JUDGMENT The unsuccessful Defendant No.1 in the Court below as Appellant has preferred this appeal challenging the judgment and decree passed by learned Civil Judge Senior Division 1st Court, Cuttack in M.S. No.244 of 1996, decreeing the suit of Plaintiff-Respondent No.1 in part with cost and directing them to pay a sum of Rs.14,91,334.32 as on 30.10.1989 with interest @ 18% per annum since then till payment. 2.For the sake of convenience, and of clarify to avoid confusion, the parties hereinafter have been referred to as they have been arrayed in the Court below. 3.The case of the Plaintiff is that it being a Corporation fully owned by the State Government established for the purpose of providing aid counseling assistance and promoting the interest of small industries in the State; on 12.05.1987 received an application from the Defendant No.2 for purchase of raw materials through their financial assistance under the raw materials assistance scheme of the Plaintiff to the tune of Rs. 5 lakhs by offering bank guarantee of the defendant No.1-Bank. Defendant No.2 Company, a small scale industry was engaged in manufacturing of M.S. Rods, tore steel etc. and so it required raw materials like iron, steel, coal coke etc. In view of that an agreement came into being on 30.06.1987 and Plaintiff agreed to extend such co-operation to Defendant No.2 subject to Defendant No.1 providing bank guarantee to the fullest extent. Pursuant to the same Defendant No.2 vide letter dated 03.07.1987 intimated the Plaintiff about the fact of forwarding of bank guarantee of the value of Rs. 5 lakh in favour of Plaintiff. On 04.07.1987, Defendant No.1 issued the bank guarantee for the aforesaid limit. Thereafter, on the request of defendant No.2, the Plaintiff issued two demand drafts amounting to Rs. 2,33,500/- and Rs.2,33,940/- in favour of SAIL Rourkela, towards supply of raw materials to Defendant No.2. Again on 11.09.1989, the Defendant No.2 requested for further financial assistance to the tune of Rs. 5 lakhs. So for that bank guarantee dated 07.04.1988 was issued by Defendant No.1, and agreement had been made as before. In view of above, the Plaintiff made further payment to SAIL by demand drafts in total worth Rs.4.7 lakh. The bank guarantee dated 04.07.1987 was extended to 04.07.1989 with the agreement to remain operative till then. 5 lakhs. So for that bank guarantee dated 07.04.1988 was issued by Defendant No.1, and agreement had been made as before. In view of above, the Plaintiff made further payment to SAIL by demand drafts in total worth Rs.4.7 lakh. The bank guarantee dated 04.07.1987 was extended to 04.07.1989 with the agreement to remain operative till then. On 28.06.1988 an agreement was entered into between the plaintiff and defendant No.2 which was indentical to the earlier agreement dated 30.06.1987. Subsequently, further financial assistance was provided and composite agreement was entered into between the parties on 21.06. 1988 wherein the financial assistance was enhanced to Rs. 15 lakhs when also Defendant No.1 furnished the third bank guarantee on 06.12.1988. 4.In case of all the above bank guarantee, the defendant No.1 unequivocally undertook to pay to the plaintiff on demand and without any demur the amounts due against any loss or damage caused to or suffered by the plaintiff by reason of any breach by the said Defendant No.2 of any terms and conditions contained in the said agreement. It is the further case of the plaintiff that on 05.09.1989, they called upon the Defendant No.2 to clear up to sum of Rs. 1473455.33 as remaining outstanding on that account by 15.09.1989. Again on 11.09.1989 reminder was issued to Defendant No.2 for payment of Rs. 1499509.75 as on 30.09.1989. But there was failure on the part of the defendant No.2 to make the payment. So the Plaintiff finally on 03.10.1989 invoked aforesaid bank guarantees calling upon the defendant No.1 to make payment as above. Several correspondences came to be exchanged between them and no payment being made by the defendant No.1, the matter was brought to the notice of the Reserve Bank of India (RBI) which also did not yield any fruitful result. So, ultimately the suit was filed as the reply of defendant No.1 on that score was found to be wholly unsatisfactory and appeared to be only with a bid to avoid the payment. Thus, the suit was filed for recovery of Rs. 15,07,695.48 as on 30.10.1989 together with interest of Rs.2,00,007.15 paisa towards interest @ of 18% per annum upto 29.06.1990 totaling to Rs.17.07,702.63. 