P.A. Kulkarni, J.
1. This is a revision by respondent No. 1 against the order dated March 25, 1981, passed by the IVth Additional City Civil Judge, Metropolitan Area, Bangalore City, in Arbitration Petition No. 12 of 1981, allowing I.A. I and thereby restraining the first respondent from realising the bank guarantees until the disposal of the main arbitration petition.
2. The parties are referred to with reference to their position in the trial court.
3. The petitioner, Korula Rubber Co. P. Ltd., a private limited company, having its registered office at Bombay, is carrying on the business of manufacturing and selling rubber goods and rubber-lining of steel pipes and fittings. Respondent No. 1, Kudremukh Iron Ore Co. Ltd., is a Government of India undertaking and is engaged in the business of iron ore mining at Kudremukh. Respondent No. 2, United Commercial Bank, is a nationalised bank. Engineers India Ltd. is the authorised inspection agent nominated by respondent No. 1 and Metchem in respect of the work of rubber-lining of pipes and fittings entrusted to the petitioner under a contract. Respondent No. 2 bank has executed five bank guarantees in favour of respondent No. 1.
4. In May, 1978, respondent No. 1 floated a tender for rubber-lining of steel pipes and fittings. The said tender invited offers for the supply of steel-fabricated items. The petitioner offered to do the work of rubber-lining of pipes and fittings and supply the other materials and to do the work of the growing and machining, etc., at the rates and on the terms and conditions mentioned in the letter dated June 22, 1978. Several negotiations went on between the petitioner and respondent No.1. The petitioner submitted its final offer in August, 1978, and it was accepted by the first respondent by its purchase order dated September 28, 1978. As per the said order, the petitioner was to attend to the work of rubber-lining of pipes and fittings of approximately 8,100 sq. metres and for a total value of Rs. 27,78,431. The said contract was subject to some conditions and specifications mentioned therein. The terms of payment were:
(i) 20% of the order value to be paid as advance against a bank guarantee as per the pro forma of respondent No. 1;
(ii) 70% against despatch of documents and inspection certificates; and
(iii) 10% within 60 days of receipt of materials and joint verification at site.
5. The petitioner was required to submit security deposit to the extent of 10% and give guarantee for workmanship, for defective materials and life guarantee against the total erosion of rubber-lining taking place to an extent which exposed the materials during the life guarantee. The said order provided for inspection of materials before despatch in accordance with the technical specifications mentioned in the contract. The relevant clauses are:
'8. Security deposit. - You are requested to submit security deposit by way of bank guarantee to the extent of 10% value of order as per clause 3 of the general conditions of contract within 15 days. The bank guarantee should be as per our pro forma from any of the banks approved by us and should be valid up to the expiry of the guarantee period.
9. Inspection. - (a) The inspection shall be carried out prior to despatch by Canadian Metchem Consultants Ltd., 25, Mahatma Gandhi Road, Bangalore, or their representative. (b) The inspection procedure/programmer should be settled with the inspection authority immediately on receipt of order and guarantee/test certificate and other data necessary as asked by Canadian Metchem Consultants Ltd. should be furnished.
10(a). Workmanship guarantee. - The rubber-lining shall be guaranteed against defective material and workmanship for a period of 12 months from the date of commissioning or June, 1981, whichever is earlier. This workmanship guarantee shall mean the rubber compound totally coming off from the metal because of poor workmanship/material. If such failures are noticed during the guarantee period, the replacement/repairs of rubber-lining shall be done by you at site free of cost.
10(b) Life guarantee. - Your rubber-lining shall have a minimum life of 30 months from the date of the commissioning or till December, 1982, whichever is earlier, subjected to same being stored and protected and subjected to the duty conditions specified in the tender documents.
6. This guarantee shall relate to the erosion of 6 mm. thick rubber- lining. The rubber-lining shall be deemed to have failed against life guarantee, if total erosion of rubber-lining takes place and metal is exposed during this period. During the lifetime guarantee period, replacement shall be done on pro rata basis, i.e. if the rubber-lining of one pipe fails in the 15th month, against the total life guarantee of 30 months, you shall bear 50% of the rubber-lining price. To and fro transportation of such pipes shall be arranged by you at your cost.
7. In or about July, 1979, respondent No. 1 drastically reduced the quantities in the final scope of supplies and unilaterally cancelled the order for rubber-lining by 2,073 sq. metres.
8. Disputes and differences arose between the parties. The petitioner by its letter dated April 2, 1980, set out the aforesaid facts and called upon respondent No. 1 to pay an amount of Rs. 4,89,500 as due to it for wrongful reduction of the said quantity. By its reply dated June 16, 1980, respondent No. 1 denied the liability to pay the aforesaid amount. Hence, as required by clause 32.1 of the general conditions of contract, the petitioner referred the said dispute to arbitration by its letter dated July 21, 1980. Both the parties appointed their respective arbitrators.
9. Subsequent to the reference of the dispute to the arbitrators, respondent No. 1 complained about some of the rubber peeling off at the ends of the pipes and fittings. Its first complaint was made in the middle of August, 1980, by which time the petitioner had completed deliveries of nearly 95% of the pipes and fittings duly rubber-lined. Thereafter, a joint survey of the defects was carried out at Bhagwati lay down area and the area around the concentration section on August 22, 1980. The result of the joint survey was recorded in the minutes of the meetings held at Malleswaram on August, 22, 23, 1980. The rubber on 3 pipes of 100 mm., I pipe of 125 mm. and few pipes of 400 mm. was found to be peeling off at the ends. The rubber on one 150 bend and the reducer was found to be peeled off as a whole. The defects were summarized. It was arranged at the suggestion of respondent No. 1 that the petitioner would arrange for rubber- lining/repair work at Kudremukh site itself. It was further arranged that the petitioner should depute its representative within a week thereafter along with materials/repair kits for taking up repairs in the following order:
(a) Pipes, fittings and adaptors already available on ground to be repaired first; and
(b) Pipes, fitting and adaptors to be dismantled line by line and repairs completed.
