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Judgment
Ranjit Singh, J
Punjab and Sind Bank had approached DRT-II, Delhi for recovery of a sum of Rs. 5,31,68,749.45 along with pendente lite and future interest thereon @ 20% per annum with quarterly rests as well as cost from respondents, which claim has been rejected by the Tribunal below. The present appeal is directed against the said order dated 17.8.2012 passed by the Tribunal below.
Respondent No. 1, a company incorporated under the Companies. Act, 1956, has been ordered to be wound up by the Hon'ble High Court of Delhi on 15.5.2012 and an Official Liquidator has been appointed.
Respondent No. 1 had entered into a subcontract with M/s. INVANIL MILUTINOVIC PIM for construction of power station etc. The appellant had a branch in London and respondent No. 1 had been allowed overdraft facility in US dollar through its branch at Janpath. Respondent No. 1 was granted credit facility in foreign currency. The branch of the appellant Bank was taken over and amalgamated with the Bank of Baroda and the amount then outstanding against respondent No. 1, i.e. US.$ 5,144,861.22, was transferred to the account book of Bank of Baroda. The said Bank of Baroda agreed to take over the account respondent No. 1 provided the same was guaranteed by the appellant Bank. The appellant Bank furnished Overseas. Borrowing Guarantee in favour of Bank of Baroda, London. This guarantee was renewed from time-to-time and was validated up to 31.3.1991 for a sum of US $5.8 million. Respondent No. 1 through its Managing Director, respondent No. 2, executed and delivered a guarantee undertaking repayment of obligation. Late Mr. M.S. Bhasin and late Ms. R.K. Bhasin executed personal guarantees dated 18.3.1991 and 12.4.1990 respectively. They also agreed that the guarantees would stand extended as and when the appellant extended the validity period of the Overseas Borrowing Guarantee. Respondents 4 and 5 have inherited the estate of Late M.S. Bhasin and Ms. R.K. Bhasin and so it is stated that they are liable to liquidate and discharge their liability.
The Overseas Borrowing Guarantee was invoked and a sum of Rs. 15,09,43,396/- was remitted. The respondents were called upon to pay the liability. On their failure to discharge the liability, the appellant instituted a suit before the High Court of Delhi in the year 1993, which was transferred to DRT and refilled as O.A. No. 343/1995. The appellants had reserved their right to claim interest and charges in the event Bank of Baroda claimed the same from the appellant Bank.
It is alleged that Bank of Baroda, London continued their demand of interest and other charges on the guarantee though the Bank was claiming a larger amount, but, ultimately, settled for a sum of Rs. 100 lacs, which was paid to Bank of Baroda by Bank Draft on 25.3.1996 by the appellant. Another sum of Rs. 216.16 lacs was paid vide Bank Draft dated 25.9.1996. Respondents 1 to 5 were called upon, to deposit this amount, but they failed to comply and instead sent a reply on 6.5.1996 expressing their inability to make the payment. The appellant, therefore, claimed the above amount with interest @ 20% per annum inclusive of interest tax. The claim as on 24.3.1999 was as under :mdash;
Principal amount Rs. 3,16,16,000/-
Interest Rs. 2,15,52,749/-
Total Rs. 5,31,68,749/-
The respondent agreed and undertook to pay interest @ 7.5% per annum over and above the RBI rate subject to minimum 17.5% per annum. The rate of interest at the relevant time as per RBI guidelines was 20% per annum with quarterly rests.
Defendants appeared and filed written statement. It is stated that the appellant was directly involved in granting loan to respondent No. 1. PIM had honoured several promissory notes issued by them and released payments directly to appellant under supplementary agreement. Later, however, PIM failed to pay US $ 15 million to respondent No. 1 requiring the matter to be referred to international arbitration. Since the respondent did not get the payment, they suffered heavy losses due to lack of efficiency and carelessness of the Bank. It is stated that there is no liability reflected to the Bank of Baroda in the books of accounts of M/s. Bhasin Associates Ltd. As per the respondent actually the Bank guarantee was invoked on 31.10.1991 and the amount mentioned in the guarantee i.e. US $5.2 million was inclusive of interest. Appellant had renewed the guarantee for fresh period from time-to-time and after invoking the guarantee on 31.10.1991, the appellant Bank claimed the actual amount of US $5.2 million from the respondent and so the question of Interest payment to the Bank of Baroda, therefore, did not arise.