5.The Defendant No.1 contested the suit. While traversing the plaint averments they have stated denying 100% coverage on the value of the raw materials under the bank guarantees. Thus, the suit was filed for recovery of Rs. 15,07,695.48 as on 30.10.1989 together with interest of Rs.2,00,007.15 paisa towards interest @ of 18% per annum upto 29.06.1990 totaling to Rs.17.07,702.63. 5.The Defendant No.1 contested the suit. While traversing the plaint averments they have stated denying 100% coverage on the value of the raw materials under the bank guarantees. It is only stated that the bank guarantees were only towards any loss sustained by the Plaintiff due to breach of contract made by the Defendant No.2. It is, their, case that as per clause 2 of the bank guarantee, the defendant No.1 had undertaken to reimburse any claim made by the plaintiff arising by way of loss or damage or apprehended to be caused or suffered by the plaintiff by reason of breach of any terms and conditions made by defendant No.2. It is also stated that as per the terms embodied agreements, the plaintiff was to lodge the claim within a period of 90 days from the date of default by Defendant No.2 and that having not been done; they have refuted the suit claim as untenable. Lastly, they have put the blame upon the plaintiff to have knowingly entered into the transactions with Defendant No.2 with fraudulent intent to deprive the Plaintiff and for unlawful gain; in otherwords they have set up a case of collusion. 6.The Defendant No.2 has also filed the written statement stating that the company had became sick since 1986 due to under finance by the bank. So, there was attempt of rehabilitation as per the RBI guidelines. It is also stated that as they landed in financial problem and so there arose a number of cases. Therefore, on 14.09.1989 it had requested defendant No.1 to recall the payment as per agreements against the bank guarantees issued by them and with further request to make full payment under bank guarantees after adjusting the deposit made by them in Money Multiply Deposit Certificate kept towards margin money which was to the tune of Rs. 5 lakhs which had been raised to Rs.12 lakhs. Besides the above, they claimed to have deposited Rs.1.5 lakhs and margin money for obtaining the bank guarantees and the aforesaid amount on calculation is said to be more than Rs.14 lakhs. 5 lakhs which had been raised to Rs.12 lakhs. Besides the above, they claimed to have deposited Rs.1.5 lakhs and margin money for obtaining the bank guarantees and the aforesaid amount on calculation is said to be more than Rs.14 lakhs. So, they have submitted that there was no reason for Defendant No.1 to withhold the payment of the plaintiff under the bank guarantees. They have also stated that defendant No.1 in any event has to make the payment to the plaintiff. 7.It may be stated here that the plaintiff during the suit examined two witnesses who are the Assistant Manager (Law Officer of the Plaintiff) and the Deputy General Manager, Finance of the said Plaintiff-Corporation. The defendant No.1 has examined one witness who is the Assistant Regional Manager of the bank. The plaintiff has also proved the application of defendant No.2, agreements, additional agreements, bank guarantees, renewal letters, besides other documents. Whereas the defendant No.1 has proved the letter of Defendant No.2 dated 14.09.1989 and the sanction order as well as the letter of credit. 8.The Trial Court on the backdrop of the rival case as pleaded and on going through the evidence both oral and documentary has given a finding as regards entitlement of the plaintiff to a sum of Rs.14,91,334.32 paisa as on 30.10.1989 with interest thereof @ 18% per annum till final payment from defendant No.1. The other issues with regard to maintainability etc. have accordingly been answered in favour of the plaintiff. The finding rendered by the Trial Court on Issue Nos.3 and 4 are being assailed in the appeal in order to non-suit the plaintiff. Also award of interest @ 18% over the sum of Rs.14,91,334.32 paisa w.e.f. 30.10.1989 till payment is attacked to be excessive and not in consonance with law. It may be stated here that the plaintiff has neither filed any appeal against the reduction of their total claim nor they have filed any cross-objection. 9.Learned counsel for the appellant (Defendant No.1) submitted that the trial Court has not properly appreciated the terms embodied in the agreement Exts.2 and 8 and having proceeded in a wrong direction has erred in law by rendering the finding on the issue Nos.3 and 4. 