J. B. Goel, J. ( 1 ) BY this order I shall dispose of IA No. 6997/96 filed by the plaintiff, in the suit seeking ad-interim injunction against the defendants restraining them from invoking the Bank Guarantee dated 21. 2. 1995. The immediate cause for the plaintiff in filing the suit is that the defendant No. 1 had approached defendant No. 2 Bank for extending the validity period of Bank guarantee or otherwise treating its invocation. Bank guarantee was given for plaintiff in pursuance of an agreement dated 21. 2. 1995 with defendant No. 1. ( 2 ) THE dispute between the parties has arisen in the following circumstances: Defendant No. 1, State Trading Corporation of India Ltd. (for short STC) had entered into a contract with Ministry of Food, Government of Republic of Bangladesh. on 1. 2. 1995 for export of 25000 MT +. 00 5% India Non Basmati Par Boiled rice (PR-106 variety) M/s. R. K. Export House was to supply the above goods to the STC and was to furnish performance guarantee to the Buyer, i. e. , Government of Republic of Bangladesh. The said supplier backed out and due to urgency of the shipment which was to be completed by 28. 2. 1995, defendant No. 1 decided to purchase the desired stocks of rice from Food Corporation of India (For short FCI) at open sale price and to get the same processed and graded by a private party, the STC entered into a contract dated 21. 2. 1995 with the plaintiff for processing and upgrading 25000 MT of rice and to ship the same to the foreign buyer on the terms and conditions agreed in the contract dated 21. 2. 1995 (Annexure I to the plaint ). The contract provided that the plaintiff was to take delivery of the rice to be supplied for STC at FCI Godown at Gandhidham, process and upgrade the rice and bag the same as per specification given in the contracts domestic and foreign. The plaintiff was also to arrange loading of the rice on ship nominated by STC and some more acts and things which were required to be performed by plaintiff were mentioned in Annexures I and II of the contract, which included to appoint Cargo handling agents on their own costs, keep transit foreign warehouse insurance processor and the export indemnity letter certificate of origin etc. For this work the STC was to pay to plaintiff Rs. 1,345. 00 per MT. ( 3 ) A time frame was provided for doing all this processing as per clause 12 which reads as under: "processor agrees to make first shipment of 6000 MT +. 00 5% latest by 28. 2. 1995 provided material is available for delivery at FCI Kandla/gandhidham 4 days prior to the shipment date. Thereafter, balance shipment of 19,000 MT +. 00 5% to be effected not later than 15. 3. 1995. " ( 4 ) THE contract between the plaintiff and defendant required the plaintiff to furnish the performance Bank guarantee in terms of clause 17 to the following effect: "processor agrees to furnish Performance Bank Guarantee of Rs. 35,30,625. 00 within 2 banking days of signing of this agreement in favour of STC. Such PBG to be valid for 3 months and to be extendable for further period if required" ( 5 ) THIS contract also gave right to STC to invoke this bank guarantee in case the plaintiff failed to perform the conditions as mentioned in the contract in terms of its clause 18 which reads as under: "18. In the event of non supplying of Rice in part or whole by the Processor as per conditions mentioned hereinabove as also in Annexures I and II, STC reserve the right to invoke the PBG without assigning any reason whatsoever. STC has a right to recover losses/damages etc. and shall not be in any way, restricted to only invocation of Bank Guarantee. STC has full right to recover losses/damages which STC may suffer due to non-fulfillment of this agreement and export contract. " ( 6 ) IN pursuance of this clause plaintiff furnished the following Performance Bank guarantee of defendant No. 2: "now, THEREFORE, THIS GUARANTEE WITNESSES AND THE bank hereby irrevocably and unconditionally agrees and declares as follows: 1. In consideration of the premises mentioned herein above, the bank does hereby irrevocably and unconditionally guarantee the due and faithful performance of the agreement dated 21. 2. In consideration of the premises mentioned herein above, the bank does hereby irrevocably and unconditionally guarantee the due and faithful performance of the agreement dated 21. 2. 1995 on the part of the processor and agrees, undertakes and guarantees to the STC that in the event of any breach/failure/default, for whatsoever reason, on the part of the processor, in performing all or any of its obligations under the agreement as well as the export contract as may be amended from time to time, the bank, shall, forthwith on a demand in writing for payment under this guarantee made by an officer of the rank of Chief Marketing Manager or above of STC, pay to STC without any demur protest or contestation and without any reference to the processor the said amount of Rs. 35,30,625. 