10. The petitioner on September 29, 1989, sent its representative to Kudremukh site for final assessment of the damaged pipes and for planning regular repairs and a further survey of the pipes and fittings of different sizes was carried out. The repair crew carried out the repair work of bonding of loose ends through the pipes and 3 Nos. of fittings. A joint inspection report dated November 20, 1980, of the rubber-lined pipes/fittings repaired by the petitioner was prepared stating that the repaired pipes were found to be peeling off from the end. Based on the said report, the assistant technical manager of the petitioner inspected the rubber-lined pipes supplied by the petitioner, which had been repaired by the petitioner's crew by the cold-bonding process. It was felt by respondent No. 1 that the bonding at the ends as a result of the said process was not adequate and, therefore, it was suggested that hot vulcanising method may be tried. It was decided that the petitioner would bring one steam generator and an autoclave from Bombay to Kudremukh site and initially carry out repairs to about 150 pipes and offer them for inspection. After it was accepted, the balance pipes would be rectified by the same process. Pursuant thereto, the petitioner despatched an autoclave and a boiler to Kudremukh site along with crew in or about the middle of December, 1980, for redoing the work of repairs to the pipes and fittings with the new process of hot vulcanising. Whilst the repair work was going on, there was labour trouble in the Bombay unit of the petitioner-firm in the last week of January, 1981, which fact was intimated by the petitioner to respondent No. 1 by letter dated February 9, 1981. However, on February 11, 1981, the petitioner was surprised to receive a telegram from respondent No. 1 giving an ultimatum to commence rectification/relining work on or before February 16, 1981, and to ensure completion thereof by February 28, 1981. The petitioner was threatened that if the work was not commenced by February 16, 1981, or completed by February 28, 1981, respondent No. 1 would be constrained to take alternate action for relining by other sources at the best possible prices at the risk and cost of the petitioner without further reference to the petitioner. On the date when the petitioner received the said telegram dated February 11, 1981, the labour trouble at the petitioner's Bombay undertaking had become very server to such an extent that the petitioner and its executives and officer were being totally prevented by the workers from entering the undertaking. Hence, the petitioner informed respondent No. 1 by telex dated February 17, 1981, that their officer, Shri Mani, along with the crew would reach Kudremukh on February 23, 1981. Respondent No. 1 threatened to carry out the risk purchase action. The petitioner informed respondent No. 1 that it is doing everything possible to carry out the work of repairs; but respondent No. 1 was really preventing the petitioner from carrying out the repairs and, therefore, it called upon respondent No. 1 to desist from so doing failing which the petitioner would take legal action. Since the assistant technical manager resigned in the meanwhile, the technical manager was sent to the site on February 28, 1981, to carry out the repairs. The crew sent by the petitioner was not allowed to do the work. The threat of respondent No. 1 to carry out the work by other sources is a clear violation of its rights and interest arising under the contract. It can still enforce its right to carry out the repairs. In continuation of the earlier dispute which had been referred to the arbitrators, the petitioner by its letter dated March 11, 1981, referred this dispute also to the arbitrators.
11. Thereafter, the present application was filed by the petitioner restraining respondent No. 1 from encashing the bank guarantees and restraining the bank from paying cash to respondent No. 1.
12. Respondent No. 1 resisted the application.
13. The trial court, on a consideration of the materials, granted the injunction restraining respondent No. 1 from realising the bank guarantees till the disposal of the petitioners.
14. Respondent No. 1, being aggrieved, has come up with the present revision.
15. Learned counsel, Shri Sundaraswamy, for the revision-petitioner referred me to the following decisions: United Commercial Bank v. Bank of India, : 3SCR300 ; Mahrashtra State Electricity Board v. Official Liquidator, High Court, Ernakulam, : 1SCR561 ; Edward Owen Engineering Ltd. v. Barclays Bank International Ltd  3 WLR 764;  1 All ER 976 (CA), ACC Babcock Ltd. v. Straw Products Ltd, AIR 1985 Delhi 237, Vinay Engineering v. Neyveli Lignite Corporation Ltd., : AIR1985Mad213 ; National Projects Construction Corporation Ltd. v. G. Ranjan, : AIR1985Cal23 ; Road Machines (India) P. Ltd. v. Projects and Equipment Corporation of India Ltd., : AIR1983Cal91 , Harparshad and Co. Ltd. v. Sudarshan steel Rolling Mills, : AIR1983Delhi128 ; Pesticides India Props. Mewar Oil and General Mills Ltd. v. State Chemicals and Pharmaceuticals Corporation of India Ltd., AIR 1982 Delhi 78. On the other hand, learned counsel, Shri Mehta, appearing for the petitioner, attempted to distinguish the said decisions cited by learned counsel, Shri Sundaraswamy, and relied on State Bank of India v. Economic Trading Co. S.A.A., : AIR1975Cal145 , Harparshad and Co. Ltd. v. Sudarshan Steel Mills, : AIR1980Delhi174 .
16. To appreciate the said rulings referred to by both the advocates, it is necessary to find out the meaning of the words:
(i) letter of credit;
(ii) contract of guarantee ; and
(iii) contract of indemnity.
17. The learned author H.P. Sheldon, in his Practice and Law of Banking, 8th edition (revised), has stated:
'Letter of credit. - There are various kinds of these instruments. One kind is a letter addressed by one banker to another requesting the banker to whom the letter is addressed to hold at the disposal of a named third party a specified amount of money, and to charge the issuing banker with the total amount of all cheques honoured or payments made on the authority of the letter.
Another kind of letter of credit authorises the person named in the letter to draw bills on the issuing banker at the tenor and up to the amount stated in the letter, the issuing banker on his part promising to accept all bills drawn in accordance with his instructions. This kind of letter of credit is usually issued for a specified period, generally not longer than six months. If the letter undertakes the acceptance of bills without conditions, it is termed an `open' or `clean' letter of credit. If the promise to accept is a conditional one, viz, that the documents of title to the goods in respect of which the bills are drawn shall be sent to the issuing bank together with the bills for acceptance, the letter is called a documentary letter of credit.
Both these kinds of letters of credit contain a stipulation that the amount of all cheques or bills drawn under them shall be indorsed upon them, so that the letters always show how much of the credit remains available.
Letters of credit may be either confirmed or unconfirmed, irrevocable or revocable, or they may authorise the negotiation of bills with or without recourse to the drawers. A confirmed credit embodies a banker's written confirmation. If such a credit be advised to the beneficiary through another banker, such advice does not carry the confirmation or guarantee of the advising banker unless it is so stated. The term of confirmed or irrevocable credits cannot be altered without the consent of all the parties thereto. An unconfirmed credit is one which does not carry a banker's confirmation. From the beneficiary's point of view, the best form is a banker's confirmed irrevocable credit.
Letters of credit are not negotiable, and also not transferable. If the person named in the letter loses it, or has it stolen from him, and the finder or thief or any other person gets possession of the letter and presents it to the banker to whom it is addressed, that banker will have to bear any loss should he negotiate any draft bearing the forget signature of the person named in the letter, as such a payment would be no payment as between the paying banker and the person rightfully entitled to sign the drafts. A letter of credit states the limit of the credit and the time during which it is held at the disposal of the grantee. These conditions and any others imposed by the grantor-banker must be rigorously observed. No holder of a bill on which the signature of the grantee is forged can maintain an action against the grantor-banker for refusing to accept such a bill, and the holder cannot maintain an action unless the bill drawn on the authority of the letter complies with the terms expressed in the letter.
