Judgment

Mrs. SUJATA V. MANOHAR

( 1 ) LEAVE granted.

( 2 ) THE appellant had entered into a contract with respondent No. 1 on 18-1-80 under which respondent No. 1 had agreed to supply to the appellant pumps together with butterfly valves, motors etc. The terms of the contract also contained an arbitration clause.

( 3 ) IN connection with various payments made or to be made under this contract, the first-respondent furnished to the appellant, inter alia, five bank guarantees in favour of the appellant issued by the Canara Bank which are the subject-matter of dispute before us. These are: (1) a bank guarantee Dated 27-2-80 for Rs. 11,54,290. 00, (2) a bank guarantee Dated 26-7-86 for Rs. 85,000. 00 (3) a bank guarantee Dated 26-7-86 for Rs. 2,53,250. 00, (4) a bank guarantee Dated 26-7-86 for Rs. 63,411. 42 and (5) a bank guarantee Dated 26-7-86 for Rs. 3,79,875. 00. While the first two bank guarantees are performance guarantees, the other three bank guarantes are to secure the advances given by the appellant to the first-respondent to be adjusted against payments to be made under the contract. All these bank guarantees are payable on demand. Clause 1 of the bank guarantee Dated 26-7-8