Full Judgment
2. It is the case of the respondent Allahabad Bank that the Syndicate Bank has issued two Bank guarantees BG No. 34/1989 & BG No. 35/1989 in favour of the 2nd defendant M/s. Dhanalakshmi Consolidates Industries Ltd., Chennai, guaranteeing payment of Rs. 1,25,00,000/- (BG No.34/1989) and also guaranteeing payment of a further sum of Rs. 3,75,00,000/- (BG No. 35/89) to the 2nd defendant and both these guarantees were executed by the Syndicate Bank on 29.4.1989 but the Bank Guarantee BG No. 34/89 stands discharged as the lease rentals due under it were paid of by the Syndicate Bank, So, there remains only the Bank guarantee bearing BG No. 35/89 and the interim decree is passed by the DRT on the ground that the Syndicate Bank admitted the fact that the 2nd defendant M/s. Dhanalakshmi Consolidates Industries Ltd., Chennai, assigning its rights under Bank guarantee bearing No. 35/89 in favour of the plaintiff M/s. Allahabad Bank issued notice of assignment to the plaintiff Bank in the present TA. It is also stated that the Syndicate Bank conveyed its acceptance to the said assignment by its letter dated 3.5.1989.
3. It is also further stated that the Syndicate Bank has pleaded that the assignment is notified to the Syndicate Bank and has been duly recognised and registered under the. Agreement and the Bank has agreed to comply with the terms of assignment and to make payment of monthly rentals to the Allahabad Bank in the event of the 1st defendant (M/s.
Mangalore Chemicals & Fertilizers Ltd., Bangalore) committing default for making the payment. It is also stated that the Bank Guarantee further issued by the Syndicate Bank in favour of M/s. Dhanalakshmi Consolidates Industries Ltd., provides that the Syndicate Bank irrevocably and unconditionally guarantees that M/s. Mangalore Chemicals & Fertilisers Ltd., Bangalore, shall pay M/s. Dhanalakshmi Consolidates Industries Ltd., Chennai, the monthly rentals and in the event of any default by M/s. Mangalore Chemicals & Fertilisers Ltd., for any reason whatsoever in paying the monthly rentals on the due dates, it was also open to the Dhanalakshmi Consolidates Industries Ltd., Chennai, to invoke the Bank Guarantee and demand immediate payment of the defaulted monthly rent or the entire rent payable for the whole period of lease. It is also stated that the maximum amount payable by the Syndicate Bank in respect of the guarantee is limited to Rs. 3,75,00,000/- with interest @ 16.5% p.a. or at such rates as may be prescribed by the Reserve Bank of India from time-to-time for the interest payment commercial loans from the date of default. The Syndicate has to perform all the obligations under the Bank guarantee to the Allahabad Bank and shall pay all the monthly rentals in the event of default by the Mangalore Chemicals & Fertilisers Ltd., to the Allahabad Bank. On these facts, the interim decree was passed by the PO, DRT-1 Chennai, directing the Syndicate Bank to pay the decree amount to Allahabad Bank Aggrieved against that Order in the present appeal is preferred by the Syndicate Bank.
4. Counsel for the Syndicate Bank submitted that there is no admitted liability and the Syndicate Bank never admitted to pay the amount under the guarantee and there is no admitted liability at all and the interim decree passed is not proper and the PO, DRT-1 can pass a well considered Order in the OA after considering all the aspects and the interim decree passed is not sustainable.
5. Counsel for the respondent Allahabad Bank submitted that the Syndicate Bank executed the Bank Guarantee for the due repayment of the amount in case of default by Mangalore Chemicals and Fertilizers Ltd., and as there is default the Allahabad Bank is entitled to invoke the Bank guarantee executed by the Syndicate Bank and the Syndicate Bank is liable to pay the guarantee amount since it is under obligation to perform the obligations of the guarantee and as per the guarantee the Syndicate Bank is liable to pay the amount and the Allahabad Bank has invoked the Bank guarantee and the interim decree passed is perfectly justified. Counsel for the respondent Bank also submitted that originally also similar application for interim decree was filed. An application for passing interim decree was filed before the High Court of Madras in C.S. No. 651/1994 and the High Court has passed Order 22.12.1995 directing the Syndicate Bank to approach the High Power Committee immediately and report to the High Court.