The banker, having pledged himself to pay drafts drawn under a credit, takes a letter of guarantee, and if necessary, security, from the person who has requested him to grant the credit. In the case of a documentary credit, the banker has the security of the merchandise shipped. The terms the customer wishes embodied in a credit should be set out clearly in his request and passed on by the banker in the same way. Care is particularly needed where the terms of the credit have to be cabled. In the guarantee, the guarantor undertakes to provide the funds necessary to meet the drafts before their maturity or undertakes to accept and pay them according to whether the bills are drawn on the banker or on the guarantor himself. Of the specimen forms of credit given above, two are addressed direct to the beneficiary and one to another bank.
In order to be able to take advantage of a credit opened in his favour, the beneficiary must see that he complies strictly with the terms of the credit in every respect. The banker opening the credit cannot be expected to make all sorts of external inquiries as to whether the description of the merchandise, as given in the documents presented to him, does in fact conform to the credit, although expressed in a different way. The accepting banker is concerned only with documents which must conform precisely with the terms of the credit, these terms having been settled by the banker's principles. This principle was emphasised in J.H. Rayner and Co. Ltd. and Oilseeds Trading Co. Ltd. v. Hambros Bank Ltd.  2 All ER 694;  1 KB 37(CA) and Bank Melli Iran v. Barclays Bank (Dominion, Colonial and Overseas)  2 TLR 1057;  2 Lloyds Rep 367.
Letters of credit are very useful instruments in facilitating commercial relations between, say, an importer here and a merchant abroad, or financing the shipment of merchandise from one foreign country to another. The importer, for instance, gets his banker to issue a letter of credit undertaking to accept bills up to a certain amount by the merchant abroad. Seeing that the credit of the importer is reinforced by the credit of the bank, the foreign merchant is in no doubt about receiving payment for the goods he exports. Moreover, he himself is able to use the letter in order to get the bills negotiated or discounted, and so obtain payment for his produce, or in getting credit for the purchase of the produce shipped. The letter of credit described above is a `confirmed banker's credit', and when once the letter has been confirmed to the beneficiary, i.e., the person in whose favour the credit has been granted, the credit cannot be revoked except with the beneficiary's consent. Such transactions would be impossible unless it was clear that the grantor-banker must comply with the terms of the letter irrespective of the state of accounts between him and the importer. `The essence of this letter (of credit)', said Earl Cairns, in In re, Agra and Masterman's Bank: Ex parte Asiatic Banking Corporation  2 Ch App 391, 397, `is ...that the person taking bills on the faith of it is to have the absolute benefit of the undertaking in the letter, and to have it in order to obtain the acceptance of the bills which are negotiable instruments payable according to their tenor, and without reference to any collateral or cross claims'.
Another form of credit very frequently used in connection with the financing of shipments of merchandise and produce from countries overseas to this country, and between foreign countries, is one under which the bills are drawn on the importer himself, the banker's services in the matter being requisitioned in order that the foreign exporter may be able to negotiate the bills he has drawn on the importer. The importer signs a document called a 'letter of guarantee' , in which he undertakes to accept and pay all bills drawn under the credit in accordance with the terms and conditions set out therein. The credit is communicated to the beneficiary (or exporter) who can sell his draft to his local banker, and so obtain payment for his produce. These credits are generally `documentary' , and the bills must, therefore, be accompanied by bills of lading, invoices and insurance policies, though, as regards insurance, the matter may be arranged this side on receipt of a cable advice from the shipper that the goods are ready for shipment. The bills drawn by the foreign exporter may be for the full invoice value of the goods, or for an agreed percentage, according to the terms of the contract between the parties. The banker who purchases (or negotiates) the bills sends them forward to a banker on this side, and gets as security the documents representing the produce. The latter is hypothecated or pledged to the banker as security under a `letter of hypothecation', signed by the exporter, in which the banker is given power to sell the goods on default of the drawee to meet the bills. If the importer does not meet the bills in due course, the banker can sell the goods and thus recoup himself, and call upon the parties for any deficiency. It should be noted that in a credit of this nature, the exporter is fully liable as drawer of the bill, and that the transaction, in effect, is an advance made on the joint responsibility of the drawee, with the merchandise as collateral security. The banker who issues the credit reserves to himself the right to cancel a credit of this nature in respect of any unused portion of the credit, on giving notice to the parties concerned.
If the credit is so worded that the amount for which it is available automatically reverts to the original amount, it is termed a `revolving credit', that is to say, it may, e.g., authorise the drawing of drafts up to a limit of Pound 1000 outstanding at any time, in which case, as soon as the drafts have run off, the credit becomes available again, until cancelled, or until the date of expiration.'
18. In Scheldon and Fielder's Practice and Law of Banking, 11th edition, page 542, it is stated:
'An unconfirmed credit is one on which the issuing bank advises the credit as either revocable or irrevocable but the correspondent bank does not add its confirmation thereto.
19. Another form of credit, frequently used in connection with the finance of shipments of merchandise and produce from countries overseas to this country and between foreign countries, is one under which bills are drawn on the importer himself, the bank's services in the matter being requisitioned in order that the foreign exporter may be able to negotiate the bills he has drawn on the buyer. The credit is communicated by the bank to the beneficiary who can sell (i.e., negotiate) his draft to his local banker, sometimes `without recourse', and so obtain payment for his produce. This is known as a negotiation credit.
20. Thus, it becomes crystal clear that letter of credit are mostly used between the seller and the purchaser in order to see that the seller gets his money without much difficulty.
21. Section 124 of the Contract Act defines the contract of indemnity as:
'A contract by which the one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person, is called a `contract of indemnity''.
22. Section 125 of the Contract Act reads:
'The promisee in the contract of indemnity, acting within the scope of the his authority, is entitled to recover from the promisor -
(1) all damages which he may be compelled to pay in any suit in respect of any matter to which the promises to indemnity applies;
(2) all costs which he may be compelled to pay in any such suit if, in bringing or defending it, he did not contravene the orders of the promisor, and acted as it would have been prudent for him to act in the absence of any indemnity, or if the promisor authorised him to bring or defend the suit;
(3) all sums which he may have paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the promisor, and was one which it would have been prudent for the promisee to make the absence of any contract of indemnity, or if the promisor authorised him to compromise the suit.'