00. . . . . . notwithstanding any dispute whatsoever pending between the STC and the processor. In case bank does not pay invoked amount within 7 days from the date of demand, bank shall pay interest @ 10% from the date of demand and date of actual payment. " ( 7 ) THE contract provided that the first lot of 6000 MT of Rice was to be shipped to Bangladesh latest by 28. 2. 1995, but the requisite quantity of Rice was to be made available by STC to the plaintiff 4 days prior to this shipment date which they failed to do so and the plaintiff thus could not do his part of the job/works as required under the contract. ( 8 ) THE STC vide their letter dated 24. 2. 1995 (Annexure 3) wrote to the Managing Director of FCI requesting to make available the requisite quantity of Rice so as to enable STC to complete the export obligation by 15. 3. 1995 and on this request FCI could arrange to make available only 4600 MT of Rice through FCI godown on 4. 3. 1995 to the plaintiff. Thereafter between 6. 3. 1995 to 31. 3. 1995 more quantity of Rice from FCI Godown was supplied by STC to the plaintiff. In this way the plaintiff were supplied in all 11852. 697 MT of Rice for processing and shipment as against the contracted quantity of 25000 MT. The goods could not be shipped for transport to Government of Bangladesh on 28. 2. 1995 and 15. 3. 1995 more quantity of Rice from FCI Godown was supplied by STC to the plaintiff. In this way the plaintiff were supplied in all 11852. 697 MT of Rice for processing and shipment as against the contracted quantity of 25000 MT. The goods could not be shipped for transport to Government of Bangladesh on 28. 2. 1995 and 15. 3. 1995 as agreed and the contract between STC and Government of Bangladesh remained unoperational. It is not the case of STC that there was any fault or breach on the part of the plaintiff in not completing their part of the contract. When the time for shipment on 28. 2. 1995 was not observed and no further instructions were received from STC, the plaintiff had written letter dated 13. 3. 1995 to the STC seeking further instructions to process and for shipment of Rice to Government of Bangladesh and also informed the STC that plaintiff had incurred various expenses for completing their part of the agreement vide their letter dated 13. 3. 1995 (Annexure 5 ). ( 9 ) NO instructions were issued by STC to the plaintiff for a long time and by means of FAX message dated 29. 3. 1995 (annexure 6) they informed the plaintiff as under: "we propose to lift the stocks of Rice kept in your custody at Kandla/gandhidham as it is for loading per M. V. Mentis. Since vessel has already tendered N. O. R. you are requested to immediately advise your representative at Kandla/gandhidham to allow STC Gandhidham/our CHA to lift the Stocks in his presence for loading into vessel M. V. Mantis. Matter most Urgent. " ( 10 ) VIDE letter dated 29. 3. 95 (Annexure 7) the plaintiff in reply informed STC as under: "we understand from Mr. S. R. Verma that you intend to export Super Fine Rice lying in our custody at Kandla port on "as is where is" basis without effecting grading and repacking. We request you to kindly consult us before taking any action in this regard since we have made lot of efforts right from loading this cargo from Punjab to Kandla and storing the same at Kandla port. You are also well aware of the fact that we have already incurred heavy expenses to the tune of appox. Rs. 75 lakhs for handling this cargo till this time. You are also well aware of the fact that we have already incurred heavy expenses to the tune of appox. Rs. 75 lakhs for handling this cargo till this time. This is for your information and for immediate discussion. " ( 11 ) VIDE another letter dated 31. 3. 1995 (Annexure 8) the plaintiff further informed the STC that they had undertaken various steps on their part in performance of the contract as per details given in this letter and offered to settle their claim of compensation for their services @ Rs. 400. 00 per MT amounting to Rs. 47 Lacs. Plaintiff vide FAX message dated April 4, 1995 in reply to defendant s letter dated 3. 4. 1995 also supplied break up/details of the actual expenses incurred by the plaintiff till that date in handling the stocks of Rice of STC and the total claim made amounted to Rs. 60,90,356. 00 and requested the defendant to make payment of these expenses. ( 12 ) THE STC wrote letter dated 3. 