ORDER S.C. Pandey, J. 1. This is an appeal against the order dated 1.2.1998 passed by Seventh Additional district Judge, Bhopal, in Arbitration Case No. 1 of 1998, where by he has disposed of the application filed by the appellant under the Arbitration and Conciliation Act, 1996 (hence-forth 'the Act'). Section 37 (1) of the Act specifically provides that the Court competent in law to hear appeals from the original decree of the Court, passing the order, inter alia, under Section 9 of the Act shall hear the appeal. Thus Court is competent to hear this appeal. 2. The facts of this case giving rise this appeal may be briefly stated. The applicant is a State-level Co-operative Society, registered under the MP, Co-operative Societies Act 1960, having its head office at Bhopal. It carries on the business of extraction of oil and produces deoiled cakes from Soyabean. Apart from marketing Soyabean oil, the appellant also exports de-oiled cakes to various countries as Soyameal for making different items of food of high protein content. 3. The appellant entered into two agreements dated 22.10.1997 with the respondent No. 1, which is a public company registered under the Companies Act 1956. Its name is PepsiCo India Holdings Ltd. (PIH, for short). It appears that the two agreements were of complementary in nature. The respondent No. 1 required the appellant to procure Soyabean seeds of a given quality for purchasing them and delivering them at the processing unit of the appellant at Banapura or Ujjain. The respondent No. 1 agreed to pay price which would be at par with that in open market or even better. It would be obvious that the purpose of respondent No. 1 in entering into agreement was to employ the services of the appellant for collecting the Soyabean seeds and reaching them to its own processing plants instead of buying them from open market or employing some other agency in line of business for procuring the Soyabean seeds for the respondent No. 1 with a condition that they reach the plants of the appellant at Ujjain or Banapura. 4. The respondent No. 1 further entered into another agreement on 22.10.1997 which required the appellant to extract oil from Soyabean seeds supplied by the respondent No. 1 at the processing plant of the appellant at Ujjain or Banapura. After subjecting to certain processes the appellant obtained clean seed. 4. The respondent No. 1 further entered into another agreement on 22.10.1997 which required the appellant to extract oil from Soyabean seeds supplied by the respondent No. 1 at the processing plant of the appellant at Ujjain or Banapura. After subjecting to certain processes the appellant obtained clean seed. Thereafter moisture from the seeds had to be recovered for obtaining dry clean seed. After that the Oil content in the seeds was removed for extracting oil to obtain dry clean de-oiled cakes. The extracted oil is a bye-product of processing. However, the clean de-oiled cakes are further treated with oil on clean seed basis to obtain Net Dry De-oiled cakes. The Net Dry De-oiled cleaned cakes could be subject to further processing by adding moisture, and silica for making a cake marketable as Soyameal cake. In this process of making a Soyameal cake the initial oil extracted on seed basis is reduced by the content present in the Soyameal. It appears that the respondent No. 1 required the cakes so prepared for its international market. It chose to sell the extracted oil to the appellant itself. 5. It would not be out of place now to reproduce in "extermo" some of the important clauses of the agreement for PROCUREMENT of Soyabean seeds. PROCUREMENT AGREEMENT This Agreement is made and entered on this 22nd day of October 1997 between PepsiCo India Holdings Ltd., a Company registered under the Companies Act 1956 and having its Head Office at 38, DLF Corporate Park, S Block, Qutab Enclave, Phase III, Gurgaon, Haryana 122 002, hereinafter called the 'PURCHASER' which term shall unless repugnant to the context or contrary to its meaning thereof include its successors executors and assignees of the first part and M/s. M.P. State Cooperative Oilseed Growers Federation Ltd, 1 Arera Hills, Bhopal (Unit Ujjain or Banapura at the option of PIH) hereinafter calls PROCURER which term unless repugnant to the context or countrary to the meanings thereof includes its successors and executors of the second part. WHEREAS PROCURER has represented to the PURCHASER that they have a well established system for procurement of Soyabean seeds within the State of Madhya Pradesh and also that the prices at which they can deliver Soyabean seeds of the quality as required by the PURCHASER to the PURCHASER at PROCURER'S processing unit at UJJAIN or BANAPURA M.P. (hereinafter referred to as the 'Plant') will be at par or better than the price of Soyabean seed bought in the open market and delivered similarly to the plant. In consideration to the above now the PURCHASER as well as PROCURER hereby agree to the terms and conditions of Soyabean seed procurement indicated hereunder: - 1. PERIOD This Agreement is for the period 15th October 1997 to 30th June 1998 and shall expire if not extended by mutual agreement in writing. Procurement will start from 15 the October or the date of signing the Agreement whichever is later. 2. QUNTITY AND PRICE (a) PURCHASER has requested the PROCURER to purchase and supply 60,000 (+/-5%) MT Soyabean seed to the plant. (b) The PURCHASER shall each month indicate, to PROCURER as monthly procurement forecast. It is agreed that such forecasts will be only indicative and shall not in any way be construed as indents by the PURCHASER or be binding upon the PURCHASER. (c) The procurement of Soyabean seed by PROCURER shall be carried out as per weekly procurement plan given by the PURCHASER. The procurement plan will indicate the quantity and the price range at which the procurement needs to be done. (d) The PURCHASER reserves the right to stop/suspend procurement of Soyabean seed by PROCURER at 24 hrs. notice communicated in writing. However if the procurement is suspended during the currency of the Agreement then the procurement commitment on the part of PROCURER goes down pro-rata for the period when the procurement is suspended. PROCURER by way of a written communication will indicate to the PURCHASER the quantity and price of Soyabean seed production on each day and the information shall be provided by the next day as far as possible. 3. QUALITY The quality of Soyabean seed delivered by PROCURER to PURCHASER will conform to the following specifications S. No. PARTICULARS FAQ GRADE-I GRADE-II 1. Foreign Matter 1% 2% 3% 2. 3. QUALITY The quality of Soyabean seed delivered by PROCURER to PURCHASER will conform to the following specifications S. No. PARTICULARS FAQ GRADE-I GRADE-II 1. Foreign Matter 1% 2% 3% 2. Moisture 12% 12% to 14% 12% to 14% Soyabeans beyond the above specifications would not be acceptable unless cleared in writing by the PURCHASER. The PROCURER will give pro-rata rebates on moisture beyond 12% and upto 14% @ 1% on value for 1% excess moisture (To clarify if moisture is 13% then the rebate will be 1 % value of Soyabean) Similarly, PROCURER will give pro-rata rebates on Foreign matter beyond 1 % and upto 3% @ 1 % on value for 1 % excess. FOREIGN MATTER, e.g. if foreign matter is 3% then the price rebate would be 2%. Both rebates shall apply independent of each other and simultaneously. Clauses 4, 5, 6 and 7 are not relevant. 8. ADVANCE AND BANK GUARANTEE The PURCHASER has agreed to advance Rs. 5.00 crores to PROCURER. PROCURER agrees and undertakes that as a condition precedent to the advance of Rs. 5.00 crores to be paid to it by the PURCHASER under this Agreement PRODUCER shall provide one or more irrevocable Bank Guarantees for a period of nine months starting 15th October 1997 (hereinafter referred to as Bank Guarantee) for an amount of Rs. 5.00 crores in the format annexed hereto as Annexure A securing the amount advanced by the PURCHASER from time to time till the due performance of all the obligations of PROCURER under this Agreement. The PURCHASER shall be at liberty to invoke the Bank Guarantee if PROCURER fails to fulfil any or all the obligations under this Agreement. Clauses 9 and 10 are not relevant. 11. ASSIGNMENT Neither party hereto shall have the right to assign any of its rights or obligations hereunder without the prior written consent of the other. Clauses 12, 13 and 14 are not relevant. 15. TERMINATION The Agreement can be terminated by either party by giving to the other a minimum of ninety days notice in writing to be delivered by a registered A/D post to the other party at the addresses given above. 16. Clauses 12, 13 and 14 are not relevant. 15. TERMINATION The Agreement can be terminated by either party by giving to the other a minimum of ninety days notice in writing to be delivered by a registered A/D post to the other party at the addresses given above. 16. TERMINATION UNDER SPECIAL CIRCUMSTANCES Notwithstanding anything contained in Clause (15) thereof this Agreement may by notice in writting be terminated with immediate effect at the option of either party hereto (hereafter the 'terminating party') in any of the following events namely. (a) If either party to this Agreement contravenes any provision of this Agreement and does not cure or rectify the defect or contravention within 15 days of receipt of a written notice from the other party, pointing out the contravention then the latter party has the right to terminate this Agreement forthwith by giving the other notice in this behalf. (b) If the other party hereto shall go into liquidation other than a voluntary liquidation for the purpose of reconstruction or amalgamation or shall commit an act of bankrupt or shall compound with its creditors generally, or if a receiver or judicial manager shall be appointed over the whole or a substantial part of the assets of the other party. (c) If the other party hereto or the whole or a substantial part of its assests shall pass under the control of any authorised person or Companion which the terminating party shall have reasonable cause to disapporve. 17. CONSEQUENCES OF TERMINATION PROCURER shall immediately pay on termination to the PURCHASER Rs. 5.00 crores taken as advance or alternatively provide Soyabean seeds of the quality as required under Clause (3) of value of Rs. 5 Crores which amount will be worked out as per Clause (7) of this Agreement. The PROCURER shall provide all such documents as required by PURCHASER to substantiate that Soyabean seeds given to the purchaser are valued at Rs. 5 Crores. The PURCHASER will be at liberty to refuse acceptance of such Soyabean seed which is not as per the quality specifications. However, for the Soyabean supplied by the PROCURER for which payments have not been made by the PURCHASER the PURCHASER shall adjust the amount by deducting the value of the Soyabean supplied from the advance of Rs. 5 Crores. The bank guarantee shall also be invoked by the PROCURER only for such balance amount unadjusted. However, for the Soyabean supplied by the PROCURER for which payments have not been made by the PURCHASER the PURCHASER shall adjust the amount by deducting the value of the Soyabean supplied from the advance of Rs. 5 Crores. The bank guarantee shall also be invoked by the PROCURER only for such balance amount unadjusted. Clause 18 is not relevant. 19. ARBITRATION Any dispute or difference in respect of this Agreement arising out of the Agreement during the course of executing of the Agreement or after termination of the Agreement between both the parties then the same shall be settled by arbitration in accordance with the provisions of the Arbitration and Conciliaton Act 1996. Although before making any reference of any type of dispute to the aforesaid Arbitrator both the parties shall try to settle the differences/disputes amicably. Both parties hereto agree to jointly request the Arbitrator in writing to pass a speaking arbitration award. Clause 20 is not relevant. Similarly the important and relevant clauses of the Processing Agreement may be reporduced as below : - AGREEMENT This Agreement is made and entered on this 22nd day of October 1997 between Peps Co India Holdings Ltd., a Company registered under the Companies Act 1956 and having its Head Office at 38, DLF Corporate Park, S Block Qutab Enclave, Phase III, Gurgaon, Haryana 122 001, hereinafter called as "PIH" which term unless repugnant to the context or contrary to its meaning thereof includes its successors, executors and assignees, on the first part and M/s. MP. STATE COOPERATIVE OILSEED GROWERS FEDERATION LTD. 1-ARERA HILLS, BHOPAL (UNIT UJJAIN OR BANAPURA, AS PER THE OPTION OF PIH) hereinafter called the "PROCESSOR" which term unless repugnant to the context or contrary to the meanings thereof includes its successors and executors on the second part. WHEREAS PIH has requested the Processor to undertake processing of Soyabean supplied by PIH as per the terms and conditions mentioned in this Agreement and whereas the Processor has agreed to undertake the processing and to deliver to PIH products conforming to the quality and yields as specified in this Agreement. in consideration to the above now PIH as well as Processor hereby agree to he terms and conditions of processing indicated hereunder - 1. in consideration to the above now PIH as well as Processor hereby agree to he terms and conditions of processing indicated hereunder - 1. QUANTITY PIH agree to get processed into Soya meal and soya oil (herinafter referred to as the said Product (s) minimum 60,000 MT (+/-2% at PIH option) Soyabean starting 15th November 1997 to 30th June 1998 and will deliver this quantity of Soyabean at M.P. OILFED UJJAIN OR BANAPURA UNIT (hereinafter referred to as the "Processing Unit") PIH shall have the option to get processed between 8000-10000 MT of Soyabean per month. Sub-clause (a) of this clause 1, is not relevant. 2. COMMENCEMENT OF PROCESSING (a) The Processor will undertake processing work immediately after receipt of 2000 MT Soyabean seed from PIH. This quantity will be made available by Nov. 15th 1997 and an equivalent quantity maintained in stock to facilitate uninterrupted processing. Clause 3 is not relevant. 4. SOYA OIL PURCHASE i. Soya oil produced under this Agreement would be sold by PIH to the processor immediately on production by raising a sale invoice. Sub-clause ii of this Clause 4 is not relevant. iii. Processor would be given interest-free credit of 30 days from the day Soya oil is produced and invoiced to it. If at the end of the above credit period the Processor's selling price is lower than the market price of soya oil prevailing on the date of such sale then the interest-free credit for the payment of soya oil would be extended by a further 30 days. iv. The processor would provide a bank guarantee for Rs. 4 crores against purchase of soya oil to cover the oil credit for a period of 30 days. In case the period of credit is extended by a further period of 30 days then a post-dated cheque payable after 30 days of due date will be given to PIH on the date of extension of the credit which in turn will be subject to receipt of such cheque. The bank guarantee would state that it would also cover amount which may become payable due to dishonouring of cheques also. In case the Processor defaults in the payments resulting in encashment of the bank guarantee and or dishonouring of the cheque. PIH has the right to sell the soya oil to any other party. The bank guarantee would state that it would also cover amount which may become payable due to dishonouring of cheques also. In case the Processor defaults in the payments resulting in encashment of the bank guarantee and or dishonouring of the cheque. PIH has the right to sell the soya oil to any other party. If the price recovered for each such sale is less than the Purchase Price then the Processor will be liable to pay PIH the difference in the two prices. v. In case the Processor defaults in the payments resulting in encashment of the bank guarantee and or dishonouring of the cheque, PIH has the right to sell the soya oil to any other party. If the price received for each such sale is less than the Purchase Price then the Processor will be liable to pay PIH the difference in the two prices. Sub-clause vi of this clause is not relevant. 5. YIELDS The Processor hereby agrees to process soyabean in such a manner that maximum recovery of Products and by-products are achieved. The Total yield of Products and by-products should in any case be not less than 99.8% on moisture free basis and will be worked out as per format annexed herewith in Annexure A (hereinafter referred to as Material Balancing Statement). (a) Soya Oil - The minimum soya oil yield shall be 1% (one percent) less than weighed average oil contained in the clean soyabean. That is if the weighed oil in soyabean is 19% the yield of crude oil shall be 18% of seed weight leaving 1% maximum oil in the soya meal. Yield will be settled on total processing. (b) Soya Meal - The yield of the soyameal shall be the difference between the soyabean processed and of the soya oil produced and foreign matter (FM) separated. The yields of soya meal shall be calculated on ex-factory despatched delivered weight. The foreign matter will be taken into account on average total quantity of soyabean supplied for processing. Clauses 6, 7, 8, 9, 10, 11, 12 and 13 are not relevant. 