( 1 ) THE petitioner is a Co-operative Society established under the provisions of the Karnataka Co-operative Societies Act, 1959, hereinafter called 'the Act'. It was appointed as a sub-agent of the Karnataka Food and Civil Supplies Corporation Ltd. , hereinafter called the 'kfcsc' for the purposes of procurement, storage, hulling and delivery of foodgrains and holding paddy stock for and on behalf of KFCSC. Whereas the petitioner, though having his own Rice Mill since required to hull the paddy in stock in private mills for rice delivery, due to urgency of rice required by the KFCSC, entered into an agreement dated March 17, 1984 with the 3rd respondent appointing him a Milling Agent for the purposes of hulling paddy and to deliver the resultant rice, subject to certain terms and conditions.

( 2 ) THAT, according to the terms and conditions of the agreement, the 3rd respondent furnished a bank guarantee to the petitioner to an extent of Rs. 1 lakh; and, agreed to convert the paddy of such variety and quality as may be directed by the petitioner from time to time, into raw rice or boiled rice as the case may be and quality standards as prescribed and deliver the same to the petitioner within the period prescribed; the agreement also provided for payment of penalty by the 3rd respondent at the rate of Rs. 100/- per day, in case of default in delivery of the rice and for enforcement of the bank guarantee by the petitioner for non-performance of the services/duties or breach/default of any of the terms of the said agreement.

( 3 ) IT is stated that, by the year 1986, the 3rd respondent committed default in delivery of certain quantity of rice to the petitioner. The petitioner after notice dated January 15, 1986, calling upon the 3rd respondent to comply with the terms of the agreement by delivering the required quantity of rice invoked bank guarantee by demand dated February 8, 1986. The 3rd respondent filed a suit in O. S. 39/1987 on the file of the learned Munsiff, Gangavathi and obtained an ex parte order of temporary injunction restraining the petitioner from enforcing the bank guarantee; On the application of the petitioner the interim injunction came to be vacated, and the Bank credited the amount mentioned in the bank guarantee to the account of the petitioner on July 11, 1988, at the request of the petitioner; Later the suit also came to be dismissed.

( 4 ) THE 3rd respondent raised a dispute under Section 70 of the Karnataka Co-operative Societies Act, before the Deputy Registrar of Co-operative Societies, Raichur, for a judgment and award against the petitioner for recovery of transport and hulling charges in a sum of Rs. 52,847. 55 with interest thereon and for a further direction to the petitioner to reimburse a sum of Rs. 1 lakh along with interest thereon from the date of release to the date of reimbursement with a further declaration that he is not liable to pay Rs. 1 lakh to the Andhra Bank. The Deputy Registrar by his award dated April 22, 1991 directed the 3rd respondent to delivery 169. 50 quintals of rice or its cost at the present market price in lieu of rice to the petitioner with penalty as per clause 20 of the agreement from 15-1-1986 to 8-2-1986 to the petitioner. The Deputy Registrar has further directed the petitioner to reimburse the bank guarantee of Rs. 1 lakh to the 3rd respondent upon his delivery of rice or payment of its value and also to pay the outstanding arrears of transportation and milling charges in a sum of Rs. 52,547. 55 to the 3rd respondent.

( 5 ) AS the period of default was not properly calculated, the petitioner filed an application before the Deputy Registrar to modify the period of default from 15-1-1986 till 8-2-1986' to 15-1-86 till 11-7-88'. The said application was rejected. However, the review application filed by the 3rd respondent for award of interest in respect of Rs. 1 lakh and Rs. 52,847. 55 was allowed, which ultimately came to be quashed by this Co