JUDGMENT - Dr. D.Y. CHANDRACHUD, J.:---The plaintiff entered into a contract with a consortium called Saipem SPA/Snamprogetti of Italy for the construction of a system of undersea pipelines. The contractors were to provide a bank guarantee in respect of any claim of liquidated damages that may arise under the contract and accordingly the defendant has furnished an irrevocable and unconditional bank guarantee in the amount of US $ 6, 387, 500/- and Indian Rs. 8,060, 000/-. The bank guarantee was extended from time to time for a value reduced in accordance with the actual work done and as of the date of invocation of the guarantee, the guarantee was for a value of US $ 4,320,432/- and Indian Rs. 5,515,959/-. The guarantee being an irrevocable and unconditional bank guarantee, contained provisions as are usual in such guarantees. The relevant clause of the guarantee is extracted in para 6 of the plaint and provided thus : "Now therefore, in consideration of the premises aforesaid and at the request of the contractor, we State Bank Of India, Overseas Branch, Bombay, Bank organized under the laws of India and having its registered/head office at Calcutta (hereinafter called "the bank"), so as to bind ourselves and our successors and assignees do hereby irrevocably and unconditionally undertake to pay to you, the company, on demand in writing without demur or protest and irrespective of any contest or dispute between your goodselves and the contractor and without reference to the contractor, any sums of money at any time or from time to time demanded by the company upto an aggregate limit of USD. 6,387,500/- (US Dollars six million three hundred eighty seven thousand and five hundred only) plus INR 8, 060,000/- (Indian Rupees eight million sixty thousand only) on account of any liquidated damages due from the contractor to the company. We further agree that as between us and the company for the purpose of this guarantee/undertaking, any notice of demand by the company towards liquidated damages and any amount claimed in such notice by the company on account thereof, shall be final and binding as to the factum of the L.D. and the amount payable by us to the company hereunder relative thereto." 2.According to the plaintiff, there was a delay on the part of the contractor in completing the work within the scheduled date of completion. On 27th September, 1993, the plaintiff addressed a letter to the defendant invoking the bank guarantee, stating therein that the contractor had been advised to extend the validity of the Bank Guarantee and in the event of the contractor not doing so on or before 1st October, 1993, the letter of the plaintiff be treated as a notice of invocation of the Bank Guarantee. Various reminders were addressed on 15th October, 1993, 19th October, 1993, 4th November, 1993 and 13th December, 1993 for crediting the amount under the guarantee to the account of the plaintiff. By a letter dated 4th November, 1993, the plaintiff claimed that it was entitled to interest with effect from 4th October, 1993, that is after the invocation of the Bank Guarantee. The Contractor had, in the meantime, moved the tribunate Di Milan which is the Commercial Court in Italy of the first instance for an order restraining the Italian Bank Credito Intaliano from paying any part of the proceeds of the counter guarantee which the Italian Bank had issued in favour of the defendant. On 30th September, 1993 an ex parte order is stated to have been issued by the Court in Italy against the Italian Bank, from paying over the proceeds of the counter guarantee. The Italian Court has thereafter on 2nd March, 1994 issued an order requiring the bank in Italy to abstain from payment of any sum in execution of the agreement of guarantee/counter guarantee arising between the relationship of the Foreign consortium and the plaintiff under the contract entered into on 6th March, 1990. The order of the Italian Court has been extracted in para 13 of the plaint. 3.The present summary suit came to be instituted in this Court on 12th March, 1996 for a claim in the amount of US $ 4,320,432/- and Indian Rs. 5,515,955/- together with interest on the said amount at the rate of 18% per annum from 1st October, 1993 and future interest until payment or realisation. Costs of the suit were also prayed for. 4.An affidavit in reply to the summons for judgment was filed in these proceedings on behalf of the defendant, on the basis of which an application came to be made under the provisions of sub-rule (5) of Rule 3 of Order 37 of the Code of Civil Procedure, 1908, for leave to defend the suit. 4.An affidavit in reply to the summons for judgment was filed in these proceedings on behalf of the defendant, on the basis of which an application came to be made under the provisions of sub-rule (5) of Rule 3 of Order 37 of the Code of Civil Procedure, 1908, for leave to defend the suit. A similar provision is contained in Clause (2) of Rule 221 of the High Court Original Side Rules, which provides that the defendant may apply on such summons for leave to defend the suit by filing an affidavit or affidavits showing that he has a good defence to the suit on merits by disclosing such facts as may be deemed to entitle him to defend. 