( 1 ) APPELLANTS have preferred TO this appeal against the order dated 19. 5. 1994, passed by Shri G. S. Jugti, Additional District Judge, allowing the application of respondent No. 1 under Order XXXIX Rules 1 and 2 of the Code of Civil Procedure, restraining the appellant from encashing the two bank guarantees till the disposal of the main suit.

( 2 ) THE learned Additional District Judge allowed the application of respondent No. 1, holding that the notice invoking the bank guarantee was not in accordance with thc terms and conditions of the bank guarantee and was, therefore, of no legal ellect and inoperative. As per the impugned order, the notice did not disclose as to why the bank guaranlee was being invoked, It did not mention the alleged non-supply of material or the resultant loss or the extent thereof. Besides, he held that the contract was subsisting and had not been rescinded, in the absence of which the hank guarantee could not be encashed. He also held that respondent No. 1 would suffer huge loss on encashment of the bank guarantee.

( 3 ) THE facts, in brief, leading to the filing of this appeal may be noted :

(I) Appellant, which is a cement manufacturing unit, placed there orders. dated 22. 6. 90, 25. 7. 90 and 5. 10. 90 for the supply of Helical gears and pinions on respondent No. 1, M/s. Krishna Clears Pvt. Ltd. Order dated 22. 6. 1990 was placed for the supply of one Helical gear and two Helical pinions, lor a total value of Rs. 13. 44 lacs. The goods were to he supplied within eight months from the date of the order, viz. 22. 2. 1991.

(II) The second and third orders, viz. Orders dated 25. 7. 1990 and 5. 10. 1990. for one Helical Pinion each were of the value of Rs. 2. 96 lacs each. The second order was to be supplied within four months, i. e. by 21. 1 1. 1990 and the third order by 5. 2. 1991.

(III) Under the terms of the contract, 25% of the value of the orders was to be paid by the appellant in advance against irrevocable confirmed hank guarantee, lobe furnished by respondent No. 1. The appellant, on acceptance of the three orders, paid a sum of Rs. 4. 84 lacs to respondent No. 1. being 25% of the value of the three orders.

(IV) On receipt of the advance amount, respondent No. 1 furnished two bank guarantees, viz. Bank guarantee No. 24/90 dated 1. 9. 1990 for a sum of Rs. 4. 10 lacs, covering the advance of the first and the second order. A second bank guarantee, viz. 27/90 for Rs. 74,000. 00 covering 25% of the advance paid for the third order placed on 25. 10. 1990.

(V) Appellant s case is that respondent No. 1, after having received the total advance amount of Rs. 4. 84 lacs, made no efforts to supply the gears and pinions, either within the slipulaled time or the extensions granted. On 17. 8. 1991, upon appellant s representative s visit, respondent No. 1 requested for extension of time till October 1991, for supply of pinions and for remaining material by December 1991. Vide its letter dated 19. 1 1. 1991, appellant notified respondent No. 1 that it (respondent) was still not adhering to the revised committed schedule, as intimated vide its letter of 17. 8. 19 ji. Respondent No. 1 had not supplied two pinions, which even as per the revised schedule, were to he supplied by October 1991. Respondent No. 1 was further notified that no information had been received about the despatch of material despite continuous follow up. Appellants further notified respondent No. 1 that in case no reply was received by 25. 1 1. 1991. they shall be constrained to encash the bank guarantees and also claim damages suffered for non-execution of the order. Both the bank guarantees were extended upto 31. 3. 1992.

(VI) Appellant, vide its letter dated 27. 11. 1991, addressed to the Punjab National Bank, sought invocation of the bank guarantees. The relevant portion of the said letter is extracted below : "the above party has failed to comply with the delivery commitments despile our various remainders and persona