23. As to sub-section (1), it is obvious that when a person has altered his position in any way on the faith of a contract of indemnity, and an action is brought against him for the matter against which he was indemnity, it would be very hard indeed if, when he came to claim the indemnity, the person against whom he claimed of a different view being taken. In the case of contracts of indemnity, the liability of the party indemnified to the third person is not only contemplated at the time of the indemnity, but is the very moving cause of that contract and in cases of such a nature, the costs reasonably incurred in resisting or reducing or ascertaining the claim may be recovered.
24. Section 126 of the Contract Act reads:
'A `contract of guarantee' is a contract to perform the promises, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the `surety', the person in respect of whose default the guarantee is given is called the `principle debtor', and the person to whom the guarantee is given is called the `creditor'. A guarantee may be either oral or written.'
25. There can be no correct of guarantee unless there be a principle debtor. The surety's obligation must be substantially dependent on a third person's default. A promise to be primarily and independently liable is not a guarantee, though it may be an indemnity. In a contract of guarantee, there have to be three parties: (1) a principle debtor, whose liability may be actual or prospective, (2) a creditor, and (3) a third party, who in consideration of some act or promise on the part of the creditor promises to discharge the debtor's liability of the debtor should fail to do so. In the case of indemnity, the promisor makes himself primarily liable and undertakes to discharge the liability in any event. Therefore, there is a lot of difference between letters of credit on the one hand and contract of indemnity on the other. There is a also a lot of difference between the letters of credit on the one hand and contract of guarantee on the other. This distinction would be of much assistance in understanding the various views referred to by both the parties.
26. Shri Sundaraswamy, as already stated above, relied on United Commercial Bank v. Bank of India, : 3SCR300 . In the said Supreme Court case, it was only a letter of the credit that was involved, but not a contract of indemnity or guarantee. The argument of learned counsel, Shri Sundaraswamy, that the said ruling indicated that there was not much of difference between letter of credit and contract of indemnity or contract of guarantee, does not appeal to me in the least. There is no reference to contract of guarantee or contract of indemnity in the said Supreme Court case. Paragraph 27 of the said Supreme Court case reads (at page 200):
'The main point in controversy is: Whether the court should in a transaction between a banker and a banker grant in injunction, at the instance of the beneficiary of an irrevocable letter of credit, restraining the issuing bank from recalling the amount paid under reserve from the negotiating bank, acting on behalf of the beneficiary against a document of guarantee/indemnity at the instance of the beneficiary?'
27. In paragraph 28 of the said Supreme Court case, it is stated (at page 200 and 201):
'The nature of the contractual obligations flowing from a banker's letter of irrevocable credit and, more particularly, the rights of the seller as the accredited party or beneficiary of the credit, against the issuing and drawee bank was dealt with by this court in Tarapore and Co. v. Tractoroexport, Moscow : 2SCR920 . It was held that the opening of confirmed letter of credit constitutes a bargain between the banker and the seller of the goods which imposes on the banker an absolute obligation to pay. It was, however, pointed out, relying on a passage in Chalmer's Bills of Exchange, that it can hardly be overemphasised that `the banker is not bound or entitled to honour the bills of exchange drawn by the seller unless they, and such accompanying documents as may be required thereunder, are in exact compliance with the terms of the credit'. Such documents must be scrutinised with meticulous care. If the seller has complied with the terms of the letter of credit, however, there is an absolute obligation upon the banker to pay, irrespective of any disputes there may be between the buyer and the seller as to whether the goods are up to contract or not.'
28. In paragraph 32B of the said decision, it is stated (at page 203):
'The authorities are uniform to the effect that a letter of credit constitutes the sole contract with the banker, and the bank issuing the letter of credit has no concern with any question that may arise between the seller and the purchaser of the goods for the purchaser price of which the letter of credit was issued. There is also no lack of judicial authority which lay down the necessity of strict compliance both by the seller with the letter of credit and by the banker with his customer's instructions.'
29. It is also stated in the same paragraph (at page 203):
'It is also elementary to say that a bank is not bound or indeed entitled to honour drafts presented to it under a letter of credit unless those drafts with the accompanying documents are in strict accord with the credit as opened.'
30. In paragraph 38 of the same ruling, it is stated (at page 206):
'In the light of these principles, the rule is well-established that a bank issuing or confirming a letter of credit is not concerned with the underlying contract between the buyer and seller. Duties of a bank under a letter of credit are crated by the document itself, but in any case it has the power and is subjected to the limitations which are given or imposed by it, in the absence of the appropriate provisions in the letter of credit.'
31. Paragraph 41 of the said Supreme Court case reads (at page 206):
'A letter of credit sometimes resembles and is analogous to a contract of guarantee. In Elian v. Matsas  2 LI LR 495 (CA) Lord Denning M.R. while refusing to grant an injunction stated:
`a bank guarantee is very much like a letter of credit. The courts will do their utmost of enforce it according to its terms. They will not, in the ordinary course of things, interfere by way of injunction to prevent its due implementation. Thus, they refused in Hamzeh Malas and Sons v. British Imex Industries Ltd.  2 QB 127 (CA). But that is an absolute rule. Circumstances may arise so as to warrant interference by an injunction.
32. Therefore a reference to the said various paragraphs would clearly bring out that there is a marked distinction between letters of credit, contracts of guarantee and contracts of indemnity. The said Supreme Court case involved only a letter of credit. Therefore, the reliance placed by learned Counsel, Shri Sundaraswamy, on the said decision will not help him in the least. Further, even the said Supreme Court decision clearly lays down that it is the terms of the particular document that must be looked into by the courts while interpreting the tenor of that document. As it was a case of irrevocable letter of credit, the temporary injunction granted by the High Court was vacated by the Supreme Court.
33. Shri Sundaraswamy relied on Edward Owen Engineering Ltd. v. Barclays Bank International Ltd.  3 WLR 764;  1 All ER 976 (CA). It is stated on page 981 of All ER:
'A performance bond is a new creature so far as we are concerned. It has many similarities to a letter of credit, with which of course we are very familiar. It has been long established that when a letter of credit is issued and confirmed by a bank, the bank must pay it, if the documents are in order and the terms of the credit are satisfied. Any dispute between buyer and seller must be settled between themselves. The bank must honour the credit. That was clearly stated in Hamzeh Malas and Sons v. British Imex Industries Ltd.  2 QB 127;  1 All ER 262 (CA) Jenkins L.J. giving the judgment of this court, said:
`...it seems to be plain that the opening of a confirmed letter of credit constitutes a bargain between the banker and the vendor of the goods, which imposes on the banker an absolute obligation to pay, irrespective of any dispute which there may be between the parties on the question whether the goods are up to contract or not. An elaborate commercial system has been built up on the footing that bankers' confirmed credits are of that character, and, in my judgment, it would be wrong for this court in the present case to interfere with that established practice.'