5.By an order dated 27th April, 1998 a learned Single Judge of this Court granted unconditional leave to the defendants to defend the suit. The learned Single Judge noted in para 5 of the order the defences which had been urged on behalf of the defendants, those being : (i) the invocation of the Bank Guarantee was not in accordance with the terms of the guarantee ; (ii) the contractor at whose behest the Bank Guarantee had been furnished, had obtained an injunction restraining the Foreign Bank from making payment under the counter guarantee and since it was not possible to obtain payment under the counter guarantee, the defendant could not pay under the guarantee which was executed in favour of the plaintiff ; (iii) there were arbitration proceedings which had been initiated between the plaintiff on the one hand and the Foreign Contractor on the other hand. In granting the defendant unconditional leave to defend the suit, the learned Single Judge was of the view that the letter of invocation was not in accordance with the terms of the guarantee; the arbitration proceedings were pending before the arbitrator and that the Italian Court was also seized of the case in which the defendant was restrained from making any payment of the creditor. 6.Aggrieved by the order of unconditional leave to defend the suit passed by the learned Single Judge of this Court, the plaintiff filed a special leave petition before the Supreme Court in which leave came to be granted. By a judgment and order dated 21st July, 2000, a Bench of the Supreme Court consisting of Hon'ble Mr. Justice S. Rajendra Babu and Hon'ble Mr. By a judgment and order dated 21st July, 2000, a Bench of the Supreme Court consisting of Hon'ble Mr. Justice S. Rajendra Babu and Hon'ble Mr. Justice S.N. Phukan, disposed of the Civil Appeal, Civil Appeal No. 4120 of 2000. The Supreme Court, after referring to the well settled principles of law in relation to the grant of injunctions in matters relating to unconditional Bank Guarantee held that in the absence of a plea of fraud much less a finding thereon, this Court was not justified in holding that the defence raised by the defendant bank was sufficient to grant unconditional leave to defend the suit. The Supreme Court considered each one of the defences which came to be urged on behalf of the defendant and, besides holding that the defences which had been raised by the defendant were "totally untenable" came to the conclusion that the grant of unconditional leave was in the circumstances unjustified. In the concluding part of the judgment, the Supreme Court held thus : "When, in fact, there is no defence for suit filed merely to rely upon an injunction granted or obtained in their favour does not carry the case the respondent bank any further. The only basis upon which the respondent bank sought for and obtained the injunction is that in event the counter guarantee cannot be honoured by reason of the injunction granted by the Italian Court the respondent bank should be extended the similar benefit. But a persual of the Foreign Exchange Manual makes it clear that none of the claims would be an impediment to make payment under the Bank Guarantee in question. Therefore, in our view, the High Court plainly erred in having granted leave to defend unconditionally. We vacate the order and dismiss the application filed by respondent bank for leave to defend by allowing this appeal". (emphasis supplied). 7.In the circumstances, it would be clear from the judgment of the Supreme Court that while setting aside the judgment of this Court granting unconditional leave to the defendants to defend the suit, the Supreme Court vacated the order of the learned Single Judge and dismissed the application filed by the defendant bank for leave to defend. (emphasis supplied). 7.In the circumstances, it would be clear from the judgment of the Supreme Court that while setting aside the judgment of this Court granting unconditional leave to the defendants to defend the suit, the Supreme Court vacated the order of the learned Single Judge and dismissed the application filed by the defendant bank for leave to defend. This is a matter of significance, because in my view, the operative order passed by the Supreme Court would preclude the defendant from seeking to agitate any further a defence as constituting ground sufficient to entitle the defendant to leave to defend the suit. 8.The defendant, under the provisions of Order 37 of the Code of Civil Procedure, 1908, is permitted by sub-rule (5) of Rule 3, at any time, within 10 days from the date of service of summons for judgment, to apply on such summons for leave to defend the suit by an affidavit or otherwise, disclosing such facts as may be deemed sufficient to entitle him to defend. A similar provision is contained in Rule 221(2) of the High Court Original Sides Rules though under the provisions contained therein, the defendant has to show that he has a good defence on merits by disclosing such facts as may be deemed to entitle him to defend. The consequence of the order declining or rejecting an application for leave to defend the suit is provided by sub-rule (6) of Rule 3 of Order 37 of the Code of Civil Procedure, 1908. Sub-rule (6) provides that at the hearing of the summons for judgment, if the application for leave to defend is refused, the plaintiff shall be entitled to judgment forthwith. In so far as the Rule, in the High Court Original Side Rules is concerned, an element of discretion is conferred upon the Judge, in that Clause (4) of Rule 222 postulates that if the defendant does not apply to defend the suit, the Judge may pass a decree forthwith. In so far as the Rule, in the High Court Original Side Rules is concerned, an element of discretion is conferred upon the Judge, in that Clause (4) of Rule 222 postulates that if the defendant does not apply to defend the suit, the Judge may pass a decree forthwith. 