6. Counsel for the appellant Syndicate Bank submitted that only the Allahabad Bank plaintiff was directed to approach the High Power Committee by the High Court but the Allahabad Bank did not approach the High Power Committee and the Syndicate Bank was not asked to approach the Committee. On a perusal of the High Court Order, it is clearly seen that only the Syndicate Bank was directed to approach the Committee. It is stated that the applicant Bank in Application No. 6369/94 i.e. the Syndicate Bank was directed to approach the High Power Committee since the applicant Bank as well as the plaintiff Allahabad Bank are owned by the Government of India and that in accordance to the judgment of the Supreme Court in 1994(4) Supreme Court Page-158, the dispute between them is to be settled by the High Power Committee which was directed to be constituted by the Supreme Court. It was stated in the High Court Order that it is open to the applicant the Syndicate Bank to approach that Committee if it has not already done so or even if the plaintiff has not done so. Plaintiff is the Allahabad Bank and the applicant Bank is the Syndicate Bank and it was directed that the applicant shall approach the Committee immediately and report to that Court as to the progress on that application within ten weeks. As directed by the High Court, the applicant Bank the Syndicate Bank did not approach the High Power Committee. On the other hand, the Allahabad-Bank obtained permission from the Cabinet Secretariat for filing the Suit against the Syndicate Bank and by virtue of such permission obtained by the Allahabad Bank, the Allahabad Bank is entitled to proceed against the Syndicate Bank.
7. The Allahabad Bank obtained clearance from the Cabinet Secretariat for continuing its Suit even in the year 1995 i.e. on 20.4.1995 period to the passing of the Order by the High Court of Madras. But the thing is when the matter was called in the High Court, this aspect with regard to obtaining permission from the Cabinet Secretariat was not brought to the notice of the High Court and if it had been brought to the notice of the High Court, the High Court would have passed appropriate order on that day.
8. In the Order passed by the Cabinet Secretariat dated 20.4.1995, it has been clearly set out as Item 30 in that Order. Item 30 reads as follows : "Permission to pursue the suit filed on 30.9.1993 by the Allahabad Bank against Syndicate Bank, the guarantor Dhanalakshmi Consolidates Industries Ltd., for recovery of their dues amounting to Rs. 5,76,71,501/-.
(Note No. ADV/Recovery/Gen. 4976 dated 10.3.1994, circulated by Allahabad Bank).
Having regard to the fact there is a substantial question of law involved in the dispute and the amount involved is also large, the Committee permitted Allahabad Bank to pursue the litigation." 9. The Allahabad Bank after obtaining permission from the Cabinet Secretariat has sought for passing such interim decree and accordingly the interim decree was passed. Since the Allahabad Bank obtained permission to prosecute the Suit against the Syndicate Bank, The Allahabad Bank is entitled to seek any relief including interim decree against the Syndicate Bank.
10. Counsel for the appellant Bank submitted that there is no necessity to pass interim decree now and it is not admitted liability and all these things can be considered while disposing of OA. The Syndicate Bank has admitted in Para-8 of its Reply Statement that as per the terms of the Bank Guarantee made by the respondent, it started making payments after the demand was made by the applicant, in view of the failure on the part of the third respondent to fulfil its obligations and the payments were made from the month of December, 1990 and the payments were made promptly and as the applicant started to make unreasonable claims, the respondent is liable to pay an amount of Rs; 8.33 lakhs per month from 19th month under the said guarantee. In Para-9 of the Reply statement, the Syndicate Bank has accepted that the respondent never shirked upon their responsibilities under BG 35/89 and the respondent was prompt in payment till September, 1991 and this respondent never made any attempt to escape from its obligations and they are always in compliance of the Bank guarantee.