On the basis of these pleadings the Tribunal noted the points which required determination. As per the Tribunal, it was required to examine if there was any legal obligation on the part of the appellant Bank to pay the interest demanded b Bank of Baroda as per the terms of Bank guarantee and if respondents were liable to pay the claim raised by the appellant and if so, to what extent their liability would be?
After considering the evidence, the Tribunal has come to the conclusion that the Bank guarantee expired on 31.1.1991 and so the appellant Bank could not make payment on the guarantee any amount in the year 1995 to Bank of Baroda. The Tribunal has also questioned the action of the appellant Bank in getting into negotiation with Bank of Baroda when the contract specifically stipulated that all the rights under the guarantee would be forfeited and Punjab & Sind Bank, i.e. the appellant, would be relieved and discharged from all liabilities under the guarantee after the prescribed period.
This finding of the Tribunal is seriously contested by the appellant in the present appeal. As per the Counsel for the appellant the Overseas Borrowing Guarantee was invoked by the beneficiary Bank of Baroda on 26.3.1991, much before the determination of the terms of the Overseas Borrowing Guarantee on 31.3.1991. As per the Counsel, there was thus no impediment for payment of Overseas Borrowing Guarantee on 31.10.1991 and the interest for the period spanning over from the date of invocation to the date of payment. As per the Counsel, the amount due on Overseas Borrowing Guarantee could not be paid to the beneficiary Bank immediately on invocation on 26.3.1991 as the respondents, did not place the funds at the disposal of the appellant for making such payment. The payment was accordingly made on 31.10.1991. On this basis, it is stated that the respondents would be responsible for paying interest up to 31.10.1991. Counsel would also contend that the appellant Bank was engaged in a long drawn negotiation with Bank of Baroda to avoid incurring interest liability which was for the benefit of respondents and in this back ground, after negotiation, interest was paid on 25.3.1996 and 25.9.1996 much subsequent to the date of payment. To claim this interest liability, Counsel would refer to the counter-guarantees dated 1.7.1987, 23.1.1990, 18.3.1991 executed by respondents 1 to 3 as also the guarantee dated 12.4.1990 jointly executed by late Mr. M.S. Bhasin and Ms. R.K. Bhasin.
To support his submission that the appellant was required to discharged its liability of interest, the Counsel has placed reliance on the judgment in the case of Sree Meenakshi Mills Ltd. v. Radial Tribhovandas Thakar, Vol. XLIII Bombay Law Reporter 53, where it was held that the liability of the guarantor must be judged by his contract of guarantee and not by a contract between the principal debtor and the creditor. The Counsel has also referred to Shin Satellite Public Co. Ltd. v. Jain Studios Limited, I (2006) CLT 166 (SC) : II (2006) SLT 13 : (2006) 2 SCC 628 : AIR 2006 SC 963, where he has relied upon the observations that a Court of Law will read the agree ment as it is and cannot rewrite nor create a new one. The contract must be read as a whole and it is not open to dissect it by taking out a part treating it to be contrary to law and by ordering enforcement of the rest if otherwise it is not permissible. The. Court has further observed that it is well-settled that if the contract is in several parts, some of which are legal and enforceable and some are unenforceable, lawful parts can be enforced provided they are severable.
To explain the delay in making the payment of interest when the liability for guarantee was discharged in the year 1991, the Counsel would rely on the observations record in Oil and Natural Gas Commission v. Collector of Central Excise, 1995 Supp (4) SCC 541. The Counsel contends that since the dispute was between two Banks which were public sector undertakings, the appellant Bank was required to ensure that no litigation came to the Court or Tribunal without matter having been first examined by the Committee and cleared for litigation.
