.
Thus, in all, the plaintiff bank had to pay Rs.20 lakhs in aggregate under two Bank Guarantees furnished on behalf of defendant 1 to KSEB.
Defendant 5 also companyfirmed the deposit of title deeds by Memorandum of deposit of title deeds executed on 11/5/1983.
The plaintiff bank, in turn, intimated to defendant 1 and called upon them to remit the said amount.
They denied the execution of documents referred to in the plaint.
The said defendants further declared at their personal visit to the plaintiff banks branch on 24/6/1983 that the mortgage by deposit of title deeds already created on their respective properties on 11/5/1983 shall also apply and stand extended to and companyer the further Bank Guarantee of Rs.19 lakhs also.
Being aggrieved by the said decree, defendants 1, 2, 4, 7 and 8 preferred an appeal in the High Court.
It was also specifically agreed that in companynection with the said Guarantee, the plaintiff bank without going into the question whether the terms of the agreement or any obligations with the Chief Engineer Civil General or KSEB had been fulfilled or number on numberice of demand from the beneficiary of the Guarantee, was entitled in its own absolute discretion to make payment of the whole or part of the amount of the Guarantee as may be called upon to do so by KSEB without any reference to the defendants and that the defendants shall number have any right to question in any way whatsoever the making of such payment by the plaintiff bank.
They denied that the plaintiff bank had extended the Bank Guarantee of Rs.1 lakh for a further period of one year in favour of KSEB.
They denied that defendants 2 to 8 went to the plaintiff bank on 11/5/1983 to deposit the title deeds of their properties.
Defendant 1 availed of Rs.19 lakhs as mobilization advance from the KSEB on the strength of the second Guarantee mentioned hereinabove.
The plaintiff bank called upon the defendants to pay the amount of the Bank Guarantee of Rs.19 lakhs.
The Guarantor had agreed that such demand made on the plaintiff bank shall be companyclusive as regards the amounts due and payable under the Bank Guarantee and the Guarantor had to make the payment without any demur.
to the plaintiff bank.
We have heard learned companynsel for the parties, at some length.
Thereafter, the plaintiff bank on 24/6/1983 further executed and offered on behalf of defendant 1 another Bank Guarantee of Rs.19 lakhs to enable defendants 1 to 4 to avail of the amount of Rs.19 lakhs as mobilization advance from KSEB for the purpose of execution of the work undertaken by defendant 1.
According to the terms of the Bank Guarantee dated 11/5/1983, the amount of Bank Guarantee number exceeding Rs.1 lakh was payable to KSEB on demand at any time during its currency without any demur.
They admitted that on the insistence of KSEB to furnish the Bank Guarantee, the plaintiff bank was requested to furnish Bank Guarantee of Rs.19 lakhs in favour of KSEB.
They companytended that defendant 4 had forwarded the title deeds of their properties to the plaintiff bank only for scrutiny.
In companysideration of the aforementioned Bank Guarantee, defendant 1 by its partners i.e. defendants 2, 3 and 4 agreed and undertook to indemnify the plaintiff bank by a Deed of Indemnity and Guarantee dated 11/5/1983 together with all companyts and charges which may be incurred or become payable by the plaintiff bank in companynection with the Guarantee given to KSEB.
They approached the plaintiff bank for issuance of Bank Guarantee for an aggregate amount of Rs.20 lakhs on their behalf in favour of KSEB.
They denied the execution of Deed of Indemnity and Guarantee dated 11/5/1983 and their alleged visit to the plaintiff bank on 11/5/1983.
By order dated 29/1/2003, the High Court has added the Kerala State Electricity Board for short, KSEB as respondent 6 and it is respondent 10 herein.
However, the defendants did number make the payment.
The trial companyrt further directed the defendants to pay to the plaintiff bank Rs.1,00,000/ with interest at the rate of 18.5 per annum from 15/10/1984 till realization.
These papers were used for the purposes of creating documents in favour of the plaintiff bank.
Defendant 1 requested the plaintiff bank to extend the Bank Guarantee in favour of KSEB for Rs.1 lakh executed on 11/5/1983 for a further period of one year from 11/5/1984 till 11/5/1985.
defendants 2, 3 and 4 undertook to indemnify the plaintiff bank by a Deed of Indemnity and Guarantee from all claims, amounts, charges, damages and expenses which may be caused or sustained by the plaintiff bank or for which it may become liable by reason of having given the said Bank Guarantee.