9.Learned counsel for the appellant (Defendant No.1) submitted that the trial Court has not properly appreciated the terms embodied in the agreement Exts.2 and 8 and having proceeded in a wrong direction has erred in law by rendering the finding on the issue Nos.3 and 4. It is also his submission that the trial Court has committed grave error of law by not arriving at a conclusion in the facts and circumstances of the case and in view of the evidence, let in by the parties that Defendant No.2 acted with malafide intention and the plaintiff having colluded with Defendant No.2 has caused loss to this Defendant No.1 and as such the amount demanded is not a legal demand. It is further submitted that the trial Court ought to have arrived at a finding that the plaintiff and defendant having violated the terms embodied in three agreements as well as the bank guarantees, the defendant No.1 as such ought not to have been made liable to pay any amount whatsoever in respect of these transactions. It is next contended by him that the award of interest as made by the trial Court at the rate of 18% per annum over the amount of Rs.14,91,334.32 with effect from 03.10.1989 till the date of final payment and necessary direction to that effect is untenable as it offends and runs contrary to the provision of Section 34 of the Code of Civil Procedure. 10.The learned counsel for the respondent No.1 (plaintiff) while supporting the finding rendered by the trial Court submitted that there has been absolutely no violation of any terms and conditions of the agreements and bank guarantees with reference to the performance of the same as required to be done by the plaintiff and those having been fully in adherence to the time stipulated, there was no alternative on the part of the trial Court but to arrive at a conclusion that it has so arrived at. Therefore according to him, the said finding is unassailable. As regards pendentilite and future interest at the rate of 18% per annum he contends that the said rate has been chose as appropriate as well as just and proper by the trial Court as that was the prevailing rate of interest in cases of commercial leading as was being levied by the Nationalized banks. As regards pendentilite and future interest at the rate of 18% per annum he contends that the said rate has been chose as appropriate as well as just and proper by the trial Court as that was the prevailing rate of interest in cases of commercial leading as was being levied by the Nationalized banks. Alternatively though not conceding, he submitted that as in this case when the principal sum as per the decree has already been paid by the Defendant No.1 as regards the rate of interest a reasonable course in accordance with law as this Court deems fit and proper may be adopted so as to give a quietous to the lis for all times to come. 11.Keeping in mind above rival submission, let me first proceed to examine the sustainability of the finding rendered by the trial Court on issue Nos.3 and 4. The right of the Plaintiff or invocation of the Bank Guarantee is under challenge in the suit which is covered by the above issues. In respect of the violation of agreements dated 30.06.1987, 06.04.1988 and 21.06.1988, Clause 12 of the agreement is pressed into service and that reads as under :- “That the finance assistance shall be provided to the first party for procurement of the materials as aforesaid to the extent of Rs. 15 lakhs for a period of 90 days and the first party shall clear up the dues of the Second party within a period of 90 days from the date of advance.” A bare reading of this clause makes it abundantly clear that after expiry of ninety days if no demand is raised against the Defendant No.2, the right of the plaintiff to invoke the bank guarantee would stand foreclosed not withstanding the fact that the bank guarantee stands valid for one year. However, the validity period of bank guarantee manifestly makes it clear that the plaintiff has the liberty to invoke it at anytime during the period and not thereafter. In the present case in respect of that invocation of bank guarantee, notices of demand for payment from Defendant No.2 has been given first to Defendant No.2 and on their failure to perform or act upon, invocation has been made under Ext.14. In the present case in respect of that invocation of bank guarantee, notices of demand for payment from Defendant No.2 has been given first to Defendant No.2 and on their failure to perform or act upon, invocation has been made under Ext.14. So there appears no substance in the attack that the plaintiffs right to invoke the bank guarantees in this case does no more survive after expiry of ninety days. Thus I hold the Trial Courts view in affirmative in favour of the plaintiff as right to which this Court subscribes. 