JUDGMENT
P. Thangavel, J.
1. This is a suit for recovery of a sum of Rs. 10,27,500 with interest at 16.50 per cent annum and for costs.
2. The brief facts, which are necessary for the disposal of the suit, are as follows:
The 2nd defendant, who is carrying on business as film producers at Madras, approached the plaintiff for advancement of loan of Rs. 10 lakhs for their business. The 1st defendant, which is a subsidiary branch of State Bank of Mysore at Madras, agreed to provide Bank guarantee for repayment of the sum of Rs. 10 lakhs with interest on behalf of the 2nd defendant. Accordingly a bank guarantee dated 4.4.1986 was executed by the 1st defendant for Rs. 10 lakhs for repayment of the principal and interest with 161/2 per cent per annum at Madras in favour of the plaintiff for a period of one year from the date of advancement of loan by the plaintiff to the 2nd defendant. The bank guarantee can be invoked by the plaintiff within the stipulated time if the 2nd defendant failed and neglected to pay the loan advanced. The plaintiff advanced a sum of Rs. 10 lakhs by issue of a cheque dated 4.4.1986, drawn on Indian Overseas Bank and the said cheque was realised by the 1st defendant and credited to the account of the 2nd defendant in the said bank. The 2nd defendant informed the 1st defendant with regard to the issue of the abovesaid crossed cheque. The 1st defendant, by letter dated 11.4.1986, confirmed the bank guarantee given to the plaintiff on behalf of the 2nd defendant. The 2nd defendant failed, to pay the amount due to the plaintiff and, therefore, the plaintiff called upon the 1st defendant on 17.6.1986, invoking the bank guarantee, to pay the amount due to the plaintiff from the 2nd defendant. The 1st defendant was again reminded by letter dated 21.6.1986. The 1st defendant sent a letter dated 16.6.1986, which was received by the plaintiff on 26.6.1986, stating that the Bank Officer of the 1st defendant Thiru M.Sundaraganapathy had issued the bank guarantee dated 4.4.1986 at the instance of the 2nd defendant without bringing the same into accounts or books maintained by the 1st defendant and without the approval of the controlling authorities for the issue of such bank guarantee and that, therefore, the 1st defendant cannot be made liable on the basis of the bank guarantee, which was said to have been fraudulently brought about in gross violation of the established norms and procedure. The plaintiff again issued a notice dated 17.7.1986 to the 1st defendant, demanding payment of Rs. 10 lakhs based on the bank guarantee issued by the 1st defendant, denying the averments made in the letter sent by the 1st defendant. The 1st defendant again sent a letter dated 30.7.1986 through its Advocate, for which a rejoinder dated 10.11.1986 was sent by the plaintiff. The 1st defendant, having issued the bank guarantee on behalf of the 2nd defendant is bound to fulfil the obligation and cannot dispute the liability. After giving credit to the payment of Rs. 1,37,500 made by the 2nd defendant to the plaintiff, towards interest from 5.4.1986 to 6.4.1987, the plaintiff has come forward with this suit for recovery of the balance amount of Rs. 10,27,500 from the defendants jointly and severally.
3. The 1st defendant, a Corporation constituted by the State Bank of India (Subsidiary Banks) Act, 1959, resisted the suit claim made by the plaintiff on the following grounds: The 1st defendant is to function in accordance with the directions and instructions issued by the Board of Directors, who are assisted by the Managing Director of the 1st defendant-Bank. The functioning of the said bank should be within the purview of the State Bank of India (Subsidiary Banks) Act, 1959, The 1st defendant did not issue financial guarantee in respect of the loan of Rs. 10 lakhs advanced by the plaintiff in favour of the 2nd defendant and the said financial guarantee has not been entered into the bank guarantee register or the records maintained by the 1st defendant-Bank. There is no application from the 2nd defendant to the 1st defendant for issue of bank guarantee, The manager of the 1st defendant has no power or authority to enter into a transaction of bank guarantee for a sum of Rs. 10 lakhs without submitting the proposals or recommendations to obtain sanction of the Board of Directors/Managing Director of the 1st defendant. The alleged bank guarantee issued by the 1st defendant to the plaintiff on behalf of the 2nd defendant, is wholly void and inoperative. The alleged bank guarantee is an outcome of fraud practised by the Manager of the 1st defendant, plaintiff and the 2nd defendant in collusion with one another. The abovesaid fact had come to the notice of the inspecting authorities at the time of the inspection of the 1st defendant-branch in June, 1986. The bank issued a letter dated 16.6.1986 through its Advocate to the plaintiff about the detection of issue of bank guarantee dated 4.4.1986 by the Manager M. Sundaraganapathy without obtaining the approval of the controlling authority and also about the non-binding nature of the abovesaid bank guarantee on the 1st defendant. Again the bank issued a reply notice dated 27.6.1986 to the letter dated 21.6.1986 issued by the plaintiff. To the notice dated 17.7.1986 issued by the plaintiff, the 1st defendant sent a reply dated 30.7.1986, revealing the true facts. The letters dated 4.4.1986 and 11.4.1986 sent by M.Sundaraganapathy, who was the Branch Manager of the 1st defendant at that time, are not valid and binding on the 1st defendant. To the letter sent by the Advocate for the plaintiff on 10.1.1987, the 1st defendant had sent a reply on 6.2.1987. The Bank guarantee issued in favour of the plaintiff could not be considered as one issued by the 1st defendant. The alleged bank guarantee is null and void and inoperative and cannot be enforced against the 1st defendant. The claim of interest at 16.50 per cent per annum on the principal amount of Rs. 10 lakhs by the plaintiff, is without any merit. It is under the said circumstances, the 1st defendant has ought for the dismissal of the suit filed by the plaintiff.