34. Further, it has been stated in the said case (at page 981):
'It is well-established that a letter of credit is independent of the primary contract of sale between the buyer and the seller. The issuing bank agrees to pay upon presentation of documents, not goods. This rule is necessary to preserve the efficiency of the letter of credit as an instrument for the financing of trade.'
35. It is further stated in the said case (at page 982):
'That case shows that there is this exception to the strict rule; the bank ought not to pay under the credit if it knows that the documents are forged or that the request for payment is made fraudulently in circumstances when there is no right to payment.'
36. Further, it is stated on page 982:
'Such is the law as to a confirmed letter of credit. How does it stand with regard to a performance bond or a performance guarantee? Seeing that it is a guarantee of performance, that is a guarantee that the supplier will perform his contract obligations, one would expect that it would be enforced in such a case the following:'
37. It is further stated on page 983:
'So, as one takes instance after instance, these performance guarantees are virtually promissory notes payable on demand.'
38. It is also further stated (at page 983):
'All this leads to the conclusion that the performing guarantee stands on a similar footing to a letter of credit.'
39. Therefore, even the said English law relied on by learned counsel, Shri Sundaraswamy, emphasises the footing that the document in question is a letter of credit.
40. Shri Sundaraswamy then relied on Maharashtra State Electricity Board v. Official Liquidator, High Court, Ernakulam : 1SCR561 . The guarantee which came up for interpretation in the said case is stated that in paragraph 3 (at page 251 of 53 Comp Cas):
'The Canara Bank Ltd. hereby agrees unequivocally and unconditionally to pay within 48 (forty-eight) hours, on demand in writing from the Maharashtra State Electricity Board or any officer authorised by it in this behalf, of any amount up to and not exceeding Rs. 50,000 (rupees fifty thousand only), etc., etc.'
41. Therefore, the guarantee that came up for interpretation in the said Supreme Court case contained an agreement to pay unequivocally and unconditionally on demand. Practically, it was a promissory note payable on demand.
42. In paragraph 7 of the said decision, the Supreme Court stated (at page 253):
'Under the bank guarantee in question, the bank has undertaken to pay the Electricity Board any sum up to rupees 50,000 and, in order to realise it, all that the Electricity Board has to do is to make a demand. Within forty-eight hours of such demand, the bank has to pay the amount to the Electricity Board which is not under any obligation to prove any default on the part of the company in liquidation before the amount demanded is paid.'
43. The Supreme Court further stated in paragraph 7 (at page 254):
'In view if the unequivocal language of the letter of guarantee, no reliance can be placed by the company in liquidation on the decision of this court in Punjab National Bank Ltd. v. Shri Vikram Cotton Mills Ltd.  40 Comp Cas 927 (SC), in which the surety's liability was limited to the `ultimate balance' found due from the principle debtor and the said balance had not been ascertained before the institution of the suit.'
44. Therefore, even the said Supreme Court case was decided on the wordings found in the bond of guarantee itself. It does not lay down the principle that in every case of guarantee the bank is bound to pay the money to the party concerned irrespective of the fact as to whether any loss to damage is proved or not. Every document whether it be a contract of guarantee or a contract of indemnity, must be considered by the court with reference to the words found in the document and the tenor thereof. The court should find out from the terms as to whether the bank has given any unconditional or irrevocable promise to pay the person concerned irrespective of the fact as to whether any damage or loss is proved to have been sustained by it.
45. Shri Sundaraswamy relied on ACC Babcock Ltd. v. Straw Products Ltd., AIR 1985 Delhi 237. One of the conditions of the guarantee which came up for interpretation in the said Delhi case is found in paragraph 5 of the said judgment. It reads (at page 239):
'5(2)...We, State Bank of India, do hereby agree to pay without any demur to SPL (Straw Products Ltd., defendant) on first demand an amount not exceeding Rs. 36,10,000 (rupees thirty-six lakhs ten thousand only) for failure to fulfil the performance guarantee as per the contract.'
46. In paragraphs 6, it is stated by the Delhi High Court (at page 239):
'From the perusal of the various clauses of this performance bank guarantee, it is made out prima facie that the plaintiff does not figure any where as far as enforcement of the same by the defendant against the bank is concerned and that the bank has undertaken to pay to the defendant without any demur on first demand by the defendant, and the defendant, has also been the sole judge whether the plaintiff has fulfilled the performance guarantee as provided in the contract and the guarantee further makes the demand made by the defendant conclusive as regards the amount due and payable by the bank under the guarantee.'
47. In paragraph 14, it is stated by the Delhi High Court (at page 242):
'There was a bank guarantee. The Corporation made a demand on the bank to pay the amount covered by the guarantee. When Pesticides took note of this, they immediately brought a petition and sought an injunction against the bank restraining it from making payment to the Corporation. The question posed was as to what was the meaning and effect of the bank guarantee. There was also an arbitration clause in the contract between the parties. It was observed as under:
...Whether the Corporation has committed breach of contract or Pesticides are in default is a question which has to be decided by the arbitrator. But the bank guarantees are independent of this dispute. They are autonomous in character. They are self-contained. The bank has undertaken to pay the amount of the guarantees in the event of default/failure on the part of Pesticides to observe all or any of the conditions regarding the supply of goods 'on the first demand without protest or demur and without reference to' Pesticides. They have further agreed to make the payment 'notwithstanding any contestation' by Pesticides or the 'existence of any dispute whatsoever' between the Corporation and the Pesticides. It means this that the bank has agreed to pay 'unconditionally and irrevocably' the amount of the bank guarantees in the event of default of Pesticides.'
48. In paragraph 16, the Delhi High Court has stated (at page 243):
'In a Calcutta case reported as Texmaco Ltd. v. State Bank of India  83 CWN 807;  1 CLJ 356, the bank under the performance guarantee, undertook irrevocably and unconditionally, the obligation without any contestation, demur, or protest and/or without any reference to the manufacturer, and/or without questioning the legal relationship subsisting between the exporter and the manufacturer, to pay the sum of money under the guarantee, on first demand being made by the exporter.'
49. Thus the argument of learned Counsel, Shri Sundaraswamy, by relying on the said decision that in a case of the present type on hand, the bank is bound to pay notwithstanding the fact that an arbitration is pending between the parties or that a dispute has started between the parties and No the with standing the fact that the amount of loss has not been as yet calculated or determined, cannot be accepted because every contract entered into will have to interpreted with reference to the specific terms or the words used in the bond itself. If the bond, whatever be its nature, shows that the bank has undertaken to pay without any demur or contestation on demand, it would be an irrevocable or unconditional contract and the bank, if the contract is unconditional or irrevocable, is bound to pay the amount to the person concerned notwithstanding the fact that arbitration proceedings or disputes between the parties are pending.
