JUDGMENT
S. Mukherjee, J.
1. The present plaintiff (M/s Business Bank) is an investment bank converted as such with the approval of the Central Bank of Jordan on 23.10.1990. Earlier it was a public shareholding Company under the name “National General Investments Company Ltd.” established some time in the year 1980.
2. In November 1981, the plaintiff Bank was approved for conversion into a Commercial Bank. The plaintiff bank claims to be the successor-in-interest of another bank, Bank of Credit and Commerce International, (hereinafter referred to as “BCCI”).
3. It is the case of the plaintiff bank that in relation to certain overdraft facility extended by said M/s. BCCI to one M/s Uttam Singh Duggal & Company, the defendant bank had given a counter bank-guarantee for value of Jordanian Dinars 3,74,800/- being Overdraft Guarantee Ref. BG-19/86.
4. In terms of the said counter bank-guarantee dated 6.12.1986, the defendant bank undertook to pay to BCCI Jordan, any amount (subject to maximum of Jordanian Dinar 3,74,800, upon receipt of BCCI’s first written demand stating that the said M/s Uttam Singh Duggal & Co. Pvt. Ltd. have failed to repay the amounts Overdraft from the Bank.
5. On 19.12.1987 the value of the counter bank guarantee was reduced to Jordanian Dinar 3,50,000.
6. Thereafter, on 29.1.1991 the defendant extended the period of the counter bank-guarantee up to 30.4.1991 for the value of Jordanian Dinar, 1,12,779.61, being the amount inclusive of interest at 13% p.a. from 1.2.1991.
7. Shortly before the validity period of the bank-guarantee was to expire, on 30.4.1991 BCCI wrote to the defendant bank to finally settle the Overdraft Account.
8. Thereafter, on 30.4.1991 the validity of the bank guarantee, was extended up to 31.5.1991 for the amount of Jordanian Dinar 1,12,779.61.
9. Before the date of the expiry of extended bank guarantee, on 7.5.1991, M/s BCCI lodged its claim under the bank guarantee for a sum of US # 173,184.17, calling upon the defendant bank to remit the said amount forthwith. The relevant communication by which the counter bank guarantee was invoked, may be set out hereinbelow for convenience of reference:-
(Copy of letter dated 7.5.91)
TO: UNITED BANK OF INDIA
72, JANPATH – NEW DELHI, INDIA
FM: BCCI AMMAN MAIN
TEST NO. 66-5381 FOR NH DT. 7.5.91
URGENT URGENT
KINDLY REFER TO OUR TLX MSX MSG 328 DTD. MAY 2, 1991 IN RESPECT OF YOUR CONFIRMATION TO SETTLE THE DD A/C OF UTTAM SINGH DUGHAL AND CO. WITH US. WE REGRET TO ADVISE YOU THAT WE HAVE NOT RECEIVED YOUR CONFIRMATION AND CENTRAL BANK OF JORDAN REFUSES ANY FURTHER EXTENSION OF THE GTEE. WE HEREBY LODGE OUR CLAIM TO PAY THE DD AMOUNT OF M/S UTTAM SINGH JD: 116461,514 DR PLUS INTEREST JD: 1303,722 TOTAL AMOUNT JD: 117765,236 EQUIVALENT OF USD: 173,184.17 BY TLX TRANSFER TO OUR A/C NO. 4024001 WITH SECURITY PACIFIC INT’L BANK, NEW YORK UNDER YOUR TESTED TLX CONFIRMATION TO US.
YOUR KIND ATTENTION TO THIS SUBJECT IS HIGHLY APPRECIATED.
REGDS
BCCI AMMAN MAIN 1455 BCCI JO
10. On 22.5.1991, 28.5.1991 and 29.5.1991 BCCI sent repeated messages to the defendant bank calling upon the defendant bank to credit BCCI’s account maintained with the Security Pacific International Bank, New York to the corresponding extent.
11. The defendant bank initially responded, vide communication dated 29.5.1991, that it had approached the RBI for approval for remittance, and would be remitting the amount immediately upon receiving the said approval.
12. A number of communications were also sent by the defendant bank assuring that the approval of the RBI was likely to be received and the amount would be expected to be remitted. The defendant bank also conveyed regret for the inconvenience caused to the BCCI.