14. The yields of soya meal shall be calculated on ex-factory despatched delivered weight. The foreign matter will be taken into account on average total quantity of soyabean supplied for processing. Clauses 6, 7, 8, 9, 10, 11, 12 and 13 are not relevant. 14. QUALITY SPECIFICATION The different products produced shall conform to the following specifications - (a) Soya Meal (i) Oil Note - exceeding 1 % (see) basis) (ii) Sand & Silica - Not exceeding 2% (iii) Moisture - Maximum 12% at the time of production Minimum 11% (iv) Urease Activity - Maximum 0.30 Unit on EEC method, (v) Fibre - No to exceed 6% (this parameter depends on the quality of the soyabean and therefore the question of addition reduction of fibre value does not arise). However, for purpose of settlement of yield in terms of clause 5 (b) the moisture at the time of despatch will be taken if despatch is effected within 30 days otherwise, moisture as analysed on 31 st day of the production shall be taken for material balancing, (b) Soya Oil Quantity of oil produced shall conform to the following specification - 1. MIV (Max) 0.50 Max 2. Colour 40 Units Max. 3. Sap Value 189-195 4. IV 120-141 5. FFA (Max) 1.5% 6. Unaponifiable matter (max) 1.5% 7. Flash point 110 Degree C Min. 8. Phosphatides 700 ppm Max Subject to damaged seed not exceeding 2%. However in case any quantity of oil is stored for more than 7 days from the date of production 0.3% of oil produced is maximum acceptable as sludge for the purpose of calculation of oil yields. Processor shall at all times, permit PIH's representatives authorised in this behalf to visit and inspect the Processing Unit premises for the purpose of inspecting the said Products so as to ensure compliance with the specifications and if so required shall produce to PIH all accounts, record and other documents maintained by it in connection with the processing The said products so produced shall conform to the specifications as set out and PIH will have the right to reject such of the said products not meeting with the specifications stipulated herein above after permissible rebate in practice. Beyond such quality rejections the Processor shall replace the rejected material within 21 days from the date of the acceptance or rejection by the Processor. Beyond such quality rejections the Processor shall replace the rejected material within 21 days from the date of the acceptance or rejection by the Processor. Clauses 15, 16, 17, 18, 19, 20 and 21 are not very relevant. 22. TERMINATION (a) This Agreement can be terminated by either party by giving to the other a minimum of ninety days' notice in writing to be delivered by registered A/D post to the other party. However, this notice period shall not absolve either party of their obligations related to processing as per clause 1 and settlement of accounts fully and finally. (b) If either party to this Agreement contravenes any provision of this Agreement and does not cure or rectify the defect of contravention within 15 days of receipt of a written notice from the other party pointing out the contravention, then the latter party has the right to terminate this Agreement forthwith by giving the other notice in this behalf, (c) In the event of termination under this clause the party in default shall be liable to pay to the other liquidated damages as per provisions of clause 16. Clause 23 is not relevant. 24. (a) Arbitration - Any dispute or difference in respect of this Agreement arising out of the Agreement during the course of execution of the Agreement or after termination of the Agreement between both the parties then the same shall finalised by a negotiation between the two parties and finally settled by arbitration in accordance with the provisions of the Arbitration and Conciliation Act 1996. Although before making any reference of any type of dispute to the aforesaid Arbitrator both the parties shall try to settle the difference/disputes amicably. (b) Jurisdiction - This contract shall be subject to the jurisdiction of Courts of Bhopal only. (c) This agreement shall be deemed a business transactions or related to the business of M.P. STATE COOPERATIVE OILSEED GROWERS FEDERATION LTD. and therefore any dispute shall be referred to the court of Bhopal under M.P. Cooperative Societies Act 1960 only. 6. The two agreements dated 22.10.1997 for procurement and processing of soyabean seeds are linked with each other and, therefore, it would be appropriate to give in a nut shell, a bird's eye view of the aforesaid relevant clauses. and therefore any dispute shall be referred to the court of Bhopal under M.P. Cooperative Societies Act 1960 only. 6. The two agreements dated 22.10.1997 for procurement and processing of soyabean seeds are linked with each other and, therefore, it would be appropriate to give in a nut shell, a bird's eye view of the aforesaid relevant clauses. The agreement for procurement of soyabean seeds has the following salient features: - (i) The appellant represented to respondent No. 1 that it had a well established system for procurement of soyabean seeds within the State of Madhya Pradesh and was in a position to supply soyabean seeds to the respondent No. 1 for delivery at their oil extraction plants situate at Ujjain or Banapura. The quality of the seeds would be as per requirement of the respondent No. 1 and at prices thereof would at par or better than the soyabean seeds bought in the open market and delivered similarly, (ii) The agreement was made for the period between 15th of October, 1997 to 30th of June, 1998. (iii) The quality and the price was fixed as per clause 2. However, the respondent No. 1 reserved the right of suspension of procurement after giving 24 hrs. notice in writing. Consequently, the appellant's liability to supply soyabean seeds during the currency of agreement stood reduced Pro-rata for the period of suspension. (iv) The quality required by the respondent No. 1 was in respect of three categories of seeds of soyabean. The first category called FAQ was to contain 1% foreign matter and moisture upto 2%. The category i.e. Grade I would be acceptable if contained foreign matter upto 2% and moisture to the tune of 12% to 14%. The third category of Grade-II could contain foreign matter upto 3% and moisture between 12% to 14%. It appears that the respondent No. 1 was very particular about the quality specifications mentioned above. It laid a condition that soyabean beyond the above specification shall not be acceptable unless cleared in writing). In the latter case, the respondent No. 1 was entitled to Pro rata rebate on existence of moisture or foreign matter beyond the percentage mentioned in the agreement of procurement. The rebate was chargeable exclusively on one count or simultaneously on both the counts according to circumstances of the case. In the latter case, the respondent No. 1 was entitled to Pro rata rebate on existence of moisture or foreign matter beyond the percentage mentioned in the agreement of procurement. The rebate was chargeable exclusively on one count or simultaneously on both the counts according to circumstances of the case. (v) The appellant and the respondent No. 1 provided in clause 8 of the agreement that - (a) the respondent No. 1 had agreed to provide Rupees 5 Crores by way of advance, (b) Consequently, the appellant agreed to and undertook to furnish irrevocable bank guarantees for an amount of Rs. 5 Crores for a period of nine months, starting from 15th of October, 1997. (c) The format of agreement shall be Annexure-A. (d) The bank guarantee shall secure the amounts advanced by the respondent No. 1 from time to time till the due performance of all the obligations of the respondent No. 1. (e) The respondent No. 1 was given liberty to invoke the guarantee, if the appellant failed to fulfil all or any of its obligations under the agreement. (vi) The clause 11 of the agreement prohibited assignment of any of the right or obligation of a party to any other person without a prior written consent, (vii) The clause 15 of the agreement provided for 90 days' notice for termination of the agreement in normal circumstances, (viii) The parties to the agreement reserved the right of termination of the agreement under special circumstances as an exception to clause 15. It gave an option to either party to terminate the agreement with immediate effect on the happening of the following events : (a) In the event of either party committing a breach of any term of the agreement and not rectifying the defect within 15 days of the receipt of a notice in writing from the other party, the aggrieved party had a right to terminate after due notice. (b) On either of the party going in liquidation the other party had a right of immediate termination. (c) On transfer of its whole or substantial assets to a company or another person by either party not approved by the other party on reasonable grounds. The termination of the agreement with immediate effect was to made in writing as per clause 16 of the agreement. (c) On transfer of its whole or substantial assets to a company or another person by either party not approved by the other party on reasonable grounds. The termination of the agreement with immediate effect was to made in writing as per clause 16 of the agreement. (ix) The clause 17 provides for consequences of termination : - (a) On termination of agreement the appellant was to refund Rs. 5 Crores taken by way of advance immediately. (b) Alternatively, the appellant was required to provide soyabean seed of equal value of the quality as per clause - 3 of the agreement. The value of the soyabean seeds was determined as per clause - 7 of the agreement and for this purpose, the appellant was required to provide all such documents as were necessary to substantiate its claim to the satisfaction of the respondent No. 1. The respondent No. 1 was at liberty to refuse the offer of soyabean seeds in lieu of Rs. 5 Crores which were not supplied as per quality specifications. (c) The respondent No. 1 was required to adjust the value of soyabean seeds supplied by the appellant to the extent the appellant had received payment for the supply already made from the bank guarantee of Rs. 5 Crores. It was further provided that the respondent No. 1 (wrongly mentioned as procurer in clause - 17 due to mis-typing) shall invoke the bank guarantee only for such balance of amount. (x) There is a provision of resolving the dispute or difference arising out of the agreement during the course of its execution or after termination by an arbitrator as per provisions of the Act. It has been provided in Clause 19 that before going in for arbitration the parties shall try to settle their disputes amicably failing which the parties shall jointly request the arbitrator to pass a speaking award. These are some of the important features of the procurement agreement. 7. Now, salient features of the Agreement of Processing of the soyabean purchased by the respondent No. 1 from the appellant as per procurement agreement may be considered : (i) The period for processing was to start between 15th November, 1997 to 30th June 1998 for which the respondent No. 1 was to get processed soyabean, weighing at least 6000 M.T. (+/-2% at PIH option). (ii) For the above purpose the respondent No. 1 had an option to get the soyabean processed between 6000 to 10000 M.T. in two plants of the appellant, at Ujjain and Banapura. However, there was option to increase the monthly processing of the soyabean subject to availability of soyabean and the capacity of the two plants of the appellant. The respondent No. 1 further stipulated that 2000 M.T. of soyabean shall be made available to the appellant by November 15, 1997 and the appellant shall start the work of processing immediately. (iii) The parties agreed that soyabean oil produced by the appellant in its two plants shall be sold by the respondent No. 1, immediately on production by raising a sale-invoice. The market-price of soya-oil was determined as per sub-price of soya-oil was determined as per sub-clause (ii) of clause 4 of the agreement. It was further agreed that the appellant shall be given interest-free credit of 30 days from the day soya-oil was produced and invoiced to it. At the end of 30 days the aforesaid facility of interest-free credit was to be extended for further 30 days, provided the appellant sold soya-oil at a rate which was less than prevailing market-price. (iv) It was also stipulated that the appellant shall be required to furnish a bank guarantee of Rs. 4. Crores against the purchase of soya-oil to cover the oil credit for 30 days. It was further provided in sub-clause (iv) of clause 4 of the agreement that on extension of 30 days credit the appellant required to issue a post-dated cheques payable after 30 days of due date shall be issued by the appellant in favour of the respondent No. 1. The extension of interest-free credit shall be subject to receipt of the post dated cheques. It was further provided that the bank guarantee shall stipulate that it shall cover the amount payable to the respondent No. 1 in case the post-dated cheque was dishonoured. (v) It was also agreed that in case, the appellant defaulted in payments and consequently, the bank guarantee was required to be encashed or the cheque was dishonoured then the respondent No. 1 had right to sell the soya-oil to any other party. In case of such a sale the appellant was required to pay difference between the agreed purchase price and the price of the sale, if any. In case of such a sale the appellant was required to pay difference between the agreed purchase price and the price of the sale, if any. (vi) The quality specification for soyabean and soya-oil were detailed as per clause 14 of the agreement. (vii) The quality rebates were to be given as per clause 15 of the agreement. (viii) The respondent No. 1 was given light to assign part of its obligation to a sister company of Pepsi Co Group but liability for any breach of the agreement was of the respondent No. 1. (ix) In normal course the agreement could be [sic] fundamental by giving a notice of ninety days in writing by registered A/D by either party. However, it was provided that the period of notice shall not absolve either party to fulfil the obligations related to processing as per clause 1 and settlement of accounts fully and finally. (x) On contravention of any of the provisions of the agreement by any of the party, the other party could give a notice to rectify the defect or when there was further contravention after 15 days of receipt of notice from the other party the latter was given an additional right to terminate the agreement forthwith as an exception to right of termination of agreement by giving ninety days' notice. (xi) In the event of termination of agreement by either party under the aforesaid special right, the defaulting party was liable to the other party for liquidated damages as per clause 16 of the agreement. (xii) The clause 24 of the agreement provided for arbitration in respect of difference or dispute in respect of the agreement between the parties to the agreement during the course of execution of the agreement or after termination thereof and the matter shall be decided by arbitration under the Act. However, the parties were required to finalise the difference or dispute by a negotiation. These are thus, some of the salient features of the processing agreement. 8. It may be made clear that selective reproduction of the clauses of the two agreements and a subsequent version of these clauses is by no means exhaustive. It is merely indicative of the nature of the two agreements under decision. The Court shall, if necessary, discuss the implications of other clauses not mentioned in paragraphs 4 to 7. 9. 8. It may be made clear that selective reproduction of the clauses of the two agreements and a subsequent version of these clauses is by no means exhaustive. It is merely indicative of the nature of the two agreements under decision. The Court shall, if necessary, discuss the implications of other clauses not mentioned in paragraphs 4 to 7. 9. In clause 8 of the procurement agreement it was stated that the bank guarantee was to be provided by the appellant in the format of Annexure-A to the agreement. During the course of the argument both the learned counsel for the parties did not dispute before me that there was no such format attached to the procurement agreement. The natural inference drawn from the above agreed statement of the fact would be that the terms of the agreement did not incorporate the terms of the bank guarantee and the bank guarantee of Rs. 5 Crores was independent of the agreement in the sense that terms of bank guarantee could not be treated as a part of the agreement of procurement on account of the omission whether deliberate or accidental. 