50. Shri Sundaraswamy, as already stated above, also relied on Vinay Engineering v. Neyveli Lignite Corporation Ltd., : AIR1985Mad213 . Condition No. 3 in the said bond which came up for interpretation in the said Madras case is to be found on page 220. It reads (at page 180):
'3. For this advance payment, we, the undersigned, Bank of Baroda, hereby guarantee to the effect that we irrevocably undertake to pay to the purchaser upon the purchaser's first demand and without demur the amount paid by the purchaser in advance or part thereof, etc.'
51. Condition No. 5 also reads (at page 180):
'5. This guarantee shall be valid till March 11, 1984, and the purchaser has the right to encash the bank guarantee up to 60 days from the said date. Unless a claim has been lodged or action taken against us under this guarantee before the said date, we, the Bank of Baroda, shall be deemed to have discharged our liability, and no action shall lie against us thereafter.'
52. In paragraph 10 of the said Madras case, it is stated (at page 180):
'The plain reading of clause 3 unmistakably points out that the bank guarantees are irrevocable, and that on the first respondent's demand and on the first respondent advising the second respondent that the appellant had failed to fulfil its delivery obligations in respect of bank guarantees 11/13 and 11/94 and failed to fulfil its obligations of erection and commissioning as regards bank guarantee 11/121, the bank is bound to make the payments forthwith.'
53. Therefore, it was also a case of an irrevocable and unconditional contract.
54. Shri Sundaraswamy then relied on National Project Construction Corporation Ltd. v. G. Ranjan : AIR1985Cal23 . The bond that came up for interpretation in the said case also made it clear that the bank had undertaken unconditionally and irrevocably to pay the Corporation on demand and without demur. The said Calcutta case would also show that the words or the terms in every bond must be scrutinised, analysed and interpreted and it is on an analysis and interpretation of the terms entered into between the parties that the particular covenant will have to be enforced. The said Calcutta case does not support the view of learned counsel, Shri Sundaraswamy, that in every case of guarantee given, the bank is bound to pay the money to the person concerned notwithstanding any dispute or litigation subsisting between them. The Calcutta case also makes it clear that if the terms mentioned in the contract do not amount to an unconditional or irrevocable contract and it has no right to insist in the bank making the payment as mentioned in the guarantee.
55. Shri Sundaraswamy then relied on Harparshad and Co. Ltd. v. Sudarshan Steel Rolling Mills : AIR1983Delhi128 . What has been stated in the said case is (headnote of AIR):
'Merely because suits between the parties are pending would not, ipso facto, entitle the plaintiff to the grant of an injunction. Further, a bank guarantee is a contract between the issuing bank and the person in whose favour the guarantee has been furnished. Though the bank guarantee may have been issued by the banker at the instance of its client, as far as the bank guarantee is concerned, it is a bilateral contract between the banker and the party in whose favour the guarantee has been furnished. The party at whose instance the guarantee has been furnished is, in a way, a stranger to the said contract of a bank guarantee. The person in whose favour the bank guarantee has been issued has a right to ask the bank to fulfil its obligation in terms of the bank guarantee. If the terms of the bank guarantee entitle a party to ask for the payment of money from the bank, then that right cannot be interfered with merely for the reason that there exists a dispute between the party and the client at whose instance the bank guarantee had been issued.
56. Ultimately, even as per the said Delhi decision, the court should consider the terms of the guarantee that are sought to be enforced against the bank itself. Even in Pesticides India, Props. Mewar Oil and General Mills Ltd. v. State Chemicals and Pharmaceuticals Corporation of India Ltd., AIR 1982 Delhi 78, it is stated that the guarantee was conditional and irrevocable.
57. In State Bank of India v. Economic Trading Co., S.A.A., : AIR1975Cal145 , it is stated (headnote):
'A bank guarantee has a dual aspect. It is not merely a contract between the bank and the beneficiary of the guarantee; it is also a security given to the beneficiary by a third party. In seeking to enforce the guarantee, the beneficiary in effect seeks to realise the security furnished by the third party and the third party has, therefore, locus standi to challenge the enforcement of guarantee. In the case of a letter of credit, however, courts are slow to interfere with its operation not merely on the ground of their importance in international trade but also on the ground that the beneficiary is assured of the payment by the bank once he has complied with the terms and conditions of the letter of credit irrespective of his non- compliance with the contract into which he had entered with the third party or in other words on the ground of autonomy of the letter of credit.'
58. It has been stated in paragraph 3 on page 148 by the Calcutta High Court:
'It was, next, submitted that the State Bank of India had given an undertaking to the Bank of Alexandria to pay without contestation or without protest. It was, then, submitted that there was an indemnity given by the State Bank of India to the Bank of Alexandria. Therefore, as a result of this indemnity, the Bank of Alexandria was entitled to enforce the obligation of payment and in the premises such an order should not be passed which would hamper the international reputation and credit of the State Bank of India. Lastly, it was urged that there was an obligation or undertaking by the guarantee of instruction of the plaintiff to indemnity and make payment to the State Bank of India by the plaintiff by a letter dated 29th August, 1967. Therefore, the impugned order was illegal and not in accordance with the law. In support of the contention, reliance mainly was placed on a decision of the Supreme Court in the case of Tarapore and Co. v. Tractoroexport, Moscow, : 2SCR920 . There, what had happened was that in pursuance of a contract with a Russian firm for supply for machinery, an Indian firm opened a confirmed, irrevocable and divisible letter of credit with a bank in favour of the Russian firm. In a suit by the Indian firm alleging that the machinery supplied was not up to the contract, the Supreme Court held that in that suit the court would not be justified in granting temporary injunction restraining the bank as well as the Russian firm from taking any further steps in pursuance of the letter of credit. The Supreme Court allowing the appeal expressed the view that an irrevocable letter of credit had a definite implication. It was a mechanism was bound to have serious repercussions on the international trade. Except under very exceptional circumstances. the courts should not interfere with that mechanism. The Supreme Court further observed that the opening of the confirmed letter of credit constituted a bargain between the banker and the vendor of the goods which imposed upon the banker an absolute obligation to pay irrespective of any dispute there might be between the parties as to whether the goods were up to contract or not. A vendor of goods selling against a confirmed letter of credit was selling under the assurance that nothing would prevent him from receiving the price. If the buyer had an enforceable claim that adjustment must be made by way of the refund by the seller and not by way or retention by the buyer. The letter of credit was independent of and unqualified by the contract of sale or underlying transaction. The autonomy of an irrevocable letter of credit was entitled to protection. In these circumstances, the Supreme Court iterfered with the injunction granted by the trial court. It has to be mentioned that in that case there was an irrevocable letter of credit the operation of which was being restrained by way of injunction. In the instant case, the obligation between the plaintiff and the State Bank of India does not arise under any irrevocable letter of credit. The importance of irrevocable letters of credit being a mechanism of international trade was emphasised by the Supreme Court because of the special relationship between the banker and the customer. That principle will not apply to contract or a letter or guarantee given by a banker to a bank. That distinction has been clearly brought out in the Bench decision of this court in the case of Minerals and Metals Trading Corporation of India Ltd. v. Surajbalaram Sethi  74 CWN 991. The Division Bench observed that a bank guarantee had a dual aspect. It was not merely a contract between the bank and the beneficiary of the guarantees. It was also a security given to the beneficiary of a third party. In seeking to enforce the bank guarantee, the beneficiary of the guarantee, in effect, sought to realise the security furnished by the third party and the third party had, therefore, a locus standi to challenge the enforcement of the guarantee.'