4. 1995 (Annexure 9) to the plaintiff requesting that the Rice be loaded on vessels MV Mantis and GIOS pending negotiations of the compensation to be paid to the plaintiff and in another letter dated 5. 4. 1995 (annexure 10) informed the plaintiff as under: "as explained to you during discussion, we shall examine the same and shall subsequently discuss with you to arrive at an amicable settlement. Meanwhile, as discussed with you we would request kindly to release atleast 10,800 MT rice out of the total stocks of about 11,800 MT lying with you against trust receipt. " ( 13 ) IT appears that this reest of the defendant was complied by the plaintiff and 10,800 MT of the rice was loaded into vessel MV Mantis and GIOS as per the directions of the defendant as is admitted by defendant in para 4 of their written statement. ( 14 ) SUBSEQUENTLY, perhaps after various meetings and discussions the defendant vide their letter dated 16. 4. 1996 (Annexure 12) offered to pay to the plaintiff Rs. 21. 02 Lacs in full and final settlement of their claims subject to the plaintiff accounting for the balance stock of rice lying with them. And further desired that, "we will consider releasing of your PBG on receipt of stocks from you and on their accepting the above amount of Rs. 21. 21. 02 Lacs in full and final settlement of their claims subject to the plaintiff accounting for the balance stock of rice lying with them. And further desired that, "we will consider releasing of your PBG on receipt of stocks from you and on their accepting the above amount of Rs. 21. 02 Lacs as full and final settlement of all your claims". On demand by plaintiff, vide letter dated May 15, 1996 (Annexure 14) details of this compensation offerred were also given. ( 15 ) THE balance quantity of goods were lying in the custody of the plaintiff s agent i. e. ACT Shipping Ltd. , Ship 206-207, Seva Sadan II, New Kandla and as desired by defendant in their letter dated 22. 5. 1996 (Annexure 15) the undertaking of that agent was also furnished by the plaintiff for releasing the balance quantity of the stock to the defendant unconditionally. The said agent had given an undertaking that they were in possession of balance stock of PBSF rice belonging to STC, and in the event STC floats tender for despatch of these stocks they undertook to deliver the same to the person/firm authorised by STC to whom such stocks will be sold immediately, and further undertook that they shall not withhold the delivery of the above said Cargo for whatsoever reason including their claim outstanding for settlement by STC on account of handling charges. This fact is admitted in para 27 of the written statement by STC. Inspite of this no steps have been taken by STC for taking delivery of the remaining stocks of rice and instead of releasing the bank guarantee the STC had been approaching the defendant No. 2 and the plaintiff for extension of the validity of the bank guarantee from time to time which was so got extended till 15. 7. 1996. STC again wrote to defendant No. 2 bank for extension of the validity of the bank guarantee and the defendant No. 2 bank vide their letter dated 15. 7. 1996 (Annexure 20) informed the plaintiff that defendant No. 1 was claiming the guarantee amount unless the same is extended and the plaintiff had to bear 100% margins since the guarantee had become a disputed guarantee. 7. 1996 (Annexure 20) informed the plaintiff that defendant No. 1 was claiming the guarantee amount unless the same is extended and the plaintiff had to bear 100% margins since the guarantee had become a disputed guarantee. ( 16 ) AFTER receipt of this letter the plaintiff filed the present suit impleading STC as defendant No. 1 and the bank, namely State Bank of India as defendant No. 2 alleging that this action of the defendant No. 1 was fraudulent, arbitrary, malafide, unfair and the STC were not justified under the contract and claimed reliefs of injunctions against demanding any payment under the said guarantee. ( 17 ) THE bank guarantee had been extended earlier and on 30. 8. 96 the plaintiff was further directed by this Court to extend the bank guarantee for 2 weeks from 17. 9. 1996 and it has been further extended during the pendency of the suit. However, on 12. 12. 1996 after hearing the parties, and on the plaintiff making an unconditional statement that they had no objection in releasing the balance stock of the rice to the plaintiff, direction was given by the Court that if the defendant pays Rs. 21 lacs and odd as admitted by them then the plaintiff shall renew the bank guarantee for 2 weeks. ( 18 ) I have heard the learned counsel for the parties. ( 19 ) LEARNED counsel for the plaintiff has contended that the plaintiff had furnished the bank guarantee in pursuance of the agreement dated 21. 