10. It is not in dispute that two bank guarantees were given at the instance of the appellant pursuant to the aforesaid two agreements -(i) the agreement for procurement and (ii) the agreement for processing. The initial term of both the bank gurantees was from 1.12.98 to 30.4.98, entitling the respondent No. 1 to make a claim within one month i.e. by 31st May, 1998. At the request of the appellant, both the bank gurantees were extended upto 31.7.98 extending the claim period upto 31.8.98. 11. The terms of the frank guarantee dated 1.12.97 for Rs. 6 Crores, given by the Bank of Baroda, are as follows : - HBG/BG/97/19 Dated 01.12.97 M/s PepsiCo India Holdings Ltd. NEW DELHI. Dear Sirs, We, Bank of Baroda (hereinafter called Guarantor) hereby issue this irrevocable and unconditional Bank Guarantee, in your favour. Whereas M/s. M.P. State Cooperative Oilseed Growers' Fed. Ltd. of the address 1, Arera Hills, Bhopal (herein after called OILFED), have agreed to secure through an unconditional and irrevocable bank Gurantee, the advance of Rs. Dear Sirs, We, Bank of Baroda (hereinafter called Guarantor) hereby issue this irrevocable and unconditional Bank Guarantee, in your favour. Whereas M/s. M.P. State Cooperative Oilseed Growers' Fed. Ltd. of the address 1, Arera Hills, Bhopal (herein after called OILFED), have agreed to secure through an unconditional and irrevocable bank Gurantee, the advance of Rs. 6,00,00,000/- (Rupees Six Crores only) by PepsiCo India Holdings Ltd. of the address 38, DLF Corporate Part, S-Block, Qutab Enclave, Phase III, Gurgaon, Haryana - 122 002 (hereinafter called PIH) as per the agreement dated 22nd October 1997 signed between OILFED and PIH (hereinafter referred to as the Agreement). 1. In consideration of PIH accepting the Guarantor's obligation contained herein in discharge of OlLFED obligation to provide a Bank Guarantee as stated above the Guarantor inevocably and unconditionally establishes its irrevocable guarantee in favour of PIH and for the account of OILFED for an amount not exceeding Rs. 6,00,00,000/- (Rupees Six Crores Only) available immediately, and undertake to pay PIH an amount not exceeding Rs. 6,00,00,000/- (Rupees Six Crores Only) upon demand being made by PIH as under. 2. Upon receipt of a written demand from PIH at any time, stating that, OILFED has failed to fulfill any of the conditions specified in the Processing Agreement dated 22nd October 1997 and the Procurement Agreement dated 22nd October 1997 signed between PIH and OILFED, which demand shall be without the need for PIH to take legal action against or to obtain the consent of OILFED, and notwithstanding any conditions, and without any right to set off or counter claim we will subject only to paragraph 5 above, forthwith pay to PIH the amount specified in such demand. The payment shall be made by transfer to such account at such bank in such place as PIH may direct. 3. We, Bank of Baroda, do hereby undertake to pay the amount due and payable under this guarantee without any demur merely on a demand from PIH. Any such demand made on the bank shall be conclusive as regards the amount due and payable by the bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 6,00,00,000/- (Rupees Six Crores only). 4. Our maximum aggregate liability hereunder shall not exceed Rs. 6,00,00,000/- (Rupees Six Crores Only). Any such demand made on the bank shall be conclusive as regards the amount due and payable by the bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 6,00,00,000/- (Rupees Six Crores only). 4. Our maximum aggregate liability hereunder shall not exceed Rs. 6,00,00,000/- (Rupees Six Crores Only). Our obligation hereunder shall not be affected by any act, omission, matter or thing (whether or not known to us or PIH), so as to operate to release or otherwise exonerate us from such obligations in whole or in part including without information. We, Bank of Baroda, further agree that the guarantee herein contained shall remain in full force and effect during the period that would be taken for performance of the Agreement and it shall continue to be enforceable till all dues of PIH or by virtue of the said Agreement have been fully paid and its claims satisfied or discharged or till 31st May 1998. 5. All amounts payable under the Guarantee shall be made in full without any deduction for or on account of any present or future taxes, charges, fees, deductions, counterclaims or withholdings of any nature whatsoever and by whomsoever imposed. 6. If any provision of this Guarantee becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provision shall not in any way be affected or impaired. 7. Any demand on, or other communication to us, under the Guarantee shall be in writing and shall be sent by post, telex or fascimile transmission to the address set out herebelow. 8. The guarantee shall be governed by and constructed in accordance with the laws of India. We submit to the jurisdiction of the Courts of Bhopal (M.P.). 9. The guarantee shall be valid for its full value (unless reduced in accordance with Clause 5 above) upto the close of business on 30th April 1998 and unless a claim is made upon us, within one month thereafter, i.e. before 31st May 1998, all your rights under this guarantee shall be extinguished and we shall be relieved and discharged from all liabilities under this guarantee. for Bank of Baroda, Branch Habibgani, Bhopal Accountant Manager Sd/-illegible Sd/-illegible Dated 01.12.97 No. HBG/14/ADV-458 Dated 29.04.98 The Managing Director, M/s. PepsiCo India Holdings Ltd. Gurgaon GURGAON Dear Sir, Ref. for Bank of Baroda, Branch Habibgani, Bhopal Accountant Manager Sd/-illegible Sd/-illegible Dated 01.12.97 No. HBG/14/ADV-458 Dated 29.04.98 The Managing Director, M/s. PepsiCo India Holdings Ltd. Gurgaon GURGAON Dear Sir, Ref. - Our Bank Guarantee No. 97/19 for Rs. 600 lacs in your favour at the request of MP. State Cooperative Oilseed Growers' Federation Ltd. At the request of M/s. MP. State Cooperative Oilseed Growers' Federation Limited, 1, Arera Hills, Bhopal, the captioned guarantee has been extended upto 31.7.98 with a claim period of one month i.e. upto 31.8.98. The other terms and conditions of the guarantee remain unchanged. This letter will form an intergral part of the original guarantee bond. Yours faithfully, For Bank of Baroda, Sd/- Illegible Sr. Br. Manager, Habibganj Branch, Bhopal 12. The terms of the Bank Guarantee dated 1.12.97 given by the Bank of Maharashtra are as follows : - M/s Pepsico India Holdings Ltd., NEW DELHI (7/97-98 1.12.98) Dear Sirs, We, Bank of Maharashtra (hereinafter called Guarantor) hereby issue this irrevocable and unconditional Bank Guarantee, in your favour. Whereas M/s. M.P. State Cooperative Oilseed Growers' Fed. Ltd. of the address 1, Arera Hills, Bhopal (herein after called OILFED), have agreed to secure through an unconditional and irrevocable Bank Guarantee, the advance of Rs. 3,00,00,000/- (Rupees Three Crores Only) by PepsiCo India Holding Ltd. of the address 38 DLF Corporate Park, S-Block Qutab Enclave, Phase III, Gurgaon, Haryana 122 002 (hereinafter called PIH) as per the agreement dated 22nd October 1997 signed between OILFED and PIH (hereinafter referred to as the agreement) 1. In consideration of PIH accepting the Guarantor's obligation contained herein discharge of OILFED obligation to provide a Bank Guarantee as stated above the Guarantor irrevocably and unconditionally establishes its irrevocable guarantee in favour of PIH and for the account of OILFED for amount not exceeding Rs. 3,00,00,000/- (Rupees Three Crores Only) available immediately, and undertake to pay to PIH an amount not exceeding Rs. 3,00,00,000/- (Rupees Three Crores Only) available immediately, and undertake to pay to PIH an amount not exceeding Rs. 3,00,00,000/- (Rupees Three Crores Only) upon demand being made by PIH as under. 2. 3,00,00,000/- (Rupees Three Crores Only) available immediately, and undertake to pay to PIH an amount not exceeding Rs. 3,00,00,000/- (Rupees Three Crores Only) available immediately, and undertake to pay to PIH an amount not exceeding Rs. 3,00,00,000/- (Rupees Three Crores Only) upon demand being made by PIH as under. 2. Upon receipt of a written demand from PIH at any time, stating that OILFED has failed to fulfill any of the conditions specified in the Processing Agreement dated 22nd October 1997 and the Procurement Agreement dated 22nd October 1997 signed between PIH and the OILFED, which demand shall be against or to obtain the consent of OILFED, and notwithstanding any conditions, and without any right to set off or counterclaim we will, subject only to paragraph 5 below, forthwith pay to PIH the amount specified in such demand. The payment shall be made by transfer to such account at such bank in such place as PIH may direct. 3. We, Bank of Maharashtra, do hereby undertake to pay the amount due and payable under this guarantee without any demur merely on a demand from PIH. Any such demand made on the bank shall be conclusive as regards the amount due and payable by the bank under this guarantee. However, our liability under this guarantee shall be restricted to an amount not exceeding Rs. 3,00,00,000/- (Rupees Three Crores Only). 4. Our maximum aggregate liability hereunder shall not exceed Rs. 3,00,00,000/- (Rupees Three Crores Only). 5. Our obligation hereunder shall not be affected by any act, omission, manner or thing (whether or not known to us or PIH), so as to operate to release or otherwise exonerate us from such obligation in whole or in part including without intimation. We, Bank of Maharashtra, further agree that the guarantee herein contained shall remain in full force and effect during the period that would be taken for performance of the Agreement and if shall continue to be enforceable till all dues of PIH or by virtue of the said Agreement have been fully paid and its claim satisfied or discharged or till 31st May 1998. 6. All amounts payable under this Guarantee shall be made in full without any deduction for or on account of any present or future taxes, duties, charges, fees deductions, counterclaims or with holdings of any nature whatsoever and by whomsoever imposed. 7. 6. All amounts payable under this Guarantee shall be made in full without any deduction for or on account of any present or future taxes, duties, charges, fees deductions, counterclaims or with holdings of any nature whatsoever and by whomsoever imposed. 7. If any provision of the Guarantee becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provision shall not in any way be affected or impaired. 8. Any demand on, or other communication to us under the Guarantee shall be in writing and shall be sent by post, telex or fascimile transmission to the address set out here below. 9. This Guarantee shall be governed by and constructed in accordance with the laws of India. We submit to the jurisdiction of the courts of Bhopal (M.P.). 10. The guarantee shall be valid for its full value (unless reduced in accordance with Clause 5 above) upto the close of business on 30th April 1998 and unless a claim is made upon us, within one month thereafter, i.e. before 31st May 1998, all your rights under this guarantee shall be extinguished and we shall be relieved of and discharged from all liabilities under this guarantee. Dated (Seal) 7/97-98 1.12.97 Sd/- llegible For Bank of Maharashtra, Branch TT Nagar, Bhopal 13. Now the stages has arisen for stating the case of the appellant before the court-below. In this application under Section 9 of the Act the appellant stated initially that it supplied in all 934376 M.T. of soyabean seeds from time to time. The respondent No. 1 accepted the factual position and remitted cost of procurement of the soyabean seeds from time to time. It was stated in paragraph 5 of the application that the appellant received Rs. 5,00,00,000/- (Rupees Five Crores) as an advance and Rs. 9.07,14,809/- (Rupees Nine Crore Seven Lacs Fourteen Thousand Eight Hundred and Nine) towards the seeds supply. The appellant gave details of total payments by the respondent No. 1 according to the following chart: S. No. Cheque/DD No. Date Amount (Rs. ) 1. 337100 3/12/97 5,00,00,000.00 2. 021675 11/12/97 3,00,00,000.00 3. 021688 16/12/97 40,58,263.00 4. 021827 31/12/97 70,77, 464.00 5. 021828 31/12/97 8.06,292.00 6. 021829 31/12/97 68,33,649.00 7. 612141 7/1/98 57,84,056.00 8. 612142 7/1/98 3,60,95,462.00 9. TDS Deduction 59,623,.00 Total 14,07.14,809.00 It was stated by the appellant that two bank guarantees of Rs. ) 1. 337100 3/12/97 5,00,00,000.00 2. 021675 11/12/97 3,00,00,000.00 3. 021688 16/12/97 40,58,263.00 4. 021827 31/12/97 70,77, 464.00 5. 021828 31/12/97 8.06,292.00 6. 021829 31/12/97 68,33,649.00 7. 612141 7/1/98 57,84,056.00 8. 612142 7/1/98 3,60,95,462.00 9. TDS Deduction 59,623,.00 Total 14,07.14,809.00 It was stated by the appellant that two bank guarantees of Rs. 9 Crores were given in favour of the respondent No. 1. The respondent No. 1 abruptly sent intimation of suspension of purchase of soyabean seeds by letters dated 8.1.98 and 9.1.98. By that time, the appeallant had purchased 9343.765 M.T. of soyabean seeds on account of the respondent No. 1 and had processed them as per agreement for processing the soyabean seeds for and on behalf of the respondent No. 1. The respondent No. 1 had received the delivery of de-oiled cakes and exported them. It was stated thereafter the parties settled the account but despite that fact respondent No. 1 jumped into condusion against the appellant and did not pay any heed to the letter dated 24/27-4-98 or the oral requests of the appellant. The appellant averred due to sudden demand for cancellation of the activities of procurement the appellant's advance arrangement for collection of soyabean seeds and deals of sale of soyabean oil likely to be extracted went haywire". The appellant suffered huge losses for which it would lay claim before the Arbitrator. It was stated that the appellant had already incurred a loss of Rs. 120 Crores and thus this act of respondent No. 1 fatal. It was claimed that thereafter the respondent No. 1 invoked the two bank guarantees on 15.6.98 from Bank of Baroda and from Bank of Maharashtra demanding Rs. 6 Crores and Rs. 3 Crores respectively in writing. This invocation of the bank guarantees aforesaid was done without notice to the appellant. Such invocation of the bank guarantees was illegal as a fundamental breach was committed by the respondent No. 1 amounting to fraud. The last words added in the printed application in pen almost as a matter of an afterthought. It was claimed that the respondent No. 1 had breached the specific terms of the agreement wherein it was specifically agreed that there was legal obligation upon the respondent No. 1 to settle the dispute before the involvement of the terms of bank guarantee. It was claimed that the respondent No. 1 had breached the specific terms of the agreement wherein it was specifically agreed that there was legal obligation upon the respondent No. 1 to settle the dispute before the involvement of the terms of bank guarantee. The appellant gave in paragraph 13 of its application under Section 9 of the Act, the account position of procurement of soyabean seeds as follows : - 13. As per the accounts of the applicant, the account position of soyabean procurement is as under:- Particulars Amount Advance received from non-applicant No. 1 against Bank Guarantee. 5,00,00,000.00 Amount received against soyabean supply 9,07,14,809,00 Total: 14,07,14,809.00 less: - Cost of soyabean 9,90,50,812.61 Service charges Amount paid 14,12,915.46 71,043.00 Total: 10,05,34,771.07 Quality rebate Transportation charges 15,68,463.13 3,49,702.82 Total: 19,18,165.95 NET AMOUNT Less: NET AMOUNT 9,86,16,605.12 9.86,16,605.12 NET BALANCE 4,20,98,203.88 It was averred that it was clear that the liability of the appellant was limited to Rs. 4,20,98,203.68 against the advance of Rs. 5 Crores made by the respondent No. 1. That too shall accrue if and when the accounts were settled and disputes regarding the payments of liquidated damages were settled by the arbitrator. It was claimed that the appellant was already in the process of approaching the High Court under the Act and, therefore, the appellant claimed that it was entitled to interim order of injunction restraining the respondent Nos. 2 and 3 from paying to the respondent No. 1 the amount of two bank guarantees till the disposal of final award. The application filed by the appellant was supported by an affidavit filed on behalf of the appellant by Shri Satish Gupta, Deputy Manager of the appellant. 