1. Petitioner is the plaintiff in O.S. No. 163 of 1982, on file of the Sub-Court, Gobichettipalayam. It filed the suit against respondents herein, for grant of a permanent injunction restraining them from recovering the sum of Rs. 85,639.89 from the State Bank of India, Gobichettipalayam Branch, till they establish their claim against the plaintiff in a court of law. Pending disposal of the suit in I.A. No. 737 of 1982, it sought for grant of a temporary injunction under Order 39, rule I and section 151, CPC, restraining respondents from realising the said amount by enforcing the bank guarantee till the disposal of the suit. Courts below having rejected the relief, this civil revision petition is preferred.
2. The plaintiff claimed as follows : The first defendant manufactures nitrogenous and other chemical fertilisers. The plaintiff was appointed as a dealer under exhibit B-25 dated September 25, 1980, for the sale and distribution of its products in certain territories of Tamil Nadu. As and when the plaintiff informs the second defendant specifying the requirements, allocation would be made by issue of delivery notes to the concerned ware-house, and, thereafter, the plaintiff will receive the supply. The second defendant issues invoices whereupon the plaintiff makes payments. In order too assure prompt payment of invoice, the plaintiff was directed to furnish bank guarantee, and it had furnished two bank guarantees totalling Rs. 1 lakh, under exhibits B-13 and B-14 dated October 17, 1979, for Rs. 50,000 each, issued by the State Bank of India, Gobichettipalayam. Thought the plaintiff was prompt in payment of invoices, it understands that some of the officials of the second defendant supplied products to retailers and other parties closely known to them, and to avoid detention, for record purposes they bring those transactions under any one of the recognised dealers in clanderstice manner, and so long as payments are received within time from such clandestine purchasers, there was was not trouble. But when it fails, the officials in order to exculpate themselves demand payments from authorised dealers, and that was how a demand for Rs. 1,29,183.69 was made on the plaintiff by letter dated July 17, 1982 (exhibit A-4). The defendants having threatened to invoke the bank guarantee in default of payment of he amount so claimed, it sent a reply on August 3, 1982 (exhibit A-5), requesting for details to be furnished. But the second defendant had not chosen to give any reply so far. Out of the claim made, the plaintiff admits liability only for Rs. 43,543.50 and has already paid a sum of Rs. 20,735 on July 29, 1982, and is prepared to pay the balance at any time. It disputes liability only for Rs. 85,639.89. In paragraph 7 of the plaint, it refers to certain communications to show how the demand made by the second defendant was fraudulent. when the product was not actually supplied, the bank, as the surety, is also not liable to pay the amount as per the terms in exhibits B-13 and B-14. Bank guarantees have been invoked only to save the skin of the officers of the defendants who have committed fraud, and, hence, the suit had been filed.
3. The second defendant in the written had repudiated this claim stating that, when an irrevocable bank guarantee had been furnished, a demand having been made by letter dated October 1, 1982, for payment of the sum of Rs. 1,29,183.69, the plaintiff had unjustly intercepted it by filing the suit. The bank had violated the terms of the bank guarantees. It is due to inability to pay debts, in spite of taking delivery of goods, that the suit had been filed on false grounds. After referring to procedure adopted in selling the goods, the allegations made in paragraphs 6 to 9 of the plaint have been denied. In the light of the decision in United Commercial Bank v. Bank of India, : 3SCR300 , the bank has no other option than to honour the bank guarantee.
4. The trial court held that documents produced by the defendants show that there could not have been clandestine sale of products to third parties, and, hence, the plaintiff has not made out prima facie case of fraud. Relying upon Tarapore and Co. v. V/O Tractoroexport, Moscow : 2SCR920 , it held that it is only under extraordinary circumstances, courts would injunct the bank guarantee from being invoked. The appellate court also concurred with these findings.
