( 1 ) THE long history of this case is as follows:--The petitioner entered into a contract with the respondent for purchase of abandoned fertiliser plants for Rupees 40,02,500/- on "as is where is'' basis pursuant to respondent's invitation to tender No. 14/80 dated 30-5-1980. The terms of the said contract are contained in the petitioner's offer dated 23-5-1980 and the respondent's letter of acceptance dated 30-5-1980. By this letter, the respondent (hereinafter referred to as the FCI) admitted having received Rs. 5,00,000/-from the petitioner by way of earnest money. The petitioner was to pay Rs. 5,00,00,000/- by way of security deposit. By this letter of acceptance, the FCI adjusted this aforesaid earnest money against the said security and directed the petitioner to pay the balance Rs. 45. 00. 000/- within 15 days in the manner as follows:-- (1) Rs. 5,00,000/- by crossed bank draft. (2) Rs. 40,00,000/- by unconditional and irrevocable bank guarantee.

( 2 ) PURSUANT to the said letter, the petitioner furnished one bank guarantee for Rs. 4,00,00,000/- through the Punjab and Sind Bank on 11-6-1980 and paid Rs. 5,00,000/- in cash on 12-6-80. On 7-7-80 the F