14. It appears that the appellant realised that in the original application it had hardly made any pleading regarding the alleged fraud committed by the respondent No. 1. Therefore, it was asserted by way of amendment in the original application by adding paragraph 14-A that the respondent No. 1 not only raised a fraudulent demand but also procured fraudulent bank guarantees for itself. It was claimed that the bank guarantee under the procurement agreement was intendedly limited to cover Rs. Five Crores for advance made by the respondent No. 1. It was claimed that the bank guarantee under the procurement agreement was intendedly limited to cover Rs. Five Crores for advance made by the respondent No. 1. The bank guarantee under the processing agreement was intended to cover the credit on oil-sale, and was also to cover the amount which became due for dihonouring the cheque for 30 days. It was stated that the bank guarantee under the procurement agreement could not be invoked for dues under the processing agreement. It was further said that the bank guarantee under the procurement agreement was not in accordance with Proforma A. The bank guarantee aforesaid exceeds the purpose the contractual obligation and authority under the principal agreement. It was stated that on termination of the agreement for procurement of soyabean seeds the respondent No. 1 could encash the bank guarantee for unadjusted advance amount and nothing more as per Clause 17 thereof. In paragraph 14-B it was stated that in view of paragraphs 2 and 10 of letter of bank guarantee read alongwith other terms, it could be concluded that the bank guarantee is not absolute as it appears to be on the face of it. It was asserted that the Clause 5 of the bank guarantee showed that it was made for securing the advance of the amount made by the respondent No. 1 to the appellant or its reduced value. The aforesaid clause was consistent (sic inconsistent ?) with Clause 17 (ibid). According to appellant in absence of any provision for reduced value it should be inferred that there was fraud played by the respondent No. 1. In paragraph 14(C) of it was alleged that the demand making the bank guarantee for nine Crores was under the misapprehension of facts. The claim could not be for nine Crores. It was also claimed that they have indulged in forging of records. It was claimed that the outstanding account of dispute in regard to interest. The disputed notice dated 11.6.98 does not state at all that appellant failed to fulfill any of the conditions specified in both the agreements, yet a fraud was committed by misrepresentation to the bank. In paragraph 14 (D) it was stated that it was utter false-hood on the part of respondent No. 1 to state to the bank that the appellant failed to perform its part of the agreement. In paragraph 14 (D) it was stated that it was utter false-hood on the part of respondent No. 1 to state to the bank that the appellant failed to perform its part of the agreement. It was the respondent No. 1 which suspended the agreement for its own selfish business interest. The letter dated 8.1.98 suspending the procurement agreement was for alleged market conditions and this was an instance of fraud. In paragraph 14 (E) of the amended reply it was stated that there were circumstances which gave rise to special equities in favour of the appellant to make this case of irretrivable injunction and injury to the appellant. In paragraph 14 (F) it was stated that the appellant is a Co-operative Federation engaging in common course for the welfare of the poor. It was working under financial constraint, and therefore, if illegal demand of the respondent be permitted, the entire structure of the appellant would shake. Consequently, the above co-operative projects based on the projects of the appellant shall fail affecting the welfare of farmers and growers in the State of M.P. The paragraph 14 (G) says that under the facts and circumstances of the case the question of right to seek encashment of the bank guarantee would be covered by arbitral dispute. This right cannot be rendered infructuous by the respondent No. 1 by encashing the bank guarantee. 15. The respondent No. 1 filed a reply to initial application saying that the appellant had made bald allegations of fraud. It was asserted that in view of number of decisions of the Supreme Court the disputes under the underlying agreement could not be considered for issuance of an injunction. Only ground for granting injunction would be, if it be proved that one of parties had committed fraud, which must be established to the satisfaction of the Court granting injunction and, further that bank must have notice of that fraud. The nature of fraud should be of an egregious nature so that the Court may safely say that the entire underlying transaction stood vitiated. The nature of fraud should be of an egregious nature so that the Court may safely say that the entire underlying transaction stood vitiated. The respondent No. 1 took the stand that even if be assumed, though not admitted by it, that the amount recoverable from by the respondent No. 1 against its claims from the appellant were limited to those set out by the appellant in his application under Section 9, the Court was not entitled to consider them for turning down the right of demand of respondent No. 1 from respondents No. 2 and 3 invoking the bank guarantee. It was the case of the respondent No. 1 that two bank guarantees in question, were complete and independent contracts, wholesome in themselves, and the Court may not look into the underlying contract for interpreting the contract of bank guarantee. The banks were duty bound to fulfil the terms of the guarantees in question, on the demand of the respondent No. 1 and, therefore, the Court could not look into the underlying agreements for determining if the appellant was entitled to an injunction. These were the preliminary objections of the respondent No. 1. It also gave parawise reply. The main thrust of the reply was that the agreement for procurement of soyabean seeds and the processing agreement were intimately and inextricably connected with each other. They reflected a single transaction. The appellant failed to procure soyabean seeds according to specifications as per procurement agreement. On 5.1.98 the respondent No. 1 asked the appellant to suspend the agreement. Then on 8.1.98, the respondent No. 1 reiterated that the soyabean seeds collected on 6th, 7th and 8th of January, 1998 could not be billed to it. According to the respondent No. 1, the appellant was supplying damaged seeds and the moisture content of those seeds was at variance with agreed specifications. Further, it was stated that the appellant had granted rebate to it on account of defect in quality as also because it had supplied damaged seeds. The fact was duly reflected in provisional statement of account dated 22.4.98. It further defaulted in payment of oil sale value. The appellant was paid and credited more than it was its due. A sum of Rs. 9,41,07,834.00 was due. The fact was duly reflected in provisional statement of account dated 22.4.98. It further defaulted in payment of oil sale value. The appellant was paid and credited more than it was its due. A sum of Rs. 9,41,07,834.00 was due. Besides the respondent No. 1 was entitled to claim damages, it was stated specifically that even the appellant was not denying that it had received in far excess of the amount towards procurement of soyabean seeds as per paragraph 5 read with paragraph 13 of the application. However, this statement did not give clear picture. This statement did not include the amounts payable to the respondent No. 1 due under the processing agreement towards the oil purchased by the appellant from the respondent No. 1. It was claimed that respondent No. 1 was required to pay more than Rs. 9 Crores as already stated. It was legally obliged to pay interest at the rate of 18% per annum on that amount. Apart from that, the respondent No. 1 was also entitled to claim damages from the appellant as well as from respondent Nos. 2 and 3. It was claimed that bank guarantees under Clause 8 of the procurement agreement was made not only for advance of Rs. 5 Crores but also for securing the amount advanced to the appellant from time to time by the respondent No. 1. It was claimed that Clauses 3 and 4 of the processing agreement show that the bank guarantee of Rs. 4 Crores was required to be furnished to cover the credit for 30 days. It was further agreed that this credit facility could be extended for thirty days and this agreement tried to secure the amount by requiring the appellant to issue a post-dated cheque and it was provided that the bank guarantee shall include a term that it could be invoked on dishonouring of the cheque. The respondent No 1 denied that it had no right to suspend the agreement. The letters dated 5.1.98 and 8.1.98 were in accordance with the terms of agreement. The appellant had taken the money in advance but was unable to pay its dues. The appellant breached the agreement and committed default. It was further stated that in reality, who breached the agreement could be decided by arbitrator. It was denied that the appellant supplied 9343765 M.T. of soyabean seeds. The appellant had taken the money in advance but was unable to pay its dues. The appellant breached the agreement and committed default. It was further stated that in reality, who breached the agreement could be decided by arbitrator. It was denied that the appellant supplied 9343765 M.T. of soyabean seeds. The value of the oil was not paid. The ultimate product after extraction of oil i.e. De-oiled cake was of poor quality and a large part of it could not be shipped. It was claimed that Rs. 9 Crores would be only a part of the amount due. This was much more to it as the respondent No. 1 was entitled to claim damages inter alia or less of profit over and above the amount of Rs. 9,41,07,834.00 as given in the Annexure-A to the reply. It was stated that the appellant had with held from the eyes of the Court that it was unable to procure and supply soyabean seeds as per specifications. It was denied that the appellant had suffered a loss of Rs. 120 Crores. The appellant was informed that on non-payment of dues under the agreement the respondent No. 1 shall invoke the bank guarantee. There was no law which required the respondent No. 1 to give notice or send the copy of invocation letter to the appellant. On the other hand, the respondent Nos. 2 and 3 acted mala fide contrary to banking practice, when they clandestinely made it known to the appellant that they had received the letter of invocation in respect of the bank guarantees. There was no fundamental breach of agreement. The appellant did not approach the Court with clean-hands because it suppressed material facts regarding the credit due to respondent No. 1 in respect of the value of the oil. The purported settlement of Account showed that the appellant owed to the respondent No. 1 more than Rs. 9 Crores as the things stood then but the appellant gave a partial picture by referring to due under the procurement agreement. The respondent No. 1, thus controverted the initial injunction application under Section 9 of the Act. 16. The respondent No. 1, however, did not amend its reply in order to counter the amendments by way of consequential amendment. 9 Crores as the things stood then but the appellant gave a partial picture by referring to due under the procurement agreement. The respondent No. 1, thus controverted the initial injunction application under Section 9 of the Act. 16. The respondent No. 1, however, did not amend its reply in order to counter the amendments by way of consequential amendment. The Court-below has held in paragraph 31 of its order that the provisions of Order 8 Rule 5 of the Code of Civil Procedure would not apply for the reason that this Court in rules framed under Section 82 of the Act, known as MP. Arbitration Rules had omitted to apply Order 8 of the Code of Civil Procedure. The Rule 9 (11) of the aforesaid rules does not mention that Order 8 would be applicable. This conclusion of the Court-below was not assailed during the course of the arguments. However, even if those provisions were applicable, the Court was not powerless to demand strict proof of the allegations under the application under Section 9 of the Act. However, the learned counsel for the appellant did not argue the matter on the foundation of deemed admission and, therefore, this Court shall proceed to decide the case as if omission to make consequential amendment was of no consequence. 17. The Court-below has refused to grant injunction to the appellant but has safe-guarded the interest of the appellant by providing : - (i) that the respondent No. 1 shall give an inrrevocable bank guarantee of Rs. 7 Crores in favour of the appellant to the effect that in case, the Arbitral Tribunal passes an award against the respondent No. 1, the appellant shall be able to recover the amount from the respondent No. 1 by invoking the bank guarantee. (ii) The respondents No. 2 and 3 were directed to release the amounts of their bank guarantees on production of the original bank guarantees in favour of respondent No. 1 and the certified copy of the bank guarantee was to be issued by the bank in favour of the appellant amounting to Rs. 7 Crores. (iii) It was further directed that for release of the amount of both bank guarantees, the respondent No. 1 shall deposit Rs. 7 Crores. (iii) It was further directed that for release of the amount of both bank guarantees, the respondent No. 1 shall deposit Rs. 1,20,84,175.00 in F.D.R. This amount shall remain in Fixed Deposit as a security and the entitlement to get the amount shall be determined by the Arbitral Award. Such directions could be given by the Court under Section 9 (ii) (b) of the Act. Section 9 (ii) (d) of the Act specifically deals with grant of injunction or appointment of receiver. The respondent No. 1 has not challenged the aforesaid direction and in case the appeal is allowed this Court is of the opinion now there would be no occasion to maintain the aforesaid directions as they are the direct consequence of dismissal application for injunction. The Court below has tried to secure the amount for the arbitral award. If the dismissal is maintained these directions are in favour of the appellant. The counsel for the appellant did not argue that he was not satisfied with the conditions imposed upon the respondent No. 1 in case the injunction claimed was not granted. The aforesaid facts, therefore, do not call for an exercise in interpretation of various clauses of Section 9 (ii) of the Act. This appeal is merely confirmed to the question if the Court-below rightly refused to grant injunction under Section 9 (ii) (d) of the Act. This was the only question hotly debated by the counsel for the parties. 18. The learned counsel for the appellant argued that the order of the Court-below was liable to be reversed on the ground of fraud perpetrated by the respondent No. 1 upon the appellant. Firstly it was submitted that the respondent No. 1 was responsible for furnishing the terms of the two bank guarantees. The terms of the two bank guarantees were obtained by fraud. The terms of the bank guarantees were not as envisaged by the two agreements, in question. The learned counsel for the appellant further argued that the fraud contemplated as condition for grant of injunction was not limited to the formation of underlying agreements or the bank guarantees. Any fraud or misrepresentation amounting to fraud would also be considered for granting a temporary injunction upto the decision of Arbitration proceedings. The learned counsel for the appellant further argued that the fraud contemplated as condition for grant of injunction was not limited to the formation of underlying agreements or the bank guarantees. Any fraud or misrepresentation amounting to fraud would also be considered for granting a temporary injunction upto the decision of Arbitration proceedings. As to the question of fraud committed by respondent No. 1, in obtaining the two bank guarantees, the learned counsel for the appellant argued that it was clear from clause 8 of the procurement agreement that a bank guarantee or bank guarantees were required to be furnished by the appellant to the tune of Rs. 5 Crores, for a period of nine months. This was a bank guarantee to secure the advance of Rs. 5 Crores made by the respondent No. 1 in favour of the appellant. The learned counsel for the appellant argued that format of the bank guarantees should have been as per Annexure-A to the agreement. The learned counsel urged that the bank guarantees in question, were not in accordance with the format. At this stage the learned counsel was asked to show to the Court if there was any format (Annexure-A) attached to the procurement agreement. Both the counsel stated that there was none. Therefore, the argument of learned counsel that the respondent No. 1 did not adhere to format (Annexure-A) is rejected at this stage and it shall not be considered any further. However, the learned counsel for the appellant further argued that the bank guarantees were obtained by fraud on its own terms shall be dealt with during the course of discussion, The learned counsel for the appellant argued that in case that appellant was able to establish that while invoking the bank guarantees in question, the respondent No. 1, having committed breach of the two underlying agreements had misrepresented to the banks, that appellant