9.The learned Counsel appearing on behalf of the plaintiff placed reliance on the judgment of the Supreme Court and submitted that in view of the fact that the Supreme Court while allowing the appeal of the plaintiff against the grant of unconditional leave to defend, had dismissed the application for leave to defend filed by the defendant, a judgment as prayed for should forthwith be entered in favour of the plaintiff. On the other hand, on behalf of the defendant it was sought to be submitted that : (i) The judgment and order of the Supreme Court was only a direction vacating the grant of unconditional leave by this Court; that this Court was seized of the matter on remand and should, therefore, once again consider the issue as to whether leave to defend should be granted to the defendant ; (ii) The suit which has been instituted in this Court by the plaintiff is not maintainable as a summary suit under the provisions of Order 37 of the Code of Civil Procedure, 1908 since the claim for interest at the rate of 18% per annum is not supported by any contract or agreement between the parties ; (iii) That in any event, Clause (4) of Rule 222 confers a discretion upon this Court on, whether or not to pass a decree and that this Court notwithstanding the judgment of the Supreme Court should not pass a decree in favour of the plaintiff since the suit was not maintainable as a summary suit ; and (iv) If the defendant is entitled to urge the question as to whether leave to defend should be granted to it, once again as if this was a remand, the defendant is willing to furnish a Bank Guarantee in favour of the plaintiff to secure the dues of the plaintiff in so far as the principal amount of the Bank Guarantee is concerned. 10.In considering the tenability of the submissions which have been urged on behalf of the defendant, it would be necessary to notice at this stage that in pursuance of the provisions of Rule 3 of Order 37 of the Code of Civil Procedure, 1908 and the corresponding provision contained in Rule 221 of the High Court Rules, the defendant had, by filing an affidavit, sought leave to defend the suit. Unconditional leave had been granted by a learned Single Judge of this Court against which the plaintiff carried the matter to the Supreme Court. By the judgment delivered on 21st July, 2000, the Supreme Court, after evaluating the defences which were urged on behalf of the defendant, was clearly of the view that this Court was not justified in granting an order of unconditional leave to defend. The Supreme Court also held that the defence which had been urged on behalf of the defendant is "totally untenable" and "in fact, there is no defence". The Supreme Court held that the mere fact that arbitration proceedings were pending between the plaintiff and the Foreign Contractors; the fact that the Italian Court had issued an injunction restraining the Italian Bank from paying under the counter guarantee would not be sufficient to entitle the defendant leave to defend. While vacating the order granting unconditional leave, the Supreme Court has dismissed the application filed by the defendant for leave to defend. It must be noted that before the Supreme Court, the plaintiff had filed an appeal against the order of this Court and, therefore, the entire summons for judgment was before the Court for consideration. A reading of the judgment of the Supreme Court would leave no manner of doubt that the Court vacated the order passed by this Court granting unconditional leave, and has also dismissed the application for leave to defend filed by the defendant. In these circumstances, it would be wholly inappropriate to read the judgment of the Supreme Court as meaning that there was a remand to this Court for fresh consideration of whether the defendant should be granted leave to defend the suit. The judgment of the Supreme Court is clear and the plain consequence thereof is that the defendant is not entitled to leave to defend. The judgment of the Supreme Court is clear and the plain consequence thereof is that the defendant is not entitled to leave to defend. In these circumstances, the consequence that must follow is what is provided for under the Code and as under the application Rule of the Rules of the Original Side. The plaintiff should be entitled to a judgment and decree, especially in the circumstances of the present case. 11.On behalf of the defendant it was sought to be submitted that in the absence of a contractually agreed rate of interest between the parties the suit itself was not maintainable. Reliance is sought to be placed in this regard on the judgment of the Division Bench of this Court in (Hydraulic and General Engineering Ltd. v. UCO Bank)1, reported in 1998 I.L.J. 793, which followed an earlier Division Bench judgment of this Court in (Randerian Sons)2, Appeal No. 1060 of 1986 dated 24-2-1987. In the Hydraulic and General Engineering case, a suit was filed by the UCO Bank to enforce a counter guarantee issued by the first and the second defendants to cover payments which were required to be made by the plaintiff under a guarantee executed by the bank. One of the defences to the suit was that the claim for interest could not have been made in the summary suit since the guarantee did not provide for the payment of interest. A Division Bench of this Court noted that this position appears to have been conceded before the learned Single Judge by the learned Counsel appearing on behalf of the plaintiff viz., that the claim for interest which was calculated in the plaint did not find any basis in the said counter guarantee. The Division Bench held that the claim for interest as included could not be justified in a summary suit and in holding so, relied upon the following observations contained in the earlier judgment of the Division Bench delivered on 24th February, 1987 : "Under the Rules of this Court strict conditions are imposed on the defendants in a summary suit. They must file their appearance in Court within a very short specified period and failure to do so entitles the plaintiffs to obtain an ex parte decree against them. It must logically follow that there must