4. The 2nd defendant has taken the stand that the 1st defendant has given bank guaratnee on behalf of the 2nd defendant validly, that the 1st defendant has forced the 2nd defendant to furnish immovable property security for the suit bank guarantee and has also taken an agreement in December, 1990 from the 2nd defendant with regard to Flat No. 45/15, Taylors Road, Kilpauk, Chennai that the 1st defendant is bound to honour the bank guarantee and that the contentions raised contrary to it by the 1st defendant, cannot be sustained.
5. On the pleadings made by both the parties to the suit, the following issues were framed for consideration:
(1) Whether the 2nd defendant has borrowed a sum of Rs. 10 lakhs from the plaintiff on 4.4.1986?
(2) Whether the 1st defendant has given bank guarantee for the amount borrowed by the 2nd defendant?
(3) Whether the 1st defendant is liable to pay the amount claimed in the suit?
(4) Whether the Manager of the 1st defendant-Bank acted without authority and whether the Bank is not liable for the act of the Manager?
(5) Whether there was any act of fraud and collusion between the plaintiff, the 2nd defendant and the Manager of the 1st defendant-Bank?
(6) Whether the 1st defendant-Bank is not liable for the suit claim?
(7) To what relief is the plaintiff entitled?
6. Issues (1) and (2): The Power Agent of the plaintiff Thiru B. Uttamchand Galada was examined as P. W. 1 on behalf of the plaintiff, while the Deputy Manager of the 1st defendant-Bank Thiru P. Sundaram, was examined as D.W.1 on the side of the 1st defendant. No evidence was let in on behalf of the 2nd defendant. Ex.A-8 dated 27.3.1986 is the letter sent by the 2nd defendant to the plaintiff, seeking a loan of Rs. 10 lakhs, agreeing to execute a promissory note and to furnish financial bank guarantee from the 1st defendant-Bank. It would also disclose that the 2nd defendant had specifically stated that the loan of Rs. 10 lakhs can be advanced after execution of promissory note and furnishing of financial bank guarantee from the 1st defendant for repayment of the loan by the 2nd defendant. Ex.A-9, dated 28,3.1986 is the letter sent by the plaintiff to the 2nd defendant with a copy to the 1st defendant, agreeing to lend a loan of Rs. 10 lakhs to the 2nd defendant on furnishing financial bank guarantee by the 1st defendant for the abovesaid amount and also on the execution of the promissory note by the 2nd defendant in favour of the plaintiff for the abovesaid amount at the time of issue of cheque by the plaintiff to the 2nd defendant.