had breached the terms of agreement and thereby committed fraud. The learned counsel for the appellant argued that the bank guarantees in question, could not be said to be independent contracts in themselves. They should be held to be incorporated in the original agreements as per intention of the parties. The learned counsel for the appellant argued that the bank guarantees in question, could not be said to be independent contracts in themselves. They should be held to be incorporated in the original agreements as per intention of the parties. For this reason, the learned counsel sought liberty from the Court to show that not only the respondent obtained the aforesaid bank guarantees fraudulently but also committed breach of agreements and misrepresented to the banks in question that the appellant was guilty of this breach. During the course of the argument the learned counsel pointed out that it was not disputed before the Court-below that so far as procurement agreement is concerned the appellant was liable to pay Rs. 4,20,98,203.00 to respondent No. 1. Therefore, to that extent appellant may be entitled to invoke the bank guarantee as per Clause 17 of the agreement. It was also sought to be argued that the letters invoking the bank guarantees were contrary to two agreements. The respondent No. 1 could invoke the bank guarantees for breach of all or any of the conditions. The statement made to the banks that the appellant had failed to fulfil any of the conditions of the procurement agreement and the processing agreement dated 22nd of October, 1997 was contrary to terms of the two bank guarantees. It was gross misrepresentation of the fact that the appellant had breached all the conditions of the agreements. According to learned counsel the use of the word any of the conditions implied that the appellant had breached all the conditions. This was a total misrepresentation of facts amounting to fraud and the Court was entitled to consider the misrepresentation on the part of the respondent No. 1 to hold in favour of the appellant. The learned counsel pointed out to the fax message issued on behalf of the respondent No. 1 dated 9.1.1998 and highlighted the message of the respondent No. 1 to the effect that it confirmed the fact that it had asked the appellant to stop purchasing of soyabean with effect from 5.1.1998 on its account due to desperate market conditions. The learned counsel pointed out to the fax message issued on behalf of the respondent No. 1 dated 9.1.1998 and highlighted the message of the respondent No. 1 to the effect that it confirmed the fact that it had asked the appellant to stop purchasing of soyabean with effect from 5.1.1998 on its account due to desperate market conditions. It was initially submitted that though the appellant denied that it received the message dated 5.1.1998, it raised on this document relied when the Court pointed out to the learned counsel for the appellant that he cannot rely on the uncommunicated document because this document would be valueless, if not communicated. Therefore, the learned counsel for the appellant elected to say that he would rely on this document and the Court may take it that this message was received by the appellant. It was argued that special equities were created in favour of the appellant under the facts and circumstances of the case and, therefore, the Court should issue temporary injunction. It was also submitted that the question of invocation of bank guarantees cannot be decided in isolation. It was part and parcel of the agreement of procurement and the processing agreements and, therefore, the right of the appellant and respondents can be determined by the arbitral tribunal. The respondent No. 1 was not entitled to invoke the bank guarantee. During the course of the arguments, the learned counsel for the appellant relied upon the following authorities: - (i) M/s. Synthetic Foams Ltd. v. Simplex Concrete Piles, (India) Pvt. Ltd., AIR 1988 Delhi 207. (ii) M/s. R.C. Thakkar v. The Bombay Housing Board (by its successors) now The Gujrat Housing Board, AIR 1973 Gujt 34. (iii) Hindustan Paper Corporation Limited v. Keneil-House Angami, 1990 (68) Comp. Cases 361. (iv) Taj Trade and Transport Co. Ltd. V. Oil and Natural Gas Commission and another, 1994 (80) Comp. Cases 740. (v) Shiv Ispat Udyog P. Ltd. v. Indus Valley, 1986 (60) Comp. Cases 405. (vi) Nangla Construction India (P) Ltd. v. Natural Buildings Construction Corporation Ltd. and Others, 41 (1990) DLT 359, (vii) Hindustan Steel Works Construction Ltd. v. Tarapore & Co. And another (1996) 5 SCC 54 . (viii) Larsen & Toubro Ltd. v. Maharastra State Electricity Board & Others, (1995) 6 SCC 68 . Cases 405. (vi) Nangla Construction India (P) Ltd. v. Natural Buildings Construction Corporation Ltd. and Others, 41 (1990) DLT 359, (vii) Hindustan Steel Works Construction Ltd. v. Tarapore & Co. And another (1996) 5 SCC 54 . (viii) Larsen & Toubro Ltd. v. Maharastra State Electricity Board & Others, (1995) 6 SCC 68 . The learned counsel for the appellant further submitted that apart from fraud of the respondent No. 1, the Court should grant temporary injunction to the appellant restraining the respondent No. 1 to recover the amount of Rs. 9 Crores from the appellant by invoking the bank guarantee on the appellant who shall, otherwise, suffer immensely. The appellant had suffered a loss upto Rs. 120 Crores by the end of March, 1997. The fractional financial structure shall suffer a death-blow to it. This blow in turn shall paralyse the co-operative projects of the appellant. Consequently, the farmers and growers shall also suffer. The Court must look to the welfare aspect of the activities of the appellant and hold that there are special equities in its favour to save it from irretrivable injustice or damage. 19. The learned counsel for the respondent No. 1 argued that it was well established that the underlying agreements cannot be looked into for granting or refusing injunction. A bank guarantee was an independent contract and the Banks could not look into the original underlying agreements for withholding the amount payable to the beneficiary. The Banks have to obey the terms of the bank guarantee. For this reason, the Courts are chary of looking the original underlying agreement. It was submitted further that there are numerous decisions of the Supreme Court and the High Courts laying down the law to the effect that Court may grant temporary injunction in case of an unconditional and irrevocable bank guarantee on account of an egregious fraud committed by the beneficiary in relation to the transaction in question. The Court must be satisfied that the fraud was established by the opposite party. As to the decree of fraud, the learned counsel submitted that it should be such which would vitiate the agreement on which the bank guarantee was founded. The subsequent dispute in performance of contract did not give rise to cause for issuing injunction restraining a party from enforcing the bank guarantee. As to the decree of fraud, the learned counsel submitted that it should be such which would vitiate the agreement on which the bank guarantee was founded. The subsequent dispute in performance of contract did not give rise to cause for issuing injunction restraining a party from enforcing the bank guarantee. The matter regarding the breach of contract by the either party the agreement has to be settled by the appropriate tribunal, be it a Civil Court or an arbitral tribunal, depending upon the terms of the agreement. It was further submitted that the Courts have evolved another category where interference with the invocation of a bank guarantee could be made. It came under the heading of irretrievable injustice or damage. It was forcefully argued that irretrievable injustice could be inferred only in those cases where re-imbursement to appellant was impossible. There was no such allegation in the application. The Court cannot take into consideration the hardship to the appellant for which the respondent No. 1 was not directly responsible. The respondent No. 1 was a sound Company as would be borne out by the fact that it promised and advanced initially Rs. 5 Crores to the appellant at the time of entering into procurement agreement or soon thereafter. It further paid Rs. 9,07,14,809 to the appellant for procuring the soyabean seeds. It was further submitted that the Court-below has safe guarded the bank guarantee of Rs. 7 Crores, asking it to deposit Rs. 1,20,84,175/- in fixed deposits as a security. Both these accounts shall ensure to the benefit of the appellant till the arbitral tribunal gives its award. It was submitted that the Court should reject the contention of the appellant regarding irretrievable injury. It was further submitted that the appellant had no prima facie case in its favour. The balance of convenience lay in allowing the banking transaction to go on. It was pointed out that the initial application under Section 9 of the Act did not state any material particulars of fraud committed by the appellant. The application under Section 9 of the Act was filed because the respondent No. 1 had invoked the bank guarantees in question without giving a notice to the appellant. It appears that the word fraud' was added in pen at the time of filing of the application. The application under Section 9 of the Act was filed because the respondent No. 1 had invoked the bank guarantees in question without giving a notice to the appellant. It appears that the word fraud' was added in pen at the time of filing of the application. The allegations of fraud were brought in as an after thought by way of the amendment. It was submitted even that amendment did not spell out a fraud of the nature that entitled the Court to pass an order of injunction. This category should be limited to a fraud in connection with (i) the formation of the agreements and (ii) the bank guarantees. It was also argued that there was no established fraud as the facts were in dispute. 20. The learned counsel for the respondent No. 1 urged further that the fraud must be such as could be recognized by a Banker before refusing to honour a bank guarantee. It should not depend upon facts alleged by one party and disputed by the other. The Bank cannot adjudicate and it cannot take sides. Otherwise, the whole banking system would be paralysed and the honour of the Bank in dealing with the customers shall be shaken. It is an egregious fraud known to Bank that shall stop it from honouring the bank guarantee. The undconditional bank guarantees made payable on demand without demur must be paid without any hesitation. The Court should, therefore, refuse to grant injunction as payment could not be postponed till the dispute regarding breach of contract is decided by the arbitral tribunal. A bank guarantee being an independent contract, it was not necessary to quantify the money payable as per agreements in question. There was no question of unjust enrichment in this case and even it be so it could not be a ground for granting an injunction. The learned counsel drew the attention of this court to observations of Jagannatha Shetty, J. in the case of U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. (1988) 1 SCC 174 , at page 192-193, paragraph 43, wherein the learned Judge agreeing with the conclusions of Sabyasachi Mukherjee, J., observed that the question of examining prima facie case or balance of convenience would not arise, if the Court cannot interfere with the unconditional bank guarantees, in question. Nevertheless, the learned counsel submitted in the alternative that the appellant had no prima facie case in its favour. The respondent No. 1 had not breached any terms of the two guarantees and it has invoked them as per terms of the bank guarantees, in question. The learned counsel argued that the balance of convenience is always in favour of allowing the smooth running of banking transactions. The learned counsel for the respondent No. 1 pointed out that the respondent No. 2, the Bank of Baroda and the respondent No. 3, the Bank of Maharashtra, instead of honouring the unconditional bank guarantee given by them in favour of the respondent No. 1 without demur, wrote letters dated 16.6.98 and 17.6.98 respectively demanding the amount covered by the bank guarantees from the appellant. The respondent No. 1 was not concerned under what circumstances the respondent No. 2 and 3 were persuaded by the appellant to agree to issue the guarantees in its favour without securing their interest. However, by their letters they indicated to the appellant that now the bank guarantees are invoked and it may enter into litigation. This attitude of the Banks was seriously criticised and reliance was placed on the observation of B.N. Kripal, J. in the case of Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engg. Works (P) Ltd., reported in (1997) 6 SCC 450 at page 463, paragraph 32. In this case, His Lordship stated in no uncertain terms that it is legal and moral duty of the Banks to honour their commitments. The action of the Bank in that case was not appreciated when it dragged its feet in order to allow the respondent No. 1 in that case to seek favourable injunction. The learned counsel for the respondent No. 1 submitted that in the case in hand, the respondents No. 2 and 3 also showed partisan attitude and behaved in a manner which does not behove the Banks. The learned counsel for respondent No. 1 refuted the arguments of the counsel for the appellants on facts and stated that two agreements i.e. the procurement agreement and the processing agreement formed part of a single transaction. The parties did not annex terms of Bank guarantee under procurement agreement to an advance of Rs. 5 Crores. The parties must have given up the idea of having one or more bank guarantees of Rs. The parties did not annex terms of Bank guarantee under procurement agreement to an advance of Rs. 5 Crores. The parties must have given up the idea of having one or more bank guarantees of Rs. 5 Crores under the procurement agreement and one or more guarantees of Rs. 4 Crores under the processing agreement as initially agreed. Instead the two bank guarantees of Rs. 6 Crores and Rs. 3 Crores respectively, were given. The amount of guarantees of the Bank of Baroda amounting to Rs. 6 Crores could not be exclusively confined to advance of Rs. 5 Crores. Therefore, it would be misnomer to call it a bank guarantee securing the advance of Rs. 5 Crores. The additional Rs. 1 Crore out of Rs. 6 Crores must be referable to the processing agreement because under the processing agreement the appellant was required to give a guarantee of Rs. 4 Crores, whereas a bank guarantee of Rs. 3 Crores was given by the Bank of Maharashtra. It was argued that the parties did not adhere to the two agreements at the time the bank guarantees were given on the terms mentioned in them. This was a subsequent modification because the appellant insisted that Rs. 5 Crores be paid to it. It was argued that there was no merit in the argument of the appellant that the respondent No. 1 was guilty of committing fraud in supplying the terms of the bank guarantees. The proposed terms of the two bank guarantees were sent by the appellant itself to respective Banks. It was an open eyed transaction on the part of the appellant. It was emphasized that the appellant supported the fact in its application under Section 9 of the Act by stating that only Rs. 4,20,98,203.68 were due to the respondent. It omitted to mention in its application the amount due under the processing agreement. The total amount was Rs. 9,41,07,834.00. It was stated that the provisional statement of accounts between the parties dated 22.4.98 showed that provisionally Rs. 7,79,15,825.58 were due. This statement dated 22.4.98 was signed by the parties. However, this statement too was incomplete as interest was not finalized. The letter dated 11th June, 1998 referes to that aspect of the matter. The aforesaid suppression of facts on the part of the appellant was in itself sufficient for refusal of equitable relief of injunction. 