be equally stringent requirements postulated on the plaintiffs. They must file their appearance in Court within a very short specified period and failure to do so entitles the plaintiffs to obtain an ex parte decree against them. It must logically follow that there must be equally stringent requirements postulated on the plaintiffs. One of these requirements would be that they must not in the suit make a claim not warranted by the contract or under a statutory provision. If it can be demonstrated, as it can be in the instant case, that the plaintiffs have in the plaint made a claim for interest not warranted by the statutory provision or by the contractual document, then the suit must be one which cannot be accepted as a summary suit. Once this is demonstrated, one of two consequences must follow. The first and the more obvious is to grant to defendants unconditional leave to defend the suit and transfer the same to the appropriate cause list long cause, short cause or commercial cause. The present case would fall in the last category. There is another way open and that is for the plaintiffs who are faced with such defence in the affidavits made on the Summons for Judgment to apply for permission to withdraw their Summons for Judgment with liberty to take out a fresh Summons for Judgment after amending the plaint and putting their house in order. Recording of the statement to give up or accept reduced interest is not sufficient." 12.In these circumstances, what is sought to be submitted in the present case was that the claim for interest is not based upon the terms of the guarantee executed by the defendant and that, therefore, the defendant would be entitled to unconditional leave to defend the suit. This submissions cannot be countenanced for a number of reasons. The first and foremost, as already stated earlier, is that it is not open to the defendant to urge before this Court at the present stage that the defendant should be granted leave to defend the suit since that stage has already elapsed. The application of the defendant for leave to defend stands dismissed upon the decision of the Supreme Court. What the defendant attempts to do is to reagitate the question of the grant of leave to defend. This impermissible. Secondly, reliance has been placed on behalf of the plaintiff on the provisions of the Interest Act, 1978. The application of the defendant for leave to defend stands dismissed upon the decision of the Supreme Court. What the defendant attempts to do is to reagitate the question of the grant of leave to defend. This impermissible. Secondly, reliance has been placed on behalf of the plaintiff on the provisions of the Interest Act, 1978. Section 3(1) of the Interest Act, 1978 provides as follows : "3. Power of the Court to allow interest.---(1) In any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the Court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say, ---- (a) if the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then, from the date when the debt is payable to the date of institution of the proceedings ; (b) if the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings: Provided that where the amount of the debt or damages has been repaid before the institution of the proceedings interest shall not be allowed under this section for the period after such repayment." 13.Section 3 of the Interest Act, 1978 confers power upon the Court to allow interest. The power of the Court is to allow interest not at a rate exceeding the current rate of interest, in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made. The power of the Court is to allow interest not at a rate exceeding the current rate of interest, in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made. The expression, "current rate of interest" is defined in section 2(b) as being the highest of the maximum rates at which interest may be paid on different classes of deposits by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949. The power of the Court to allow interest under section 3 arises inter alia, in proceedings for the recovery of any debt. If the proceedings relate to a debt payable by virtue of a written instrument at a certain time, then the Court is empowered to award interest from the date when the debt is payable to the date of the institution of the proceedings. If the proceedings do not relate to any such debt, then the power to allow interest is from a date mentioned in the written notice of demand until the institution of proceedings. 14.In the case of an unconditional and irrevocable Bank Guarantee, the issuing bank undertakes an explicit obligation towards the beneficiary of the guarantee to pay on demand, a claim lodged by the beneficiary upon the bank. The obligation assumed by the bank is absolute and a claim which has been lodged by the beneficiary in terms of the provisions of the guarantee has to be met by payment by the issuing bank. The law has now been well settled that the person or body at whose behest the issuing bank has issued the bank guarantee, is not entitled to an order of injunction save and except in the case of established fraud or where the payment of the guarantee would cause irretrievable injustice or in a case where there are special equities. Again, the nature of the circumstances that must exist in order to establish a case of irretrievable injustice or special equities has been carefully circumscribed in decided cases. Again, the nature of the circumstances that must exist in order to establish a case of irretrievable injustice or special equities has been carefully circumscribed in decided cases. The judgments of the Supreme Court on the subject emphasis the importance of banks honouring their obligations under unconditional bank guarantees since