Judgment:
ORDER
M.V. Tamaskar, J.
1. The order in this revision shall also govern the disposal of C.R. No. 433/93.
The controversy in the present revision is regarding the encashment of bank guarantee executed by the plaintiff Bank in favour of M.P.E.B. The plaintiff-Bank had offered security for recovery of the amount under the agreement of supply of electricity to M/s. M.P. Carbide and Chemicals Ltd. The clause of the bank guarantee disclosed that it was an irrevocable bank guarantee to the extent mentioned in the said agreement.
2. In Civil Revision No. 432/93 the amount of guarantee is Rupees 20 lacs whereas in Civil Revision No. 433/93 the amount of bank is Rs. 16 lacs.
3. The Board filed a suit for performance of the obligations under the guarantee against the applicant Bank. The Bank filed an application under Order 7, Rule 11, C.P.C. for dismissing the suit on the ground that it was barred under Order 7, Rule 11(d) of the C.P.C. i.e. where the suit appears from the statement in the plaint to be barred by any law.
4. In the instant case, the Bank stood sureties for performance of the contract with M/s. M.P. Carbide and Chemicals Ltd., a company registered under Companies Act and was declared as sick industry under the provisions of the Sick Industrial Companies (Special Provisions) Act 1985.
5. The estimated dues against the company are Rs. 80 lacs.
6. An objection raised by the applicant/ Bank is that the guarantee having been given for performance of a contract in relation to an industry which has been declared sick, no recovery can be made from the Bank particularly in view of Section 26 of the above Act. Section 26 reads thus:
'26. Bar of jurisdiction -- Now order passed or proposal made under this Act shall be appealable except as provided therein and no civil court shall have jurisdiction in respect of any matter which the Appellate Authority or the Board is empowered by, or under, this Act to determine and the injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.'
The objection of the learned counsel for the applicant-Bank is that if the amount cannot be recovered directly from the Company, the same cannot be recovered indirectly from the Bank.
7. The question of recovery from the Company does not arise in the circumstances mentioned above. The Bank had stood surities agreeing to pay in the nature of Bank guarantee an amount mentioned therein to the Electricity Board for supply of electricity.
8. M.P. Electricity Board has not been shown as party to any of the agreements entered into under the Sick Industries Act nor is there any matter pending before the Board between the parties i.e. M. P. Electricity Board and Allahabad Bank in respect of any of the matters mentioned therein. A perusal of Section 26 of the Act creates bar of jurisdiction in respect of any order passed or proposal made under the Act to be questioned in any Civil Court. In the instant case, M. P. Electricity Board is not challenging any order passed or proposal made under the Act. What the Board is exercising is a right conferred under the bank guarantee which is a contract be-tween the applicant-Bank and the Board. Assuming that there is some scheme framed under Sections 18 and 19 of the Act, but it does not appear that such a scheme in any way restricts the right of M. P. Electricity Board to recover the amount under the agreement, authorises down payment to M. P. Electricity Board of Rs. 16 lacs in one case and the same amount in the other case also. The clause is quoted below:
'State Government/M.P.E.B.:
a. xxxxx
b. M.P.E.B. to accept an amount of Rs. 15 lakhs as down payment towards its arrear dues after waiver of oral charges etc. and adjustment of arrears of power Subsidy and the balance amount in 36 equal monthly instalments after commencement of commercial production on interest free basis.
The liability under the agreement is much eloquent and it does not prohibit recovery under the bank guarantee. Moreover, a perusal of the draft rehabilitation scheme nowhere so states that M. P. Electricity Board is a party independently in the said agreement. The learned counsel for the applicant stressed that special secretary to the Gov-ernment of Madhya Pradesh, Bhopal is said to represent M. P. Electricity Board in the said rehabilitation scheme. The argument is rather too farfetched. There is no basis for the same. Even otherwise, this submission will require recording of evidence.
9. The learned counsel for the non-applicant submitted that the trial Court was correct in rejecting the application (sic) as the propositions of law stated in Svenska Handelsbanken v. M/s. Indian Charge Chrome (1994) 1 SCC 502 para 38: (AIR 1994 SC 626, para 40) of the said judgment is quoted below:
'38. Coming to the merits of the case itself it appears to us that the High Court totally misdirected itself in assuming that the present application for interim relief against the en- forcement of bank guarantee is not to be decided strictly on principles of injunction in relation to bank guarantee but general princi-ples of injunction on lenders would be applicable and on that basis proceeded to decide the matter.'
Further reliance was placed on U. P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P.) Ltd., (1988) 1 SCC 174. It is stated that the commitments of banks must be honoured free from interference by the courts. An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with. In order to restrain the operation either of irrevocable letter of credit or of confirmed letter of credit or of bank guarantee, there should be serious dispute and there should be good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties.
10. In the instant case, the circumstances do not suggest that the order passed by the learned District Judge is in any way against the principles laid down in Modi Spinning and Weaving Mills Co. Ltd. v. U. P. State Electricity Board, AIR 1992 All 247. Cessation of supply of electriciy in future cannot by any stretch of imagination to be said be taking steps for recovery of arrears which have already fallen due.
11. The legal proceedings for demand of the amount secured under the bank guarantee against the bank cannot be said to be barred of an execution proceedings against the sick industry. If the Bank makes any demand against the sick industry, probably that may be a cause (for) grievance and not the present one.
12. The revisions are dismissed accordingly, with costs. Cost is Rs. 200/- in each case.