7. Ex.A-3, dated 4.4.1986 is the bank guarantee given by the first defendant through its Branch Manager to the plaintiff for a sum of Rs. 10 lakhs. A perusal of Ex.A-3 would disclose that the bank guarantee is an irrevocable one for Rs. 10 lakhs for a period of one year from the date of payment of loan by the plaintiff to the 2nd defendant and that the bank guarantee can be invoked by demand or claim within one year from the commencement of the bank guarantee. Ex.A-6, dated 4.4.1986 is the letter sent by the plaintiff to the 2nd defendant with a copy to the 1st defendant informing about the receipt of bank guarantee dated 4.4.1986, issued by the 1st defendant in favour of the plaintiff for the loan of Rs. 10 lakhs to be advanced issued by the plaintiff to the 2nd defendant. It would also disclose that the plaintiff had issued a crossed cheque bearing No. 82/ CA/15 0570140, dated 4.4.1986 for Rs. 10 lakhs drawn on Indian Overseas Bank, T. Nagar, Madras-17 as against the bank guaratnee given by the 1st defendant on behalf of the 2nd defendant. Defendants 1 and 2 were asked to acknowledge Ex.A-6, dated 4.4.1986. Ex.A-2 dated 11.4.1986 is the letter of acknowledgement by the 1st defendant to the plaintiff for the receipt of Ex.A-6, dated 4.4.1986. It would also disclose that the 1st defendant had acknowledged, nothing contents of the letter and has also confirmed it. The documentary evidence referred to above, the evidence given by P.W.1 and the non-denial of the 2nd defendant with regard to the receipt of the crossed cheque referred to above, issued by the plaintiff in favour of the 2nd defendant, would disclose that the plaintiff had advanced a sum of Rs. 10 lakhs to the 2nd defendant on the strength of the bank guarantee Ex.A-3, dated 4.4.1986 executed by the 1st defendant in favour of the plaintiff for Rs. 10 lakhs for a period of one year from the date of advancement of the loan. The evidence of P. W. 1 would further disclose that the 2nd defendant had encashed the abovesaid cheque issued by the plaintiff by putting the said cheque in his account in the 1st defendant bank. The abovesaid evidence of P. W. 1 was not contradicted by the 2nd defendant in the cross-examination. D.W.1 would admit during cross-examination that the plaintiff should have issued a cheque for Rs. 10 lakhs in favour of the 2nd defendant and the 2nd defendant should have deposited the abovesaid cheque with the 1st defendant-Bank, who, in turn, should have realised the cheque amount and credited in the account of the 2nd defendant. Though D.W.1 has admitted during cross-examination that he has to confirm the abovesaid fact by verifying with the records of the Bank, he has admitted during cross-examination that he has not gone through the records relating to the transaction of Rs. 10 lakhs before giving evidence in the suit. D. W. 1, who has come forward to give evidence based on records, ought to have gone through the records of the 1st defendant-Bank with regard to the realisation of the said amount and also with regard to the fact as to whether the said amount was adjusted towards overdraft facilities provided to the 2nd defendant by the 1st defendant-Bank as suggested by the plaintiff. The evidence of D.W.1 will be of no use to the 1st defendant with regard to the issue of cheque by the plaintiff to the 2nd defendant for Rs. 10 lakhs, collection of the said amount by the 1st defendant and crediting the same in the account of the 2nd defendant in the 1st defendant-Bank, which, according to the plaintiff, was adjusted towards overdraft facilities provided to the 2nd defendant by the 1st defendant-Bank. Therefore, this Court holds that the plaintiff has advanced a loan of Rs. 10 lakhs with interest at 16.50 per cent per annum to the 2nd defendant for the business in film carried on by the 2nd defendant on the bank guarantee issued by the 1st defendant on behalf of the 2nd defendant for a sum of Rs. 10 lakhs in favour of the plaintiff for a period of one year from the date of advancement of the loan. Issues (1) and (2) are accordingly answered in favour of the plaintiff.
8. Issues (3) to (7): A perusal of Ex.A-1 the statement of account produced by the plaintiff for receipt of interest from the 2nd defendant towards the loan advanced to an extent of Rs. 10 lakhs would disclose that the plaintiff has realised interest of Rs. 1,37,500 from 5.4.1986 to 6.4.1987 from the 2nd defendant towards the loan of Rs. 10 lakhs advanced by the plaintiff. The payment of interest to the abovesaid extent to the plaintiff by the 2nd defendant has not been disputed by the 2nd defendant. According to the plaintiff, the 2nd defendant had failed and neglected to pay the principal amount and balance of interest and. therefore, the plaintiff had sent a letter to the 2nd defendant as seen in Ex.A-10, dated 10.6.1986. A perusal of Ex.A-10 would disclose that the plaintiff informed the 2nd defendant that he would invoke the bank guarantee given by the 1st defendant for realising the loan amount since the 2nd defendant had not returned the loan amount of Rs. 10 lakhs with balance of interest in spite of several telephonic calls. A similar letter Ex.A-11, dated 14.6.1986 was sent by the plaintiff to the 2nd defendant, threatening to invoke the bank guarantee given by the 1st defendant since the loan amount was not paid by the 2nd defendant despite several demands.