12.Next as regards the liability of defendant No.1. In this connection it is better to straightway go to Clause 2 of the Bank Guarantees Exts. 4, 9 and 12 which runs as under being identical in all the three :- “We Central Bank of India, Cuttack do hereby undertaken to pay to the amounts due and payable under this guarantee without any demur, merely on a demand from the authority stating that the amount claimed is due by way of loss or damage caused to or would be caused to or suffered by the authority by reason of breach by the aid company of any of the terms and conditions contained in the said agreement or by reason of the company failure to perform the said agreement. Any such demand made on the bank shall be conclusive as regards the amount due and payable by the bank under this guarantee shall be conclusive as regards the amount due and payable by the Bank under this guarantee. However, out liability under this guarantee shall be restricted to an amount not exceeding Rs.5,00,000/- (Rupees Five Lakhs) only.” The above being given a plain reading goes to show that the Defendant No.1 had undertaken to pay the amount due under the bank guarantee without any demur, merely on a demand from the plaintiff indicating that the same is due on account of loss or damage caused or likely to cause or suffer by the plaintiff. In view of the breach by Defendant No.2 in respect of the terms and conditions contained in the agreement or by reason failure on the part of the Defendant No.2 to perform the said agreement. In view of the breach by Defendant No.2 in respect of the terms and conditions contained in the agreement or by reason failure on the part of the Defendant No.2 to perform the said agreement. It is also clear that any such amount claimed upon Defendant No.1 shall be conclusive as regards the amount due and would be payable by the Defendant No.1 under the said guarantee. The stand of the Defendant No.1 is that it has no liability to make payment in the facts and circumstances of the case. However, the Assistant Regional Manager, Defendant No.1 has deposed in the case that when the company fails to pay the Plaintiff, the amount due, it becomes the loss of the plaintiff. The indication to that effect has been given by the plaintiff on 14.09.1989 which was also with the knowledge of the Defendant No.1 that the Defendant No.2 had failed to make payment of the dues of the plaintiff, i.e. with regard to loss caused to the plaintiff. It is admitted that all the bank guarantees were valid till their invocation. Before trial Court reliance was placed on the decision in the case of Kudermukh Iron Ore Co. Ltd. v. Korula Rubber Co. Pvt. Ltd. and another, AIR (1987) Karnatak 139. The Trial Court as it appears having gone through the cited case and also the decision rendered therein has distinguished the same for being made applicable to the case in hand and on carefully going through the same, I find no such reason to have been surfacing so as to record any disagreement. The well settled principles in the matter of bank guarantee as stated in the case of National Aluminimum Company Ltd. v. M/s. R.S. Builders (India) Ltd. and others, 1991 (1) CLT 401 and also in the case of National Thermal Power Corporation Ltd. v. Hind Galvanizing and Engineering Co. Ltd. and another, AIR 1990 Calcutta 421 has been rightly taken note of by the Trial Court to come to the finding that the claim of the Plaintiff falls within the scope and ambit of the terms embodied in the bank guarantees dated 04.07.1987, 07.04.1988 and 06.12.1988 furnished by the Defendant No.1 on behalf of the Defendant No.2 as well as the agreement dated 30.06.1987, 06.04.1988 and 21.6.1988 between the plaintiff and the Defendant No.2. Thus, the right of Plaintiff to recover the amount due to be paid by Defendant No.2 from the Defendant No.1 on account of such undertaking under the bank guarantees in the above eventuality firmly stands. Thus, the Trial Court’s finding on the above score is found to be free from any flaw which is hereby confirmed. 