5. Mr. S. Gopalaratnam, learned counsel for the petitioner, submits that it is not his endeavour to claim that a court can in a light-hearted manner grant interim injuctions, preventing a bank guarantee or a letter of credit being honoured on time. He has taken considerable pains to analyse the decisions hereunder referred to, to show that the correct view to be taken is to proceed on the basis that a bank guarantee or a letter of credit and the like, must be allowed to be an effective instrument so as to secure payment, irrespective of whatever be the disputes raised between the seller and the buyer, and that only in extraordinary circumstances, an injunction could issue. With fraudulent intention if a party to the contracted invokes a bank guarantee, no court could allow an illegality being committed, merely because the relief claimed is in respect of a bank guarantee or a letter of credit. He respectfully submits that, in spite of specific instances adverted to by the plaintiff to show that fraud had been committed, this essential factor had been evasively dealt with by courts below, and that by continuing to keep the bank guarantees alive, during the pendency of he proceedings, defendants would not, in any manner be prejudiced.
6. As to what should be the approach to be made by courts when bank guarantees are invoked, after referring to Sections 126, 128, 133, 140 and 145 of the Indian Contract Act, 1872, dealing with indemnity and guarantee, he refers to United Commercial Bank v. Bank of India, : 3SCR300 , wherein it was held that it is a well-established rule that a bank issuing or confirming a letter of credit, is not concerned with underlying contract between the buyer and the seller. After referring to the decision in R. D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd.  3 WLR 752 (QB), it is stated there in as follows (p. 207 of 52 Comp Cas) :
'We would like to adopt a passage from his judgment at p. 761 : It is only in exceptional cases that the courts will interfere with the machinery of irrevocable obligations assumed by banks.'
7. Dealing with scope of Order 39, rules 1 and 2, it was held that, unless plaintiff establishes that there was bona fide contention between the parties, or a serious question to be tried, and balance of convenience is taken into account, an interim injunction would be wholly unwarranted. In paragraph 41 it is stated (p. 206 of 52 Comp Cas) :
'A letter of credit sometimes resembles and is analogous to contract of guarantee ... to warrant interference by an injunction.'
Counsel for the defendants also relies upon the same decision to plead that courts cannot intercept bank guarantees being invoked, and that inter se disputes between contracting parties cannot be taken into account by the bank.
8. The contention of Mr. S. Gopalaratnam, learned counsel, is that, the decisions of the Supreme Court in Tarapore and Co. v. V/O Tractoroexport, Moscow : 2SCR920 , and United Commercial Bank v. Bank of India, : 3SCR300 , are to the effect that usually courts should refrain from granting injunction to restrain performance of the contractual obligations arising out of a letter of credit or bank guarantee. But there is no absolute bar against courts granting interim injunction under Order 39, rules 1 and 2, and section 151, CPC, if circumstances warrant. He would point out that, in none of the decisions, it had ever been held that courts are powerless to injunct the invocation of letter of credit or bank guarantee. He submits that the courts below misconstrued that this matter does not fall within the exception contemplated in the said decisions. Before proceeding further, he points out that the observation in Ellian v. Matsas  LJ LR 495 to the effect that a letter of credit sometimes resembles and is analogous to a contract of guarantee, overlooks the fact that a letter of credit could not come within the definition of section 126 of the Contract Act, and, hence, in so far as India is concerned, the bank guarantee like the one issued in the present matter cannot be equated to a letter of credit. He points out that, even in the said decision, no analysis had been made anywhere as to how a bank guarantee could be equated to that of a letter of credit, and that is only a passing reference made in the course of the judgment. He pleads that the emphasis laid in Tarapore and Co. v. V/O Tractoroexport, Moscow : 2SCR920 , cannot be imported to the same extent when bank guarantees are involved. At this juncture, he refers to Sreenivasa General Traders v. State of A.P. : 3SCR843 , wherein it was held (page 1261 of AIR 1983 SC) : 'A case is an authority only for what it actually decides and not for what may logically follow from it. Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generallity of the expressions which may be found there are not intended to be expositions of the whole law but governed or qualified by the particular facts of the case in which such expressions are to be found. Observations in the judgment which were really not necessary for the purposes of the decision and go beyond the occasion have no binding authority and merely have persuasive value.' Hence, it is rightly contended that by referring to the decision of Lord Denning in United Commercial Bank v. Bank of India, : 3SCR300 , it would not mean that a bank guarantee and a letter of credit are equitable. In view of what has been stated in Sreenivasa General Traders v. State of A.P. : 3SCR843 , no difficulty exists in understanding the correct legal principles to be followed when bank guarantees are involved. Thought in Tarapore and Co. v. V/O Tractoroexport, Moscow : 2SCR920 , it was in respect of a letter of credit, in United Commercial Bank v. Bank of India, : 3SCR300 , as to how a bank guarantee should be dealt with, it was having been well laid down, what further requires to be considered is, whether plaintiff's case would be an 'exceptional case' warranting interference by court. That there can be exceptional cases was recognised in R. D. Harbottle (Mercantile) Ltd. v. National Westmister Bank Ltd.  3 WLR 752, and this view having found approval by the Supreme Court, it is not as if, in no case a bank guarantee could be intercepted form being honoured. Even in Ellian v. Matsas  2 L1 LR 495 (CA), it is stated that, 'Circumstances may arise such as to warrant interference by injunction', and it was case wherein the court granted injunction treating it as a special case, because the ship owners, in breach of the undertaking, imposed a further fee, and, hence, they had disabled themselves from acting on the guarantee.
9. To show that extraordinary or exceptional or special cases would arise, wherein courts would be inclined to injunct the invocation of bank guarantees, United City Merchants (Investments) Ltd. v. Royal Bank of Canada  2 All ER 72;  2 WLR 1039 is relied upon, wherein it was held that the system of confirmed irrevocable documentary credits had been developed in international trade to give the seller an assured right to be paid before he parted with control of the goods and that does not permit of any dispute with the buyer as to the performance of the contract of sale to be used as a ground for non-payment or reduction or deferment of payment, but to this general statement of principle as to the contractual obligations of the confirming bank to the seller, there in one established exception : that is, where the seller, for the purpose of drawing on the credit, fraudulently presents to the confirming bank documents that contain, expressly or by implication, material representations of facts which to his knowledge are untrue. The exception for fraud, on the part of the beneficiary seeking to avail himself of the credit, is a clear application of the maxim 'ex turpi causa non oritur actio' or, if plain English is to be preferred, 'fraud unravels all'. The courts will not allow their process to be used by dishonest person to carry out a fraud. In R. D. Harbottle (Mercantile) Ltd. v. National Westminster Bank Ltd.  2 All ER 862 :  3 WLR 752 :  QB 146 also, it was held that only in exceptional cases, would the courts interfere with the machinery of irrevocable obligations assumed by banks, and that courts have a discretion to grant interlocutory injunction, whenever it is just or convenient to do so. In Maharashtra State Electricity Board v. Official Liquidator, H.C., : 1SCR561 , it was held that a bank issuing a guarantee cannot raise the plea that it is liable only to the extent of any loss that may have been sustained by the party on whose behalf it has issued bank guarantee and not for the whole amount, and that the liability absolute and unconditional. B. S. Aujla Co. P. Ltd. v. Kaluram Mahadeo Prosad, : AIR1983Cal106 , is to the effect that in the absence of a clear case of fraud to the knowledge of the bank, it is a well-settled principle of balance of convenience that a court should not grant injunction restraining payment in terms of the letter of credit. An injunction would issue under Order 39, rules 1 and 2, only if the plaintiff establishes that he has a prima facie case, meaning thereby that there was a bona fide contention between the parties or a serious question to be tried. On behalf of defendants, apart from relying upon Tarapore and Co. v. V/O Tractoroexport, Moscow : 2SCR920 and United Commercial Bank v. Bank of India, : 3SCR300 , reference is also made to United City Merchants (Investments) v. Royal Bank of Canada  2 WLR 1039 :  2 All ER 720 and Vinay Engineering v. Neyveli Lignite Corporation  96 LW (SN) 61.
