The main legal point established in the judgment is the requirement for a plausible defense and the consequences of a defense being illusory or sham in cases covered by Order XXXVII of the Code of Civil Procedure.

G.S. SISTANI, J.

(IA.10504/2013) under Order XXXVII Rule 3(5) CPC by defendant no.1) and IA.8128/2013 under Order XXXVII Rule 3(5) CPC by defendant no.2 and 3)

1. Plaintiff has filed the present suit under the provisions of Order XXXVII of the Code of Civil Procedure. The present suit is based on two bank guarantees which were furnished by the defendant no.1 in favour of the plaintiff. The plaintiff is a Government of India enterprise and claims to be one of the largest international trading company of India engaged inter alia in the manufacture, sale, import, export and marketing of ferrous and non-ferrous metal and minerals.

2. Defendant no.1 is a trading company and a partnership concern of which Mr. Kashish Kumar Rastogi is the proprietor. Defendant no.1 had approached the plaintiff in the year 2006 for drawal of gold under its Open General License (OGL) Scheme on loan basis and outright sale schemes. The defendant no.1 has been lifting gold from time to time. Defendant no.1 had furnished amongst others the following financial bank guarantees issued by defendant no.2, Bank of India to secure the repayment of the gold loan that was being drawn:

Sl.No.	Bank Guarantee No.	Amount (Rs.)	Date of Issue	Date of Validity
1.	60247FIBGO80055	20,000,00	24.10.2008	20.04.2009 extended from time to time, the last extension being issued on 15.03.2011 with the validity/claim period upto 20.04.2012.
2.	60241FIBG110014	90,000,00	25.04.2011	24.04.2012
3.	60241FIBG110016	90,000,00	26.04.2011	25.04.2012

3. It is the case of the plaintiff that on receipt of the aforesaid bank guarantee no.60241FIBG110014 dated 25.04.2011 for Rs.90 lakhs, the plaintiff had sought confirmation from defendant no.2 vide letter bearing no. MMTC/JRO/BG/KA/11-12 dated 25.04.2011, which was duly confirmed. Similarly, the plaintiff had sought confirmation of bank guarantee no. 60241FIBG110016 dated 26.04.2011 for Rs.90 lakhs. Further, as per the plaint, under the (OGL) Scheme and upon application made by defendant no.1 for supply of gold under the loan scheme and on the basis of securities/bank guarantees furnished, the plaintiff delivered quantities of gold to defendant no.1 on loan basis aggregating to 11 kgs for which payment became due from the month of March 2012, which remained unpaid. The plaintiff thereafter upon the non receipt of payment from defendant no.1 vide letter bearing no. MMTC/JRO/OGL-LOAN/KA/2011-12 dated 21.03.2012 invoked the bank guarantees referred to in para 2 aforegoing.

4. In response to the invocation letter, the defendant no.2 honoured its liability in respect of the bank guarantee No. 60247FIBGO80055 by issuing a pay order of Rs.20 lakhs. However, the remaining bank guarantees were not encashed by defendants no.2 and 3 on the ground that the said bank guarantees were forged and did not originate from the bank and they were not even in the computer system of the bank. The plaintiff also addressed communication to the Chairman and Managing Director of defendant no.2 on 03.04.2012 and 10.05.2012. However, no response was received. Legal notice was also issued. No satisfactory response was received.

5. An application (IA.10504/2013) under Order XXXVII Rule 3(5) of the Code of Civil Procedure seeking leave to defend has been filed by defendant no.1. As per the application seeking leave to defend, the case of defendant no.1 is that defendant no.1 had furnished bank guarantee to secure the loan. Defendant no.1 has not disputed or denied the relationship between defendant no.1 and the plaintiff. Defendant no.1 has admitted having furnished the bank guarantees to secure repayment of the gold loan, which was drawn from time to time. Para 8 of the leave to defend discloses the details of the bank guarantees which were furnished by defendant no.1 to secure the loan which has been gr