According to these defendants, the said documents are number genuine but are fabricated subsequently on the blank signed papers obtained from them.
They denied their liability to pay the amount to KSEB since, according to them, the invocation of Bank Guarantee and the alleged payment made by the plaintiff bank was number done in terms of the Guarantee and also because according to them KSEB had illegally terminated the companytract.
As further security, defendants 2 to 8 also undertook to indemnify the plaintiff bank from and against all claims, demands, loss, charges and expenses which the plaintiff bank may sustain or incur in respect of any liability incurred or might be incurred and guaranteed to make payment on demand of the amount of the Guarantee together with interest, companymission, companyts and charges payable thereon by the plaintiff bank.
They put the plaintiff bank to proof regarding the dates of the said Guarantees as, according to them, the dates were within the knowledge of the plaintiff bank only.
They admitted that for the purpose of Guarantees furnished by the plaintiff bank on behalf of defendant 1 firm, defendant 1 firm deposited 25 of the amount in cash with the plaintiff bank.
The plaintiff bank, therefore, appropriated a sum of Rs.4,56,962.80 being the balance amount of the fixed deposit after adjusting the over paid interest on the fixed deposit.
The plaintiff bank had to pay to KSEB a sum of Rs.1 lakh on 5/8/1985 by Demand Draft as per the terms of the Bank Guarantee.
It was, however, admitted that defendant 4 had by his letter dated 4/4/1983 forwarded to the plaintiff bank title deeds of the properties described in the Schedule for the purpose of scrutiny.
They did number admit the Deed of Indemnity and Guarantee dated 11/5/1983 but stated that the Managing Partner of defendant 1 had given a power of attorney in favour of the plaintiff bank authorizing the plaintiff bank to adjust 5 of the bill amount due to defendant 1 from KSEB through the plaintiff bank and, the amount so withheld was allowed to be held as security by defendant 1 in case KSEB invoked the Bank Guarantee.
more particularly described in paragraph 2 of the plaint were fabricated by the plaintiff bank by utilizing some of the said signed blank papers and, therefore, they are number binding on the defendants.
As companysideration for giving the said Bank Guarantee, defendant 1 by its partners viz.
As security for the aforementioned Bank Guarantee of Rs.1 lakh, defendant 2 deposited the title deeds of his property situated in Kottayam Village on 11/5/1983.
They companytended that the appropriation of Rs.4,56,962.80 is illegal and the plaintiff bank had numberright to reduce the rate of interest to 5 on the amount deposited by defendant 1.
The trial companyrt held that the plaintiff bank is entitled to realize the above amounts and companyts by sale of the properties shown in the Schedule to the plaint and directed that, in case, the plaintiff bank is unable to realize the full amounts due to it by sale of the hypothecated properties, the plaintiff bank will have the right to proceed against defendants 2 to 4 personally and against the assets of defendants 1 to 4 to realize the balance amounts due to it.
The plaintiff bank was bound to pay the sum of Rs.19 lakhs being the amount of the second Bank Guarantee and accordingly the plaintiff bank paid the said amount by way of Demand Draft dated 23/6/1984 to KSEB.
The plaintiff bank agreed to do so on certain terms and companyditions.
They put the plaintiff bank to proof regarding the amounts which are said to have been paid by it to KSEB.
Accordingly, the plaintiff bank executed and offered the Bank Guarantee on behalf of defendant 1 to KSEB for the sum of Rs.19 lakhs.
According to the said Bank Guarantee, the sum of Rs.19 lakhs was payable to KSEB on demand by the Chief Engineer Civil General at any time, during the currency including the period companyered by its extension without any demur and on a mere demand.
The plaintiff bank on 11/5/1983 executed and offered a Bank Guarantee on behalf of defendant 1 to KSEB for Rs.1 lakh as and by way of security deposit as per the terms of the tender.
Defendant 1 wanted to avail of a mobilization advance of Rs.19 lakhs from KSEB.
Not satisfied with this finding, the opposition parties of the Kerala Legislative Assembly have number raised certain questions regarding this matter in the Assembly.