10. These decisions make it quite clear that there is no absolute rule prohibiting grant of interim injunction relating to bank guarantees and in exceptional cases courts will interfere with the machinery of irrevocable obligations assumed by banks, and that the plaintiff must establish a prima facie case meaning thereby that there is a 'bona fide' contention between the parties or a serious question to be tried, and further, the balance of convenience is also a relevant factor. If an element of fraud exists, then courts would step in to prevent one of the parties to the contract from deriving unjust enrichment by invoking the bank guarantee.
11. Hence, the primordial aspect to be considered is,whether there is a bona fide contention between the parties or a serious question to be tried, so as to make out a prima facie case. The only contention of the plaintiff herein is that defendants have practised fraud upon it and hence they cannot invoke the bank guarantees. In paragraphs 6 and 7 of the plaint, the specific instances relating to the alleged fraud are pleaded. In the written statement, except for a vague denial, not even a single instance had been explained away by reference to any of the documents. When a party to a proceeding pleads fraud by referring to certain transactions and furnishes particulars to sustain the said contention and if the opposing party rests content by general denials, the only course open to the court, at this stage of the matter, is to act upon the claims of the plaintiff, provided they are plausible and seemingly worthy of belief. Even in the counter- affidavit filed to the I.A., except for stating the usual nature of transaction adopted between the parties and the decision in United Commercial Bank v. Bank of India, : 3SCR300 , no particulars are furnished to show as to how far the plea of fraud, as raised, is unsustainable. As for the trial court,in paragraph 6, it has simply catalogued in seriatim all the documents filed by the contesting parties. In paragraph 7, it takes up the only point relating to forgery pleaded regarding Ex. B-28. It compares the signature found therein with that in Exs. B-26 and B-27, and states that on a superficial comparison, it is unable to make out forgery. No other factual claims made by the petitioner had been dealt with. Plaintiff filed I.A. No. 46 of 1983 for sending Ex. B-28 for the opinion of a handwriting expert. But it was rejected on February 19, 1983, holding that 'No finding need be given for the present to dispose of the I.A. No. 737 of 1982', and hence the petition was closed with liberty to file a separate petition for the same prayer at the time of trial, if necessary. Having stated that no finding need be given for the present on the aspect of forgery, it had proceeded to dispose of the matter, only on the ground that the plaintiff had failed to establish forgery. It has unjustly prevented the plaintiff from establishing an important factual claim, by refusing to send Ex. B-28 to a handwriting expert to give his opinion as to its genuineness. When a plea of fraud is made, by claiming that a particular document had been forged, the trial court ought not to have stood in the way of relevant evidence being adduced even at that stage of the matter. By preventing the plaintiff from adducing relevant evidence, and in spite of holding that no finding need be given for the present on the aspect of forgery pleaded,it had erroneously proceeded to render the only finding that Ex. B-28 does not appear to be a forgery. It is on this sole ground, it had held that plaintiff had not made out a prima facie case.
12. As for the appellate court, in paragraph 6 alone it deals with the prima facie nature of the case after referring to Exs. B-25, 13, 14 and 10, it holds that,, when the plaintiff had received four delivery orders and four invoices, it must naturally be taken that it had taken delivery of the goods covered by the delivery orders from the warehouse. It further observes that, when signatures of the person who took delivery on behalf of the plaintiff are found, Exs. B-1 to B-8 go to show that all the goods covered by the invoices have in fact been supplied to the plaintiff and, hence, there is no warrant for the plaintiff's contention that the defendants have played fraud in supply of goods to strangers and making the invoices in the name of the plaintiff. Mr. S. Gopalaratnam, learned counsel for the plaintiff, argued at great length, by referring to each one of documents, to show that the lower appellate court had relied on documents filed by defendants without looking into the inherent discrepancies existing therein, and hence the court had not applied its mind to the contents of these documents. Merely because four delivery orders and invoices exist, it had proceeded on a presumption that the plaintiff must have taken delivery of goods from the warehouse, when its main grievance is that they are documents brought into existence by the officials of the defendants in the clandestine dealings indulged in by them. This criticism is not without substance, because the appellate order does not deal with the points taken by the plaintiff as to why such documents cannot be put against it and of the discrepancies existing therein. Even the limited materials which plaintiff had referred to in paragraph 7 of the plaint had not been dealt with by the courts below to show that there is no serious question to be tried between the parties. Though he has taken more than one point to show discrepancies and obvious defects in the documents relied upon by defendants, only a few are dealt with hereunder for the limited purpose of finding out whether this case would come under the category of exceptional or special cases, as held by the Supreme Court.