13. On 16.7.1991 the defendant bank requested for the break-up of the amounts being claimed for RBI’s approval. Reportedly reply was sent giving the details of outstanding balance of M/s Uttam Singh Duggal & Co.
14. On 12.2.1992, the defendant bank allegedly changed its stand, and called upon the plaintiff bank to furnish the documentary evidence to the effect that it (Plaintiff) was the lawful legal successor of the former BCCI Amman, and to give details of the amount claimed.
15. On 30.3.1992, the plaintiff bank furnished the copies of the Overdraft Statement of Account of M/s Uttam Singh Duggal & Co. Pvt. Ltd., as well as copy of the letter from the Central Bank of Jordan certifying that the plaintiff bank was the successor of M/s BCCI.
16. Thereafter on 1.8.1992, the plaintiff bank furnished certified copies of the order of Aman First Instance Court, appointing Central Bank of Jordan as the Liquidator Court, appointing Central Bank of Jordan as the Liquidator to sell the assets of BCCI’s branch of Jordan to the plaintiff.
17. After sending reminders dated 29.3.1993 and 17.6.1993, the plaintiff served legal notice upon the defendant bank, to which there was reportedly no response.
18. It was the case of the plaintiff that one Mrs. R.B. Mehndiratta, Deputy Chief Officer (Law) of the defendant bank, spoke the plaintiff’s lawyers and offered to settle the matter.
19. It is suggested that the defendant was prepared to pay the principal amount only, without interest, but the said compromise proposal was declined by the plaintiff, who thereupon filed the present suit under Order xxxvII of the Code of Civil Procedure.
20. The defendant filed the application for leave to defend, which was registered as IA. 7995/94 and which was duly supported by the affidavit of Shri Vinod Kumar Maheshwari, Chief Manager of the defendant bank. Leave to defend was sought on the following accounts:-
(i) There is no privity of contract between the defendant bank and the plaintiff;
(ii) The defendant does not accept the plaintiff, to the lawful successor of the BCCI;
(iii) No permission has been obtained from the Court before which liquidation is pending, to institute the present suit;
(iv) The admitted case of the plaintiff being that Central Bank of Jordan has been appointed the Liquidator of BCCI, therefore no valid proceedings could take place without arraying the said Liquidator and in absence of said Official Liquidator the suit fails on the point of non-joinder;
(v) The counter guarantee given was not an unconditional guarantee;
(vi) The invocation made by BCCI vide telex dated 7.5.1991, is not in accordance with the terms of the guarantee inasmuch as it is no where stated that M/s Uttam Singh Duggal & Co. have failed to pay the amount overdrawn or that the Company failed to comply with the terms of conditions over which the terms of overdraft was sanctioned;
(vii) The invocation was issued only on the ground of non-acceptance of further extension; (viii) BCCI never furnished any statement of overdraft account of M/s Uttam Singh Duggal & Co. Pvt. Ltd. M/s BCCI has been ordered to be liquidated on account of various acts of fraud of its Directors and its officials, and as such the amount claimed is inflated and fictitious;
21. There are also other contentions in the leave to defend application, which need not be elaborated on account of the reasons detailed in the subsequent paras of this judgment.
22. In my view, at the leave to defend stage, a case is to be decided on the shortest possible canvas so as not to prejudice either party by observations on merits of entirety of aspects arising in the suit.
23. In the present case, I find that the letter of invocation by the plaintiff bank dated 7.5.1991 is prima facie not in accordance with the terms of the counter bank-guarantee.
24. It is nowhere even alleged in the communication dated 9.5.1991, that M/s Uttam Singh Duggal & Co. Pvt. Ltd., have failed to pay amount overdrawn, or that they have failed to comply with the terms and conditions on which overdraft limit was sanctioned.
25. Reliance has been placed by the defendant Bank and rightly so, in my opinion, upon the judgment of Apex Court in the case of Hindustan Construction Company Ltd. v. State of Bihar , in which it has been categorically held that the terms of the bank guarantee, are extremely material, and since the bank guarantee represents an independent contract between the bank (Defendant) and the beneficiary (BCCI), therefore both the parties would be bound by the terms thereof.
26. The invocation of the counter bank guarantee has necessarily to be in accordance with the terms of the bank guarantee. Since that is not so in the present case, therefore the invocation itself is not valid.
