O.A. No. 2830 of 2000. Case: State Bank of Hyderabad Vs The Highway Consumers Co-operative Society and Anr.. Mumbai Debt Recovery Tribunals

Case NumberO.A. No. 2830 of 2000
CounselFor Appellant: Devendra Singh, Adv., i/b., K.N. Bhandary, Adv. and For Respondents: M.H. Rawal, Adv.
JudgesK.J. Paratwar, Presiding Officer
IssueArbitration Act - Section 34; Maharashtra Co-operative Societies Act - Section 164; Limitation Act, 1963 - Article 23
CitationIV (2005) BC 172
Judgement DateMay 20, 2005
CourtMumbai Debt Recovery Tribunals


K.J. Paratwar, Presiding Officer

1. This is an application for recovery of Rs. 46,76,801.53 with interest @ 16.5% from the date of filing the original application till full realisation.

2. The defendant No. 1 carries business of distribution of rice and other foodgrains. By letter dated 24.2.1977 it had requested the applicant to issue Bank guarantee for Rs. 5 lacs for payment of price of certain goods being purchased from defendant No. 2. The guarantee was initially upto 25.5.1977 with additional period of 60 days for the beneficiary for taking action to enforce the claim under the guarantee. The guarantee was subsequently extended upto 25.8.1977 with similar additional period of 60 days for taking action for enforcement of the claim under the guarantee.

3. In consideration of the applicant having executed the guarantee in favour of the defendant No. 2, the defendant No. 1 executed counter guarantee/indemnity dated 26.2.1977 for indemnification against any loss or claim that may be against the applicant from the said guarantee. The defendant No. 2 by letter dated 25.7.1977, 24.8.1977, 29.9.1977 and 24.10.1977 made claim from the applicant of the guarantee amount. But, the defendant No. 1 wrongfully contended in letter dated 24.8.1977 that the guarantee had expired on that date and asked the applicant not to make payment. The Bank intimated to defendant No. 2 about the defendant No. 1's stand. The defendant No. 2 thereupon executed Indemnity in the applicant's favour in respect of payment that would be made by the Bank under the guarantee. Accordingly, the Bank made payment to defendant No. 2 pursuant to the Indemnity executed by defendant No. 2 on 21.2.1978. The applicant informed the defendant No. 1 about payment made by it to defendant No. 2 and called upon it to repay the same. The defendant No. 1 by Advocate's letter dated 19.6.1978 refuted the liability. This was informed by the Bank to defendant No. 2 who informed the Bank that the Registrar of Cooperative Society in Arbitration Case No. 782/2103 of 1978 has already taken up the matter. The proceedings were stayed under Section 34 of Arbitration Act by the Co-operative Court. In the circumstances, the applicant gave notice dated 24.9.1985 and 5.6.1986 under Section 164 of Maharashtra Co-operative Societies Act.

4. The applicant's contention is that it was bound to make payment to defendant No. 2 under the Bank guarantee given at the instance of defendant No. 1 who in...

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