the very fabric of trade and commerce depends upon the fulfilment of the assurance held out in such guarantees that the issuing bank will honour its obligations. The bank guarantee is a contract exclusively between the issuing bank and the beneficiary. The issuing bank is not concerned with an underlying contractual dispute that may arise between the beneficiary and the contracting party at whose behest the bank had issued the guarantee. The bank under an absolute obligation to pay under the guarantee upon a demand being lodged in terms of the guarantee. These precepts which are indeed a matter of well settled legal principle postulate that upon the invocation of the Bank Guarantee by the beneficiary of the guarantee, the unconditional obligation of the bank to pay has to be immediately fulfilled. Immediately upon the invocation of the bank guarantee, the bank is required to meet the demand without demur or protest. In these circumstances, a debt becomes due and payable by the bank upon invocation of the bank guarantee. Since the debt becomes payable upon the invocation, the jurisdiction and power of the Court to award interest in the provisions of section 3 of the Interest Act, 1978 are attracted. In the case of a Bank Guarantee as in the present case, the debt is payable by the bank by virtue of a written instrument at a certain time, the time being immediately upon invocation of the bank guarantee. The Court is, therefore, empowered by the provisions of Clause (a) of sub-section (1) of section 3 of the Act to award interest at a rate not exceeding the current rate of interest. 15.Section 3 of the Interest Act, 1978, it must be noted, confers a discretionary power upon the Court to award interest for, the section provides that the Court "may if it thinks fit allow interest". 15.Section 3 of the Interest Act, 1978, it must be noted, confers a discretionary power upon the Court to award interest for, the section provides that the Court "may if it thinks fit allow interest". In a case such as the present, where the bank has assumed an unconditional obligation to pay to the plaintiff who is the beneficiary under the guarantee, there is a debt due and payable by the bank upon the invocation of the bank guarantee. This debt arises out of a written contract between the issuing bank, the defendant in the present case, and the beneficiary who is the plaintiff. A summary suit is clearly maintainable upon the foundation of such a debt. The Court is statutorily vested with the power to award interest in such a case from the date when the debt is payable until the date of the institution of the proceedings. The invocation of the power of the Court to award interest under the provisions of section 3 of the Interest Act, 1978 does not affect the maintainability of the proceedings. The power, it must be noted, is a power to be exercised by the Court in appropriate cases where the Court considers it appropriate in the exercise of the judicial discretion to award interest. The power having been statutorily conferred upon the Court, the claim is permissible and within the purview of the earlier judgments of the Division Bench referred to hereinabove. 16.In the present case, the claim for interest has been made at the rate of 18% per annum. I am of the view that the plaintiff is entitled to the award of interest under the provisions of section 3(1)(a) of the Act since despite the unconditional obligation which was assumed by the issuing bank, in the present case the plaintiff, has been kept out of the moneys for a period of over 7 years. Despite the well settled position of law laid down by the Supreme Court in relation to an unconditional bank guarantee, the defendant bank has chosen not to honour its obligation to pay. There is no substance in the argument based upon the provisions of the Foreign Exchange Manual since this was advanced before and rejected by the Supreme Court. Despite the well settled position of law laid down by the Supreme Court in relation to an unconditional bank guarantee, the defendant bank has chosen not to honour its obligation to pay. There is no substance in the argument based upon the provisions of the Foreign Exchange Manual since this was advanced before and rejected by the Supreme Court. At the same time, in determining what should be the appropriate rate of interest to award, regard must be had to the fact that under section 3 of the Interest Act, 1978, the Court has the discretion to award interest at a rate not exceeding the current rate of interest. "Current rate of interest" is defined in section 2(b). In the circumstances, of the case, I am of the view that the interests of justice would be subserved if under the provisions of section 3(1)(b), the plaintiff is awarded interest at the rate of 12% per annum from 1st October, 1993 until the date of the filing of the suit and the same rate of interest from the filing of the suit until payment or realisation. 17.In the circumstances, the following order is passed : (i) The plaintiff is entitled to a decree in the principal amount of the bank guarantee being US $ 4,320,432/- and Indian Rs. 5,515,959/-. The plaintiff would be entitled to interest at the rate of 12% per annum from 1st October, 1993 until the date of institution of the suit i.e. 12th March, 1996 and to interest from the date of the suit until payment or realisation at the same rate. The plaintiff is also entitled to the costs of the suit. The summons for judgment is, in the circumstances, made absolute in the aforesaid terms and there shall be a decree accordingly. The plaintiff to submit the original documents within a period of two weeks from today. Registry not to draw up the decree till the original documents are tendered. Summons for judgment made absolute. -----