9. A perusal of Ex.A-13, dated 17.6.1986, the letter sent by the 2nd defendant to the 1st defendant with copy to the plaintiff’s head office, would disclose that the 2nd defendant had made mention about the bank guarantee given by the 1st defendant to the plaintiff for Rs. 10 lakhs, issue of cheque for Rs. 10 lakhs and deposit of the said cheque by the 2nd defendant with the bank of the 1st defendant and about the counter guarantee given by the 2nd defendant to the 1st defendant. It would also disclose that the 2nd defendant had questioned the authority of one of the officers of the 1st defendant-Bank in informing the plaintiff about revoking of bank guarantee given by the 1st defendant in favour of the plaintiff and that the 2nd defendant had warned the 1st defendant that the 1st defendant would be liable in damages to the 2nd defendant for such improper action. Ex.A-13 further would disclose that the 2nd defendant had informed the 1st defendant about the bank guarantee given by the 1st defendant to the plaintiff on behalf of the 2nd defendant and also to implement the bank guarantee Ex.A-3, dated 4.4.1986 executed by the 1st defendant in favour of the plaintiff. Ex.A-12, dated 21.6.1986 is the letter sent by the plaintiff to the 1st defendant with copies to Zonal Manager, Regional Manager and the Chairman of the 1st defendant with regard to the invoking of the bank guarantee given by the 1st defendant on behalf of the 2nd defendant and about the re-confirmation of the abovesaid bank guarantee by the 1st defendant to the plaintiff by letter dated 11.4.1986. Of course, a perusal of Ex.A-7,, dated 16.6.1986, the notice sent by the 1st defendant through its counsel to the plaintiff would disclose that the inspection officials at the time of inspection of the 1st defendant-Bank, came to know about the issue of bank guarantee Ex.A-3, dated 4.4.1986 for Rs. 10 lakhs by the Manager, of the 1st defendant Thiru M.Sundaraganapathy and also about the non-registering of the said bank guarantee in the books of account of the 1st defendant-Bank. According to the 1st defendant, as seen from Ex.A-7, the bank guarantee was brought about fraudulently in collusion with other persons. Ex.A-7 is silent with regard to the persons with whom there was collusion to bring about the bank guarantee fraudulently. It would also show that the letter Ex.A-7 dated 16.6.1986 was posted on 18.6.1986 as seen from the postal seal in Ex.A-7 and not on 16.6.1986. Ex.A-4, dated 17.7.1986 is the notice sent by the plaintiff through its Advocate. It would also disclose that the letter of the plaintiff invoking the bank guarantee was hand delivered and acknowledgement therefor was obtained from the 1st defendant even on 17.6.1986, apart from sending another letter by registered post which was received by the 1st defendant on the next day. In Ex.A-4, it has been mentioned about the issue of bank guarantee dated 4.4.1986 by the 1st defendant in favour of the plaintiff and about the advancement of loan of Rs. 10 lakhs by the plaintiff to the 2nd defendant, based on the abovesaid bank guarantee. The letter dated 11.4.1986 sent by the 1st defendant to the plaintiff with regard to the abovesaid bank guarantee has also been reconfirmed in Ex.A-4. The plaintiff has specifically asserted that the letter Ex.A-67 was sent by the 1st defendant to the plaintiff with ante-date of 16.6.1986 after receipt of the letter of the plaintiff by the 1st defendant, invoking bank guarantee, on 17.6.1986. If the postal seal affixed on Ex.A-7 is taken in consideration, the contention raised by learned Counsel for the plaintiff that the letter Ex.A-7 should have been issued with ante-date 16.6.1986, though it should have been sent only on 18.6.1986 after receipt of the letter of the plaintiff dated 17.6.1986, cannot be held as unsustainable one.