11. Counsel for the respondent Bank relies upon the decision of the Supreme Court in Uttam Singh Duggal & Co. Ltd. v. United Bank of India and Ors., VI (2000) SLT 87=(2000) 7 Supreme Court Cases 120, When the Apex Court has held that-- "When a statement of admission is brought before the Court, as the party making the statement is given sufficient opportunity to explain such admission, judgment on admission can be decreed if the explanation is not accepted by the Court and Resolution passed after meeting of Board of Directors of petitioner Company clearly setting out that the Company accepted "its liability as per details stated" and mentioning a figure (Rs. 1015.80 lakhs) and petitioner communicating resolution to respondent I Bank as enclosure to a letter and petitioner Company filing affidavit-in-opposition stating that except what were matters on record and except for what appealed in the resolution, all allegations to the contrary were disputed and denied." 12. The Apex Court has also held in the above said decision that "An inference as to admission can be drawn on the basis of the pleadings in the application under Rule 6 and the answering affidavit and High Court rightly affirmed the decree passed by the Trial Court." 13. Counsel for the respondent Bank also relies upon the decision of the Supreme Court in Daewoo Motors India Ltd. v. Union of India and Ors., AIR 2003 Supreme Court Page-1786, wherein the Apex Court has held that-- "The Bank Guarantee furnished by the Bank being unconditional and absolute Bank guarantee, and the Bank has rendered itself liable to pay the case on demand by the President of India notwithstanding any dispute raised by the company in any proceeding before any Court or Tribunal." 14. Counsel for the respondent Bank drawn my attention to the following important sub-clause in Clause 7 of the Guarantee executed by the appellant Syndicate Bank-- (a) You shall be entitled to enforce this Guarantee without making any demand and/ or taking any proceedings against MCF; (b) Notwithstanding the recovery of sums from us under this guarantee, you shall have all the rights and remedies under the above recited agreement to recover such sums found due and payable thereunder or otherwise by MCF to you; (c) The guarantee herein contained shall be a continuing guarantee and till such time as all money due and payable by MCF to you on the terms of the above recited Agreement are paid off in full, shall remain in full force and effect and shall be binding on us in accordance with its terms.
(e) Our liability for payment will not be effected by any discrepancy of any nature whatsoever which may exist in the said hereinbefore recited Agreement and the said bills or any of them; (j) Your demand for payment under his Guarantee shall be final and conclusive evidence of our liability to pay and we shall not be required to verify the propriety and/or the legitimacy of such demand on any ground whatsoever and any such demand for payment under this guarantee made on us by you in writing and sent by Registered Post AD or by hand delivery at the following address: Syndicate Bank, Gandhinagar, Bangalore-560 009, shall be deemed to have been sufficiently and properly made by you.
15. Counsel for the appellant Bank relies upon the decision of the Supreme Court in Balraj Taneja and Anr. v. Sunil Madan and Anr., VIII (1999) SLT 65=IV (1999) CLT 362 (SC)=1999(7) Supreme 27, wherein it has been held that-- "Under Order 12, Rule 6, the Court can, at an interlocutory stage of the proceedings, pass a judgment on the basis of admissions made by the defendant. But before the Court can act upon the admission, it has to be shown that the admission is unequivocal, clear and positive. This Rule empowers the Court to pass judgment and decree in respect of admitted claims pending adjudication of the disputed claims in the suit. In spite of admission of a fact having been made by a party to the suit, the Court may still require the plaintiff to prove the fact which has been admitted by the defendant. This is also in consonance with the provisions of Section 58 of the Evidence Act. The proviso to this section specifically gives a discretion to the Court to require the facts admitted to be proved otherwise than by such admission." 16. In the case on hand, the Syndicate Bank has executed the Bank Guarantee. Invoking the Bank Guarantee, the Allahabad Bank has sought for interim decree. So, it cannot be stated that the Bank Guarantee has to be proved.