Item 1 : Under Ex. A-5, dated March 21, 1982, plaintiff asked defendants to furnish a copy of accounts till date from the beginning. Under Ex. A-2 dated May 21, 1982, defendants informed the bank that, 'the party has settled fully their dues with us and as on date their debit balance is nil'. Plaintiff states that in spite of it, under Ex. A-4, dated July 17, 1982, they state that the opening balance is Rs. 3,279.79, but no explanation is forth coming as to how this amount became due.
Item 2 : As for Ex. A-7, the invoice, admittedly there is no delivery challan issued.
Item 3 : Ex. B-8, is the delivery challan for the invoice under Ex. B- 9. This shows that G. R. Anantharaman (brother of G. R. Shrinivasan, who is the sole proprietor of the plaintiff firm) took delivery of 20 tons by lorry TMR 9475 on May 24, 1982, whereas Ex. B-12, the certificate produced by the defendants and issued by warehouse at Salem, discloses that 10 tons were delivered on May 24, 1982, and one ton on June 1, 1982, and 9 tons on June 3, 1982, and the lorry numbers also vary. Hence, it is pleaded that Ex. B-8 does not prove delivery of the goods covered by Ex. B-9.
Item 4 : In Ex. B-2, an invoice, the word 'Dindigul' is scored out and overwritten as 'salem' whereas in the two copies received by the plaintiff, only Dindigul warehouse is shown as the plaice from where delivery had been effected. When these copies of invoices were sought to be marked as additional documents, the lower appellate court has refused to receive them. I.A. No. 93 of 1983 filed for additional documents to be received, was dismissed on April 30, 1983.
Item 5 : As for Ex. B-1, a delivery challan, it shows delivery by lorry TMT 4142, whereas Ex. B-12, the concerned invoice, shows that the lorry number is TMT 5242, and here again, Dindugul had been scored out and Salem had been written.
Item 6 : In Ex. B-3, the name of the person to receive delivery is not filled up. But yet the second defendant has put his signature as if he had attested the signature of the person who is to take delivery. The delivery had been made to one A. Govindansami who does not represent the plaintiff. In respect to this consignment, Ex. B-12, the certificate of the warehouse manger is to the effect that delivery was made through lorry TNL 3579 and not TNL 4889 which is mentioned in the delivery challan. In Ex. B-6 also, there is alteration regarding the warehouse from where the goods are to be cleared.
Item 7 : Ex. B-5, the delivery challan, it shows that one V. Raman, received delivery on June 2, 1982, in TNL 3579, whereas the corresponding certificate of the warehouse manager (Ex. B-12) shows that delivery was through lorry TNL 4889.
Item 8 : Ex. B-7 is an invoice showing that the name of the warehouse had been corrected as Salem. But no delivery challan is produced. But still Ex. B-12, written by manager of Salem warehouse shows that delivery was effected under Order No. 404517 dated June 19, 1982, which cannot be correct.