27. Learned counsel for the defendant has also relied upon the judgment in M/s Mechalec Engineers & Manufacturers v. Basic Equipment Corporation , where it has been held that except in case where the defense is patently dishonest, or so implausible that it could not be reasonably be expected to succeed, otherwise in all cases the defendant is to be held entitled to grant of unconditional leave to defend.
28. In the aforesaid case of M/s. Mechalec Engineers & Manufacturers the authoritative principles have been laid down as principles (a) to (e). In the first three contingencies, the defendant is to be held as entitled to unconditional leave to defend.
29. Since principle (c) would itself be adequate to grant unconditional leave to defend, it may be noted that the said principle, as laid down by the Apex Court, is that even where the affidavit does not positively and immediately make it clear that the defendant has a defense, but only shows such facts as may lead to the inference that at the trial of the action he may be able to establish a defense to the plaintiff’s claim, even then the defendant is to be granted unconditional leave to defend, though some conditions regarding time or mode of trial, could be imposed by the Court in its discretion.
30. Learned counsel for the defendant very fairly submitted during arguments that if his case is considered under principle (c) and leave to defend is granted, he will not like to agitate that his case falls under Clause (a) or (b) of the said five principles laid down by the Hon’ble Apex Court in the said case.
31. In the present case, only on the short ground of invocation not being in accordance with the terms of the bank guarantee, in my view the defendant may be able to establish a defense and establish in the trial that defendant is not entitled to judgment, and therefore without going into any other aspect, I find the defendant to be entitled to unconditional leave to defend, which will be subject to the condition that the written statement will have to be filed positively within a period of four weeks from the date of this order, failing which the defendant shall stand precluded in that respect.
32. Likewise, the defendant will be entitled to only one opportunity of four weeks further time after the replication is filed, for bringing original documents of the defendant on record.
33. At the stage of evidence, the defendant will stand confined to availing maximum of two opportunities for producing its evidence, including for filing of affidavits and cross-examination, and subject to any specific order by this Court at the appropriate stage permitting the summoning of witness, the defendant will be otherwise bound to produce, on his own responsibility, all its witnesses in its defense.
34. The application (I.A. No. 7995/95) is accordingly allowed. The defendant is granted leave to defend which is unconditional as far as payment of any amount into Court or furnishing of any security is concerned, but is subject to conditions as detailed above in relation to the time and mode of trial.
35. While concluding, I wish to refer to certain developments in this matter for demonstrating how primarily on account of requests for adjournment/accommodation by learned counsel for the parties from time to time, a period of about 8 years has been consumed for the decision of an application for leave to defend, in a summary suit which is meant to be by way of expeditious proceedings in relation to specified category of cases falling under Order xxxvII CPC.
36. This suit was initially decreed by default in favor of the plaintiff vide judgment dated 4.8.1995. Thereafter I.A. No. 8599/95 was filed for setting aside the said ex parte decree. This was allowed on 23.5.1996. On 3.12.1997 this application (IA No. 7995/95) matured for arguments which were partly heard, but due to change of roster, the said matter was released for hearing by Regular Bench on 24.7.1998. Thereafter the matter was listed before Hon’ble Mr. Justice Dalveer Bhandari on 7.9.1998 and 11.11.1998 and before Hon’ble Mr. Justice S.K. Mahajan on 17.11.1998, 22.1.1999, 14.2.1999, 22.3.1999 and 12.4.1999 when learned counsel for the parties sought accommodation/adjournment.
37. Thereafter the case came up before Hon’ble Mr. Justice Mukul Mudgal on 20.7.1999, when again adjournment was requested by plaintiff’s counsel. Thereafter on 4.11.1999 conditional leave to defend was granted subject to principal amount in Indian rupee equivalent to Jordanian Dinnar 1,72,634 being kept in a fixed deposit in the name of the Registrar, Delhi High Court.
38. By Division Bench ordered dated 29.10.2001 passed in FAO(OS) 394/99, the order dated 4.11.1999 passed by Hon’ble Mr. Justice Mukul Mudgal granting leave to contest to the defendant subject to the condition for deposit of principal amount by way of Indian Rupees equivalent to Jordanian Dinnar 1,72,634, was set aside and the matter remanded for leave to defendant application (IA No. 7995/95) to be decided afresh in accordance with law.
39. Resultantly the application for leave to defend (IA 7995/95) is allowed in the terms detailed in para 33 above but with no order as to costs.