59. The said Calcutta case brings out a clear distinction between the letter of credit and a contract of guarantee. The said Calcutta decision is a clear authority for the proposition that it is mistake to equate a letter of credit with a contract of guarantee or a contract of indemnity.
60. In Harparshad and Co. Ltd. v. Sudarshan Steel Mills : AIR1980Delhi174 , the point has been further clearly explained. The said Delhi decision clearly lays down the principle that every document or contract must be interpreted with due reference to its terms. In paragraph 6, it is stated (at page 714):
'That the liability under a bank guarantee is absolute and cannot be evaded by raising dispute is illustrated by several decisions. But a perusal of each of these decisions would show that the absolute nature of the liability depended on the language of the guarantee in that particular case.'
61. Paragraph 10 in the said Harparshad's case  50 Comp Cas 709 (Delhi) speaks about the conditions contained in the bond which came up for interpretation. It reads (at page 715):
'The crucial conditions creating liability of the bank in the bank guarantee before us may be analysed from the bank guarantee as below:
(1) In case Sudershan Steel Rolling Mills fails;
(2) In the judgment of Harparshad and Co. Ltd. ;
(3) To carry out and fulfil any of the obligations assumed under the said contract;
(4) We undertake to pay merely upon receipt of first written notice, any amount covered by the bank guarantee that may be claimed by Harparshad and Co. Ltd. for any reason or purpose, at their own discretion without it being necessary to issue declaration to take action through administration, legal or any other channels or to prove the default of Sudershan Steel Rolling Mills and/or the veracity or the affirmation made by them.'
62. In Paragraph 11 , the Delhi High Court has stated ( at page 716) :
'If that had been the intention of the parties, the bank guarantee would not have said that the liability would arise on failure of respondent No. 1 in the judgment of the appellant to fulfil the terms of the contract. There is a distinction between the absolute liability, as contended by the appellant, and the absolute liability which arises after the terms of the bank guarantee are fulfilled. The intention of the parties according to the language of the bank guarantee was that the absolute liability should arise only after the terms of the bank guarantee are fulfilled. It was necessary for the appellant to show that it had become entitled to recover the amount under the bank guarantee because in its judgment, respondent No. 1 had failed to perform any of the obligations under the contract. The appellant made no attempt to show that it has complied with the conditions of the bank guarantee.'
63. In paragraph 12, it is clearly stated as (at page 717) :
' The bank has itself a duty to satisfy itself that the demand by the beneficiary under the bank guarantee is made in accordance with the terms of the bank guarantee.'
64. In paragraph 14, it is stated as (at page 718) :
'Until the terms of the bank guarantee are fulfilled, the amount is not placed into the pockets of the beneficiary. It still remains with the bank. It is no use for the beneficiary to say that the amount under the bank guarantee is payable to the beneficiary on demand if the demand must be preceded by a proper statement in the demand notice.'
65. Thus, a perusal of the rulings referred to by both the parties makes it clear that the court must interpret every document of contract with reference to the terms, phrases and words used in it. The courts should not hasten to interpret a particular document only with reference to the wordings used in some of the rulings referred to above. In each one of the said cases. peculiarities of the terms in the bonds come up for interpretation. The sum and substance of the principles laid down in all the said cases is that if the contract entered into is an irrevocable or unconditional agreement and it the payment is required to be made without any demur or demand, the court should be slow in restraining the party from encashing the bank guarantee. But, on the other hand, if the bond which comes up for interpretation before the court, does not contain anything to indicate that the payment should be made on demand, the court should insist on compliance with the requirements laid down by the bond.
66. The material terms of guarantee No. 1 dated October 26, 1978, involved in this case read as:
'We undertake to indemnity you and keep you indemnified from time to time to the extent of Rs. 2,77,844 (rupees two lakhs seventy-seven thousand eight hundred forty-four only) against any loss or damage caused to or suffered by or that may be caused or suffered by you by reason of any breach or breaches on the part of the contractor or any of the terms and conditions contained in the said contract and in the event the contractor shall make any default or defaults in carrying out any of the works under the said contract or otherwise in the observance and performance of any of the terms and conditions relating thereto in accordance with the true intent and meaning thereof, we shall forthwith, on demand, pay to you such sum or sums not exceeding in total the said sum of Rs. 2,77,844 (rupees two lakhs seventy-seven thousand eight hundred forty-four only) as may be claimed by you as your losses and/or damages, costs, charges or expenses by reason of such defaults on the part of the contractor.'
67. Therefore, this condition only undertakes to indemnity the revision petitioner, Kudremukh Iron Ore Co. Ltd., from time to time if any loss or damage is caused to it or is suffered by it by the act of respondent No. 1. Therefore, the question of indemnifying the Kudremukh Iron Ore Co. Ltd., as contained in clause 1, would depend upon the loss or damage caused to it or suffered by it by the conduct of respondent No. 1. It further clearly lays down that the revision petitioner would be entitled to be indemnified by reason of any breach or breaches on the part of the contractor of any one of the terms and conditions contained in the said contract. Therefore, it clearly goes to show that the revision petitioner would be entitled to the amount only on proof of the breach or breaches on the part of the contractor of any of the terms and conditions contained in the said contract. It further makes it clear that it has undertaken to indemnify the revision petitioner in a sum not exceeding Rs. 2,77,844. This, in my opinion, merely goes to show that the maximum liability which the bank has undertaken is Rs. 2,77,844. It does not mean that even in the case of the small breach of a condition, the revision petitioner would be entitled to get Rs. 2,77,844 simply on the ground that it makes a demand. This clause makes it clear that there should be a relationship between the actual damage caused to it and the demand made. It does not contain any irrevocable or unconditional undertaking to pay the said the amount of Rs. 2,77,844. Therefore, the use of the word 'sum or sums' also indicates that the revision petitioner must show the quantum of the damage or the loss caused to it and that amount should not exceed Rs. 2,77,844. Therefore, the said condition, in my opinion, does not amount to an irrevocable or unconditional promise to pay on demand.