Item 9 : Under exhibit A-5, dated August 3, 1982, on the plaintiff realising that clandestine transactions have been put through in his name, he made a request for a copy of the accounts to be furnished, but till date, defendants have not furnished the required particulars. Instead, within seven days, under exhibit A-6 dated August 11, 1982, the second defendant had addressed one Amirthalingam, stating that Kannan was being sent in connection with the settlement of plaintiff's accounts amicably. Kannan had written on exhibit A-6, stating that he could not meet Amirthalingam and that there is urgency in settling the accounts of the plaintiff. This bears the date August 14, 1982. The defendants rely upon exhibit B-24 of the same date, to claim that Anantharamam had signed on behalf of the plaintiff stating that the goods covered by the four disputed delivery orders had been received. It is in respect of this document the plaintiff states that it is a rank forgery. If such a letter had been sent to the defendants, then in the ordinary course of business,, the seal of the defendants must find a place therein.
13. Courts below have passed orders only on documents and not on any oral evidence. When so many discrepancies have been pointed out and when the plaintiff had relied upon them and was able to show that in some of the documents relevant lorry numbers are not there or concerned signatures are not affixed, in the background of the claim made that officers of the respondents have indulged in clandestine dealings, and that under the disputed invoices, plaintiff had not received goods, the courts below have miserably failed to look into the prima facie case pleaded by the plaintiff. As for the claim made in paragraph 7 of the plaint, the defendants have not placed any materials so far as to how the claim made therein is beset with any in correctness or misconception of facts. The added feature is that when exhibit B-28 is claimed to be a forged document, the first endeavour of the court ought to have been to secure the opinion of handwriting expert when the plaintiff was prepared for such a course to be adopted. It it is a forged document, then the element of fraud pleaded becomes relevant, and which would disentitle the defendant from invoking the bank guarantee. That was the main reason why they have opposed the application.
14. As already pointed out, in spite of the trial court stating that no finding need be given for the present on the genuineness of the document, it had proceeded to hold that the plaintiff had not made out a prima facie case, only on the aspect of forgery, and on other point raised by the plaintiff. It has failed to analyse the contents of the documents marked by the defendants, but had proceeded on a surmise that when the delivery orders and invoices are present, naturally it should mean that the goods have been delivered, forgetting that the case of the plaintiff is that the goods covered by the said documents were not delivered to it. If only courts below which are duty bound to do this analysis had done it, it would not have resulted in considerable judicial time of this court being spent on a matter like this. Subordinate courts shall not avoid their duty to analyse contents of documents which are relevant to find out a prima facie case. On what is stated above, it is quite obvious that the suit involves serious questions to be tried, and particularly, relating to the plea of fraud, which courts have invariably held as a significant factor to be taken into account, whenever a relief is claimed for interdicting the enforcement of a bank guarantee.
15. On balance of convenience,in the plaint itself it is admitted that a sum of Rs. 43,543.50 is payable. The plaintiff being a small dealer,it bank guarantees are invoked in spite of a prima facie case having been made out and compelled to part with a sum of Rs. 85,639.89, it would ruin its business prospects. By allowing the bank guarantees to be kept alive, defendants cannot be prejudiced.
16. Hence, the revision petition is allowed subject to the following conditions :
(i) That plaintiff to deposit in the trial court a sum of Rs. 20,735 on or before June 15, 1984.
(ii) It must keep the two bank guarantees alive, during the pendency of the proceedings, by renewing them from time to time 30 days before the expiry of the periods of respective guarantees, falling which,it will be open to the defendants to invoke the bank guarantees.
17. On behalf of the defendants it is stated that when State Bank of India is not impleaded as a party, no relief as prayed for could be granted. This would not be any impediment, because the relief asked for is to prevent defendants from invoking the bank guarantees. As per clause 4 of the exhibits B-13 and B-14, unless the amount claimed had become due by reason of buyer's failure to pay the Corporation's invoices, they cannot be invoked. It is the claim of the plaintiff that in the absence of supply of goods, the amount had not become due. Without the amount becoming due, defendants cannot invoke the bank guarantees. That is the reason why the relief is confined only against the defendants, preventing them from invoking exhibits B-13 and B-14, the bank guarantees. Hence, the civil revision petition is allowed with costs. Counsel fee Rs. 250.