10. Ex.A-5, dated 30.7.1986 is the further reply sent by the 1st defendant in addition to the reply dated 18.7.1986 sent by the 1st defendant to the counsel for the plaintiff. A perusal of Ex.A-5 would disclose that the 1st defendant is a Corporation constituted under the State Bank of India (Subsidiary Banks) Act, 1959, and that the 1st defendant has not obtained the prior approval of the controlling authorities for issue of bank guarantee Ex.A-3, dated 4.4.1986 for a sum of Rs. 10 lakhs to the plaintiff and that, therefore, the bank guarantee Ex.A-3 is not valid and binding on the 1st defendant. Of course, the 1st defendant has produced Ex.B-1, dated 6.9.1983, copy of circular No. 202/83, issued by the planning department of State Bank of Mysore with Head Office at Bangalore-9, in support of the contention of the 1st defendant, Of course, a perusal of Ex.B-1 would disclose that the Branch Managers of the State Bank of Mysore, working under the controlling authority, can issue financial guarantees only upto approved limits and that the Branch Managers were requested to issue performance guarantees with or without securities after obtaining prior approval with draft guarantee from the regional/zonal office. According to the 1st defendant, Thiru M.Sundraganapathy, the then Branch Manager can issue bank guarantee only to an extent of Rs. 10.000 or Rs. 25,000 that for issuing bank guarantee for a sum of Rs. 10 lakhs as seen in Ex.A-3, dated 4.4.1986, prior approval of regional zonal office ought to have been obtained, that the branch manager of the 1st defendant, has not obtained such approval and that therefore the said bank guarantee was also not entered into the register of contingent liabilities during the relevant period. In support of such contention, xerox copy of register of contingent liability said to have been maintained by the State Bank of Mysore, the 1st defendant, was also produced. A perusal of Ex.B-2, would disclose that the circulars issued in 1992 are noted in Ex.B-2. A perusal of Ex.B-2 would further disclose that the circulars issued in 1992 are noted in Ex.B-2. A perusal of Ex.B-2 would further disclose that the bank guarantee Nos. 86/2 and 86/3, dated 7.2.1986, 87/1, dated 19.2.1987 and 88/1, dated 19.1.1988 are noted in the said register, one after another serially. It is thereafter bank guarantee Nos. 87/2, dated 11.11.1987, 88/2, dated 8.3.1988 and 88/3, dated 12.3.1988 were entered in the said register. The fact of entering the bank guarantee No. 87/2, dated 11.11.1987 after entering the bank guarantee No. 88/1, dated 19.1.1988, would disclose that the abovesaid register of contingent liabilities was not maintained correctly by the 1st defendant or that the abovesaid register should be a carry over register from the earlier original register. In view of the said position, the contention raised by the learned Counsel for the plaintiff that the abovesaid register was not maintained properly by the 1st defendant, that the abovesaid register might be a carry over register, that the earlier original register was not produced before court for the reasons best known to the 1st defendant and that therefore, no reliance could be placed on the xerox copy of Ex.B-2, cannot be held as unreasonable one. That apart, the person who made the entries as seen in Ex.B-2, was also not examined, though D.W.1, who was not working in the 1st defendant-Bank at the time of Ex.A-3, dated 4.4.1986, was examined on behalf of the 1st defendant. Admittedly, D.W. 1 has no knowledge about the bank guarantee Ex.A-3. None of the officials working at the time of issue of bank guarantee Ex.A-3 in the 1st defendant-Bank was examined by the 1st defendant. None of the staff or officer from the regional/zonal office, to whom the bank guarantee should be sent for approval along with draft guarantee, was also examined to establish that the draft guarantee was not sent by the then Manager of the 1st defendant for approval of the regional/zonal office before issuing Ex.A-3, dated 4.4.1986 to the plaintiff for Rs. 10 lakhs on behalf of the 2nd defendant. In view of the said circumstances, mere production of Exs.B-1 and B-2 and examination of D.W.1, who has no knowledge about the bank guarantee transaction Ex.A-3, dated 4.4.1986, will not in any way help the 1st defendant to establish that the abovesaid bank guarantee was concocted by the then Manager of the 1st defendant, the 2nd defendant and the plaintiff fraudulently to defraud the 1st defendant-Bank. The then Manager Mr. M.Sundaraganapathy was also not examined in this case by the 1st defendant. The explanation offered by the 1st defendant through D.W. 1 was that the abovesaid Thiru M. Sundaraganapathy was dismissed from service and, therefore, he was not examined. Such a stand was not taken by the 1st defendant in the letters or notices sent on behalf of the 1st defendant or in the pleadings in the written statement of the 1st defendant. The records relating to initiation of disciplinary proceedings against the abovesaid Branch Manager and dismissal of the said Branch Manager were also not produced before court to prove the said allegation. In view of the said position, the contention raised by learned Counsel for the plaintiff that the 1st defendant has come forward with this case at the time of examination of D.W.1 only to get over the difficulty of non-examining the then Manager Thiru M.Sundaraganapathy, cannot be held as unsustainable one. There is absolutely no proof on the side of the 1st defendant that there was collusion between the plaintiff, the then Manager of the 1st defendant and the 2nd defendant for the alleged concocting of the bank guarantee Ex.A-3, dated 4.4.1986 with a view to defraud the 1st defendant-Bank and, therefore, such allegation made in the notice or in the pleadings in the written statement of the 1st defendant cannot be sustained. It is relevant to point out that D.W. 1 has not spoken anything with regard to the alleged collusion or fraud in executing Ex.A-3, dated 4.4.1986 by the then Manager of the 1st defendant in favour of the plaintiff on behalf of the 2nd defendant.