On the other hand, the Counsel for the respondents has not only referred to the agreement whereby the appellant Bank stood discharged from all liability after 31.3.1991 and still has paid the interest after a lapse of five years, but has also referred to a judgment in the case of Syndicate Bank v. Channaveerappa Belegi, III (2006) SLT 518 : II (2006) BC 579 (SC) : (2006) 11 SCC 506 : AIR 2006 SC 1874. The Hon'ble Supreme Court in this case has observed that where the guarantee deeds specifically state that the guarantors agreed to pay and satisfy the Bank on demand and interest will be payable by the guarantor only from the date of demand, then the limitation would begin to ran when the demand is made and guarantor commits breach by not complying with the demand. The Court has then examined the meaning of the word 'demand' and thereafter, has gone ahead to define the meaning of the words used in the guarantee bonds in question before the Court. The guarantee bond in the case before the Court stated that the guarantors agreed to pay and satisfy the Bank 'on demand'. This guarantee specifically provided that the liability to pay interest would arise upon the guarantor only from the date of demand for payment. It also provides that the guarantee shall be continuing guarantee for payment of ultimate balance to become due to the Bank by the borrower. The Court accordingly held that the terms of guarantee thus make it clear that the liability to pay would arise on the guarantor only when a demand is made. On this basis, the Court has held how the time is to be computed and it is to be from the date when payment was refused by the guarantor. The Counsel submits that there was no reason for the appellant Bank to negotiable or discharge the liability of interest after five years of the payment of the principal amount. In addition, the Counsel also contends that the respondents had signed the indemnity bond/counter guarantee dated 18.3.1991 in consideration of Bank guarantee of US $5.8 million in favour of Bank of Baroda. In view of this, the respondents and the appellant Bank on 18.3.1991 executed counter guarantee addressed to Bank of Baroda extending the validity period up to 31.3.1991. It was made clear that after this date all rights under the guarantee of Bank of Baroda would be forfeited and the appellant would be relieved and discharged from all liabilities thereunder. It is this document (Exhibit AW 1/15) which is relied upon by the Counsel to say that the appellant Bank while extending the guarantee for US $5.8 million up to 31.3.1991 has clearly stated that all rights under the said guarantee would be forfeited and appellant would be relieved and discharged from all liability under the said guarantee. As per the Counsel, hereafter the appellant Bank was totally misconceived in incurring the liability for interest for which the present claim has been made against the respondents.
The Counsel for the appellant still has relied upon the guarantees offered by the respondents where it was stated that the amount would be paid without any protest or demur and had undertaken to pay the amount with all interest at the prevailing commercial lending rate or at such rate the Bank normally charge from its customers, on the date of demand, with all costs and charges the Bank may incur and/or have become payable in connection with the fulfilment of its obligation under the guarantee. This guarantee is dated 25.2.1987. The respondents have not denied this fact, but subsequent thereto counter-guarantee was offered and which was extended up to 18.3.1991. Thereafter, the appellant Bank had clarly stated that the guarantee would be forfeited and they would be relieved and discharged from all liabilities. It is this document which has been considered by the Tribunal and has questioned the appellant Bank as to how it could pay any further amount towards the guarantee in 1996.
The Tribunal, in my view has considered all the material and evidence on record, the guarantee offered as also the counter-guarantee. The Tribunal has also considered the effect of counter-guarantee and their further extension of time. Reference is also made to a judgment of the Hon'ble Delhi High Court in the case of Explore Computers Pvt. Ltd. v. Cals Ltd., IV (2006) BC 441, which is to apply in case of invocation of Bank guarantee. I have not been able to find any cogent reason which would call for interference with this well-reasoned order recorded by the Tribunal below, which is also well-supported by law. Despite repeated queries, the Counsel for the appellant could not offer any satisfactory answer as to why the Bank paid interest liability after expiry of nearly 5 years that too after negotiation when the guarantee was extended only up to 18.3.1991 and, thereafter, it stood relieved. The appeal is, therefore, dismissed.
Appeal dismissed.