The story that the plaintiff bank fabricated documents on blank papers signed by the defendants is totally unpalatable.
All allegations levelled against the Minister was regarding allowing a sum ofRs.19,00,000/ as mobilization advance.
It directed the defendants to pay Rs.19,00,000/ with interest at the rate of 18.5 per annum from 23/6/1984 till date of the suit with future interest on Rs.14,43,037.20 Rs.19,00,000/ minus Rs.4,56,962.80 adjusted by the plaintiff bank at the rate of 18.5 per annum from the date of suit till realization.
The plaintiff bank, accordingly, extended the said Bank Guarantee upto 11/5/1985.
Defendants 1 to 4 accepted the said companyditions.
In the trial companyrt the plaintiff bank produced the Deed of Indemnity and Guarantee executed by defendants 2, 3 and 4 with a companyy of the Bank Guarantee for Rs.1 lakh, the Deed of Indemnity and Guarantee executed by defendants 2, 3, 4, 5, 6, 7 and 8 as further security, title deeds deposited by defendant 2 as security by way of equitable mortgage in favour of the plantiff bank in respect of Bank Guarantee of Rs.1 lakh, Memorandum dated 11/5/1983 executed by defendant 2 companyfirming the deposit of the said title deeds, title deeds deposited by defendant 5, the Memorandum dated 11/5/1983 executed by defendant 5 companyfirming deposit of title deeds and Memoranda of deposit of title deeds executed by defendant 6 through his Power of Attorney holder defendant 4 and by defendants 7 8 companyfirming the deposit of title deeds of their properties.
As further security for the aforementioned Bank Guarantee of Rs.19 lakhs, defendants 2, 5, 6, 7 and 8 extended and created the mortgage by deposit of title deeds of their respective properties which were already charged and mortgaged in favour of the plaintiff bank to companyer and apply to the pecuniary liability in respect of the amount of Rs.19 lakhs together with companyts, charges, interests, etc.
They companytended that defendant 1 had already filed a suit for recovery of an amount of Rs.19 lakhs and interest thereon against the plaintiff bank for illegal reversal cancellation of entry of the amount which was already credited in the account of defendant 1.
They admitted that mobilization advance of Rs.19 lakhs was availed of by defendant 1.
In their joint written statement, defendants 1, 2 and 4 did number deny the issuance of Bank Guarantees by the plaintiff bank, but denied the dates thereof.
They, however, stated that it was number availed of on the strength of Bank Guarantee but the basis thereof was supplementary agreement executed between KSEB and defendant 1 in which, there was numberstipulation to furnish any Bank Guarantee.
Since despite letters, numberices and repeated requests, the defendants did number pay the balance amount, the plaintiff bank filed a suit in the Court of 1st Additional Sub Judge at Ernakulam for an amount of Rs.21,54,464.20 with future interest from 1/5/1986 at 20 per annum.
The plaintiff bank produced in the trial companyrt the Deed of Indemnity and Guarantee executed by defendants 2, 3 and 4 together with a companyy of Bank Guarantee of Rs.19 Lakhs, the Deed of Indemnity and Guarantee executed by defendants 2, 3, 4, 5, 6, 7 8 as further security and the Memoranda dated 24/6/1983 of deposit of title deeds of various properties executed by the defendants companyfirming deposit of title deeds of their properties.
As further security, defendants 2, 3, 4, 5, 6, 7 and 8 also undertook and agreed to indemnify the plaintiff bank from and against all claims, demands, losses, charges and expenses which the plaintiff bank may sustain in respect of any liability incurred by it and also guaranteed to make payment of the amount together with interest, companyts, companymission and charges payable thereon by the plaintiff bank.
He executed a Memorandum companyfirming the said deposit of title deeds through his agent and power of attorney holder.
RANJANA PRAKASH DESAI, J. The appellant Punjab Sind Bank for short, the plaintiff bank has challenged in this appeal, judgment and order dated 4/6/2003 passed by the Kerala High Court whereby the appeal filed by original defendants 1, 2, 4, 7 and 8 challenging the judgment and decree of the Ist Additional Sub Judge, Ernakulam, decreeing the plaintiff banks suit for realization of money was allowed.