13.With the above, the next question arises as regards the quantum of the claim which has been dealt by the Trial Court in Para-12 of the judgment. The loss and damage suffered by the plaintiff has been quantified at Rs.14,91,334.32 as on 03.10.1989, the documents which evidence the same is Ext.25. It has been stated by the P.W.1 that the amount as aforesaid includes the principal and interest as on 03.10.1989, when P.W.2’s evidence remains that the principal and interest stands at Rs.14,99,000.00 as on the said date. In absence of any other document, as against the claim of the plaintiff standing at Rs.15,07,695.48, the Trial Court has rightly arrived at such a decision with regard to quantum of the claim of the plaintiff against Defendant No.1. 14.The defendant No.1 has very much challenged the grant of interest at the rate of 18% per annum over the aforesaid amount of Rs.14,91,334.32 with effect from 03.10.1989. It is admitted in course of the hearing that the Defendant No.1 has already paid a sum of Rs.14,91,334.32 on 22.05.1995. The rate of interest awarded by the Trial Court at the rate of 18% per annum is attacked as being not permissible in the facts and circumstances of the case. It is the settled position of law that in respect of commercial transaction unless the Court finds sufficient reason to award interest at the lower rate even for a period subsequent to the decree till the date of realization, there is no justification not to award interest upon the agreed rate. The State Bank of India v. Branch Manager, Bhadrak, Vol. 70, 1990 OLR 505. It may be stated here that in case of Punjab & Sind Bank v. M/s. Allied Beverages Co. The State Bank of India v. Branch Manager, Bhadrak, Vol. 70, 1990 OLR 505. It may be stated here that in case of Punjab & Sind Bank v. M/s. Allied Beverages Co. Pvt. Ltd. and others, 2011 (1) CLR (SC) 615, the challenge was made with regard to the order of the High Court of Delhi in reducing the pendentilite and future interest to 14% with annual rest i.e. simple interest as against the rate of interest at the rate of 18% with monthly rests awarded by the Debt Recovery Tribunal, Delhi. Their Lordships besides taking note of the provision of Section 19(20) contained in Recovery of the Debt due to Banks and Financial Institutions Act, 1993, Banking Regulation Act, 1949 having taken into consideration the provision of Section 34 of the Code of Civil Procedure, and upon consideration of the decision in case of N.M. Veerappa v. Canara Bank, AIR 1998 SC 1101 , the Constitution Bench decision in case of “Central Bank of India v. Ravindra and others; 2001 (1) SCC 367 also in case of Syndicate Bank, Chhenai v. Mohan Brothers and others; 2004 (10) SCC 549 approved the course adopted by the High Court while declining either to enhance the rate of interest as claimed by the Bank or in further reducing the same as prayed for by the company and upheld the action of the High Court in considering the facts and circumstances of the case and fairly neutralizing the claim of the Bank as well as the suffering of the company in passing a workable order with regard to the rate of interest. 16.Keeping in view the ratio of aforesaid pronouncements, necessary factual aspects for the purpose as gleaned may be stated through at the cost of some repeatation as necessary for proper decision. The claim is based upon the bank guarantees under Exts.4, 9 and 12. The bank guarantee under Ext.4 refers to the agreement between the plaintiff and the Defendant No.2 under Ext.2. Similarly, the bank guarantee Ext.9 refers to the agreement between as above under Ext.8 and the bank guarantee Ext.12 is with reference to the last one wherein the agreement dated 05.12.1988 finds mention. However, the agreement dated 05.12.1988 has not been proved in this case and on the other hand Ext.11, is the agreement which is dated 21.06.1988. Similarly, the bank guarantee Ext.9 refers to the agreement between as above under Ext.8 and the bank guarantee Ext.12 is with reference to the last one wherein the agreement dated 05.12.1988 finds mention. However, the agreement dated 05.12.1988 has not been proved in this case and on the other hand Ext.11, is the agreement which is dated 21.06.1988. The date of Ext.12 is 06.12.1988 and therein reference has been made to the agreement dated 05.12.1988 which appears to be an inadvertent mistake as parties in the present case have gone to admit, the last agreement dated 21.06.1988 as the foundation of said bank guarantee. Perusal of the agreements such as Ext.2 and Exts.8 and 11 do not go to show that the Defendant No.2 was under obligation to make payment of interest at any specific rate having been agreed to between them. Ext.3 is an additional agreement learning