Judgment

K.S.PARIPOORNAN, J.

(1) SPECIAL leave granted.

(2) THE appellant herein was the respondent in Matter No. 1268 of 1984, an application filed by the respondent in this appeal under Section 41 of the Arbitration Act. The appellant and the respondent entered into 11 contracts dated 21/8/1979 whereby the respondent herein was to construct 11 schools in Nalut, Libya at a cost of LD 2,437,525.000. The United Commercial Bank, Calcutta (hereinafter referred to as Bank) gave two bank guarantees to the appellant on behalf of the respondent. The first is dated 16/8/1979 for a sum of Rs. 6.50 lakhs (No. 350 of 1979 renewed on 4/5/1982, 10/5/1983 and 3/5/1984 whereby the original date expiring on 15/5/1982 was extended from time to time. The other bank guarantee is for a sum of Rs. 32.50 lakhs (No. 399 of 1979 dated 10/10/1979, renewed on 10/6/1981, 9/7/1982, 22/2/1983 and 7/7/1983, whereby the date of expiry, 10/7/1981, was extended from time to time. The Bank renewed the guarantees on the instructions of the respondent.

(3) IT is seen that disputes arose between the appellant and respondent regarding the performance of the contract resulting in a ref