2. 1995 with STC and that agreement contemplated that the goods were to be shipped to the Government of Bangladesh under agreement entered into with them on 1. 2. 1995; that agreement was abandoned and the plaintiff was not required to ship the goods under the agreement dated 21. 2. 1995 so it stood frustrated and the Bank guarantee furnished by the plaintiff cannot be invoked by the STC. In any case, the plaintiff has already returned to the STC stocks of 10,800 MT of Rice and the remaining stock has not been lifted by the STC, for no fault of the plaintiff, the plaintiff is entitled to compensation for handling the goods of the defendant as bailee and the defendant had offered a sum of Rs. 21. In any case, the plaintiff has already returned to the STC stocks of 10,800 MT of Rice and the remaining stock has not been lifted by the STC, for no fault of the plaintiff, the plaintiff is entitled to compensation for handling the goods of the defendant as bailee and the defendant had offered a sum of Rs. 21. 02 Lacs which though is unreasonable and too inadequate even has not been paid which should have been paid without prejudice to the rights and contentions of the parties. This action of the defendant in asking the bank for renewal of the bank guarantee and giving a threat of invoking the bank guarantee on failure of the plaintiff is fraudulent, misuse of its position and is against the equities in the circumstances of the case the plaintiff is thereby put to double burden and irretrievable loss. In the circumstances, the defendant is not entitled to claim extension of or for invoking bank guarantee. He has relied on Hindustan Steelworks Construction Ltd. Vs. Tarapore and Co. and Anr. J. T. 1996 (6) SC 295 and M/s. Synthetic Foams Ltd. Vs. Simplex Concrete Piles (India) Pvt. Ltd. A. I. R. 1988 Delhi 207. ( 20 ) WHEREAS learned counsel for the defendant has contended that the rights and obligations of the parties are governed by the agreement dated 21. 2. 1995 which provided for furnishing of a bank guarantee and unless the obligations arising out of that contract are discharged by the plaintiff obligation to honour the commitment made in the bank guarantee has to be fulfilled by the plaintiff; the bank guarantee is an independent contract, as such the defendant is entitled to seek extension of its validity and in case of failure to do so to invoke the same as agreed under the contract. He has relied on 1995 (6) SCC 68 and certain observations made in Hindustan Steel Works Construction Ltd. 1996 (5) SCC 34 =jt 1996 (6) SC 295 which was also relied on behalf of the plaintiff. ( 21 ) IN 1995 (6) SCC 68 Larsen and Toubro Ltd. Vs. Maharashtra State Electricity Board and others reference has been made to earlier decisions of the Supreme Court including the law laid down in Svenska Handelbanken Vs. India Charge Chrome (1994)1 SCC 502 governing the principles for invoking the Bank guarantees. ( 21 ) IN 1995 (6) SCC 68 Larsen and Toubro Ltd. Vs. Maharashtra State Electricity Board and others reference has been made to earlier decisions of the Supreme Court including the law laid down in Svenska Handelbanken Vs. India Charge Chrome (1994)1 SCC 502 governing the principles for invoking the Bank guarantees. This case law including the case of Larsen and Toubro case has also been referred to in Hindustan Steel Works Construction Ltd. Vs. Tarapore and Co. and Anr. 1996 (5)SCC 34 . ( 22 ) THE principles governing the excercise of jurisdiction by the Court in the matter of bank guarantees as laid down are that a Bank guarantee is an independent and distinct contract between the bank and the beneficiary and is not qualified by the underlying transaction and the primary Contract between the person at whose instance the bank guarantee is given and the beneficiary. In case of unconditional bank guarantee the nature of obligation of the bank is absolute and not dependent upon any dispute or proceedings between the parties at whose instance the bank guarantee is given and the beneficiary. Commitments of banks must be honoured free from interference by the Courts and it is only in exceptional cases, that is to say in case of fraud or in a case where irretrievable injustice would be done if the bank guarantee is allowed to be encashed, the Court should interfere. Again in Ansal Engineering Projects Vs. Tehri Hydro Development Corporation Ltd. and Another (1996)5 SCC 450 (3 Judges Bench) these principles have been followed. However, it is clear from the law so laid down that the Court is empowered to excercise jurisdiction against invoking of Bank Guarantee in cases where fraud or special equity is prima facie made out so as to prevent irretrievable injustice to the parties. ( 23 ) IN the present case under the contract between the plaintiff and the STC dated 21. 