7,79,15,825.58 were due. This statement dated 22.4.98 was signed by the parties. However, this statement too was incomplete as interest was not finalized. The letter dated 11th June, 1998 referes to that aspect of the matter. The aforesaid suppression of facts on the part of the appellant was in itself sufficient for refusal of equitable relief of injunction. As to the breach of agreement on the part of respondent No. 1, it was argued that it was clearly from the correspondence between parties on record that the respondent No. 1 was guilty of the breach of She agreements. It was unable to supply soyabean seeds as per quality specifications mentioned in the procurement agreement. The learned counsel stated that it would be apparent from the fact that as per provisional statement of account signed jointly by both the parties on 22.4.98. The quality rebate was assessed at Rs. 14,50,187.13 and the damaged seed at Rs. 1,18,276.00 within a very short period. The respondent No. 1 was worried about the quality of seeds supplied and therefore, it exercised its right of suspension of procurement as per agreement from 5th of January, 1998. On 8.1.1998, Shri Atindra Sen wrote a letter to the effect that the Board of directors had modified the quality of seeds on account of heavy rains. They unilaterally relexed the specifications without consulting the appellant the extent of moisture to 15% and total damage to 15%. The respondent No. 1 was warning the officers of the appellant regarding the quality of soyameal and de-oiled cakes by saying that they were not upto the mark. On 1st of December, 1997 a letter was sent to the General Manager of the appellant at Banapura regarding the moisture and oil-content in soyameal. It was stated that oil should not exceed more than 1% and moisture should be maximum 12% at the production time. In the letter dated 4th December, 1997 again written to the General Manager of the appellant it was mentioned that the de-oiled cake contained more than 12% moisture at the time of Production. Both those letters gave examples of moisture content in soyameal and de-oiled cake respectively on previous days. Again on 8th of December, 1997 a letter was sent to the General Manager regarding the fact that the moisture content was more than 12%. Both those letters gave examples of moisture content in soyameal and de-oiled cake respectively on previous days. Again on 8th of December, 1997 a letter was sent to the General Manager regarding the fact that the moisture content was more than 12%. Then letters dated 11th December, 1997, 12th December, 1997, 14th December 1997, and 15th December 1997 showed that de-oiled cake contained more than 12% of moisture on previous dates at the time of production. It was also pointed out in the letters of dated 12th December, 1397 and 15th December, 1997 that the muffle furnace was out of order and needed repair so that sand and silica contents did not exceed more than 2%. It was urged that no response was made by the appellant towards the quality control. On 19th of December, 1997 a letter was sent to Mr. Atindra Sen by the Vice President after the letter visited the office of respondent No. 1. It was a detailed letter regarding the processing plant at Banapura. It was pointed out that the moisture content in the de-oiled cakes was more than maximum 12% and sand, silica content was 1%. It was pointed out that silica level was less because of non-addition since 5.12.1997. The result was that margin of profit was eroded because the cargo was unacceptable to buyers in the international market necessitating the withholding of cargo. It was urged that under these circumstances the respondent No. 1 through Abiram Seth advised Shri Atindra Sen, the General Manager of the appellant, to suspend purchase of Soyabean seeds. As already stated, instead of improving the quality of product, the appellant through its Directors, reduced the quality of product and wrote a letter dated 8.1.1998. A fax message was sent by respondent No. 1 on 8.1.1998 not to take delivery of soyabean seeds in its account from 6th of January, 1998. The learned counsel for the respondent No. 1 submitted that confirmation message dated 9th January, 1998 not to purchase soyabean towards the account of the appellant, no doubt, was desperate market conditions but these words cannot be used to imply that respondent No. 1 breached the agreement because it was loosing ground in the international market due to topsyturvy condition of the market. The out come was on account of non-supply of quality goods by the appellant. The out come was on account of non-supply of quality goods by the appellant. It was asserted that the argument of the learned counsel for the appellant is belied by the conduct of respondent No. 1 and the appellant. However, that was not end of road. The confirmation message dated 9.1.98 also stated "please do not purchase any beans on our account till you hear from us in writing". It was submitted that negotiations between the parties continued. On 17.3.98 the respondent No. 1 demanded Rs. 4.25 Crores on account of oil seed invoices. The amount due for the month of December 1997 and January 1998. It was submitted that the letter dated 25.3.98 gave detailed reasons for suspension of operation at' Banapura. It pointed out what went wrong with procurement operations and sales and unfair soyabean purchased from the Mandi by the appellant on behalf of respondent No. 1. It appeared from this letter that the Vice President, Commercial called Shri Atinder Sen for discussion. On 3rd April, 1998 a demand of Rs. 5 Crores was made. Thereafter, naturally agreed provisional statement of account was signed. It was found that the appellant was liable to pay Rupees 7,79,15,825.58. This amount had included the claims of the appellant for Rs. 3,49,702.82 and also a debit note for oil production of Rs. 2,39, 434.48. It was so stated in the foot-note. However, it was made clear that there were other issues which were still pending finalization. Thereafter, as per earlier discussion between the parties the appellant extended the two bank guarantees till 31.7.1998 with a claim for a period of one month on the same terms and Banks, accordingly, extended the time. The learned counsel argued that it was at the instance of the appellant, the Bank guarantees were extended. Since the respondent No. 1 did not receive any amount towards the balance, the Commercial President of the Company, wrote to the appellant to the effect that accounts settled and signed were almost completed as per discussion between the parties in May, 1998. The bottle neck was on what amount the interest had to be charged. It was stated that the appellant should send an account of final calculation of interest and the details be given when the balance of amount shall be cleared, failing which it was stated that the respondent shall encash the bank guarantees in question. The bottle neck was on what amount the interest had to be charged. It was stated that the appellant should send an account of final calculation of interest and the details be given when the balance of amount shall be cleared, failing which it was stated that the respondent shall encash the bank guarantees in question. Thereafter on 15th of June 1998 two similar letters were sent to Bank of Baroda stating that the appellant failed to comply with the condition of the bank guarantees. In these letters the Bank Account of the respondent No. 1 in which the amount was to be credited, was given. It was further stated that the bank Guarantees will be delivered on remittance of the amount. The learned counsel for the respondent No. 1 argued that it was impossible to infer any fraud on the part of the respondent No. 1 much less an egregious fraud. The appellant was unable to supply the quality seed and therefore, the procurement operation had to be suspended from 6th of January, 1998. The appellant was forewarned but Instead It tried to Impose upon the respondent No. 1 its own specifications. Thereafter the parties negotiated and when the discussions showed that appellant was unable to supply quality seeds there was time for parting of ways. The appellant did not pay the balance of amount and did not calculate the interest. The appellant was forewarned as to the consequences. The learned counsel for the respondent No. 1 argued that his client was entitled to invoke the bank guarantees in question. There was no breach of any terms of the bank guarantees, themselves. There was no merit in the argument that the appellant was not aware that the respondent No. 1 shall invoke the bank guarantees. The letters invoking the bank guarantees could not be held to be fraudulent because the respondent No. 1 had used the words any of the terms of the bank guarantees. During the course of the arguments the learned counsel for the respondent No. 1 referred to a number of decisions of Supreme Court and the High Courts. They are as follows : - (1) I.T.C. Limited v. Debts Recovery Appellate Tribunal (1998) 2 SCC 70 . (2) Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and another (1997) 6 SCC 450 . They are as follows : - (1) I.T.C. Limited v. Debts Recovery Appellate Tribunal (1998) 2 SCC 70 . (2) Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. and another (1997) 6 SCC 450 . (3) U.P. State Sugar Corporation v. Sumac international Ltd. (1997) 1 SCC 568 . (4) Ansal Engineering Project Ltd. v. Tehri Hydro Development Corporation and another (1996) 5 SCC 450 . (5) State of Maharashtra v. National Construction Company Ltd. (1996) 1 SCC 735 . (6) Larsen & Tourbo v. Maharashtra State Electricity Board (1995) 6 SCC 68 . (7) Hindustan Steel Workers Construction Ltd. v. G.S. Atwal & Co. Engs. Pvt. Ltd. (1995) 6 SCC 76 . (8) Hindustan Steel Works Construction Ltd. v. Tarapore & Co. and another (1996) 5 SCC 34 . (9) Murarka Cables & Conductors Ltd. v. Zomet Trading Co. Ltd. (1995) Supp. (4) SCC 585. (10) National Thermal Power Corporation Ltd. v. Flowmore (P) Ltd. (1995) 4 SCC 514. (11) State Trading Corporation of India Ltd. v. Jainsons Clothing' Corporation (1994) 6 SCC 597 (602 to 605). (12) Svenska v. Indian Chargo Chrome (1994) 1 SCC 502 (530). (13) General Electric Vs. Punj Sons (P) Ltd. (1991) 4 SCC 230 . (14) U.P. Cooperative Federation Ltd. v. Singh Consultants & Engineers Pvt Ltd. (1988) 1 SCC 17. (15) CENTAX (India) Ltd. v. Vinmar Impex Inc. & others AIR 1986 SC 1924 : 1986 (4) SCC 136 . (16) United Commercial Bank v. Bank of India & others, 1981 (2) SCC 766 : AIR 1981 SC 1426 . (17) Tarapore & Company v. V.O. Tractors Export, AIR 1970 SC 891 : 1969(1) SCC 233 . ' (18) Ramnarayan Bhujbal Singh v. Purshottam Puran Shankar 1983 MPW 485. (19) Shri Krishan v. Kurukshetra University (1976) 1 SCC 311 . (20) Bishnudeo Narayan v. Seogeni Rai & others, AIR 1951 SC 280 . (21) A.L.N. Narayan v. Official Assignee, High Court A. ILR 1941 P.C. 93. (22) S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1 . (23) Tom Bocavey Barrett v. African Product Ltd. AIR 1928 P.C. 261. 21. The question involved in this case is if the Court should interfere with the order passed by the Court-below. (21) A.L.N. Narayan v. Official Assignee, High Court A. ILR 1941 P.C. 93. (22) S.P. Chengalvaraya Naidu v. Jagannath (1994) 1 SCC 1 . (23) Tom Bocavey Barrett v. African Product Ltd. AIR 1928 P.C. 261. 21. The question involved in this case is if the Court should interfere with the order passed by the Court-below. It has been sought to be shown by the appellant that as a matter of law the bank guarantees should be deemed to be incorporated in the original underlying agreements or that the invocation of bank guarantees should according to terms of the original agreements. In other words a bank guarantee would not be an independent contract if there be an agreement between the parties to give a bank guarantee. Now it is obvious that Section 126 of the Contract Act would cover a bank guarantee too because it would be a contract to perform the promise or discharge the liability of a third person in case of his default. The person on whose behalf the Bank undertakes to pay, would be the principal-debtor. The guarantee holder would be the creditor. The Bank would stand surety to creditor for the liabilities of the principal debtor. It is a contract of guarantee. It can not be disputed that in India such contractors are governed by the Contract Act. The contract of guarantee is thus a tri-partite agreement governed by all the provisions of the Contract Act which are made specifically to such contracts from Section 126 to Section 147 of the Contract. That does not mean that other provisions of the Contract Act would not apply to such a case. A contract of guarantee must be a "Contract". A contract is an agreement enforceable by law under Section 2 (h) of the Contract Act. Now, a surety under a contract of guarantees is to perform the promise or discharge the liability of third person. However, a surety cannot be asked to perform any promise or discharge any liability unless those are in themselves enforceable in law. In other words, the 'contract of guarantee' would be governed by the principal agreement between the principal-debtor and the creditor for at least, judging if the surety or the guarantor could be compelled to perform his part of contract. In other words, the 'contract of guarantee' would be governed by the principal agreement between the principal-debtor and the creditor for at least, judging if the surety or the guarantor could be compelled to perform his part of contract. Since the liability of the surety is co-extensive with that of the principal debtor under Section 128 of the Contract Act it would not be impermissible to look into the underlying agreement to find out if the liability of surety survives. Therefore, it would not be appropriate to hold that the underlying agreement is utterly irrelevant for determining the liability of the surety. A surety cannot be compelled to perform a promise or discharge a liability which would not be legal or which would be void within the meaning of Section 2 (g) of the Contract Act or has once become void within the meaning of Section 2 (f) of the Contract Act. Even in a case of voidable contract when the principal debtor or the creditor, as the case may be, exercises his option of not enforcing the underlying contract the liability of the surety would be discharged. This result shall follow because the underlying contract on which a guarantee is based, is so tainted that it gives a statutory right to make that an agreement void by exercise of an option. There can be no contract to perform the promise to discharage the liability of a third person when the contract becomes void by exercise of statutory option to avoid it. In other words, the surety is liable to perform a 'contract of guarantee' for default of a third person in respect of an underlying contract of agreement which could be enforced. The result of the aforesaid discussion is that this Court comes to the conclusion that to speaking generally it would not be a correct proposition of law to say that a contract of guarantee can be wholly divorced from the underlying agreement. 22. However, this Court is called upon to consider the case of two bank guarantees which would contracts of guarantees within the meaning of Section 126 of the Contract Act. The two bank guarantees are reproduced in this order in paragraphs 11 and 12. Both these bank guarantees in the case of the Bank of Baroda is Rs. Six Crores and that in the case of Bank of Maharashtra is Rs. The two bank guarantees are reproduced in this order in paragraphs 11 and 12. Both these bank guarantees in the case of the Bank of Baroda is Rs. Six Crores and that in the case of Bank of Maharashtra is Rs. Three Crores and that in the case that these two Bank guarantees are accessory contracts whereby the two Banks gave an undertaking in writing as guarantors, with the terms incorporated in the two bank guarantees. The preamble of the guarantees aforesaid show that they are securing the amounts mentioned in them, through and unconditional and irrevocable bank guarantees. The clause 1 of the two bank guarantees says that in consideration of acceptable of the obligation of the guarantor by respondent No. 1 in discharge of the obligation of the appellant to provide a bank guarantee upon the demand of respondent subject to condition mentioned in subsequent clauses. The clause 2 of the two bank guarantees requires the respondent No. 1 to state that the appellant had failed to fulfil any of the conditions specified in two agreements in question and then the Banks obligation is to pay forthwith on demand the amount specified in demand by transferring the amount to such account in such place as the respondent No. 1 may direct. It was made clear in this clause 2 that the respondent No. 1 shall not be required to seek consent of the appellant to take legal action against it before invoking the two bank guarantees. This obligation of the Banks would be notwithstanding "any conditions and without any right to set off or counter-claim." The only limitation is that the clause 2 shall be subject to clause 5. Here there is slight difference in the two bank guarantees. The clause 5 of the Bank Guarantee of the Bank of Baroda says that the Amount of Bank guarantee shall be payable without any deductions of any nature whatsoever and by whomsoever imposed. It is numbered as clause 6 in the bank guarantee issued by the Bank of Maharashtra. Here there is slight difference in the two bank guarantees. The clause 5 of the Bank Guarantee of the Bank of Baroda says that the Amount of Bank guarantee shall be payable without any deductions of any nature whatsoever and by whomsoever imposed. It is numbered as clause 6 in the bank guarantee issued by the Bank of Maharashtra. The clause 5 of the guarantee of the Bank of Maharashtra is similar to a clause which appears to be incorporated in clause 4 of the Bank of Baroda (because it is not numbered as clause 5) is in two part, being (i) the obligation to pay shall not be affected by any act, omission or matter or thing to operate as release or otherwise exonerate the obligations of the Bank in whole or in part (whether or not known to the Bank or the respondent No. 1), (ii) This part has definite relation to clause 2. It relates to duration of the bank guarantee in question. It says that guarantee shall remain in full force effect that will be taken for performance of the agreements and it shall remain in force and effect till all the dues of the respondent No 1 are paid in full and the claim of respondent is fully satisfied or discharged or till 31st of May, 1996. In other words liability mentioned in clause 2 shall be operative till respondent No. 1 obtained full discharge under the agreement or till 31st May, 1995. The clause 3 of both the bank guarantees incorporates an important condition. Both the Banks agreed to pay the amount of the Bank guarantees to the extent of maximum without any demur and merely on the demand of the respondent No. 1. The demand so made by respondent No. 1 was conclusive as "regards the amount due and payable" by the Banks under the guarantees. There is another clause, numbered as clause 7 in the Bank Guarantee of Bank of Maharashtra (No. 6 in that of Bank of Baroda) fixing the mode of demand i.e. by post, telex or fascimile transmission. There is one clause in both the agreements that even if a part of the bank guarantee becomes invalid it shall not affect the other part. The guarantees shall be construed in accordance with the laws of India and jurisdiction shall be Bhopal. There is one clause in both the agreements that even if a part of the bank guarantee becomes invalid it shall not affect the other part. The guarantees shall be construed in accordance with the laws of India and jurisdiction shall be Bhopal. The last clause fixes the maximum period for invoking the bank guarantee as 31st May, 1998. However, both the bank guarantees have been extended till 31st of August, 1998 and there is no dispute on this count. 