ORDER
J.K. Mehra, J. Member
1.
This is an appeal arising from the order of the State Consumer
Disputes Redressal Commission, Tamil Nadu. The facts leading to the filing of
the complaint briefly are as under:
The Complainant/Respondent is a Bank incorporated under
the Indian Companies Act carrying on business and financial management
and bill discounting. One M/s. Shree Ganesh approached the Respondent
for discounting bills of exchange raised by it on M/s. S.T.R. Laboratories,
Hyderabad and produced a bank guarantee issued by the Appellant from
its Juntapalli branch, Andhra Pradesh for a sum of Rs. 5.5 lakhs. Along with
the bank guarantee a letter from the Appellant dated 8th March, 1993 was
also produced confirming the issuance of bank guarantee. In the said
letter, the invoice numbers as also the delivery number and bill of
exchange dated 2nd March, 1993 were confirmed. The Respondent
believing the said bank guarantee and the letter by the Appellant to honour
the said bills of exchange drawn by the Respondent and accepted by M/s.
STR Laboratories, Hyderabad. When the Respondent sent its
representative for presentation of bills of exchange in person, no one was
found at the given address which resulted in the Respondent invoking the
bank guarantee given by the Appellants. This was done vide their letter
dated 30th August, 1993. The Appellant asked for the particulars of the
bank guarantee which were duly furnished to it. Appellant then wrote to
the Respondent that as per their records maintained at the branch, the
said letter of guarantee was not noted and that they were referring the
matter to the higher authorities. On 6th of September, 1993 the
Respondent was informed that the bank guarantee was not issued by its
branch. A detailed reply to this effect was sent by the Respondent. The
Respondent had also referred the matter to the RBI where no progress has
so far been reported. On failure to honour the bank guarantee, the
Respondent filed complaint claiming the said sum of Rs. 5,50,000/-
together with interest at the rate of 24% p.a. In reply, the Appellant denied
all the averments including the drawal of the bills of exchange by the
Respondent and further alleged that the bank guarantee could be invoked
only after exhausting all other remedies. The Appellant on making inquiries
came to the conclusion that the issuance of the bank guarantee was the
result of collusion and fraud of the concerned authorities and the then
Manager of the Appellant, Mr. R.K. Murthy, which resulted in reference of
the entire case to the CBI. On checking up the record in this connection, it
was found that the Respondents are not informed anywhere nor are they
named. On the other hand, it has been proved that the Respondent who
honoured the bill of exchange made the payment, believing that it was
duly backed up by bank guarantee, thus he had acted bona fide. The State
Commission after going through the correspondence exchange between
the parties has come to the conclusion that the bank guarantee was
actually issued from the branch of the Appellant and by the then Branch
Manager. If that Manager had not acted bona fide, that cannot absolve the
Bank from its liability under the letter of guarantee issued through its office
by its own Manager and in case there is any fraud on the part of the
customer of the bank in a collusion with the Manager, the bank has its
recourse against the said customer and its own Manager. But, they have
no right to not to honour the bank guarantee which was duly issued by its
branch and signed by R.K. Murthy who was admittedly the Branch
Manager. Accordingly, the said order directed the appellant bank to honour
the bank guarantee. It is well settled principle of law that if the act is done
in course of employment which is authorised, then the master is liable for
the acts of his servant. (Citizen’s Life Assurance Co. v. Brown, 1904 AC
423). It is also immaterial whether the agent is acting within the scope of
express authority or implied authority (Bansilal v. Kabul Chand, ILR 1945
Nagpur 204). There is no evidence on record wherein the Appellant had
established that public notice of withdrawal of authority to that Branch
Manager was given withdrawing his authority to issue bank guarantees.
On the contrary, the evidence is that he was the Branch Manager and was
acting within the normal course of his duties when he issued the bank
guarantee. The plea that the customer should have exhausted its remedies
against the principal debtor before invoking bank guarantee is also
absolutely without any merit, because the person who gives the guarantee
is surety and the person in respect of whose default the guarantee is
give is ‘principal debtor’ and the person to whom the guarantee is given
is the ‘creditor’ and that the contract of guarantee is between the guarantor
and the creditor. The liability of the surety/guarantor arose immediately on
the contingency mentioned in the bank guarantee occurring, i.e. the
dishonour of the bill of exchange. The liability arose forthwith on the default
of the principal debtor and even in a notice of default is not necessary to
wait till a suit against the surety is instituted. We agree with the
conclusions that failure of the Appellant to honour the letter of guarantee
amounted to grave deficiency in service. We do not find any infirmity in the
impugned order. It is affirmed and the appeal of the Appellant is dismissed.
Parties are to bear their own costs.