SANJAY KISHAN KAUL, J.

( 1 ) (1)THE plaintiff is a private limited company incorporated and registered under the Companies Act, 1956 and is engaged in the business of sales and purchase of computers and network products. The defendant no. 1 is a limited company dealing in supplying computers and network products.

( 2 ) THE plaintiff approached defendant no. 1 with a request for supply of computers and placed an order dated 02. 07. 1996 for supply of 33 computers of pentium 100 with Intel CPU at the rate of Rs 45,662 for each computer totalling to a value of Rs 15,06,850/ -. The plaintiff paid a sum of Rs 10 lakhs as advance towards the execution of the said order with the condition that defendant no. 1 would secure the said amount by way of a bank guarantee. The purchase order was signed both by the plaintiff and defendant no. 1 incorporating the terms and conditions between the parties.

( 3 ) IN view of the arrangement arrived at between the plaintiff and defendant no. 1, the defendant no. 1 requested defendant no. 2 to issue a bank guarantee in favour of the plaintiff to secure the advance deposit. The defendant no. 2 thus issued a bank guarantee bearing no. 25/35 dated 10-07-1996 for Rs 10 lakhs in pursuance of the purchase order dated 02. 07. 1996. The bank guarantee was valid up to 12. 01. 1997.

( 4 ) THE bank guarantee was extended up to 11. 07. 1997 and according to the plaintiff the claim period was extended up to 11. 08. 1997. The bank guarantee was thereafter extended up to 10. 10. 1997 with a claim period specified as 10. 11. 1997. The amount under the bank guarantee was payable on demand from the plaintiff.

( 5 ) THE plaintiff claims that the defendant no. 1 failed to perform its part of the contract and even sent a letter dated 29. 10. 1996 to the plaintiff stating that due to delay in import of raw materials, the defendant no. 1 may not be in a position to execute the order up to 30. 10. 1996. Thereafter defendant no. 1 by its letter dated 29. 10. 1996 cancelled the order and promised to return the advance of Rs 10 lakhs. The amount was however not paid despite being called upon by the plaintiff.

( 6 ) THE plaintiff requested defendant no. 2 to make the payment after invocation of the bank guarantee no. 25/35 as per letter dated 19. 07. 2007 which was received by the defendant no. 2-bank on the same date. The bank guarantee was, however, extended with a date of expiry up to 11. 07. 1997 and date of claim up to 11. 08. 1997. These dates were further extended up to 10. 10. 1997 and 10. 11. 1997 respectively. The plaintiff claims that despite all assurances of the officers of defendant no. 2-bank, the payment was not made and the plaintiff even sent a letter to Reserve Bank of India on 30. 09. 1997 with a copy to the Head Office of defendant no. 2, but to no avail. The plaintiff initiated proceedings before the banking ombudsman, but the plaintiff failed to get a favourable order and the case was closed.

( 7 ) DEFENDANT no. 1 is stated to have issued a refund of the advance payment by cheque no. 236139 dated 26. 09. 1997 for Rs. 10 lakh towards the principal amount received by it and a further cheque bearing no. 220422 dated 26. 09. 1997 for Rs 30,000 in favour of the plaintiff in view of the cancellation of the order. Both the cheques were drawn on the Bank of India, Lajpat Nagar Branch, New Delhi. Plaintiff presented the cheques for payment, but the cheques were returned back with the endorsement 'exceeds arrangement' The plaintiff thus filed a complaint under Section 138 and 142 of the Negotiable Instruments Act, 1882 and the complaint is stated to be pending before the court of Metropolitan Magistrate.

( 8 ) THE plaintiff approached defendant no. 2 about the failure of defendant no. 1 to perform its part of the agreement and breach thereof and requested for payment, but defendant no. 2 did not oblige. The original bank guarantee along with extended bank guarantee were submitted to defendant no. 2 but in