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2006 DIGILAW 1014 (PAT)

K. Mahender v. State Of Bihar

2006-11-07

SHEEMA ALI KHAN

body2006
Judgment 1. Heard Mr. Chittaranjan Sinha, Senior counsel appearing on behalf of the petitioners. No one appears on behalf of the Opposite Party no.2. 2. The petitioner no.1 is the Vice President of Nicholas Piramal Tower limited (hereinafter referred to as the Company) having its office at Mumbai. The petitioner no.2 is the Chairman of the said company. The complainant Pashupatinath Khemka is the partner of M/s J.R. Distributors. He has lodged a complaint petition on 27.9.2005 in which he has stated that his company was appointed as a distributor by Nicholas Piramal Limited and the parties had entered into agreement for this purpose. 3. The main allegation in the complaint petition is that the Mumbai Company had enticed the complainant to accept the distributorship of Nicholas Piramal. It has further been alleged that the petitioners had invoked bank guarantee of ten lakhs and on that basis of these facts the case has been made out under Sections 406, 120 and 420 of the Indian Penal Code. It has been submitted on behalf of the petitioners that there are certain facts and documents which would show that in fact no offence under Section 420 or 406 of the IPC has been made out in the complaint petition. The first document referred to is Annexure-3 which shows that the complainant Pashupatinath Khemka had opened a new company known as M/s Omkar Distributors and he had addressed a letter to the Nicholas Piramal on 8.6.2005 in which he had stated that, presently he had now opened a new firm and had requested permission to do the work of distribution for Nicholas Piramal. By this document the petitioner is emphasing that J.R. distributors, the partnership firm, had dissolved and the company was now operating a new firm and he wanted to Act as a distributor for the Mumbai company. 4. As far as the allegations regarding the withdrawal of ten lakhs of bank guarantee by the petitioners Mr. Sinha has referred to Annexure-4 of the petition. This is a letter addressed by Nicholas Piramal limited to J.R. Distributors dated 12.8.2005. The letter explains the reason as to why the bank guarantee was withdrawn by the petitioners. It has been said in the letter that there were outstanding dues against the complainant and the cheque given by the complainant to the petitioners company had bounced and therefore they had invoked the bank guarantee. The letter explains the reason as to why the bank guarantee was withdrawn by the petitioners. It has been said in the letter that there were outstanding dues against the complainant and the cheque given by the complainant to the petitioners company had bounced and therefore they had invoked the bank guarantee. The letter as follows: "Accordingly we have advised our Accounts/Finance to adjust your total outstanding from the invoked bank guarantee amount and kept the balance amount as interest free deposit with us as your final settlement of accounts is not yet finalized. This is for your information." 5. From this document it would appear that the petitioners do not deny and they had withdrawn the bank guarantee but at the same time they have specifically stated that the withdrawal is subject to the final settlement of accounts between the company and the firm. 6. Another Letter addressed to J.R. Distributors annexed as Annexure-5 which could explain further that the Mumbai Company had to invoke the bank guarantee due to the conduct of the complainant. It appears that J.R. Distributors had issued additional credit loan and it was necessary to adjust that amount against the bank guarantee and as such the Bank guarantee was invoked by the petitioners. It is pertinent to mention that on 7th June, 2005 a new distributorship was created by the complainant and the bank guarantee was thereafter invoked on 12th August, 2005. The relevant date which appear from the assertions made in the petition are that the complainant had already started a new distributorship under the name of M/s Omkar Distributors. The letter of the petitioners company which is Annexure (illegible) indicates that the bank guarantee was invoked on 12th August, 2005. The complainant also want to continue to deal with the Mumbai Company and wanted that they should be allotted work of distributor for the Nicholas Piramal Company. It appears that Nicholas Piramal Company did not appoint Omkar Distributors as the agents and as such it appears that the complaint case was lodged on 27.9.2005. 7. On the perusal of the allegations made in the complaint petition. The first part of the allegation is that the complainant was induced, persuaded and pressurised to become a dealer for M/S Nicholas Piramal. 7. On the perusal of the allegations made in the complaint petition. The first part of the allegation is that the complainant was induced, persuaded and pressurised to become a dealer for M/S Nicholas Piramal. The allegations are not supported by the complainant when he was examined on S.A infact in his statement he says that he was a dealer for the Mumbai Company and after two years he was asked to give a Bank Guarantee of Rupees ten lakhs. There is not a whisper that he was coerced into entering into business with Nicholas Piramal. 8. The question which needs to be addressed under what circumstances as to whether the invocation of Bank Guarantee is a criminal offence. The definition of "Guarantee" is given in sec. 126 of the Contract Act. Sec.126 reads as follows:- A "contract of guarantee" is a contract is perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called a "Sureity", the person in respect of whose default the guarantee is given is called the "Principal debtor" and the person to whom the guarantee is called the "Creditor". A guarantee may be either oral or written. Thus, the primary idea of sureityship is an undertaking to indeminify if some other person does not fulfil his promise. Therefore in essence the invocation of Bank guarantee, is encashment of the sureity given in case of default of the third party. 9 Various decisions of the Apex Court have laid down the law with respect to invocation of Bank Guarantee. That there cannot be injunction against invocation of the Bank Guarantee. It has been held that in the course of commercial dealing an unconditional bank guaranteed is given or accepted the beneficiary is entitled to realise such a bank guarantee in terms thereof irrespective of any pending dispute. The only two exceptions, being of fraud in connection with such a bank guarantee or where there would be an irreparable injustice to one of the parties. The decision in Dwarkesh Sugar Industries Limited vs. Prem Heavy Engineering Work(P) Ltd reported in 1997, SC Pg 2477 clearly indicates that no injunction can be granted against invocation of bank guarantee except for two reasons given in the injunction petition. The decision in Dwarkesh Sugar Industries Limited vs. Prem Heavy Engineering Work(P) Ltd reported in 1997, SC Pg 2477 clearly indicates that no injunction can be granted against invocation of bank guarantee except for two reasons given in the injunction petition. The Apex Court gone so far as to say that a bald assertion of fraud is not sufficient for granting an injunction relating to the encashment of the bank guarantee. 10. In another case reported in 1998 SC page 2658, the Supreme Court has upheld the order of High Court rejecting the grant of ad interim-injunction for the invocation of bank guarantee. 11. Such being the position of law, the case of the complainant that the petitioners have committed an offence under Sections 420 and 406 of the IPC by invocation of the bank guarantee is not sustainable as it is clearly the view of the Apex court that parties in a business transaction are entitled to encash the bank guarantee and no injunction can be granted for invocation of the bank guarantee. 12. Therefore the principle of law which emerges from the facts aforesaid is that the dispute is purely of a civil nature and the complainant would have their remedy in the civil court by way of filing a suit. 13. In the circumstance, mentioned aforesaid, I find that no case under Sections 420 and 406 of the IPC is made out against the petitioners and the order taking cognizance dated 7.10.2005 is accordingly quashed.