23. The question that has to be decided by this Court is whether this Court can interpret the aforesaid bank guarantees dehors the two agreements of procurement and processing or treat them as part and parcel of the two agreements. It has already been held that underlying agreement could be looked into for considering if the guarantor or surety is liable to perform any legal promise or discharging any legal default of the principal-debtor. In the sense a bank guarantee cannot be said to be totally independent of the underlying agreement. However, it is not the claim of the appellant that either of the agreements was void or was declared void subsequently. The validity of two agreements is not in question. Nor, it is said that these agreements were obtained by fraud. Therefore, the question of considering the procurement and processing agreements for determining the liability of the appellant does not arise. The Banks gave the bank guarantees under legal and valid agreements. 24. The question raised by the learned counsel for the appellant is that the Court is entitled to look into original agreements for holding whether the respondent No. 1 is entitled to invoke the two bank guarantees. In the opinion of this Court the interpretation suggested during the arguments could be adopted only in these cases whether either by the terms of the underlying agreement itself the bank guarantee is incorporated in the original agreement and that the guarantor - Bank accepts the liability. The other way to get the terms of the agreement enforced would be to incorporate in the bank guarantee itself the necessary terms of the original agreement. It was not disputed that there was no annexure to the original agreement for procurement. Nor did the parties incorporate in any of the two bank guarantees clause 8 and clause 17 of the procurement agreement. It was not disputed that there was no annexure to the original agreement for procurement. Nor did the parties incorporate in any of the two bank guarantees clause 8 and clause 17 of the procurement agreement. It appears that subsequently, both the parties did not adhere to secure the liability of the appellant as envisaged in the two agreements. Initially, the idea was that the Banks shall give one or more bank guarantees for Rs. 5 Crores securing the advance of Rs. 5 Crores or any other amount advanced by the respondent No. 1 to the appellant from time to time. The other bank guarantees for Rs. 4 Crores was to be given to secure the purchase of soya oil by the appellant on credit for a period of 30 days. However, the original idea behind the two agreements was given up and two bank guarantees were obtained of Rs. Five Crores from the Bank of Baroda and Rs. 3 Crores from the Bank of Maharashtra, covering both the agreements. For this reason, there is no merit in the argument of the learned counsel for the appellant that one of the guarantees was an advance guarantee. It is difficult to categorise the guarantee given by Bank of Baroda as an advance guarantee because it refers to both the agreements. The same argument would be applicable to the guarantee given by the Bank of Maharashtra. Realising his difficulties the learned counsel for the appellant argued that the bank guarantees in question, were obtained by the respondent No. 1 by fraud because the draft of terms of the Bank of guarantees was supplied by the respondent No. 1. It may be so. The appellant was not bound to accept these terms and should have refused to accept the suggested terms of the bank guarantees. It appears that the appellant had placed on record a proforma of the proposed bank guarantee and alleged that it was respondent No. 1 which had proposed the terms of the bank guarantees. This allegation was supported by an affidavit of Satish Kumar Gupta Deputy Manager (Finance) of the appellant and a proforma marked as Annexure A-13 alongwith that affidavit dated 22nd July, 1998. Alongwith a letter dated 25.10.98 marked as Annexure A-14, written by Shri Atindra Sen to Shri K.K. Sahu Chief General Manager of Apex Bank, T.T. Nagar, Bhopal. This allegation was supported by an affidavit of Satish Kumar Gupta Deputy Manager (Finance) of the appellant and a proforma marked as Annexure A-13 alongwith that affidavit dated 22nd July, 1998. Alongwith a letter dated 25.10.98 marked as Annexure A-14, written by Shri Atindra Sen to Shri K.K. Sahu Chief General Manager of Apex Bank, T.T. Nagar, Bhopal. It was suggested that the appellant had made a request for extension of bank guarantee in terms of Clause 8 of the procurement agreement and in terms of Clause 4 of the processing agreement. Paragraph 3 says that the respondent No. 1 shall advance Rs. 5 Crores free of interest and the appellant shall provide usual bank guarantee to avail the advance. The paragraph 5 of the letter says that the respondent No. 1 will provide an advance of Rs, 5 Crores for procurement and it will give interest free credit for 30 days' oil production. The appellant will provide a bank guarantee for the amount of Rs. 9 Crores to cover both the agreements. The format of bank guarantees is also enclosed herewith. Copies of this letter were also supplied to Bank of Maharashtra and Bank of Baroda. There was no reason for the appellant not to file the proposed format sent to the Chief General Manager. It formed part of letter dated 25th October 1997. It must be with the appellant. Copies of this document must also be lying with the Banks. Moreover, it was a self-serving statement. Nothing was sent by respondent No. 1. The respondent No. 1 on the other hand, had denied on oath by filing the affidavit of S. Venkatesh, Manager (Exports) that the pro forma (Annexure A-13) was drafted in the office of the respondent No. 1. It was stated that the bank guarantee was prepared by the appellant and sent to the Banks, in question. After obtaining the bank guarantees from the Banks, in question, they were forwarded to the respondent No. 1, through personal messenger as per letter dated 1.12.1997, marked as Annexure R-1. It appears to this Court that since the appellant has not produced the proposed format attached to the letter of Shri Atindra Sen to Shri K.R. Sahu, it is not possible to infer that he had proposed the terms of the bank guarantees in a different form to Shri Sahu. It appears to this Court that since the appellant has not produced the proposed format attached to the letter of Shri Atindra Sen to Shri K.R. Sahu, it is not possible to infer that he had proposed the terms of the bank guarantees in a different form to Shri Sahu. Even otherwise, what was proposed to Shri Sahu was not the concern of the respondent No. 1. The wordings of the proposed bank guarantees alleged to be given by the respondent No. 1, could also be related to paragraph 45 of the letter written by Shri Atindra Sen on 25.10.97. If this be so then the officers of the appellant have tried to mislead the Court. This Court relies on the affidavit on behalf of the respondent No. 1 and holds that the terms of the bank guarantees, in question, were not supplied by the respondent No. 1. In any case, this self-serving letter of the appellant could not be relied on by it for establishing that the respondent No. 1 had provided the terms of bank guarantee. Even if the respondent No. 1 had provided the terms as per Annexure P-13, the appellant was not bound to accept them. It had ample time and opportunity to vary them. In fact, the appellant had changed duration of the bank guarantees to 31st May, 1998 instead of 31st June, 1998 as given in the proposed guarantees. This Court is of the view that the two bank guarantees were given by the appellant in an open-eyed manner after weighing the pros and cons of the matter. It did not insist that the bank guarantee for Rs. 5 Crores should be in accordance with Clause 8 and Clause 17 of the procurement agreement and the bank guarantee for Rs. 4 Crores should be in terms of Clause 4 (iv) of the processing agreement. Thus, as a matter of fact, these two bank guarantees were not part and parcel of either the procurement agreement or the processing agreement. There was no Annexure-A to the procurement agreement and the agreement was signed as such. No fraud was played by the respondent No. 1 in obtaining the bank guarantee of the two Banks from the appellant. Thus, as a matter of fact, these two bank guarantees were not part and parcel of either the procurement agreement or the processing agreement. There was no Annexure-A to the procurement agreement and the agreement was signed as such. No fraud was played by the respondent No. 1 in obtaining the bank guarantee of the two Banks from the appellant. The underlying agreements cannot be referred to generally for interpreting the terms of the two bank guarantees given in favour of the respondent No. 1 at the instance of the appellant. It is clear from the preamble of the guarantees, in question, that the guarantees were given by way of security for performance of the obligations under both the agreements. The Clause 1 makes them unconditional and irrevocable and payable on demand in writing by the respondent No. 1. The demand letter should contain a statement as per Clause 2 that the appellant has failed to fulfil any of the conditions in the two agreements without requiring the respondent No. 1 to take recourse to legal proceedings. The Clause 3 makes it clear that Banks shall pay the amount without demur merely on a demand and so far as the Banks are concerned, the demand shall be treated as conclusive. The bank guarantees also postulate that no act or omission shall operate as the release of the guarantees. The duration is also mentioned till the clauses are satisfied or till 31st May, 1998 (now extended upto 31st August, 1998). It is obvious that there is a default clause and default clause makes the statement of respondent No. 1 itself conclusive. The Banks cannot demur. In the face of the terms of two bank guarantees it is difficult to see how could the Bank examine the underlying agreements in question, before releasing the amount. 25. The relief of temporary injunction is an equitable relief. The Courts have wide discretion in granting relief of temporary injunction or refusing it. A temporary injunction is not a claim as of right. The Contract Act itself provides that: - .... Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract not inconsistent with the provisions of this Act. In the case of Irrawady Flotilla Company v. Bhagwandas. ILR 1891 Cal. The Contract Act itself provides that: - .... Nothing herein contained shall affect the provisions of any Statute, Act or Regulation not hereby expressly repealed, nor any usage or custom of trade, nor any incident of any contract not inconsistent with the provisions of this Act. In the case of Irrawady Flotilla Company v. Bhagwandas. ILR 1891 Cal. 620 at page 627, Lord Macnaghten observed : - The words' not consistent with the provisions of the Act' are not to be connected with the clause 'nor usage or custom of trade'. Both the reason of the thing and the grammatical construction of the sentence if such sentence is to be tried by any rules of grammar, seem to require that application of these words should be confined to the subject which immediately precedes them. Therefore, the Court may recognize 'any usage or custom of trade' which may not be consistent with the contract Act. Now, the Legislature has used a disjunctive or between usage and custom. The Courts, therefore, are entitled to recognize a custom of Banking trade even if it be inconsistent with the provisions of the Contract Act. It is well established that a custom of a trade, which is part of law of the land, can be collected from the discussions of legal precedents and analogies. The modern Banking came to India with the onset of the British and it has now taken the shape of universal Banking practice. The Banking custom and practice in India developed alongwith the pattern of Banking practice of the common law countries. It is, therefore, natural to look for the British Precedents. In the case of P. Cooperative Federation Ltd. v. Singh Consultants (1988) 1 SCC 17 abyachi Mukerjee, J. followed the British precedents and that of the Supreme Court regarding the bank guarantees and letters of credit. In Paragraph 29 at page 189, after considering the case of Tarapore & Company, Madras v. V/o Tractors Export, Moscow, (1969) 1 SCC 233 , which postulated that letter of credit was of great importance to international trade and any interference with that mechanism was bound to have serious repurcussions on the international trade of this country, stated in paragraph 30 that these observations equally apply to a bank guarantee because the bank guarantee involves money of internal trade and transactions in a country. Jagannath Shetty, J., after considering an article i.e. "Bank Solvency and Guarantee Letters of Credit", by Paul R. Verkuil in Stanford Law Review, V. 25 1972-73, at page 719, and other cases stated as follows : 51. It is true that both the decisions of this Court dealt with a contract to sell specific commodities or a transaction of sale of goods with an irrevocable letter of credit. But in modern commercial transactions, various devices are used to ensure performance by the contracting parties. The traditional letter of credit has taken a new meaning. In business circles, stand-by letters of credit are also used. Performance bond and guarantee bond are also the devices increasingly adopted in transactions. The Courts have treated such documents as analogous to letter of credit. The result of the aforesaid decision is that the documents of credit in international trade like letter of credit and that of internal trade within the country cannot be divorced from the Banking custom and practice operating the Banking trade universally. Therefore, if Courts take notice of a Banking custom established by the precedents in England and if they be inconsistent with the Contract Act, they can be implemented. In the case of Nangia Constructions India (P) Ltd. v. National Buildings Construction Corporation Ltd. & others 41 (1990) DLT 359, in paragraph 51, at page 373, the learned single Judge did not notice this aspect of the matter in holding that in view of Section 126 of Contract Act the pronouncements of the British Courts are not valid. In the opinion of this Court, they are because they throw light on the question how far the Court may go to Banking usage or custom. Most of the British and even American precedents recognize the fact that. It is part of the Banking custom to honour the credit documents according to their terms. It is fact of Banking trade that those Bankers who do not honour the letters of credit issued to them or their own guarantees without any sound reason, which is to be culled out from the document itself, suffer in reputation as Bankers. The Banking business shall be paralysed if the Bankers were authorised to go beyond the terms of the credit-document. The Banking business shall be paralysed if the Bankers were authorised to go beyond the terms of the credit-document. Court therefore, bears this fact in the mind while considering the case of grant of temporary injunction and