upon Ext.2 and therein it has been stated that in case payment has not been received by the second party (Plaintiff) on or before the due date, interest will be chargeable at the rate of 21% per annum from the date of financing towards the value of the materials/transportation charge upto a maximum period of 120 days. However, this additional agreement with additional clause coming into being on 01.02.1988 as agreed to between the Plaintiff and the Defendant No.2 does not find mention in the bank guarantee under Ext.4 which only refers the agreement under Ext.2, the original and first one. So this Ext.3 has nothing to do with the bank guarantees and knowledge of the said clause upon Defendant No.1 can not be attributed so as to be bound it for discharge of the undertaking given under the bank guarantee. Thus, as per the undertaking given under the bank guarantee as within the limit, the Defendant No.1 has undertaken to clear up the liability of the Defendant No.2 towards the Plaintiff. So the payment of interest at a particular rate under the said agreement would ordinarily depend upon the terms and conditions of the agreement concerning the liability of the Defendant No.2 in making it liable for the payment of interest over the amount due to the plaintiff. In such state of affairs, therefore it has to be said that there was no contractual liability with regard to payment of interest as regards the claim. In such state of affairs, therefore it has to be said that there was no contractual liability with regard to payment of interest as regards the claim. The Trial Court as it appears has abruptedly without any such discussion of all these above has jumped to award the interest as per 18% per annum. Be that as it may, it cannot be denied that the transactions are not commercial. The plaintiffs perhaps in keeping above in mind has led evidence about prevailing rate of interest which the Nationalized Banks used to charge upon it in respect of the loan. It has been deposed by P.W.2 that in the year 1989 the bank used to change the interest at the rate of 18% per annum. This evidence is of course not seriously challenged and controverted by the Defendant No.1 that it was not prevailing the rate of interest when the nationalized banks were charging from the year 1989. But the question that arises whether such a course can be adopted in awarding interest in the present case as per the rate which was being charged by the nationalized bank for the purpose of grant of loan. Certainly, the nature of transaction with which we are concerned here is neither loan nor in the nature of loan. The Principal-cum-Borrower relationship stands between Defendant No.1 and the plaintiff, but, here the defendant No.1 stands in the footing of a guarantor. So when there is no stipulation with regard to payment of interest in respect of the unpaid dues as outstanding claim of the plaintiff against the defendant No.2. Therefore, defendant No.1 cannot be made liable to pay the interest at the rate as it ordinarily was then charging in connection with loan dues of the borrowers. In view of the aforesaid discussion adopting a fair and reasonable view in the matter while exercising discretion conferred under Section 34 of the Code of Civil Procedure in a sound manner, the award of interest at the rate of 12% per annum would be just and proper. The plaintiff in the case has already received the payment of the decreed claim as it stood on 30.09.1989, the date of receipt of the said sum is 22.05.1995. The plaintiff in the case has already received the payment of the decreed claim as it stood on 30.09.1989, the date of receipt of the said sum is 22.05.1995. Therefore, the defendant No.1 is liable to pay interest at the rate of 12% per annum on the said sum of Rs.14,91,334.32 being computed with effect from 03.10.1989 till 22.10.1995 the date when the defendant No.1 has paid the claim as decreed. For the aforesaid discussion and reason, the judgment and decree are liable to be modified to the extent as indicated in foregoing paragraph only with regard to the rate of interest indicated and for the period. The defendant No.1 (Appellant) is directed to make payment of the said sum towards interest over the amount Rs.14,91,334.32 at the rate of 12% per annum computed from 03.10.1989 till 22.05.1995. The defendant No.1 is directed to make payment of the said sum to the plaintiff within a period of three months hence. 17.Resultantly, the appeal is allowed in part on contest to the above extent, with cost. Appeal allowed in part.