FENNER (INDIA) LTD. versus PUNJAB AND SIND BANK

Citation: [1997] SUPP. 1 S.C.R. 457 · Decided: 07-07-1997 · Supreme Court of India · Bench: K. RAMASWAMY, D.P. WADHWA · Disposal: Appeal(s) allowed
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

• 
FENNER (INDIA) LTD. 
v. 
PUNJAB AND SIND BANK 
JULY 7, 1997 
[K. RAMASWAMY AND D.P. WADHWA, JJ.] 
Bank Guarantee-Invoking of-Held, entitled to enforce the Bank 
Guarantee only to the extent of the amount advanced with interest from the 
date of the suit. 
Code of Civil Procedure, 1908: 
Section 11-Res judicata-lssue of non-joinder tried as a preliminary 
issue and negatived--Confirmed by High Court-Held: Principle of res 
judicata applicable. 
A 
B 
c 
D 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4613 of 
1997 
From the Judgment and Order dated 14.11.96 of the Kerala High · 
Court in A.S. No. 94 of 1996. 
H.N. Salve and A.V. Rangam for the Appellant. 
T.L.V. Iyer and M.P. Vinod for the Respondent. 
The following Order of the Court was delivered : 
Leave granted. We have heard CO\lnsel for both sides. 
This appeal by special leave arises from the Judgment of the Kerala 
High Court, made on November 14, 1996 in A.S. No. 394 of 1996. 
E 
F 
The admitted facts are that the appellant laid a suit to enforce the 
Bank Guarantee against the respondent pursuant to the Agreement dated G 
April 23, 1991 entered into between the appellant, M/s. Fenner (India) 
Ltd., 3 Madurai Melakkal Road, Madurai and M/s. Vijay Exports, 23/393,. 
Panampally Nagar, Kochi under which the appellant had agreed tbus: "In 
order to finance purchase of raw nuts and processing for exports, the 
Processor requires financial support and the Exporter has agreed to ad- H 
457 
458 
SUPREME COURT REPORTS [1997} SUPP. lS.C.R. 
A vance upto Rs. 30,00,000 (Rupees thirty lakhs only) as Purchase advance 
to be secured by a Bank Guarantee." The Bank Guarantee executed on 
April 24, 1991 by the respondent Punjab and Sind Bank, the Guarantor in 
favour of M/s. Fenner (india), the Purchaser, covenented that the Pur-
chaser shall repay the amount advanced and in case of default, apart from 
B invoking the arbitration clause, the Bank would be entitled to enforce the 
Bank Guarantee for recovery thereof. It .is not disputed that the Purchaser 
had advanced upto a sum of Rs. 20,00,000(Rupees twenty lakhs only) under 
the aforesaid agreement. Since M/s. Vijay Exports, Kochi committed 
breach in payment thereof, the appellant invoked the Bank Guarantee 
against the respondent-Bank for a sum of Rs. 39,28,408 inclusive of all 
C items mentioned in the suit. The trial Court decreed the suit and in appeal 
the High Court reversed it holding that since the appellant had failed to 
advance the aweed amount of Rs. 30,00,000 for utilisation of procuring 
processing cashew nuts, it was entitled to invoke the Bank Guarantee. 
D 
The question, therefore, is: whether the appellant is entitled to 
invoke the Bank Guarantee for the amount agreed to be indemnified by 
M/s. Vijay Exports. The Bank Guarantee reads as under: 
E 
F 
G 
H 
"And whereas it has been agreed under the terms and conditions 
of the aforesaid agreement that the Purchaser shall make an 
advance to the Seller of Rs. 30,00,000 (Rupees Thirty Lakhs only) 
for utilising it for procuring/processing cashew nuts to be supplied 
under the said agreement on his furnishing a Guarantee from a 
Bank acceptable to the Purchaser. 
And whereas the Guarantor has as per terms and conditions 
of the aforesaid agreement agreed to stand guarantee for the 
amount of advance payment in favour of the seller, now this deed 
witnesses that in pursuance of the terms and conditions of the 
aforesaid agreement and in consideration of the advance payment 
agreed to be made to the seller by the Purchaser, the Guarantor 
do hereby agree and undertake to indemnify the purchaser to keep 
the Purchaser indemnified to the extent of a sum not exceeding 
the said sum of Rs. 30,00,000 (Rupees Thirty lakhs only) against 
any damage or loss that may be suffered by the purchaser by reason 
of non-fulfilment of any of the terms and conditions of the agree-
ment, by the Seiler and the Guarantor hereby undertake to pay on 
t 
'• 
' '· 
FENNER (INDIA) LTD. v. PB. AND SIND BANK 
459 
demand and without any demur or delay to the purchaser any sum A 
unconditionally irrevocably not exceeding the sum of Rs. 30,00,000 
(Rupees Thirty Lakhs only) as may be ascertained by the Purchaser 
as the damages or loss that the Purchaser may have suffered, 
provided that the Guarantee comes into force when the advance 
payment has been made to the account of the seller and the B 
Guarantor hereby covenents with the Purchaser as follows." 
A reading of it would clearl
Excerpt shown. Read the full judgment & AI analysis in Lexace.