avoids to rush into the path where the Bankers fear to tread. It is so in this sense that the Supreme Court has ruled out that bank guarantees would be independent of the underlying agreements. This view was taken by the Supreme Court in - Ansal Engineering Projects Ltd. v. Tehrl Hydro Development Corporation and another, (1996) 5 SCC 450 in paragraph 4 at page 454, State of Maharashtra v. National Construction Company Ltd. (1996) 1 SCC 735 , in paragraphs 13 and 14, at page 741, and Hindustan Steel Workers Construction Ltd. v. Tarapore & Company and another, (1996) 5 SCC 34 , in paragraph 8, at page 41, Although, the Court therein referred to the case of letter of credit but the principle is that the law declared by Supreme Court is binding on this Court under Article 141 of the Constitution. In the case of Nangla Construction India (P) Ltd. (supra), the learned single Judge tried to say that the law declared by the Supreme Court is different from the law made (paragraph 82, at page 390) and implies that law made is not binding. However, it is difficult to understand, the distinction. Theoritically, speaking the Judges decide a case. In that case, if some principle emerges, which is known as ratio decidendi that principle is the law declared. In a wider sense, in the process of arriving at the conclusion in a particular case certain new principles may be added. There may be a paradigm-shift. In that sense the law is made. This law making is within the ken of the expression of law declared under Article 141 of the Constitution. However, one cannot dispute the proposition as stated by the learned single Judge that the bank guarantee is or is not an independent contract which will depend upon its terms in paragraph (91) but above noted Supreme Court decisions are the authorities for the proposition that underlying agreement, not forming part of the bank guarantee, could not be looked into for examining the bank guarantee. We have already examined the agreements as well as the two bank guarantees to negative the plea that as a matter of fact, the two agreements were parts of the bank guarantees. The decision of the learned single Judge of Bombay High Court in Taj Trade and Transport Co. Ltd. v. Oil and Natural Gas Commission and another, 1994 (80) Comp Cases 740, does not support the contention of the appellant in the matters that relate to temporary injunction. This Court has already held that as a matter of fact that those bank guarantees were furnished for default of the appellant under the two agreements but they were not part and parcel of the agreement. However, the question of invocation of the bank guarantees, in no circumstance, could be considered, apart from the bank guarantees furnished. Only as per terms of the two agreements are referable to arbitration. The Division Bench case of Delhi High Court in the case of Shiv Ispat Udyog (P) Ltd. V. Indus Valley, 1986 (60) Comp Cases 405, is distinguishable because in that case, the guarantee-bond itself included terms of underlying agreements' as per contract between the parties. The case of Larsen & Toubro v. Maharashtra State Electricity Board. (1995) 6 SCC 68 , does not support case of the appellant. In that case the Supreme Court did not depart from established principles for grant of temporary injunction, that is to say, the invocation of a bank guarantee can be injuncted only in case of an established fraud or irretrievable injustice or damage. The Supreme Court refused to grant temporary injunction in respect of a security against advancement (Advance Guarantee). This bank guarantee was issued by Standard Charter Bank in sum of Rs. 5,50,30,000/-. The bank guarantee was invoked for Rs. 8 Lakhs when the request for extension of the bank guarantee was refused. Looking to the nature of dispute pending before the arbitrator, the Supreme Court declared to grant injunction. The other bank guarantee in the sum of Rs. 2.72 Crores was issued by the Citi Bank. It was security against the release of the retention money. It was to cover the said payments till successful completion of trial operation. The Supreme Court found that the guarantee was to ensure till successful completion of trial operation. The other bank guarantee in the sum of Rs. 2.72 Crores was issued by the Citi Bank. It was security against the release of the retention money. It was to cover the said payments till successful completion of trial operation. The Supreme Court found that the guarantee was to ensure till successful completion of trial operation. The trial operation, having been completed from 20.6.94, the right of the respondent Maharashtra Electricity Board, to invoke the bank guarantee was refused in respect of Rs. 2.72 Crores, issued by the Citi Bank. This case does not help the case of the appellant. 26. The learned counsel for the appellant did not argue that the original two agreements were obtained by fraud, by the respondent No. 1. He was unable to show that the respondent No. 1 had committed any fraud. The initial ground on which the application u/S. 9 of the Act was filed, was based on fraudulent invocation of bank guarantees without notice. This ground cannot be raised as the terms of two bank guarantees did not require the respondent No. 1 to inform that there was likelihood of invocation of bank guarantees. Even so, the appellant cannot complain. On 11th June, 1998 itself the appellant was informed that the respondent No. 1 may invoke the bank guarantees of Rs. 9 Crores. 27. The learned counsel for the appellant was unable to dispute the proposition that Supreme Court had reiterated time and again that Court should be slow to grant temporary injunction. Only in the case of a fraud of egregious nature. The Court could grant temporary injunction. The existence of such a fraud should be known to the Bank and this fraud should be established from record. It would be unnecessary to burden this order with long quotations from the aforesaid judgments of Supreme Court. Suffice it to say that such view was taken in the cases of Dwarikesh Sugar Industries Ltd. (supra), U.P. State Sugar Cooperation (supra), Ansal Engineering Project Ltd. (supra), State of Maharashtra v. National Construction, Company Ltd. (supra) Larsen & Toubro (supra), Hindustan Steel Workers Construction, Ltd. v. G.S. Atwal & Co. Engs. Pvt Ltd. Tarapore & Co. and another, (supra); Murarka Cables & Conductors Ltd. (supra); National Thermal Power Corporation Ltd. (supra), Svenska v. Indian Charge Chrome (supra), and U.P. Cooperative Federation Ltd. (supra). Engs. Pvt Ltd. Tarapore & Co. and another, (supra); Murarka Cables & Conductors Ltd. (supra); National Thermal Power Corporation Ltd. (supra), Svenska v. Indian Charge Chrome (supra), and U.P. Cooperative Federation Ltd. (supra). The other ground that entitles to interfere is irretrievable injury or damage. In the case of U.P. State Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568 , at page 574, Sujata v. Manohar, J., stated in paragraph 12 as follows : - 12. The law relating to invocation of such bank guarantees is by now well settled. When in the course of commercial dealings an unconditional bank guarantee is given or accepted, the beneficiary is entitled to realize such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a bank guarantee in terms thereof irrespective of any pending disputes. The bank giving such a guarantee is bound to honour it as per its terms irrespective of any dispute raised by its customer. The very purpose of giving such a bank guarantee would otherwise be defeated. The Courts should, therefore, be slow in granting an injunction to restrain the realization of such a bank guarantee. The Courts have carved out only two exceptions. A fraud in connection with such a bank guarantee would vitiate the very foundation of such a bank guarantee. Hence, if there is such a fraud of which the beneficiary seeks to take advantage, he can be restrained from doing so. The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned. Since in most cases payment of money under such a bank guarantee would adversely affect the bank and its customer at whose instance the guarantee is given, the harm or injustice contemplated under this head must be of such an exceptional and irretrievable nature as would override the terms of the guarantee and the adverse effect of such an injunction on commercial dealings in the country..... 28. The learned counsel for the appellant was unable to show any fraud in formation of two agreements and the two bank guarantees. 28. The learned counsel for the appellant was unable to show any fraud in formation of two agreements and the two bank guarantees. The learned counsel tried to argue that the respondent No. 1 committed fraud by misrepresentation, For this purpose the learned counsel for the appellant drew the attention of this Court in the case of Hindustan Steel Workers Construction Ltd. v. Tarapore & Co. and another (1996) 5 SCC 34 , in paragraph 18 at page 45 of which, Nanawati, J., stated that: - A demand by the beneficiary under the bank guarantee may become fraudulent not because of any fraud committed by the beneficiary while executing the underlying contract but it may become so because of subsequent events or circumstances. We see no good reason why the courts should not restrain a person making such a fraudulent demand from enforcing a bank guarantee. It was sought to be argued on the basis of above statement of law that the respondent 1 misrepresented to the Banks, in question, that it was entitled to encash the bank guarantees by misrepresenting that the appellant had not fulfilled any of the terms of the bank guarantees. It demanded more than it could recover under the procurement agreement. It may be noted herein that the finding of this Court is that the two bank guarantees were given to secure the performance of the agreements. According to the respondent No. 1, more than Rs. 9 Crores, besides claim of damages is due against the appellant under both the agreements, the accounts of which is also not settled. The appellant, on the other hand, disputes those allegations and says that it shall be entitled to claim damages for the breach of the contracts. Now, this dispute cannot be decided by the Court at the time of issuing injunction. It is well established by the various decisions of Supreme Court that merely because there is dispute between the parties which is liable to be decided in an appropriate forum a fraud cannot be inferred. The demand of the respondent No. 1 was strictly according to terms of the bank guarantees, in question. There is no merit in the argument that the term "any of the conditions" in the two agreements mentioned in Clause 2 of the bank guarantees means "all the conditions". If this argument is accepted, both the bank guarantees shall become meaningless. The demand of the respondent No. 1 was strictly according to terms of the bank guarantees, in question. There is no merit in the argument that the term "any of the conditions" in the two agreements mentioned in Clause 2 of the bank guarantees means "all the conditions". If this argument is accepted, both the bank guarantees shall become meaningless. These guarantees were to continue during the subsistence of agreement till the full accounts were settled and liabilities of either parties were discharaged, or till the duration for which the bank guarantees were given. They were issued to cover the default of the appellant, if any. The interpretation suggested by the appellant shall render the bank guarantees otiose. This is not way to interpret a document. The interpreting authority is required to give it the meaning intended by the parties unless it is palpably absurd. The decision rendered by Gujrat High Court in the case of M/s. R.C. Thakkar v. Gujrat Housing Board. AIR 1973 Guj 34 , does not advance the case of the appellant. The appellant had failed to establish fraud. The decision of a learned single Judge of Delhi High Court, in the case of M/s. Synthetic Foams Ltd. v. Simplex Concrete Piles (India) Pvt. Ltd. AIR 1988 Delhi 207, is contrary to established principles of law. The learned single Judge has gone to the extent of saying that when there is term in the bank guarantee that it shall be encashable on breach of conditions of the agreements, the duty of the person, availing the bank guarantee is to give in letter of invocation all the bundle of facts which form the cause of action for a plaint. However, the court came to the conclusion in favour of grant of injunction on the ground that contract was cancelled by the defendants without any fault of the plaintiff due to technical reason and certain funds were withheld by the defendants. 29. The learned counsel for the appellant tried to bring his case within the other category under which the Courts grant temporary injunction. It was fervently appealed to this Court that the appellant is heavily indebted and is almost in mori-bund state. The livelihood of soyabean seed growers and the procurers etc. depends upon the continuation of the appellant. Refusal to grant injunction would be the last straw that would break the back of the camel. 30. It was fervently appealed to this Court that the appellant is heavily indebted and is almost in mori-bund state. The livelihood of soyabean seed growers and the procurers etc. depends upon the continuation of the appellant. Refusal to grant injunction would be the last straw that would break the back of the camel. 30. There appears to be no merit in this argument. The case of irretrievable injury or harm would not depend upon the financial condition of the appellant. It would depend upon a circumstance when the appellant, in no circumstance, would be able to get restitution. In the case of Svenska v. Indian Charge Crome. Fed. (1994) 1 SCC 502 . It was pointed out that irretrievable injury should be like an injury as was given in the case of Itik Corporation v. Forest National Bank of Boston, 566. Ed. (Supp. 1210. It is obvious that there is no situation in this case like the calamity that happened in that case, when on account of revolution in Iran, the guarantors or the principal debtors suffered. The Court-below has safe-quarded the interest of the appellant by requiring the respondent No. 1 to give adequate security. In the case of U.P. Sugar Corporation v. Sumac International Ltd. (1997) 1 SCC 568 , in paragraph 7, at page 577, it has been held that mere fact the person, invoking the bank guarantee is a sick company, will also not give rise to irretrievable injury, in this case too it was held that situation must be as was in the case of itik Corporation (supra), for grant of temporary injunction. 31. The learned counsel for the respondent No. 1 argued that the appellant has not established its case and it is not entitled to relief of temporary injunction because it has suppressed factual material from the eyes of the Court. It did not disclose the certain facts and stated only those facts which suited it. Even in the amendment it did not choose to reveal the facts. There is substance in the argument of the learned counsel for the respondent No. 1. The appellant did not refer to in its application that provisional accounts were settled and signed by the parties. It gave only partial picture to the Court. There was default of suppression of facts. The appellant is thus not entitled to equitable relief of temporary injunction. 32. The appellant did not refer to in its application that provisional accounts were settled and signed by the parties. It gave only partial picture to the Court. There was default of suppression of facts. The appellant is thus not entitled to equitable relief of temporary injunction. 32. The learned counsel for the appellant stated that the appellant shall suffer because the respondent No. 1 is going to encash the bank guarantees, in question, without furnishing the bank guarantee till arbitration case is decided. Sri A.K. Chitaley, learned counsel for the respondent No. 1, stated that such a bank guarantee for indefinite period is not given by Banks. However, he gave an undertaking to the effect that respondent No. 1 shall continue to renew the bank guarantee furnished till the dispute between appellant and the respondent No. 1 is finally settled. 33. The result of the aforesaid discussion is that this appeal fails and is dismissed subject to the observations made by this Court hereinabove, in paragraphs 31 and 32 of this order. The stay order dated 6.8.1998, earlier passed by this Court, is hereby vacated. The consequence would be that the respondent No. 1 shall be entitled to encash the cheque dated 5.8.1998, issued by the respondent No. 2. The respondent No. 3, which has stayed its hands of paying Rs. 3 Crores to the respondent No. 1, shall now pay it to respondent No. 1 without any delay or hinderance for the reason, the order of this Court dated 6.8.1998. Nor can the respondent No. 3 take advantage of its own earlier default to the detriment of respondent No. 1. The appellant shall bear its own costs and pay that of the respondent No. 1. Counsel fee as per schedule, if certified. Appeal dismissed