11. In United Commercial Bank v. Hanuman Synthetics Limited and Ors. (1987) 61 C.C. 245, it was held as follows, following the decision in Tarapore and Co. v. V/O. Tractoroexport, Moscow (1970) 40 C.C. 447 (S.C.):
…it is a mechanism of great importance in international trade and any interference with that mechanism was bound to have serious repercussions on international trade. Except under very exceptional circumstances, the court should not interfere with that mechanism…. But the Supreme Court held that the court would not be justified in granting temporary injunction restraining the bank as well as the seller from taking any further steps in pursuance of the letter of credit that was opened.
It has also been held in the case cited above that on an allegation of fraud made against a party, the court could not prevent the bank from honouring its obligation to pay by an order of injunction and that in order to come within the exception of fraud, it is not enough to allege fraud, but must clearly establish that the documents that were to be presented by the beneficiary were forged or fraudulent.
12. In United Commercial Bank v. Bank of India and Ors. (1982) 52 C.C. 186, it was held by the Apex Court as follows:
Though the court’s power under Article 136 of the Constitution are untrammelled, they are subject to self-ordained restrictions, and as a matter of rule, the court does not interfere with the machinery of irrevocable obligations assumed by banks, save under very exceptional circumstances, and refrain from granting injunction to restrain the performance of the contractual obligations arising out of a letter of credit or a bank guarantee between a banker and a banker restraining a bank from recalling the amount due when payment is made under reserve to another bank or in terms of letter of guarantee or credit executed by it.
13. In U.P. Co-Operative Federation Ltd v. Singh Consultants and Engineers (P) Ltd. (1989) 65 C.C. 283, the Apex Court was pleased to hold as follows:
An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with except in case of fraud or in case of apprehension of irretrievable injustice has been made out….
In order to restrain the operation either of an irrevocable letter of credit or of a confirmed letter of credit or of the bank guarantee, there should be serious dispute and there should be a good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Otherwise, the very purpose of bank guarantees would be negatived and the fabric of trading operations would get jeopardised.
14. In State Trading Corporation of India Ltd. v. Jainsons Clothing Corporation , the Apex Court was pleased to hold as follows:
The court should normally insist upon enforcement of the bank guarantee and the court should not interfere with the enforcement of the contract of guarantee unless there is a specific plea of fraud or special equities in favour of the plaintiff. He must necessarily plead and produce all the necessary evidence in proof of the fraud in execution of the contract of the guarantee, but not the contract either of the original contractor any of the subsequent events that may happen as a ground for fraud.
15. In Hindustan Steel Works Construction Ltd. v. G.S. Atwal and Co. (Engineers) Pvt. Ltd. (1996) 85 C.C. 270, the Apex Court was pleased to hold that in the case of confirmed bank guarantees/irrevocable letters of credit, the court will not interfere unless there is fraud and irretrievable damages involved in the case and the fraud has to be an established fraud. It has also been held that the fact that the bank issued a guarantee in a standard form, covering a wider spectrum than agreed between the respondent and the bank and the fact that the appellant had not quantified the loss and mentioned it, were not grounds to restrain the appellant from invoking the unconditional bank guarantees.
16. The principles laid down in the cases cited above, would lead to infer that normally the court should not interfere with the bank guarantee given by the Banks in favour of the parties, unless fraud is pleaded and established by material evidence. In this case, this Court has already held that the 1st defendant has failed to establish the alleged collusion or fraud between the plaintiff, the then Manager of the 1st defendant and the 2nd defendant. Therefore, the 1st defendant cannot claim that the bank guarantee given by the then Manager of the 1st defendant on behalf of the first defendant, is not valid and binding on the 1st defendant and that, therefore, not liable to the suit claim. In view of the foregoing reasons, this Court holds that the 1st defendant is also liable to the suit claim along with the 2nd defendant jointly and severally and the plaintiff is entitled to a decree as prayed for. Accordingly issues (3) to (7) are answered in favour of the plaintiff and against the defendants.
17. In fine, the suit is decreed as prayed for with costs.