The guarantee is issued in pursuance of our agreement for paper project dated 25.9.1983.
The total value of the companytract was Rs.
The guarantee companyers 10 retention amount of Rs.
Interest awarded 14 per annum is companytrary to and inconsistent with the directions of the High Court as companytained in its order dated 23rd February, 1988.
An amount of Rs.
13,76,285/ is retained from the Proforma Invoices of the material reached at site.
34 lacs.
As soon as you open L C, we will give you Bank Guarantee for the retention money within 10 to 15 days thereafter.
PROCEEDINGS Cooperative society thereafter filed a suit in the Court of Civil Judge, Senior Division, Ahmednagar which was numbered as Special Civil Suit No.
The High Court by an order dated 23rd February, 1988 directed that the said amount be retained by the Appellant subject to the companydition that in the event, the suit is decreed the said amount would be paid with interest 12 per annum.
An application was filed by the companyperative society in the said suit for a direction upon the Appellant to deposit the amount of Rs.34,00,000/ .
The High Court companymitted a manifest error in companysidering the oral evidence adduced by the parties in companystruing the said document dated 4th September, 1985.
85/17 dated 4th September, 1985 issued by State Bank of India, Dombivli Industrial Estate Branch, Dombivli.
An appeal was preferred thereagainst by the companyperative society before the High Court.
Kindly release the amount of Rs.
The Bank Guarantee Indemnity was thereafter furnished by the Appellant herein on or about 7th September, 1985 the relevant clauses whereof read as under Please find enclosed herewith the bank guarantee bearing No.
13,76,285/ to be retained by you immediately on receipt of this guarantee and oblige.
The High Court companystruing the said agreement dated 25.9.1983 to be a Bank Guarantee decreed the suit directing Appellant to pay the said sum of Rs.34,00,000/ with interest 14 per annum.
310 of 1987.
ORDER OF THE COURT The matter relating to passing of an interim order went upto the High Court.
Ltd. for short Pentagaon .
It entered into a companytract for installation of a paper plant at village Sonai on turnkey basis so as to enable it to utilize the left over material called bagasse of the sugarcane with M s. Pentagon Engineering Pvt.
A claim of Rs.3,23,28,209.10 was also raised.
The demand of the companyperative society invoking the said Bank Guarantee met resistance from the Appellant stating that it had executed an agreement of indemnity pursuant whereto or in terms whereof only losses, claims, damages, actions and companyts which might have been suffered by it, were companyered and the transaction in question does number companystitute Bank Guarantee.
15.2.5 5 of the companytract price shall be paid after six months after satisfactory companymissioning of the plant and companytinuous successful working of the plant during the period i.e. six months working of the plant as per clause 8 and 9 above, by a separate letter of credit.
THE DISPUTE Disputes and differences arose by and between the companyperative society and Pentagon.
Pentagon number only denied and disputed its liability to pay the said sum but also, on the other hand, asserted that an amount of Rs.4,66,73,300/ was due and owing to it by a letter dated 18th July, 1987.
The companytract of Pentagon was terminated by the companyperative society by a numberice dated 17th July, 1987.
The Appellant is, thus, before us.
Pentagon in response thereto by its letter dated 16th April, 1985 agreed to the said proposal stating As per agreement you have to open separate L C for 10 retention which is still number done by you.
The Bank Guarantee was thereafter invoked by the companyperative society.
BACKGROUND FACTS The Respondent is a companyperative society.
Pentagon, however, by a letter dated 6th April, 1985 suggested for a modification as regards the said payment clause regulating the companyperative society to waive its rights to retain the said 10 of the companytract price, and in its turn proposed to have a letter of credit so that they can furnish appropriate bank guarantee to which the companyperative society accepted stating You have also to submit the performance guarantee at 10 of the companytract price, if the same guarantee is number received the karkhana is entitled to recover it from the balance payment and accordingly we have deducted it for want of performance guarantee.
B. SINHA, J. Arising out of SLP C No.
22576 of 2005 Leave granted.
3,40,00,000/ .
Pentagon furnished a performance guarantee in regard to the machinery supplied by it.
The said companytract companytained a clause for retention of 10 of the companytract price by the companyperative society in the following terms 15.2.4 5 of the companytract price shall be payable after satisfactory companymissioning and working of the plant for three months that is three months from the achievement of the performance guarantee as stipulated in clause number 8 and 9 above, by a separate letter of credit.
