Judgment

YOGESHWAR DAYAL, J. - Special leave granted. Heard.

2. This is an appeal by M/s. Svenska Handeslbanken (defendant No.4) against the judgment and order dated 11th October, 1991 of the High Court of Orissa in Misc. Appeal No. 370 of 1991 whereby the Single Judge of the High Court accepted the appeal filed on behalf of the plaintiff while injuncting defendants Nos. 4 to 12 from encashing the bank guarantee furnished by Industrial Development Bank of India (defendant No. 12) in favour of defendants Nos. 4 to 11 for a period of 2 years or till the disposal of the suit whichever is earlier and set aside an order passed by the Subordinate Judge, Cuttack dated 14th August, 1991 vacating an order of ad interim injunction dated 25th April, 1991 and dismissing the application for ad interim injunction (Misc. Case No. 143 of 1991) against defendants 4 to 12.

3. We find it convenient to refer to the parties as they were described in the suit.

4. The suit out of which the present appeal arises was filed by the plaintiff (hereinafter referred to as the borrower) before the Subordinate Judge, Cuttack, inter alia for a declaration that the guarantees executed by Industrial Development Bank of India, defendant No. 12 (hereinafter referred to as the guarantor) in favour of defendants Nos. 4 and 5 to 11 (hereinafter referred to as the lenders) are void and for an order of injunction restraining the guarantor from making payments under the guarantees to the lenders.

5. For appreciating the submissions made on behalf of the parties the facts shortly stated, leading to the filing of the present appeals are as follows :--

Sometime in 1982 M/s. Indian Metals & Ferro Alloys Ltd., (in short IMFA defendant No. 13) issued a global tender for setting up a captive power plant, viz., a coalfired steam power plant in Choudwar, Orissa. The tender indicated that credit by the suppliers will be preferred. Defendants 1 to 3 (hereinafter referred to as the suppliers submitted their tenders in this regard. Since the tender indicated that suppliers credit for the entire project is preferred, the suppliers approached defendant No. 4 (one of the lenders) to finance the project. Enquiries were made to find out the possibilities for financial assistance by the Swedish Government in the form of interest at subsidised rates.

6. Since 85 of the foreign exchange portion of the total price of the project was to be financed, discussions were held between the borrower and defendant No. 4 (one of the lenders) for finalising the terms and conditions of the loans. Discussions were also held between the borrower and the suppliers in regard to the terms and conditions of the loans so as to ensure that the credit agreements would be in accordance with the Swedish Law and regulations for subsidised export credit facilities.

7. The borrower made extensive investigation itself over a period of about two years into the details of the proposed plant.

8. On or about 28th September, 1984 contracts were entered into between the borrower (plaintiff) and the suppliers for setting up the power plant and for supplying the machinery and other equipments for the plant to the borrower.

9. Defendant No. 4 (one of the landera) formed a consortium of banks i.e. deendants 5 to 11 (Swedish Banks) (lenders) and an American Bank for financing the project. The American Bank subsequently assigned its interest in favour of one of the defendant Bank (lender). The lenders entered into two credit agreements dated 30th October, 1984 with the borrower. The credit agreements were entered into by defendant No. 4 for itself and on behalf of defendants 5 to 11 under which the lenders agreed to lend 85 of the foreign exchange portion of the cost of the project to the borrower by way of certain credit facilities. A third credit agreement dated 15th November, 1984 between the borrower and defendant No. 4 (lender) in its individual capacity was entered into. The first credit agreements were for the loans of the U.S. Do