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PETITIONER: FENNER (INDIA) LTD.

       Vs.

RESPONDENT: PUNJAB AND SIND BANK

DATE OF JUDGMENT:       07/07/1997

BENCH: K. RAMASWAMY, D.P.WADHWA.

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Leave granted. We have heard counsel for both sides.      This  appeal  by  special  leave  is  arises  from  the judgment of the Kerala High Court, made on November 14, 1996 in A.S. No.394 of 1996.      The admitted  facts are  that the appellant laid a suit to  enforce   the  Bank  Guarantee  against  the  respondent pursuant to  the Agreement dated April 23, 1991 entered into between the  appellant, M/s.  Fenner (India) Lid., 3 Madurai Melakkal Road,  Madurai  and  M/s.  Vijay  Exports,  23/393, Panampally Nagar, Kochi under which the appellant had agreed thus:  "In  order  to  finance  purchase  of  raw  nuts  and processing for  exports, the  Processor  requires  financial support  and   the  Exporter  has  agreed  to  advance  upto Rs.30,00,000/-  (Rupees   thirty  lakhs  only)  as  Purchase advance to  be secured  by a  Bank Guarantee." The Guarantee executed on April 24, 1991 by the respondent Punjab and Sind Bank, the  Guarantor in  favour of  M/s Fenner  (India), the Purchaser, covenanted  that the  Purchaser shall  repay  the amount advanced  and in case of default, apart from invoking the arbitration  clause,  the  Bank  would  be  entitled  to enforce the  Bank Guarantee  for recovery thereof. It is not disputed that  the Purchaser  had advanced upto a sum of Rs. 20,00,000/- (Rupees  twenty lakhs  only) under the aforesaid agreement. Since  M/s. Vijay Exports, Kochi committed breach in payment thereof, the appellant invoked the Bank Guarantee against the  respondent-Bank for  a  sum  of  Rs.39,28,408/- inclusive of  all items  mentioned in  the suit.  The  trial Court decreed the suit and in appeal the High Court reversed it holding  that since  the appellant  had failed to advance the agreed  amount of  Rs. 30,00,000/-  for  utilisation  of procuring processing  cashew nuts, it was entitled to invoke the bank Guarantee.      The question,  therefore, is : whether the appellant is entitled to  invoke the Bank Guarantee for the amount agreed to be  indemnified by M/s. Vijay Exports. The Bank Guarantee reads as under:      "And whereas  it  has  been  agreed      under the  terms and  conditions of      the aforesaid  agreement  that  the

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    Purchaser shall  make an advance to      the   Seller    of   Rs.30.00,000/-      (Rupees  Thirty   Lakhs  only)  for      utilizing          it           for      procuring/processing cashew nuts to      be   supplied    under   the   said      agreement  on   his  furnishing   a      Guarantee from a Bank acceptable to      the Purchaser.      And whereas  the Guarantor  has  as      per terms  and  conditions  of  the      aforesaid agreement agreed to stand      guarantee for the amount of advance      payment in  favour of  the  seller,      now this  deed  witnesses  that  in      pursuance   of    the   terms   and      conditions   of    the    aforesaid      agreement and  in consideration  of      the advance  payment agreed  to  be      made   to   the   seller   by   the      Purchaser, the  Guarantor do hereby      agree and  undertake  to  indemnify      the purchaser to keep the Purchaser      to indemnified  to the  extent of a      sum not  indemnified to  the extent      of a sum not exceeding the said sum      of Rs.  30,00,000/- (Rupees  Thirty      Lakhs only)  against any  damage or      loss that  may be  suffered by  the      purchaser   by   reason   of   non-      fulfilment of  any of the terms and      conditions of the agreement, by the      seller  and  the  Guarantor  hereby      undertake  to  pay  on  demand  and      without any  demur or  delay to the      purchaser any  sum  unconditionally      irrevocably not  exceeding the  sum      of  Rs.30,00,000/-  (Rupees  Thirty      Lakhs only)  as may  be ascertained      by the  Purchaser as the damages or      loss that  the Purchaser  may  have      suffered,   provided    that    the      Guarantee comes into force when the      advance payment  has been  made  to      the account  of the  seller and the      Guarantor hereby  convents with the      Purchaser as follows."      A  reading  of  it  would  clearly  indicate  that  the appellant had agreed to advance upto a sum of Rs.30,00,000/- [Rupees thirty  lakhs only to the Seller, M/s Vijay Exporter of utilising  it for  procuring cashew  nuts to  be supplied under the  said agreement  on their  furnishing a  the  Bank Guarantee, in  terms of  the agreement between the Purchaser and  Exporter  referred  to  herein.  In  other  words,  the undertaking given by the appellant was to advance a sum upto Rs. 30,00,000/-  to the  Purchaser and  in case of breach of repayment thereof  by the  Seller of  Purchaser, as the case may be  under the  Agreement the  appellant is  entitled  to invoke the  Bank Guarantee. Shri Vishwantha Iyer the learned senior  counsel  for  respondent  contends  that  since  the appellant did not advance a sum of Rs. 30,00,000/- being the amount agreed  to be paid , the appellant is not entitled to invoke  the   Bank  Guarantee.  We  find  no  force  in  the contention. In  view of  the expression "upto thirty lakhs", whatever amount  is advanced  and if  it is  not repaid,  on

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committing breach  thereof, the  appellant  is  entitled  to avail of  and enforce  the Bank  Guarantee to  the extent of amount advanced.  Thereby, a  sum of  Rs.20,00,000/- (Rupees twenty lakhs  only), admittedly, was advanced. The appellant is entitled  to  recover  the  same  by  invoking  the  Bank Guarantee with  interest from  the date  of the  suit.  Shri Vishwanatha Iyer  further contends  that the  Seller was not made a  party to the suit and therefore, the suit is bad for non-joinder of Seller as he is a necessary and proper party. We find  no force  in the  contention. Admittedly, issues of non-joinder was  tried as  the preliminary  issues  and  was negatived. On  revision, the  High Court  has confirmed  the same. Section  11 of the CPC envisaging the principle of res judicata stands in the way of the respondent.      The appeal is accordingly allowed. No costs.