17. Counsel for the appellant Bank also relies upon the decision of the Madras High Court in C.J. Sheth Construction Company and Anr. v.Sunderdas Arjunlal and Ors., 1996(1) CTC Page-29, and Hindustan Petroleum Corporation Ltd. and Anr. v. K.M. Yakub (Died) by LRs., 1996-2-Law Weekly 817. In 1996(1) CTC 29, it has been held that "Interim decree based on admission can be granted only when such admission is unambiguous, unequivocal and unconditional and power to grant interim decree is discretion vested in Court and plaintiff cannot claim interim decree as of right." 18. Admittedly, the Syndicate Bank has executed Bank Guarantee. When a Bank guarantee has been executed, In case of default the Allahabad Bank is entitled to invoke the Bank Guarantee and that cannot be refused by the Syndicate Bank. So under such circumstances, it is futile on the part of the Syndicate Bank to contend that interim decree cannot be passed. The admission of execution of Bank Guarantee is unequivocal and unambiguous. The Allahabad Bank has sought for invocation of Bank Guarantee and has asked for passing interim decree only based on the Bank Guarantee executed by the Syndicate Bank. The Allahabad Bank has got every right to invoke the Bank Guarantee and to ask for passing interim decree. So, it cannot be stated that the Order passed by the PO, DRT-1, for interim decree is not sustainable. I find that the Order passed by the PO, DRT-1, for interim decree is justified since the Allahabad Bank has obtained permission from the Cabinet Secretariat for filing the suit against the Syndicate Bank.
19. Counsel for the appellant Bank further submitted that originally the petition for interim decree was filed before the High Court of Madras and the High Court has passed Order and there no interim decree was passed and the filing of a fresh petition before the PO, DRT, amounts to res judicata and the application before the PO, DRT-1 is not at all maintainable. After the formation of DRT, all the suits pending before the High Court above Rs. 10 lakhs were transferred to the DRT and the High Court was ceased of its jurisdiction to decide that matter. The PO, DRT-1, is impowered to pass interim decree and if any interim relief as to be sought for, it has to be sought for only before the PO, DRT and the PO, DRT, under the provisions of the Act, is compowered to pass interim decree. So, it will not amount to res judicata. Under the provisions of the RDDBI & FI Act, 1993 the PO, DRT-1 is empowered to pass interim decree and the filing of the petition is not barred by the principle of res judicata.
20. Rule 20(5) of the DRT (Procedure) Rule, 1993 empowers the Tribunal to pass interim decree to the extent of the admission made by the defendant. Rule 12(5) of the Act reads as follows-- "Where a defendant makes an admission of the full or part of the amount of debt due to a Bank or financial institution, the Tribunal shall order such defendant to pay the amount, to the extent of the admission, by the applicant within a period of one month from the date of such order failing which the Tribunal may issue a certificate in accordance with Section 19 of the Act to the extent of the amount of debt due admitted by the defendant." 21. BIFR by its Order dated 16.12.2002 also granted permission to the DRT to conduct the proceedings. Clause 1 l(d) of the Order reads as follows-- "As DRT Chennai is seized to the issue between all Banks and Company in which Syndicate Bank is also involved we leave it to DRT, Chennai to sort out the issues for the present." 22. The PO, DRT-1, Chennai, passed interim decree only subsequent to the Order passed by the BIFR directing the DRT to sort out the issues.
The interim decree came to be passed by the DRT on the ground that the Syndicate Bank executed the Bank Guarantee and the Allahabad Bank invoked the Bank Guarantee and asked the Syndicate Bank to pay the amount covered under the Bank Guarantee. Since the Syndicate Bank has executed the Bank Guarantee, it is under obligation to fulfil its obligations under the guarantee. The execution of Bank Guarantee by the Syndicate Bank clearly indicates that the Allahabad Bank is entitled to invoke the Bank Guarantee and the Syndicate Bank is bound to fulfil its obligations under the Bank Guarantee in case of default. There is default and the Allahabad Bank has sought for invocation of the Bank Guarantee. Since there is execution of Bank Guarantee by the Syndicate Bank, the Syndicate Bank is bound by the Bank Guarantee and it is liable to pay the amount to the Allahabad Bank so it cannot be stated that the interim decree passed on the Bank Guarantee is not sustainable.
23. For the foregoing discussions, I hold that the interim decree by the PO, DRT-1, is perfectly justified and I see no ground to interfere in the Order passed by PO, DRT-1, Chennai.