2. 1995 the bank guarantee furnished was to be valid for three months but extendable and could be invoked in the event of non supply of any part or whole by the processor of the stock of rice as per conditions mentioned in the agreement. The contract between STC and foreign buyer was cancelled or frustrated in the month of February or March, 1995 itself. The contract between STC and foreign buyer was cancelled or frustrated in the month of February or March, 1995 itself. The STC should have either lifted the stock of rice immediately or settled new terms with the plaintiff. Part of the goods were obtained and the plaintiff had given consent for releasing the balance stock which ought to have been lifted without unnecessary or unreasonable delay. Under this contract the plaintiff was entitled to charge at the rate of Rs. 1345. 00 per MT for the various services and jobs undertaken by them from the defendant. However, as those services could not be performed because the agreement between the defendant and the foreign buyer was cancelled or otherwise revoked it is not alleged that the plaintiff had committed any breach of the contract dated 21. 2. 1995. The plaintiff was holding stock of the Rice of the STC obviously as a bailee and as a bailee is entitled to reasonable remuneration. The plaintiff had given his statement of claim as compensation and the defendant has offered asum of Rs. 21. 02 Lacs even that amount remains unpaid till date. Major part of the goods had been lifted and only small part of it is left. When plaintiff has not objected to the lifting of the goods by STC without insisting for their claim being satisfied it is very unfortunate that STC after 22 months has not lifted the balance stock of the goods lying with the plaintiff. Thereby it has put the plaintiff to unnecessary double burden, one costs being incurred in getting the bank guarantee extended from time to time; and secondly, in handling latter s stock as bailee. The equities of the case demand that the defendant should have paid atleast an amount of Rs. 21. 02 Lacs which according to them the plaintiff was entitled to compensation and lift their balance stock of rice. The action of the defendant in the circumstances is clearly fraudulent, misuse of their position, unjust and inequitable. On 12. 12. 1996 when the arguments were heard categorical statement was made on behalf of theplaintiff that they had never refused to allow the removal of the remaining stocks of the goods to the defendant but there was no offer to pay the admitted amount even on that date. On 12. 12. 1996 when the arguments were heard categorical statement was made on behalf of theplaintiff that they had never refused to allow the removal of the remaining stocks of the goods to the defendant but there was no offer to pay the admitted amount even on that date. It was but just and proper on the part of the defendant to have removed their goods and in the meantime, paid the amount of Rs. 21. 02 Lacs which according to them is payable to the plaintiff subject to the dispute for the balance claim being determined in proper forum. The defendant (STC) are trying to make capital out of their own acts of ommission and commission if not out of misconduct on the part of someone from their side. ( 24 ) IN the circumstances, the demand made by the defendant on the bank in their letter dated 15. 7. 1996 for extension of validity of the bank guarantee and for failure to do so, threat extended to invoke the bank guarantee was unreasonable, unjustified and highly inequitable. In my view this is a fit case for exercising the discretion of this Court against the defendant. ( 25 ) I accordingly allow this application and grant temporary injunction in favour of the plaintiff and against the defendants restraining the defendant No. 1 from invoking the bank guarantee in question given by defendant No. 2. ( 26 ) AS the bank guarantee has been extended after the suit was filed in pursuance of the interim orders passed by this Court, defendant No. 1 is also directed to make payment of the expenditure incurred by the plaintiff for extending the bank guarantee after 15. 7. 1996 within 15 days failing which plaintiff will be entitled to recover the same by execution in this case or otherwise in accordance with law. ( 27 ) THIS application is allowed with costs. Costs assessed at Rs. 10,000. 00. This is without prejudice to the rights of the parties otherwise arising under the contract.