68. Condition No. 2 reads:
'No the with standing anything to the contrary, your decision as to whether the contractor has made any such default or defaults and the amount or amounts to which you are entitled by reason thereof will be binding on us and we shall not be entitled to ask you to establish your claims under this guarantee but will pay the same on demand without any objection.'
69. If this is read along with the other terms found in the bond, it only follows that the decisions of the revision petitioner as to whether the contractor has made any such default or defaults and the amount or amounts to which the revision petitioner is entitled by reason thereof will be binding on the bank. If this is read along with the tenor of the document and other conditions, it only follows that the decision of the revision petitioner that the contractor has committed a default would be binding on the bank. However, this condition does not mean that the bank has undertaken to pay the entire amount of Rs. 2,77,844 on demand.
70. Proviso to condition No. 3 reads:
'Provided always that this guarantee shall in no event remain in force after the day of 30th September, 1980, without prejudice to your claim or claims arisen and demanded from or otherwise notified to us in writing on or before the said date which will be enforceable against us etc., etc.'
71. Therefore, this goes to show that the demand must be made before the expiry of the period mentioned in the bond or before the expiry of the extended period. Here, the period mentioned is September 30, 1980. The period extended is June 30, 1981. That alleged demand alleged to be made by the revision petitioner in September, 1980, reads as:
'We hereby prefer our claim against you for the amount covered under the guarantee. However, we have separately requested your clients to arrange the extension of the validity of the above bank guarantee and you may treat this claim as withdrawn on the extension of the validity of the bank guarantee up to December 31, 1980.'
72. It does not make any specific claim or demand as such. Simply stating that 'we hereby prefer our claim against you for the amount covered under the guarantee', does not amount to a demand contemplated by the said various decisions.
73. The wordings found in the other four guarantees are also to the same effect. The so called demands made are also continued in the same terms. Therefore, I am of the opinion that no specific demand has been made by the revision petitioner calling upon the bank pay. As already indicated above, each one of the five guarantees which are the subject-matter of interpretation in this case does not contain any irrevocable or unconditional promise to pay.
74. Further, all the five guarantees now sought to be enforced, in my opinion, amount to a contract of indemnity. If it is a case of contract of indemnity, the beneficiary must show the loss or the damages caused to it. If it is a case of indemnity, it can be enforced only after the amount is determined. So long as they are not determined, it would not be open to the revision petitioner to enforce it. Even if it is a case of contract of guarantee, the enforcement of the same would depend upon the fact as to whether there is a breach of promise to perform the contract or to perform the duty. Unless that is established, the guarantee cannot be enforced because each one of the guarantees as referred to above does not contain any unconditional or irrevocable promise to pay. None of them, in my opinion, involves a promise to pay on demand notwithstanding the dispute between the parties or notwithstanding the subsistence of arbitration proceedings between the parties.
75. Condition No. 11 reads as:
'`notwithstanding' anything obtained herein, the liability of the guarantor under this guarantee is restricted to Rs. 2,77,844 (rupees two lakhs seventy-seven thousand eight hundred forty-four only) and that this guarantee shall remain in force till its expiry on 30th September, 1980. Unless a suit or action to enforce a claim under this guarantee is filed against the guarantor within six months from the above said date of expiry, i.e., on or before 31st March, 1981, all the rights of the beneficiary under the said guarantee shall be forfeited and the guarantor shall be released and discharged from all liabilities thereafter.'
76. As already shown above, no demand claiming specific amount or alleging specific breach has been made before the expiry of even the extended date. Admittedly, no suit or action or claim has been made to enforce the claim under this guarantee within six months from the above-said date of expiry. There is no compliance with clause 11 also of the bond. Therefore, even viewed from this angle, the revision petitioner cannot lay claim at this stage to the amounts mentioned in each of these five bonds.
77. Learned counsel, Shri Sundaraswamy, relied on Road Machines (India) P. Ltd. v. Projects Equipment Corporation of India Ltd., : AIR1983Cal91 and D.T.H. Construction (P.) Ltd. v. Steel Authority of India Ltd., : AIR1986Cal31 , in support of his contention that the notice of demand need not be strictly in accordance with any of the bank guarantees and it would not be an excuse for the bank for non-payment. Any vague demand would not come within the meaning of these two decisions. There should be a specific demand showing the breach and showing the approximate loss or damage caused to it by conduct of the contractor. The language used in both these decisions will not give any unrestricted right to the revision petitioner to contend that it has made a demand and that, therefore, the bank must comply with the request. Therefore, the said two rulings also will not help the revision petitioner in this case.
78. Therefore, the temporary injunction granted by the court below needs to be confirmed though obviously not for the reasons mentioned by it but for the stated above by me.
79. I. A. No. 2 has been filed by the revision petitioner calling upon the bank to deposit money in court. The law provides for the institution of a suit or an action in a court of law. If the revision petitioner feels that he is entitled to that amount, he is at liberty to initiate an action. So long as it does not do it, I think, this court has no jurisdiction to call upon the bank to deposit the money in court. Therefore, I.A. No. 2 also merits to be dismissed.
80. Respondent No. 2 bank has filed a memo in this case. It reads as:
'The undersigned has instructions to report that:-
1. Bank guarantees are not renewed.
2. Korula Rubber Co. has requested the bank whether the bank is willing for renewal pending a reference for composite arbitration of the dispute.
3. The bank is willing to renew the guarantees subject to the following:
(a) Extension will be up to the date of making and publishing of award and for a period of 60 days thereafter.
(b) Extension will be in respect of liabilities, if any, as on date on which the guarantees were invoked.
This memo is filed in answer to the application made by the petitioner for an order directing the second respondent bank to deposit the value of the bank guarantees into court. A copy of the telex message received from the second respondent bank at Bombay is enclosed herewith.'
81. The memo filed by the bank is recorded. In view of this memo, it is for the revision petitioner to express its view clearly as to whether it is going to wait till the making and publishing of the award as mentioned in the memo. If the revision petitioner gives an undertaking to wait till the making and publishing of the award and or a period of 60 days, thereafter, it should intimate the same to the bank and the bank in view of this memo should comply with the undertaking given by it in the memo.
In the result, the revision is dismissed.
82. No costs in this revision.